DUBAI, United Arab Emirates – Just a year after the global downturn derailed Dubai's explosive growth, the city is now so swamped in debt that it's asking for a six-month reprieve on paying its bills — causing a drop on world markets Thursday and raising questions about Dubai's reputation as a magnet for international investment.

The fallout came swiftly and was felt globally after Wednesday statement that Dubai's main development engine, Dubai World, would ask creditors for a "standstill" on paying back its $60 billion debt until at least May. The company's real estate arm, Nakheel — whose projects include the palm-shaped island in the Gulf — shoulders the bulk of money due to banks, investment houses and outside development contractors.

In total, the state-backed networks nicknamed Dubai Inc. are $80 billion in the red and the emirate needed a bailout earlier this year from its oil-rich neighbor Abu Dhabi, the capital of the United Arab Emirates.

Markets took the news badly — with the Dubai woes and the continued fall of the U.S. dollar giving investors twin worries. Dubai's move raised concerns about debt across the Gulf Region. Prices to insure debt from Abu Dhabi, Qatar, Saudi Arabia and Bahrain all rose by double-digit percentages Thursday, according to data from CMA DataVision.

In Europe, the FTSE 100, Germany's DAX and the CAC-40 in France opened sharply lower. Earlier in Asia, the Shanghai index sank 119.19 points, or 3.6 percent, in the biggest one-day fall since Aug. 31. Hong Kong's Hang Seng shed 1.8 percent to 22,210.41.

Wall Street was closed for the Thanksgiving holiday and most markets in the Middle East were silent because of a major Islamic feast.

"Dubai's standstill announcement , was vague and it remains difficult to discern whether the call for a standstill will be voluntary," said a statement from the Eurasia Group, a Washington-based research group that assesses political and financial risk for foreign investors interested in Dubai.

"If it is not, Dubai World will be going into default and that will have more serious negative repercussions for Dubai's sovereign debt, Dubai World and market confidence in the UAE in general," the statement added.

Dubai became the Gulf's biggest credit crunch victim a year ago. But its ruler, Sheik Mohammed bin Rashid Al-Maktoum, had continually dismissed concerns over the city-state's liquidity and claims it overreached during the good times.

When asked about the debt, he confidently assured reporters in a rare meeting two months ago that "we are all right" and "we are not worried," leaving details of a recovery plan — if such a plan exists — to everyone's guess.

Then, earlier this month, he told Dubai's critics to "shut up."

"He needs to produce a recovery plan that will be respected by those who want to do business with Dubai," said Simon Henderson, a Gulf and energy specialist at the Washington Institute for Near East Policy. "If he does not do it right, Dubai will be a sad place."

After months of denial that the economic downturn even touched the glitzy city-state, the Dubai government earlier this year showed signs of trying to deal with the financial fallout that has halted dozens of projects and touched off an exodus of expatriate workers.

http://news.yahoo.com/s/ap/20091126/ap_on_bi_ge/ml_dubai_desperate_times;_ylt=AnlbgQt.GBKA.1OS4jxkMaX9xg8F;_ylu=X3oDMTNkNXFtZjJjBGFzc2V0A2FwLzIwMDkxMTI2L21sX2R1YmFpX2Rlc3BlcmF0ZV90aW1lcwRjY29kZQNtb3N0cG9wdWxhcgRjcG9zAzQEcG9zAzQEc2VjA3luX3RvcF9zdG9yaWVzBHNsawNkdWJhaXJlcXVlc3Q-

hey lets build more dubai's

In due time, it will pick up again ---- Im sure that they are not much in debt as the U.S.

Dubai owes over $60bn - it might be in serious trouble if it defaults on it's loans. While people have wrongly implied that 'oil money' developed Dubai, we can now see that it was funded by massive borrowing.

The long term prognosis for Dubai will be interesting - can it recover or will it go down as one of the most expensive bankruptcies?

So. . .what.
Nigeria is in debt.
S. Africa is in debt.
Ghana is in debt.
Egypt is in debt.
Iraq is in debt.
Afghanistan is in debt.
Zimbabwe is in debt.
America is in debt.
Russia is in debt.
The Asian tigers are all in debt.
Most countries in Eastern Europe are in debt.
Most South American countrìes, if not all are in debt.

So Dubai being in debt. What's the biggie about that.

And so is America. And so is much of Europe. And so is all the developed nations in the world.
That tells you something: Debt is Good!!!!
The bigger the debt, the better the society, as long as such debts are used to fuel development.

posakosa:

In due time, it will pick up again ---- Im sure that they are not much in debt as the U.S.  

The size of the american economy is much larger and better leveraged than that of Dubai's.  The US is begging for a six month grace period on it's debts.  

Dubai's GDP is about 45 billion dollars, it has total debts of 80 billion dollars.  That is not sustainable.

Abu Dhabi can probably bail them out.

debosky:

Dubai owes over $60bn - it might be in serious trouble if it defaults on it's loans. While people have wrongly implied that 'oil money' developed Dubai, we can now see that it was funded by massive borrowing.

The long term prognosis for Dubai will be interesting - can it recover or will it go down as one of the most expensive bankruptcies?

the season of open yansh

as it has been stated, this has serious implications for charlie soludo and transforming anambra into dubai


so under him -  anambra could wind up like our  banks - big noise, big rep and big debt

I think its in debt due to all the various construction projects taking place and going on--- some of those projects have to be on hold. Dubai is also an expensive island to maintain--- Im more than certain Dubai will pick up again----- in due time.

debosky:

Dubai owes over $60bn - it might be in serious trouble if it defaults on it's loans. While people have wrongly implied that 'oil money' developed Dubai, we can now see that it was funded by massive borrowing.

The long term prognosis for Dubai will be interesting - can it recover or will it go down as one of the most expensive bankruptcies?

bros thanks for saving me.   Dubai's GDP to debt ratio is atrocious and has to suspend some of its infrastructure project.  Although Naija is stagnant or going backwards, we shouldn't move too fast by building Airports and buildings that would rack up debts for nothing.

@bamowolo
Dubai is a city. U.S is a country. Big Difference.
You should think New York when you say Dubai. City, City. Comprende?

bawomolo:

The size of the american economy is much larger and better leveraged than that of Dubai's.  The US is begging for a six month grace period on it's debts.  

Dubai's GDP is about 45 billion dollars, it has total debts of 80 billion dollars.  That is not sustainable.

For now. As many of the projects in Dubai are still under construction. It is sustainable---- because they are investing for the future and not for now.

bawomolo:

bros thanks for saving me.   Dubai's GDP to debt ratio is atrocious and has to suspend some of its infrastructure project.  Although Naija is stagnant or going backwards, we shouldn't move too fast by building Airports and buildings that would rack up debts for nothing.

Who says these development projects are for nothing ? Dubai is a fantasy Island---- some homes in the Island have gone under foreclosure but I am more than certain that things will pick up again.

PapaBrowne:

@bamowolo
Dubai is a city. U.S is a country. Big Difference.
You should think New York when you say Dubai. City, City. Comprende?

Do you know the meaning of a Default?  

the state of California is having a similar crisis.  The lesson we should from a Dubai or even California is to have assets that back up our debts.  debts is good until you face the risk of default.

posakosa:

Who says these development projects are for nothing ? Dubai is a fantasy Island---- some homes in the Island have gone under foreclosure but I am more than certain that things will pick up again.

It would pick up again but at what cost? the average dubai citizen carries a government debt load of $400,000.

bawomolo:

It would pick up again but at what cost? the average dubai citizen carries a government debt load of $400,000.   

Well--- it will be costly but it will certainly pick up. Dubai is a fantasy Island built for tourists. Im not certain if there are "average citizens" per se. Most workers there, travel from pakistan/neighbouring cities and countries--- most people who live there are mostly foreigners---- it will be fine.

posakosa:

Well--- it will be costly but it will certainly pick up. Dubai is a fantasy Island built for tourists. Im not certain if there are "average citizens" per se. Most workers there, travel from pakistan/neighbouring cities and countries--- most people who live there are mostly foreigners---- it will be fine.

ha if only world markets were this optimistic.

We would see what happens in the upcoming months.

bawomolo:

Do you know the meaning of a Default?  

the state of California is having a similar crisis.  The lesson we should from a Dubai or even California is to have assets that back up our debts.  debts is good until you face the risk of default.

It would pick up again but at what cost? the average dubai citizen carries a government debt load of $400,000.   

You can never have assets enough to back up massive develomental projects running into gazillions.
All the infrastructural development in the U.S was built on massive debts- NO COLLATERAL!
A default is not so much of a bad thing as long as there is a rescheduling.

We need basic amenities in Nigeria even if it's at the expense of the Paris club. Who cares, after all, all the G8 nations are owing them. This idea of rushing to pay off our debts beats me. Obj would have used the $36Bn to provide these things and fund the interests from the oil dividends.

bawomolo:

ha if only world markets were this optimistic.

We would see what happens in the upcoming months.

what happens to the markets is very cyclical--- you know. Up and down, and up and down---- I think currently, more of the problem now I think will be building trust again amongst the various investors needed to invest in the various projects----  

I don't think that the market will be as strong in the upcoming months---maybe mid way of next year. Everyone is focused on building the green market economy--- esp. when it comes to construction projects--- which may be applicable to Dubai--- but im not even sure how strong or reliable the green market economy is or will be.

But more importantly, Im sure things will pick up.

Believe it or not. For a city like Dubai, the debt is a good one.

PapaBrowne:

You can never have assets enough to back up massive develomental projects running into gazillions.
All the infrastructural development in the U.S was built on massive debts- NO COLLATERAL!
A default is not so much of a bad thing as long as there is a rescheduling.

and what if the Banks are unable to reschedule, what happens?

continuous rescheduling of debt is indeed a bad thing.  We all saw how well that philosophy worked for GM and co.

Dubai World, and delay repayment on some of the company's $59bn (£36bn) of liabilities, sent ripples through financial markets, denting equities and riskier currencies.

Sterling was one of those to suffer. It hit its weakest point in a month against the euro and a basket of currencies on worries about British banks' potential exposure to debt problems in Dubai.

"There are concerns regarding the extent of the exposure of the UK banks to Dubai, hence sterling is coming under pressure," said Ian Stannard, currency strategist at BNP Paribas.

Aloy~Emeka:

We need basic amenities in Nigeria even if it's at the expense of the Paris club. Who cares, after all, all the G8 nations are owing them. This idea of rushing to pay off our debts beats me. Obj would have used the $36Bn to provide these things and fund the interests from the oil dividends.

FYI - Naija didn't pay $36bn, some of the debts were canceled using a debt relief program (Nigeria had to pay a portion and it was free).  The Oil dividends are what's responsible for increased allocation and the recent CBN bank bailout.

Debt cancellation has little to do with how inefficient the Nigerian government is.

puskin:

Believe it or not. For a city like Dubai, the debt is a good one.

na wa o. sanusi needs to read some posts on nairaland. risking default is now a good thing

Risking default on a very good nd viable investment plan/process is alwayz a good thing.
So, it is known in the Macro-economics world.

puskin:

Risking default on a very good nd viable investment plan/process is alwayz a good thing.
So, it is known in the Macro-economics world.

Defaulting on a loan is NOT a good thing oooh.

posakosa:


Defaulting on a loan is NOT a good thing oooh.

I agree defaulting on a loan is not a good idea at all. It will increase the cost of insuring your debt. The action of Dubai of already affecting oil rich Abu Dhabi, Qatar and Saudi Arabia becasue the cost of insuring their debt has increased.

Defaulting is only a good idea if you have the approval of debt holders who are willing to roll over the debt. In Dubai's case they do not [b]yet [/b]have an agreement

We need basic amenities in Nigeria even if it's at the expense of the Paris club. Who cares, after all, all the G8 nations are owing them. This idea of rushing to pay off our debts beats me. Obj would have used the $36Bn to provide these things and fund the interests from the oil dividends.

Gbam! Gbosa!!

Looking back, OBJ did that because he wanted 3rd time, same reason he signed-away the Bakasi penisula.

Debt is not the problem, but what you do with the money you borrowed.

If you incur debt to invest in value-adding activity, this will clean up your debt.

Nigerians are blind to see how world-bank send us a Nigeria, all she did was 'enrich' same institutions that sent her as Minister to Nigeria!