The Sudden Economic Crises of Dubai - Essay Example

With the global recession hitting the world in 2008 all investments came to a halt. The market became bearish and infrastructure projects came to a halt. Dubai was adversely affected because the property prices during normal times were sky high but dropped immensely during the recession. It was felt by analysts that Dubai was like a pack of cards and its fall was inevitable. It was regarded as a monument of greed and vanity. It is in this context that the report is prepared and it analyzes how the own doing of Dubai led to the crisis.

The crisis is analyzed using Porter’s Diamond model and it has been found that Dubai largely depended on foreigners to avail its services. The domestic demand from locals was not very high. Porter has identified domestic demand as an important factor for a firm’s competitive advantage. This was Dubai’s weakness. As far as labor factors are considered there are not many local labors available in Dubai. Dubai depends on laborers from other countries which is a setback for Dubai. Moreover, lack of education is also an important factor which Dubai needs to work upon in order to be competitive in the future.

The United Arab Emirates is divided into seven city-states that have their own governments, own budgets, own legal structures and so on. Dubai has developed at a very fast pace but in the last decade, it has increased its spending massively on major infrastructure projects in order to develop real estate and to attract tourists. The Dubai problem started when Dubai World which is a state-owned company having a liability of $60 billion, announced its bail-out plans (Spencer, 2009). The uncertainty regarding Dubai sent down shivers across the globe.

It led to more than $14 billion being wiped out of the British banks. Although the total debt of Dubai was around $80 billion, the uncertainty had a rippling effect all across the globe (Hosking & Robertson, 2009). The report tries to find out the main causes of the Dubai crisis. The prime objective of this study is to find out whether the crisis was a result of the ambitious plans of the government of Dubai or was prompted by other factors.