WHY DUBAI’S ECONOMY IS ON SHAKY GROUND: ASTONISHING FACTS!

Dubai has been regarded as one of the most booming economies of today. From shopping
festivals, to skyscrapers and to mega city projects, Dubai is virtually without a parallel when it
comes to sheer luxury. But, recent facts have come up which suggest that all that glitters is not
gold and the shining success of Dubai is hiding an impending economic crunch. Stay tuned to
find out what economic turmoil are we referring to.
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Dubai is an extremely attractive location for businesses because of its global reach. It
has a really unique economic model which has led to a lot of success. Gulf countries have been
rich for quite a while but no other Gulf state has had the same level of awe-inspiring financial
success as Dubai, and to imagine all of that happening without actually relying heavily on oil
exports is truly baffling. Unfortunately for the Emirates, it seems that Dubai’s economic model
has run into some issues which compromise its long-term viability. This means that Dubai will
have to switch towards a different economic model if it is to continue on its upward trajectory.
But before we go back to Dubai, we need to zoom out a bit and see how the rest of the
world is doing financially right now. Survey data suggests that most Americans who were
comfortably earning in six digits in the pre-pandemic era, are now struggling to make their ends
meet. Most Americans are facing trouble in paying their rents and meeting other liabilities. But,
how are the hedge fund managers coping with this crisis? Most of these fund managers are
putting their investments into unorthodox investment opportunities like art. Market analysts have
reported that right now they are seeing the lowest correlation of investment to any traditional
stock market opportunity, like the S&P-500, in the past 26 years. Truth be told, this was not an
easy market to get into, but Masterworks provides an accessible platform through which
paintings worth millions could be procured. Now, this is how the rich and the super rich are
spending their money now.
To understand what’s happening in Dubai, we have to go back to the 60s when Dubai
was nowhere close to the glamorous and prosperous city it has become today. In fact,
Dubai was a poor fishing town. Oil was found in Dubai but the reserves were not as huge but
due to the small size of the city, it suddenly got very rich due to its reserves of black gold. This
led the then ruler of Dubai, Sheikh Rashid Bin Saeed Al Makhdoom to lay out a strategic plan
which would enable Dubai to expand on its riches. This was a really smart move because Dubai
could not count on oil to stay afloat, since the reserves were not even remotely comparable to
what they found in the Kingdom of Saudi Arabia or elsewhere. The Sheikh then spent all of the
resources on improving the connectivity of Dubai with the rest of the world- wisely investing in
infrastructure such as airports, roads and hotels. Due to this infrastructure, Dubai was regarded
as a Western city operating in the Middle East because it had the HQs of important western
companies and all their branded restaurant chains could be found in Dubai. Dubai was
emulating the model set by Beirut, the capital of Lebanon. Due to its excellent connectivity with
the West, many established banks now wanted to operate in Dubai and with the banking
industry came the legal fraternity and the healthcare industry. Dubai kept on improving its
infrastructure so that it could also start fostering its tourist based economy.
All of this naturally led to a global interest in Dubai’s real-estate market which was
launched by the government back in the 1990s. The government had begun investing into
real estate and construction because it had ready access to cheap labor from anxious workers
coming from Pakistan, India, Bangladesh and Sri Lanka. Dubai really capitalized on all its
resources and the results were outstanding too- for example, the Burj Khalifa is just one
example.
But what is the danger to Dubai’s economy right now? The IMF has said that Gulf
economies might be looking towards an economic recession because the oil reserves might not
last until 2040. In fact, most modest estimates have suggested that oil reserves might run out by
2034. This means that oil-based Middle Eastern economies have to radically revise their
economic structures in order to remain relevant in the region. Now you may be asking yourself-
how does this relate to Dubai? Dubai had the least reserves of oil in the region and till now plays
a vital role in the economy of UAE. The United Arab Emirates produces about 3.2 billions of oil
barrels a day, which makes it a total of 54.5 billion worth of exports per year. That is a huge
amount. But, Dubai’s real estate market could be a potential savior if it relaxed its citizenship
requirements. Most of Dubai’s real estate market is driven by external investors, who will lose
interest as soon as the oil goes out of the picture. To keep the investors interested, UAE has to
lax its citizenship laws. This will attract more people to invest in Dubai’s real estate and can
potentially make up for the lost revenue from petroleum exports! The good news for Dubai is
that historically it has shown excellent strategic thinking, and we believe that it can do the same
for its people in the face of present crises as well.
On this optimistic note, we will conclude today’s video. Please give this video a huge
thumbs up, if you found something of value in it. Thanks for watching till the end and see
you in the next one! Cheers