Analysis of Dubai’s Economy

Analysis of Dubais Economy Dubai’s Financial Crisis: Dubai is usually characterized by sky piercing towers, rotating buildings, spectacular architectural designs, flow of petro-dollars which refers to the income coming from exporting oil and its products to other countries, broad and clean road networks, etc. It represents a face of modernization and advancement and has earned a place amongst one of the most technically advanced countries in the world. This rapid development of the country was a result of the focus of the government on tourism thus promoting the real estate sector with the help of revenues coming from export of oil and natural gas. With the largest real estate company of Dubai Emaar properties becoming bankrupt in the United States and vaDubai proposal to delay the repayment of all its debt’s for a period of 6 months on November 26, 2009 the financial crisis in Dubai was exposed in front of the world which had bad effects on countries around the world. The debts were as large as $59 billion causing a stop to the investment cycle of Dubai for 6 months. The Dubai’s real estate industry was based on huge loans which they expected to pay through the revenues they earn from them but with recession hitting the industry badly their plans failed. Thus the Dubai’s financial crisis to a large extent can be said to be a consequence of real estate bubble burst in Dubai. Dubai’s Economy: Before getting to the financial crisis it is important to know the structure of the Dubai’s economy which is one of the most unique and unusual in the world. It is divided into free zones setup by the government of Dubai. The zones are industry specific with Jebel Ali free zone being the fastest growing in the world. The Jebel Ali free zone offers a set of products and services such as: ready to use offices, Business centers, factories, Warehouses, infrastructure ready plots etc. Jebel Ali free zone commonly referred to as Jafza is a part of Dubai based; a s tate owned Economic Zones World. It is one of the world’s biggest developers of Economic Zones, Logistics and Research and development driven Industrial Parks. The main free zones of Dubai are Jebel Ali free zone, Dubai Internet City, Dubai Media City, and Dubai Maritime City which are based on the industries they are related with. People have false misconception about Dubai’s economy they believe that it’s mainly driven by oil and gas although the oil sector comprises of less than 6% economy of Dubai that was primarily dependent on oil as a main source of revenue in the past. Dubai being a part of the United Arab Emirates is expected to be great producer of oil, petroleum and natural gas although it is a good producer but compared to other countries of the United Arab Emirates it produces relatively lesser quantities of oil. Dubai produces 240,000 barrels of oil per day and its revenues from natural gas constitute only 2% of the total revenue that United Arab E mirates gets from natural gas. Although it is true that Dubai’s economy was initially build on the revenues generated by its reserves of oil and natural gas but with time it’s oil reserves have reduced significantly as a result of a large increase in the demand for oil and oil products around the world and over the years and Dubai exporting a great amount of oil to other countries it is expected that Dubai’s reserves of oil will get exhausted in the next 20 years and so it has concentrated on the tourism industry to generate good revenues at that time. (Dubai hit hard)