Dubai yesterday shocked investors by asking for a debt stand-still of $59 billion from its state owned holding Dubai World, which focuses on real estate activity and that has developed some of the world's most extravagant real estate projects and constructions. Dubai's debt problem derives from a property boom that occur ed during these years which brought the world's tallest building as well as the extravagant palm beach island. But despite these incredible constructions we can see how all this led to significant hangover too. Western investors trust has been shaken by this announcement, who during the global financial downturn turned to the oil-exporting gulf region especially Dubai in search of help.
Media analysis:
After having read several Reuters articles regarding the matter, I chose to analyse an article that looked forward to the problem, which explained how Dubai may need help from its neighbour city Abu Dhabi. It refers to a power shift from Dubai to Abu Dhabi. The author asks rhetorical question such as "whether Abu Dhabi will bail out Dubai and at what price? . It explains the role of Abu Dhabi which is the capital city of UAE, and the seat of most of its oil wealth and the largest of the seven self-governing emirates by size. All these factors took a back seat during the last decade as Dubai undertook incredible building projects in the real estate sector in order to become the financial hub of the country as well as the most attractive city for tourism. The author analyses how Dubai needed the help of Abu Dhabi even before the market crash, lending $15 billion to Dubai, and it will need help especially now by admitting it can't meet the debts of Dubai World. All this is playing in favour of Abu Dhabi's ambition to unify UAE policies and laws, and to build a strong image of the political power in that region. Therefore the article analyses the situation also from a political point of view. Explaining how Iranian pressure regarding the nuclear weapon activity are concerning not only Abu Dhabi, but Washington too.
Bloomberg took a different approach to the news. The article went straight to the point, focusing on the bond issue and how the debts in bonds decreased from the crash of the real estate sector in Dubai in 2008. It took into account how this stand-still from Dubai World has deeply affected the western markets since the big global financial downturn. However, it took many opinions from different analysts, in order to compare and contrast, also with the crisis that affected Argentina in 2001. But the Author here did not really try to explain or actually give a possible solution or future perspective of the problem. It just explained the news in analytical and detailed way with basis points and numbers.
The Wall Street journal and FT gave a sensation to be the most shocked newspaper. Caring especially about their markets and banks involved such as; HSBC, RBS and Barclays. The undertook the approach just to explain how it has affected investors and how it was unfair to them. In an era where Dubai has attracted overseas financial companies in order for them to operate with relative freedom like in western countries and low tax barriers. This led me think on how such a country with such a significant resources of oil can have such debts?..Well, this is what the two articles transmit to the reader.
In my point of view, the Reuters article was the best to understand the overall situation which brought to this collapse of Dubai. I may add that the speed in how Dubai has built and created all these incredible infrastructure and buildings was too good to be real and stable. And that even though a country is rich for its natural resources, this does not mean that building in a rush brings a fast stable economy, especially if the foundation or root is sand. However, I think that at the end the neighbour Abu Dhabi will not want to see Dubai to sink. So a significant help will be on the way soon.
Sources:
Bloomberg:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aRsjlClzl500
Reuters:
http://uk.reuters.com/article/idUKTRE5AP2S220091127?pageNumber=3&virtualBrandChannel=0
WSJ and FT:
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