DUBAI CRISES

PRESENTATION BY :

MOHIT KUKREJA

ANIL CHHABRIA

DHIRAJ PURSWANI

NITIN NAGDEV

KARAN KHATRI
 INTRODUCTION OF DUBAI

Trading and commercial hub of the Middle East

Its geographical location made it an important

trading hub and by the beginning of the 20th century,it
was an important port.

Today, Dubai has emerged as a global city and a

business hub.Although Dubai's economy was built on
the oil industry, currently the emirate's main revenues
are from tourism, real estate, and financial services.
Composition of UAE economy
 OTHER FACTS AND FIGURES

Unemployment 4% May (2009)

GDP growth 7.4% (2008)

CPI inflation 1.9% April (08 –09)

National debt $142 billion June 18,09

DUBAI-ECONOMIC POSITION
Dubai had issued to international
investors, bonds worth $1.9trillion,
& sent the message that its
economic position is unshakable!

But now that foundation has

shaken!
 DUBAI FINANCIAL CRISIS
Dubai was another fallout of the global real estate bubble
With global financial markets plunging after Dubai World, the
government investment company burdened with $59 bn liabilities,
requested for deferment of debt to its creditors for six months, on
25th Nov 2009.
Nakheel has a debt of $26bn[ $3.5 bn islamic bond due to be paid
on 14th Dec 2009.
The Dubai government’s total debt is estimated at $80 bn.
Indian stock markets also plunged with heavy selling witnessed in
banking, infrastructure and realty stocks.
 DUBAI'S GDP GROWTH TO SLOW TO 6% IN 2009

Dubai's GDP, which achieved an annual growth

rate of 17.9% from 2000 to 2006, is expected to
slow to 6% in 2009, the Dubai Chamber of
Commerce and Industry. DCCI director general
Hamad Buamim said the largest contributor to
Dubai's GDP remained the real estate sector. In
2007, the sector contributed 8% to the
country's GDP with investments totaling
Dhs25.8bn, reported Gulf News.
MAJOR IMPACTS OF DUBAI CRISES
IMPACT On STOCK MARKET

FALL IN REAL ESTATE PRICES

LAYOFF’S

DROP IN DEMAND OF GOLD

IMMEDIATE DROP IN OIL PRICES

DEPRECETION IN “DIRHAM”
IMPACT ON STOCK MARKET
Across Asia banking shares plunges down.

Hangsang 3.1%
Nikkei 1.8%
 Shanghai composite index 2.36%
Australian stock exchange 3.0%
BSE 2.0%
THE IMPACT OF THE FINANCIAL CRISIS
ON DUBAI'S PROPERTY MARKET
The construction industries seeking a major freefall

Labourers are asked to go home

Whatever construction projects were on the avil,are

shelved
 Immediate drop in oil prices

There was slight drop in oil prices as oil contributes

to 6 % in Dubai economy.
This crisis is a setback pushing Dubai to rely more
on oil revenue. Dubai has to pump more oil out to
finance its debt. and as OPEC is not expected to
increase the production quotas, expecting oil prices
 to go even lower.
 Drop in demand of Gold:-

Dubai does not produce Gold on its own, it seeks

exports from countries like India and re-exports
them to other countries.
 Depreciation in Dirham:-

 The valuation of AED (The local currency of Dubai)

saw a drop. This means the strengthening of the
Dollar, by a bit.
 REASONS
Dubai, unlike other six emirates of UAE is not a country rich with oil
resources.

This city state is purely a business city wholly depending upon tourism
and other businesses.

Dubai World, in a haste to attract world entrepreneurs started spending

more and more on building fine roads, star hotels,etc.

Foreign institutional investors also invested much here, especially

during the last four years.

Real-estate business in Dubai suddenly collapsed.

This made an impact on other businesses also.

 EFFECTS
•Dubai world has business tie-ups in different countries including India.
These projects, may be delayed( resulting in cost increase), or dropped,
or prolonged.

•Unemployment problem may arise in Dubai. Enterprises may have to

retrench a portion of their employees.10 lakh Indians are working in
Dubai and other UAE countries.

•Foreign Institutional investers, who have business ties with Dubai

World, may face loss.70 financial institutions have lent credits to Dubai
world.

•Banks in Dubai may face crisis.

•When the world is recovering from last year's economic recession, this
may push it back to same position.
 HOW IT AFFECTS INDIA

•A large number of Indian workers, especially from Kerala,

work in Dubai.

•Some construction workers are likely to lose their jobs in

Dubai. It may have some repercussions on Kerala’s economy,
which is substantially dependent on Gulf money.

•Since the global financial meltdown, many low-paid workers

in the Middle East have already lost their jobs.
 EFFECT ON IMPORT EXPORT ESTATE OF INDIA

• Even gems and jeweler industries may

be impacted negatively with many
Indian firms having links to Dubai’s
world-famous bullion markets.

A substantial portion of India’s inward

NRI remittances come from UAE.
 IMPACT ON EXPORT

India’s Export to UAE 13.1% in FY09 -

 Gems And Jeweler - 38.38%
 Petroleum products - 17.53%
Non ferrous metals - 17.42%
Basmati Rice - 29.4%
Machines - 16.34%
 Indian Banks In Dubai

HDF
BOB Axis SBI ICICI
C
EFFECTS ON INDIAN BANKS
Bank of Baroda : Bank of Baroda has some real estate
exposure to Dubai -accounting to around five per cent of
its loan book.

State Bank of India: The bank has an exposure of Rs

1,443 crore or 0.2 percent of total assets in the UAE, which
the bank claims as insignificant.

Even as banks are denying that they will be impacted

materially by the present Dubai debt crisis, RBI has
directed banks to reveal their exposure to Dubai World.
INABILITY TO REPAY LOAN INSTALMENTS
DUBAI government has announced just recently, that it is,for the timebeing ,
not in a position to repay its outstanding debt of $7,40,000.

At the same time, Government owned mega finance institution-DUBAI

WORLD also declared that it may not be able to repay any loan for 6months.

This 'Dubai World' is engaged in different business enterprises like-

transport,ship building,township building,etc.

A sister-concern of Dubai world,a building construction company, named

NAKHEEL is also telling that it requires some more time to repay its debt
instalments.

All these indicate that Dubai's financial

foundation is ...... SHAKING!
 ROLE OF ABU DHABI AS A SAVER
•Dubai asked Abu dhabi to bail out from this crises.

•However , it up to Abu Dhabi, the wealthy capital of the

United Arab Emirates how it would like to assist Dubai.

•Analysts are expecting Abu Dhabi (the senior and

controlling Emirate in the UAE) to help soften the blow of
this crisis.

•A recent report by HSBC confirms that Abu Dhabi has the

cash liquidity to support its own banks and property
companies
•Therefore, Abu Dhabi is likely to use some of this
liquidity and stability to help prevent a complete
collapse of markets in Dubai.

•The UAE Central Bank has already confirmed that it

board has discussed plans to launch facilities for
supporting real estate lending in Dubai, as well as in
the rest of the UAE.
 RAY OF HOPE.

•Inspite of all these, experts hope that it is possible to recover.

• Then Abudhabhi, another emirette in UAE, had helped Dubai by

lending a loan of $1,00,000.Abudhabhi is a financially stable country..It
can help.

•Just on 29th,November,Abudhabhi has announced that it would

concider the financing aspect,item wise, taking each main transaction
on merits.

•It has also clarified,it is not going to take full responsibility of all loans.

•There are many wonderful constructions in Dubai.

BURJ DUBAI
PALM ISLANDS
WORLD ISLAND
 3 LESSONS FROM DUBAI CRISIS

Diversification is not just a buzzword

Debt does matter ... Eventually
Foreign investing can be risky
 O N
S I
L U
NC
CO
THANK YOU