The growth and development of Dubai World Group
The international business became essential for the most of organizations in order to improve their business performance and to find new marketing worldwide; the large economic boom experienced by the UAE these days and continuing for many years, the most important features of economic prosperity in the country, tens of major projects move strongly the economy by pumping billions of dirham in this emerging market, and the real estate boom brings with it prosperity in other sectors linked to it directly or indirectly, such as industry and trade of construction materials, travel and tourism industry and the service sector, retail and educational sectors, health and even transportation. The real estate sector absorbed the largest share of employment, which includes all categories and ages, and this large number of employment needs all the previous service. Although the real estate sector has accounted for 11,5 % of GDP achieved in 2005, due to an increased number of housing units and non-residential, which amounted to 847 units during the past year, and the construction sector in turn has almost the same rate, meaning that both sectors are the about 23 % of GDP, this figure goes up if we take into account the impact of real estate and construction in other sectors.
One of the most famous and effective companies that contributed to the growth and development of Dubai is Dubai World group; this group established several corporations that operated the international business and encouraged the foreign investments to come and share the economic growth of the UAE.
The international business in the UAE started with the competitive and progressive economic situation in the country; Dubai is the main economic capital of the country by holding the largest shares, as its control for the activities of work, where it is progressive removal of barriers to foreign investment in the country with the expansion of free zones, and that the amendment of laws on foreign ownership in emirates such as Abu Dhabi, Dubai, Ajman and Ras Al Khaimah , refers to the desire to integrate fully into the global economy. Among the factors that played a key role in the booming real estate sector in the UAE high population growth rates, and old age segment of young people, and the large influx of expatriates, and high levels of liquidity in the region and supportive government policies, as well as to the reasonableness of the profit margin of 12 % per annum. Has exceeded the real estate sector in the UAE national borders to move to regional and global prospects of welcome, where companies such as launched (reconstruction) and (Dubai Holding) and (Dubai World) and (Construction) mega-projects in Pakistan, Egypt, Algeria, Tunisia and South Africa, Britain and the United States and Saudi Arabia, both through the creation of such real estate or buy, while the UAE real estate sector attracted a large volume of Gulf investments in particular and the world in general, and the sector has seen a substantial number of real estate companies in Saudi Arabia and Kuwait and launched large-scale projects by virtue of that enjoyed by Gulf investment advantages and exemptions especially, as did many of those companies in alliances with UAE companies to launch major projects and take advantage of this lucrative market. Perhaps one of the reasons that contributed to the promotion of the sector is the setback suffered by the local stock market, and the Gulf over the past two years, it has also caused the migration of part of an estimated investment from stock markets to the real estate market, which have more than safety and stability despite the limited stock market returns relative jumps. something else contributed to the real estate boom, a large pool of liquidity injected by banks and funding bodies in the real estate market through the financing of major projects on the one hand and finance the purchase of freehold units on the other hand, the volume of housing finance 120 billion dirham, is expected by private sources, to reach 200 billion dirham over the 3 years, and the proportion of funding to 95 % of the value of units, and overestimated the banks in financing, reaching out of danger and that go beyond the volume of lending to the size of deposits has about 17 billion dirham.
The methodology of this research is based on the interview with managers of some groups of Dubai World group, the interview is driven by core questions about the factors, importance, outcomes, and problems related to Dubai World Group.
Instrument: Interview Questions
Q1- What are the main reasons and factors contributed to the establishment of Dubai World Group?
Q2- How international business is represented in Dubai World Group?
Q3- what are the main business issues related to international business in Dubai World Group?
Q4- What are the main business fields operated by Dubai World Group?
Q5- How Dubai World Group manages the international business transactions?
Q6- What are the main risks faced Dubai World Group?
Q7- How Dubai World Group managed the latest financial crisis?
Q8- What is the role of restructuring strategy in Dubai World Group to handle and manage the latest financial crisis?
Justification of the Study
This study discusses the situation of Dubai World Group as one of the most famous and major international business drivers in the UAE especially in Dubai; the study will analyze and conclude the performance of Dubai World Group as international business by applying spotlight on the main organizations related to the group and figure out the international business strategies and plans prepared by the group to meet the challenges and handle the risks in the local and international markets. This study will analyze and compare the past situation of Dubai World Group versus the current situation of this group and conclude the results.
Purpose of the Study
This study aims to discuss and analyze the situation of Dubai World Group as international business organization in the UAE by considering the following issues:
The main business operations held by the group
The advantages and disadvantages of the group as international business.
The contribution of the foreign investments in the growth and improvement of the group as international business.
The effects of the latest financial crisis on the group.
The strategic procedures followed by the group to handle and manage the financial crisis.
The restructuring process and its pros and cons.
Recommendations for the group to handle the situation and beware of other problems and risks in the international business.
International Business in About Dubai World
Since its establishment; Dubai World Group started its business internationally and locally and encouraged and attracted huge number of business investors to share the group and improve its financial and economic strengths; Dubai World holds the task of achieving global reputation and prestige of the Emirate of Dubai in the field of international investments. And the Dubai World holding company it oversees the operation of a diverse range of industries and play a pivotal role in the rapid economic growth witnessed by the emirate. The objective of the Dubai World to become the main engine of growth contributes to advancing the development at the local and global levels.
The Dubai World's investment four strategic areas of growth in the business world to the twenty-century atheist, namely, transport and logistics services, marine developments, Urban Development, investment and financial services.
Dubai International Wallet
Dubai World Group includes the Dubai World portfolio which one of the major members of the group of the most famous companies and projects at the international business level. Dubai World and includes, for example, DP World, one of the largest marine terminal operators in the world, Dry-docks World and Dubai Maritime City, which aim to establish Dubai as a leading center for shipbuilding and marine services, and Economic Zones World which operates several free zones around the world, including the free zone of Jebel Ali and Techno Park in Dubai, Nakheel real estate development company that stands behind the real estate projects is unique, such as the Palm Islands and the Isle of the world, and estate planning firm Limitless, the global, which holds several development projects in different parts of the world, economic, financial, and investment group operating in the field of world sports and entertainment, which seeks to redefine the industry through value to explore opportunities in the areas of investment and development, and Dubai World Africa, which oversees the regional development and a diversified portfolio of investments in the continent, and the operation arm of the international investments, the group which has a global footprint in finance, capital, leisure and aviation in addition to many other business enterprises.
The international business strategy is based on the work of Dubai World, driven by a combination of pragmatic acquisitions and investments that show vision, and is determined to achieve tangible results and measurable to the work of Dubai World and its partners.
As Dubai World Group one of the largest companies in international business world, is pursuing a policy of engagement Dubai World labor practices that are consistent with the objectives of the company to preserve the environment and social responsibility. Thanks to strong leadership with a vision is right, our thoughts were always characterized by innovation, ambition and meet the needs of sustainable development. Dubai World believes that the success of the company based on the principle of interdependence of all individuals and employees. The philosophy being pursued on a solid foundation based on best practices to exercise moral and integrity. And shows the commitment of Dubai World social responsibility is evident in its various social campaigns in the field of education, health care, the environment and welfare of staff and the community in which resolved.
Members of Dubai World
The members of Dubai World Group include Dubai Government, currently undergoing restructuring and is burdened by financial difficulties, ten companies including “Nakheel”, which has developed a number of major projects handled by Dubai Properties, Dubai Ports World, the third largest port operator in the world. The government of Dubai has announced last Wednesday that it had requested the freezing of the financial benefits of Dubai World debt, estimated at 59 billion dollars accounted for the bulk of the debt of the Government of the Emirate of Dubai and its affiliates the estimated $ 80 billion Dirhams.
Nakheel is the main developer of industrial Palm Islands in the Gulf, and has difficulties to pay the value of Islamic bonds worth U.S. $ 3,5 billion on December 14.
The “Palm” projects have been forced by the global financial crisis to freeze the number of mega projects including the world's tallest tower length of more than miles, and the city “Waterfront” which has an area twice the size of Hong Kong.
Limitless and other real estate company is a subsidiary of Dubai World, and was implementing projects in Russia, Vietnam and Saudi Arabia, but to highlight its projects in Dubai “Arabian Canal” assumed to be water artery in the heart of the desert emirate. However, the future of the project is not clear. And deserve the debt of the company worth U.S. $ 1,2 billion at the end of March (March) next year.
The investment firm is the investment arm of Dubai World, has a huge acquisitions worth 2,9 billion dollars since its inception in 2003. One of the most prominent deals was the purchase ship “Queen Elizabeth 2” which would turn into a floating hotel off the island of Palm Jumeirah in Dubai.
Dubai Ports World company is the third largest port operator and container terminals in the world and occupies approximately 50 stations in 32 countries. The company has problems that will delay projects to expand and freeze the recruitment process due to slowing business as a result of the global economic crisis. The company said it earned $ 621 million in 2008, with a high 48 % of profits in 2007. This is the company's most profitable and the strengths of the Dubai World Group. Dubai World companies and also world free zone company, which operates particularly Jebel Ali Free Zone in Dubai, the largest free zone in the region.
The company also control subsidiaries of the group and specialized in investments in sports and entertainment. The center of the Dubai Multi Commodities is a free zone dedicated to trading in gold, diamonds and various kinds of minerals and commodities. Moreover, Dubai Dry-docks is a company dealing with about 400 ships per year, especially oil tankers. The Dubai Maritime City real estate project is expected to be implemented within 2012.
The other major member of Dubai World Group is “Dubai Natural Resources World” companies, Dubai World is specialized in investing in energy, mining and agriculture in different parts of the world, the last company was founded within the group, was founded in September last in the midst of global financial crisis. This company was established to manage the financial and non financial resources of the group and provide effective strategic plans and procedures that can handle and manage the resources for the company of the group, the natural resources world company became one of the most important parts of the group that responsible of creating, managing, and maintaining the different resources in order to protect and prevent any unexpected problems and risks, this company improved the attraction and encouraged several investors to share the group.
Investments in the Dubai World Group
The major international business investments of Dubai World Group are based on organizations and companies that invest in existing and start-up funds and projects through three sections: Dubai Investments Industries, M'sharie Project, and Dubai Investments division of Real Estate. Dubai investments has is either owned directly or by one of its subsidiaries, investments are in fields of manufacturing, agriculture, wholesale, real estate and retail trade, the industrial and commercial developments, tourism and transportation. Dubai investments listed its shares on the Dubai Financial Market (DFM). In October 2005, Dubai investments reached AED2.5 billion totally. Businessmen in the UAE highlighted the opportunities of investments in the UAE in Business Meet 2008 held at Hotel of Jumeirah Beach, Dubai.
That experience was organized by All Colleges of Alumni Forum, with the apex body of 50 colleges of alumni from the south Indian states, which was designed to provide new lines of investments in UAE by non residents of Indians. In his important address, Mons Joseph, the Indian Minister of Public Works, highlights the efforts initiated by the UAE and said that he would express the sentiments and concerns by NRIs on the business challenges and advantages of investing in UAE generally and Dubai especially.
Uzbekistan aims to attain $3.5 billion of investment from the UAE in different sectors ranging from exploration of gas to artificial fuels production, regarding to a announcement obtained by Reuters. The announcement comes on the feeds of Islamic President of Uzbek, in the UAE and lists 21 investment projects in the Central Asian nations that had been offered by Dubai companies as a result.
According to UAE central bank, the economic growth in the last financial year will grow up to a range of 6% to 6.5%, mainly because of strengths in investments within large scale of manufacturing and commercial projects. The other key indicators which are going with the government's expectations include a current account of 6% cent of GDP and a budgetary deficit of 5.2% of GDP.
Dubai received around $18 billion as foreign direct investment in 2005, doubling the previous year total, that encouraged by the governmental policies of the UAE’s 23 free zones, the Minister of Economy announced that Global investments are playing major role in the growth. The economic minister Shaikha Lubna Al Qasimi said that the UAE will remain attractive pole for international investors since it allows 100% foreign ownership in the free trade zones.
Dubai Stock Market
Dubai stock market first established and opened in Nov. 2000, the good economic environment was the main reason of opening this stock market. Moreover, the economic developments in Dubai and Dubai represented with the large enterprises and real-estates companies like Emaar and Sorouh was the main factors that encourage the ministry of economy to start the stock market.
Currently, Dubai stock market is playing major role in the financial situation of the large investment companies and individual investors as well, it is the link between the investment company and investor in Dubai and UAE. The major players of the stock market of Dubai are: Dubai National Bank, Sorouh Real-Estates, Etisalat Telecommunication, and Dubai Islamic Bank.
Main Objectives of Dubai Stock Market
Provide opportunities to invest savings and funds in securities in order to benefit national economy.
Ensure the soundness and accuracy of transactions and to ensure the interaction between demand and supply in order to determine prices.
Protect investors through establishing fair and proper dealing principles between various investors.
Impose stringent controls over securities transactions to ensure sound and conduct procedure.
Develop investment awareness by conduction studies and issuing recommendations in order to ensure that savings are invested in productive sectors.
Ensure financial and economic stability and develop trading methods in order to ensure liquidity and stability of prices of Securities listed on the market.
Mutual Funds Analysis of Dubai Stock Market
In this analysis, we will apply the financial formulas on the three major players of Dubai stock market, we chose “Nakheel”, “Etisalat”, and “Dubai National Bank”, the financial analysis will focus on the stock index of each company, the period of analysis is one month “October 2008”.
The data needed for this financial analysis are collected from the official website of Dubai Stock market “www.dfm.co.ae/default.aspx”
The following charts and tables reflect the financial stock indexes of October 2008 for the three mutual companies:
Stock Indexes of October 2008
6 - 10
11 - 15
16 - 20
21 - 25
26 - 31
Dubai National Bank
As shown in the table and the chart, the stock indexes of the main mutual funds of Dubai Stock market are dropping down, the main reason of that was the world financial crisis occurred and still standing ahead of the financial funds of all stock markets over the whole world, the index of Etisalat was the most one that affected of the crisis, the index closed at -1.63 the end of October; the index of Dubai National Bank raised up little bit to close at 1.01, the index of Nakeel closed at 1.35 after 4.20 at the beginning of October. These data represent the initial signs of the financial crisis occurred in 2008 and affected negatively on Dubai World Group.
From the chart, we can note that the most active stock index is Nakheel real-estates, we can explain that from the extreme construction development in Dubai which is mainly managed by Nakheel. The lowest net asset value is the Etisalat’s, because of the low level of attraction in investment of the communication sector in the UAE rather than investments of real-estates or commercial bank which are more active.
Average Share Price of Abu Dhabi Stock Market
The average share price can be measured by calculating the average of share prices at the beginning of period and comparing it with the average at the end of that period, considering the three chosen companies we well find out the situation of Dubai stock market in October 2008.
The Average Price of Shares in Oct. 2008
Price of Shares
Total Market Value
Beginning of Oct.
End of Oct.
Beginning of Oct.
End of Oct.
Dubai Natinal Bank
By looking into the share prices at beginning and end of October, we can notice that the average is decreased from $21 to about $12; the size of shares decreased in the stock market, and the total market value is decreased following the decline of the share size of Abu Dhabi Stock Market.
Debit Problems of Dubai World
Debit problems of Dubai World Group has announced that the total value of the debt of Dubai World Group and the companies that are subject to the restructuring of approximately $ 26 billion, stressing in this regard that the proposed restructuring, which consists of 5 stages only for the group and some of its subsidiaries, including Company (palm) and the World Company (Limitless) world.
The group announced in the first official statement issued since when it announced it would ask its creditors to postpone debt repayments until the end of May next, the process of restructuring will not include the company (Infiniti) International Holding Company for international investments, and the World Company (the world of ports and free zones) and all of its subsidiaries (the company, DP World and Economic Zones World and the ferry company P & O and the Jebel Ali Free Zone) and all of which enjoy a stable financial situation.
The statement published in the (Gulf) United Arab Emirates newspapers highlighted that the total value of the debt of Dubai World and companies that are subject to the restructuring of approximately $ 26 billion. According to the statement, the process of restructuring will be in the interest of all parties concerned and will be divided into several stages, including: business planning stage, the stage of determining the level that can be maintained from which to make a profit and generate cash, and the stage of evaluating options to reduce debt, including the sale of assets, The assessment phase of funding needs, in addition to the formulation phase of the restructuring proposals and submit them to creditors and their implementation.
The statement emphasized that the initial discussions began between Dubai World and funded banks and it's going to a constructive approach. In the light of the operational challenges of current and future obligations of the group, it is expected to be the processing of strategic alternatives and to take relevant action on an urgent basis. As part of the process, forward (palm) the request of a campaign to appoint an official representative of their instruments for them to start discussions with them.
The statement declared that the Dubai World Group has appointed to advise on the restructuring of the group, as well as company (Rothschild), which will continue in its current role as a financial consultant, referring to the earlier announcement of the appointment of a managing partner in the corporate finance department in a company (Deloitte, Aidan Birkett), Chairman of the restructuring of Dubai World, which will evaluate the development and implementation of the restructuring process so as to address the financial and operational challenges faced by the group while maintaining the availability of capital needed for the future of the group.
In addition, the statement declared that after a detailed review of the level of liquidity of the group and the position of the capital structure, Dubai World said that it should immediately consider strategic alternatives for the current capital structure of some of its affiliated companies, and it will follow the methodology of continuous communication and will provide the latest developments with the evolution of stages of the process.
Total debits of British banks to the Dubai World group of 5 billion dollars, making it the largest lender of foreign banks for the group owned by the Dubai government.
The newspaper "Financial Times" British, Thursday published that banks in the country and their advisers are still trying to count the total amount that was lent to Dubai World.
But the newspaper said that the "Royal Bank of Scotland" is the largest British banks at risk, is estimated to range between one billion and two billion dollars, pointing out that banks virus. S. Me. Plc, Standard Chartered, and Lloyds is exposed at about one billion dollars each. The Dubai World unveiled a plan to restructure the debt of 26 billion dollars, based on this plan, the exposure of Royal Bank of Scotland reduced to about $ 700 million, a level much lower than had been feared.
Restructuring Process of Dubai World
Dubai World Group announced the first statement the restructuring, before the proposed restructuring, which consists of five stages with only some of the group and its affiliated companies including Nakheel World, World of Limitless. The statement said that the restructuring process will not include the Infiniti International Holding Company and Investment Company, the world of global ports and free zones (and all of its subsidiaries company of DP World and Economic Zones World and the ferry company P & O and Jebel Ali Free Zone) and all of which enjoy a stable financial situation.
The statement said that preliminary discussions began between Dubai World and funded banks are going to a constructive approach in the light of the operational challenges of current and future obligations of the group, it is expected to be the processing of strategic alternatives and to take relevant action on an urgent basis and as part of this process moving forward, "palm" of the demand instruments of a campaign to appoint an official representative of them to start discussions with them.
According to the projections by the majority of the statement will serve the restructuring process in the interest of all related parties will be divided into several stages, including: business planning stage, the stage of determining the level that can be maintained from which to make a profit and generate cash, and the stage of evaluating options to reduce debt, including the sale assets, and the stage of assessment of funding needs, in addition to the formulation stage of the restructuring proposals and submit them to creditors and their implementation.
Restructuring process appointed company Molise & Company to advise on the restructuring of the group, along with Rothschild and the company which will continue in its current role as a financial consultant, referring to earlier announcement of the appointment of Managing Partner of Corporate Finance at Deloitte LLC. M. M, Aidan Birkett, Chairman of the restructuring Dubai World, which will evaluate the development and implementation of the restructuring process so as to address financial and operational challenges faced by the group while maintaining the availability of capital for the future of the group.
Dubai World Group expressed that they would like this statement to inform providers of financing on the recent developments regarding the structure of capital. The statement said that after a detailed review of the level of liquidity of the group and the position of the capital structure, Dubai World has concluded that it should immediately consider strategic alternatives for the current capital structure of some of its affiliates. Dubai World group declared that it will follow the methodology of continuous communication and will provide the latest developments with the evolution of the process. The restructuring process started according long-term plan to commit the pay back of the financial debits required to the foreign investors and restart its business activities in order to protect the economic situation of Dubai and the whole UAE as well.
Changes in international business process of an organization can take several shapes; in case of Dubai World Group, there are many changes occurred; these changes affected the international business and changed the strategy of it.
Change by Top to Bottom
Change by top to bottom may occurred in an organization in cases of problems in international business progress, this change usually produces low financial incomes, and caused by many factors such as quality of products/services, pricing strategy or competitive advantages. The problems occurred in Dubai World Group, the trouble was breaking in is no easy task. And even if the international makers succeed, restructuring process will not provide a quick escape from the financial crisis. First, Dubai World Group must confront daunting cultural, organizational, and competitive challenges that will take years to work through
Change by Bottom to Top
Change by bottom to top is the growing process in international business, the growth in economic, financial or promotional situations of organizations is an example of change by bottom to top, in other hands, the problems solving in organizations is re-building the structure of international business; for example, the shrink of overall revenues of Dubai World Group pushed the corporations to find solutions, some of these solutions was selling some stocks in the financial market, but this was not enough anyway to avoid the situation. Dubai World Group was a very strong in the local and international market, especially in real estate sector; Dubai World Group was at the first rank of competition with others. The cooperation between Dubai World Group and other organizations in Abu Dhabi is huge corporations in the UAE local market was a perfect solution that will rise up the both to the top of the local market and enhance the international business performance of Dubai World Group.
Change by Process
Change by process is the changes of an organization that increase or substitute products/services provided by the international business. This change is required to refresh the international business, or sometimes, forced by the competitions in marketplace. Changes by process should be followed by changes in some structural properties in international business. The Dubai World Group and other major organizations in Abu Dhabi companies is a clear example of change by process, On September, 2009, leading global real estate industry players in Abu Dhabi “Sorouh” and Dubai World Group announced their partnership. This was one of the most important deals in Dubai World Group.
Change by Problem Solving
Change by problem solving is critical change should be made to avoid problem in international business, the international business problems may occurred by changes in marketplace, increase competition, changes in product/service quality, or unexpected problems such as the latest financial crisis faced all companies in the UAE and internationally. This problem forced all industries in Dubai World Group to make quick move to cover the problem and go through it, in the case of Dubai World Group the restructuring and partnerships with Abu Dhabi players was biggest change in the group to solve the problem of financial crisis and manage the financial resources needed.
The economic situation of the UAE is operated by several engines, the major engine is the oil, the explore of oil introduced the country to the international corporations to come to the UAE and invest with their economic forces and standards, that produce other economic engines to play and contribute in the economic growth in the UAE, in all other economic resources of commercial and industrial fields.But in other hand, this economic growth and opening country produce bad economic results, the most one of these results is increasing the inflation level in the UAE.
The inflation in the UAE reached its maximum levels comparing with the previous years, we can see the results of the inflation in many shapes such as the rapid increase of prices, and the weakness in Dirhams against the other currencies.
As announced by the ministry of economy, the inflation rate in the UAE reached 9.3 % by the year 2006, this high rate is ringing the risk bells about the economic situation of the UAE, the ministry of economy returned the reasons of this high level of inflation to many reasons produced by the increasing rated of production costs, and increasing the demand against the offer in the market.
The ministry declared that increasing prices of energy resources and fuels to reach the rate of 31.5% during the 2005, led to increasing the production costs of all products and as result increased the prices of goods in the market. Which led finally to increase the inflation rate by increasing the demands in the market against the offer.
The latest economic growth in the UAE represented with the increased economic projects in all fields, especially the real estates, is considered one of the other factors produced inflation in the economic situation of the UAE.
The dependency on the US Dollar to perform the economic transactions in the UAE also considered one of the reasons of inflation, because the US Dollar is going down, the buying price of the Dirham is also going down against the other currencies. The most sectors of the UAE economy are depending on importing products and raw items, the import is controlled by the international policies which controlled with US Dollar.
Inflation and Real Estates
As we see every day in newspaper and other media, the real estate companies are playing major role in the UAE economy, this produce rapid increase in the prices of real estates and the rent prices, and affected the both of consumptions and producers as well. The inflation is the major reason of this unexpected increase of the prices in the real estate sector.
The ministry of economy is trying to solve this problem by making strategies to be established, these strategies will be applied on the real estates sector to protect the consumer against the producer, and to control and monitor the factors that lead to create financial centers in some corporation, in addition to encourage the competition which will increase the opportunities for the producer and the consumer in the same time.
New Investment Law
The ministry of economy is going to approve new law to control the investments in the UAE, this new law concentrates on decreasing the monopoly in the UAE and give opportunities for the other competitors which will lead finally to decrease the inflation in many sectors in the UAE, by opening some sectors to the foreign investors, the law also is prepared to limit the increasing in prices of real estates, and in the other goods and services to limit the increasing prices produced by the inflation.
By reviewing the statistical facts, we get these results about the situation of the UAE:
The population of the UAE increased by rate 71% from 2.4 million to 4.1 million in the 2005, the number of the housing units increased to 95% from 404,430 to 789,646 in 2005, this increase should lead to stability in rental prices, but the rapid increasing of the outer demand on these housing units to buy them, which produced by the law that allowed the non nationals to own properties in some places of the UAE.
In addition, in the same time the UAE is importing the most products and consumption goods from other countries, all importing transactions are performed with the US Dollar, the decreased price of US dollar against the Euro and other currencies to around 30% starting from 2001 affected in the same rate on the Dirham. Because of the economic link between the US Dollar and Dirham. This produce an additional inflation called “Imported Inflation”. The other important issue that the UAE exports the oil production in the US Dollar, which make it difficult to cut the link between the Dollar and the Dirham. Which forced the UAE to pay more because of the low price of the US Dollar? When we review the economical report, we found that the inflation rate of the year 2006 reached 10%.
Dubai World Group and Financial Crisis
The world financial crisis occurred in 2008 is the most serious financial crisis and the worst of its kind since the Great in 1929 and 1930s. It became visible in September 2008 with the failure of several large United States financial firms. The underlying causes the crisis had been forecasted in U.S. business journals many months before September, with remarks about the unstable financial situation of leading U.S. and European investment banks, insurance firms and mortgage banks consequent to the subprime mortgage. In the UAE; the financial sector affected strongly with this crisis, this crisis impacted the stock market and produced lack of financial resources needed for the construction process.
The boom of real estate sector led to increasable demand on the real estate loans which made over controlled demand than the offer in banks of Dubai. Most of real estate companies in Dubai are depending on loan banks to fulfill their financial resources needed for different functions. The decline of Oil prices and the financial markets of Dubai highlighted the signs of the financial crisis of banks in Dubai.
In the UAE stock markets, the UAE financial situation has been suffering a free fall this year, a similar experience that some emerging markets had during the same time. On Nov, the index of Dubai Financial Market (DFM) closed at 1,981.44 points, falling down by 68.51 % from the peak of 6,291.87 points on beginning of 2008, with loss of 4.67 billion AED (1.27billion USD). at the same time, the Abu Dhabi Securities Exchange (ADX) also fell to its minimum this year, with its general index hitting 2,755.62, down 46.48 % from 5,148.49 points on June with a loss of 1.52 billion AED.
The UAE financial cabinet should take preventive measures to support the banking system. Under the measures, the government has to provide a 3 year guarantee to deposits and savings in all national banks and foreign banks with significant operations in the UAE. In addition, the government should also guarantee all interbank lending operations between banks operating in the country and inject adequate liquidity in the financial system if and when necessary. The government also should inject another 70 billion AED into the local banking system.
Nakheel as Major Real Estate Player in Dubai World Group
The recent boom in its property market of the UAE, with prices quadrupled. The property sector became an significant contributor to the country's efforts to expand its economy so as to reduce the dependence on the oil industry as economic resource. Property developers in the UAE launched a series of distinguished projects during the boom, including the Palm Islands and Burj Dubai the highest architecture in the world. The success of those projects in promoting themselves and their developers and the continuous improvement in the property market have encouraged developers make more “mega” projects.
Nakheel Corporation, the developer of Palm Islands, announced a new project "Nakheel Harbor & Tower." The project, which will cover more than 270 hectares and accommodate over 55,000 people, include a tower more than 1,000 meters high. When completed, the tower of Nakheel Tower will take title of Burj Dubai as the world's highest building, whose current height stands more than 680 meters. The Nakheel Harbor & Tower will take more than 10 years long to complete. Now, the limitations of loans and a possible bear market for the property sector, the project's seems to be delayed or even cancelled. Nakheel said in Nov. that it will reassess its “immediate business objectives to accommodate the current economic climate. The next few months will see a scaling back of activity around some of its projects. Nakheel is not only developer to reconsider its pace in the current properties business climate. Limitless, announced in Oct. 2007 to invest 61 billion USD to build a 75 kilometer canal and a waterfront development along its shores in Dubai, announced in November that it was reviewing the rapidity of development on a continuous basis and would adjust to reflect conditions of Dubai market.
Dubai World Group should contain the problems before rising up, the majority of assets of national and foreign banks in Dubai are assigned within the country, and their parties are known, in contrast to the parties of assets in Dubai market, which are regularly unknown.
Dubai World Group may improve its international business performance by sharing other overseas businesses in the strong economic environments such as Asian economics, this step may reduce the consequences of the recent problems and refresh the business of the group.
Dealing with Abu Dhabi business players is one of the successful solutions for Dubai World Group, these deals can enhance the business performance and reduce the effects of the financial crisis and other economic problems.
The restructuring process started by Dubai World Group should not include some major organizations in the group, as Dubai World excepted Dubai Ports from the restructuring process to keep its performance; the group should classify the organizations need restructuring by reviewing the business performance of each one.
The central bank of the UAE should provide statement that regulate and manage the financial transactions and long term loans taken from the properties market; the loans should be limited with margins. The economic infrastructure of the UAE is strong; so the government should strengthen the sectors that require low levels of financial resources such as industrial activities, transportation, or tourism sector. This step may support the financial situation of the UAE and help to increase the financial incomes of the federal government.
Dubai World Group established to represent the majority and importance of the international business in Dubai and UAE; the group establishment encouraged and attracted huge number of international investments to share the success of international business provided by the group, even the risks and problems reduced the performance of the group as international business player, I think that Dubai World Group still having important and major place in the international business of Dubai and contributes to the economic growth and development of Dubai.
Dubai World group is one of the most famous figures of the successful international business operated and joined the opening of economic markets in the UAE, although the financial crisis and the large size of the international debits of the group, but the group is still holding, controlling, and operating the majority of the international business in Dubai. The effective economic projects of Dubai World group are still operating the building the economy through the positive international relationships between the government of Dubai and the other major economic engines around the world; the strong background of Dubai World played important role in the strengths and opened more opportunities for the group to improve its situation and to go through the international financial crisis with less loses.
The different projects executed and managed by Dubai World Group companies leading by Nakheel are famous witnesses of the success and the progress achieved by the group in the different sectors leading with the construction and real estate, and in the international trading businesses, the highest building in the world “Burj Khalifa” represented the challenge and success of the group in the UAE and internationally as well.
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