Why is Dubai in so much trouble?

Posted By Joshua Keating Wednesday, February 18, 2009 - 2:49 PM Share

Great rant from blogger David Galbraith via Boing Boing:

Short of opening a Radio Shack in an Amish town, Dubai is the world’s worst business idea and there isn’t even any oil. Imagine proposing to build Vegas in a place where sex and drugs and rock and roll are an anathema. This is effectively the proposition that created Dubai - it was a stupid idea before the crash, and now it is dangerous.

RGE Monitor's Rachel Ziema has a somewhat more sober version:

Unlike some of its neighbours (especially Abu Dhabi) Dubai’s growth was primarily debt financed, making it more vulnerable to the global liquidity crunch and more local liquidity tightening triggered first by the withdrawal of speculative capital and – later by the fall in the oil price. Although Dubai has little oil, it was clearly a petrodollar recycling hub. It accounted for much of the UAE’s external debt stock (some of Abu Dhabi’s state investors like Mubadala and others accounted for the rest ). Dubai based banks likely also accounted for much of the bank lending to the UAE. Moodys vulnerability indicators show that the UAE is among the most vulnerable in the MENA region.

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3:18 PM ET

February 18, 2009

Anathema?

Sex, drugs, and rock and roll are easily accessible in Dubai. Well maybe not drugs, except for alcohol. It's more than capable as a top vacation destination. The problem is that Dubai tried to build a major city overnight without the demand. But it's possible that the publicity it generated may prove to be a wise investment in the long run.

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