Dubai Economy: Ups and Down Introduction: Dubai is one of the seven regions which comprise the United

Arab Emirates. Dubai has a population of just over one million, with the vast majority (99%) living within Dubai City. Dubai contains a number of economic free zones which have various economic incentives to encourage investment and commercial development. These zones include the Internet and Media Cities, the International Financial Centre, Maritime City, the Airport Free Zone, and the Jebel Ali Free Zone. The Jebel Ali Free Zone, created in 1985, was the first of these economic zones in Dubai. The government has since invested billions of dollars into infrastructure and programs to coax foreign investors to the region. This Free Zone is not entirely tax free, but its incentives make it come very close. Companies which are run within the Jebel Ali Free Zone are given a total pass on all corporate and personal taxation for a period of fifteen years. At the end of this fifteen year period, a request may be made to be tax exempt for another fifteen years ² in effect offering the potential for an indefinite tax free status. In addition, there are no import or export taxes on companies within the Jebel Ali Free Zone. GDP growth (2000-2005) Dubai's historical economic growth has been truly impressive. In particular, since the year 2000, real GDP has been growing at a compounded annual growth rate of 13 per cent. Dubai economy has also been growing faster than the emerging economies of china and india, and the developed economies of ireland, singapore and the US. Much of Dubai's current success has been a result of its bold and visionary leadership and innovative human resources, mainly driven by government polic ies aimed at improving the business and investment environment, in addition to initiatives to establish specialised zones and mega projects (e.g. internet and media city, healthcare city, the palm, dubailand, etc). Those developments ensured a leading role for dubai and helped attract excess regional liquidity in the form of foreign direct investment (fdi). Economic growth has also been fuelled by private sector participation in developing sectors for which the government has set the stage by establishing a conducive business environment, coupled in many instances with heavy initial investments to boost private sector confidence. Other supporting factors are supply-side factors such as availability of labour and land for major real estate projects; the existence of efficient government services; a solid institutional framework and good mechanisms for service delivery; strong laws and regulations; excellent infrastructure, a strategic location coinciding with the rapid rise in global trade, especially in China and India, and openness to other cultures, giving Dubai a reputation as a safe and comfortable place to live and do business.

share prices in publicly listed companies collapsed and confidence was badly shaken in the emirate's ability to survive the crunch. the average growth rate during 2002 -2004 exceeded 16% per annum. including an Islamic bond for $3. basically there are no foundations there and any structures built without foundations is going to collapse one day or other. The emirate has said it has $80bn of debts. which began mainly in 2001. Dubai World. has liabilities of about $60bn. Government owned mega finance institution-DUBAI WORLD also declared that it may not be able to repay any loan for 6months.etc. the drivers of this growth. as a result of this consistent growth.This 'Dubai World' is engaged in different business enterprises like-transport. initiation of freehold properties for expatriates in Dubai and Sharjah. Given the wave of real estate development during the last few years. it also sold most developments off-plan.At the same time. the remarkable boom in private housing. . Property prices fell steeply. rising from aed billion in 1996 to 25. for the timebeing . the state-owned holding company whose bail-out plans triggered the current crisis.40. Output in the construction sector grew at an average annual rate of 11% over the last decade.4 billion in 2004.a building construction company.A sister-concern of Dubai world. The success of Dubai is build on very shaky foundation.5bn in December. It appears to have little cash flow to meet payments as well as relying on debt. The main problem is its real estate subsidiary Nakheel. infrastructure and industrial development. named NAKHEEL is also telling that it requires some more time to repay its debt instalments. the share of construction activities in the country's GDP rose from 8. are the rise in public spending on infrastructure. not in a position to repay its outstanding debt of $7. though some analysts say the true figure could be double that. with new developments now on hold. though only part of that is debt.ship building. and expansion of commercial and hospitality activities. Dubai's heavily foreign investment-dependent economy began to unravel in September 2008 following the global credit crunch.township building. Debt Crisis DUBAI government has announced that it is. which has huge bonds coming due.6% in 1996 to 11% in 2004.000.Dubai¶s Construction Boom: Construction activity is an integral part of a country's urbanization plans.

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