Dubai World -Recession
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The debt crisis in Dubai

The debt crisis in Dubai

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Dubai World -Recession Presentation Transcript

  • 1. ‘ Dubai World’ Recession -B.V.Raghunandan, SVS College, Bantwal Department of Business Administration, St.Joseph’s Engineering College, Vamanjoor December 8, 2009
  • 2. Dubai- Institutional Profile
    • Dubai Holdings- Private Investment arm of Sheik Mohammed bin Rashid al Maktoum
    • Dubai Holdings has four divisions: Property, Leisure and Hotels, Investments and Free Zones including tax-free business parks
    • Dubai World-Property, Leisure and Hotels
    • Investment Corporation of Dubai-Supervisory Body of all Government Projects
  • 3. ‘ Dubai World’-Recession
    • Dubai World –the Real Estate Investment Arm and Nakheel is a subsidiary for creating islands like Palm Island
    • Source of Revenue: Crude Oil Export, Tourism and Trading Margins
    • Projects: Infrastructure, Lavish Hotels, Reclaiming Land, Race Horses in the USA
    • Huge Investment in Real Estate Development
  • 4. Rationale for the New Projects
    • Dwindling Oil Resources
    • Expensive Life Styles of Royal Families
    • Need for Developing Alternate Sources of Revenue
    • Developing Tourism and Duty Free Shops
  • 5. Nature of Projects
    • Iconic Projects
    • Targeted at Most Affluent Customers
    • Built for Royalty
    • Every Project is Showcased to the World
    • Projects Executed to Meet the Deadlines
    • International Technical Expertise
    • Finance through International Borrowings
  • 6. General Defects of the Projects
    • Defective Location
    • Unnecessary Grandness
    • Too Many Projects in Succession
    • Instability in Tourism Industry
    • Redoing
    • Using Expensive Consultancy
  • 7. Projects
  • 8. Palm Island
  • 9. Cost Nightmare
    • Huge Construction Cost
    • Very High Fixed Cost
    • Unreachable Break Even Point
    • Wastage Through Redoing
    • Huge Cost of the Land (In the sea)
    • Fluctuating Fortunes
    • Expensive Consultants
  • 10. Marketing Myopia
    • Class Marketing-Unstable
    • International Customers-Choice is International
    • Real Estate Boom becomes a Bubble Quickly
    • Single Product-Tourism; No Possibility of Product Diversification
    • Political Instability of Middle East Ingrained in the minds of International Customers
  • 11. Finance Debacle
    • Presence of a Huge level of Debt leading to High Debt Equity Ratio
    • Contrary to Sharia Principle frowning upon lending for an interest
    • Unsteady Revenue
    • Hasty Completion of Too many Projects without waiting for revenue from the Previous Projects
    • No proper Project Evaluation (not using Investment Bankers)
  • 12. Impact
    • Dubai is not a Big Trading Partner of the World as the US is
    • Crude Oil Market is Bullish
    • Projects are being Halted
    • Abu Dhabi may Bail out Dubai
    • Non Real Estate Activity continues
    • Debt is likely to be rescheduled
    • No Possibility of Recession
  • 13. Impact on India
    • Regional Bias
    • Kerala, Tamil Nadu and Dakshina Kannada District of Karnataka
    • Employee Profile Bias
    • White Collar Jobs may not be affected
    • Skilled Workers and Semi-skilled and Non-Skilled workers in the Real Estate may be affected
    • Indian Real Estate is booming
  • 14. Comments of International Bankers
    • Michael Geoghegan, HSBC Group chief executive “ I am confident that the leadership of Dubai and the UAE will overcome any short-term issues they face, which appear to have been somewhat sensationalised, and continue to lay the foundations for sustainable growth".
  • 15. Comments of International Bankers
    • World Bank Group President Robert Zoellick, “the Dubai debt crisis is manageable and it would not affect India”. 
  • 16. Centre for Development Studies
    • Study of CDS for Department of Non-Resident Keralite Affairs reveals
    • -25 lakh NRIs from Kerala
    • - 37000 to 60,000 lost their jobs
    • -Of the remaining,58% remained in the same employment
    • -42% moved to another sector of employment
    • -ready employment in Indian Infrastructure Industry
  • 17. Blown-Out Press Coverage
    • Western Media
    • Action of Short-sellers
    • Increasing the Terms of Restructuring
    • Increasing the Premium on Credit Default Swaps
    • Creating a dampening effect on the Commodities market particularly on Gold and Crude Oil Markets
  • 18. THANK YOU