Dubai City Crisis: Rise and Fall

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Table of Contents

Introduction
Factors that enhance the development of cities
Factors that cause the fall of cities
Development in Dubai
The fall of Dubai
References

Introduction

A city refers to a big and densely populated urban area which may include several other independent administrative districts. The size of a city serves as a measure of economic performance and it also focuses on the existence and development of a positive feedback of a given city. This analysis will primarily focus on the factors that lead to the development and fall of cities in general. In particular, the analysis will look into the rise and fall of Dubai. This country is well known as a global city and business hub whose economy was built on the oil industry and then shifted to invest in tourism, real estates and financial services. The city is currently experiencing a very tough economic crisis. Therefore, this essay will endeavour to find out the factors that steered the development and fall of Dubai.

Factors that enhance the development of cities

The movement of people from rural to urban areas like the cities leads to urban areas proliferation. This is referred to as urbanization and it is normally associated with modernization and industrialization. For over a long period of time, cities in growing and already developed nations have cropped up as the main way of human being settlement. As a result, cities have become an instrument of progress for human beings. This is due to the concentration of trade and industry, communal, opinionated and governmental organs in cities that make them a conducive place for the rich and the poor people. Examples of cities that have grown in this manner include Chicago and Mumbai. The idea of living in the cities allows individuals to make use of opportunities of proximity and market place competition (UNDP, 2002).

Factors that cause the fall of cities

The following are some of the factors that lead to the fall of most cities. First, urban violence is a major factor that leads to the fall of a city and it’s a result of development dynamics which may differ depending on the country facing the problem. According to literature, the effects of violence and instability may influence the economic activities of a city. Political instability is also not an exceptional factor to the falloff cities. Research was done about urban violence in Columbian cities and it analyzed the distribution of crime and violence. An evaluation was also done on the relationship of violence, socio-economic factors and the efficiency of justice and it revealed that most socio-economic factors had an effect on crime and violence in the Columbian cities (World Bank, 2002).

Development in Dubai

It is significant that Dubai’s earliest developments were made possible by use of financial aids from other countries. This happened in 1954 when Mohammed bin Rashid, A ruler of the city asked for funds from Kuwait to deal with the Dubai predicament and build up the port that would become the foundation of its outstanding economy. The port was constructed at Jebel Ali in the late 1970s and currently, it is the world’s largest man-made harbour and the biggest in Middle East. As a result, an industrial area which was developed in that area (Jebel Ali Free Zone). Consequently, foreign companies were fascinated to invest in Dubai because they were excused from business and personal income taxes and export duties. Hence, so many firms opened facilities in that place hence contributing to the development of Dubai (Rivlin, 2009).

The fact that Dubai refused to go by requirements of the local analysts about development shows that the city was independent from the growth trends of the Gulf region. This helped the country to gain economic and political strength because Dubai chose to pursue its own development strategies instead of relying on those stipulated by the entire Gulf States.

The fact that Dubai does not depend entirely on oil trade because of its scarce oil resources, the city went in a haste to attract world entrepreneurs hence started spending a lot of money on building fine roads, star hotels and other tourist attraction facilities. In addition institutional foreign investors also invested a lot. In due course, the country developed a major economic crisis and this also had an effect on other businesses also. The country has not been in a position to pay huge loans it received from so many financial institutions. (Fernandes, 2008)

Dubai achieved its growth by relying on labour from other countries. This is evident from the English and South Asian dialects that are very common in the country instead of Arabic. The country’s citizens form a very small portion of the total population and this makes the country to benefit a lot from foreign investors (Ministry of information and culture, 2004).

Dubai has also flourished in its economy as a city because it’s a tourist attraction centre. There are several development projects in Dubai that most visitors marvel at. An example is the famous Burj Al Arab; a seven star luxury hotel built with a shape of massive sail. Visitors are also attracted to Dubai because of the city’s shopping oriented culture which attracts over two million people per year. This offers a major economic boost to the country (Ministry of information and culture, 2004).

The fall of Dubai

The Dubai crisis began with the reduction in the value of the real estates in the US and fall of international markets. This crisis was also related with foreign investor’s withdrawal from giving capital to Dubai. This is because they foresaw the effect of the crisis to them. As a result, the disintegration of the real estates and constructions in Dubai became so easy due to lack of finance. Therefore, the country’s economy dropped (Jayati, 2009). In addition, the misuse of oil benefits in Dubai also contributed a lot to the fall of Dubai’s state economy and political scheme. This negative effect emanates from the fact that oil revenues came in the form of economic benefits. Such benefits destroyed the economy when there was a big reap of benefits without continuous investment. A condition of this kind has negative results on GDP in the long-term because most of the encouragements to efficiency are done away with as the state distributes its oil benefits to its citizens.

As a way of saving the current situation, Dubai has begun recovering from the global financial crisis and the country is gaining financial support from the federal government. The federal government has stepped in to help the struggling companies by subscribing to half of a 20million dollar medium term note programme that had been offered to the Dubai owned entities (Nasser, 2009). An additional strategy that Dubai should also put in consideration to enhance its economic recovery is to improve its tourist attraction activities and avoid getting more financial support in terms of loans before clearing the already existing ones.

In conclusion, Dubai has great potential of recovering from the current economic crisis. Therefore, this study would recommend that the city stops relying on loans to develop, instead use its own generated income from the various economic activities in place.

References

Fernandes, C. (2008). Assessing UAE’s oil dependence: an optimal control approach. Contemporary Middle eastern Issues. Volume 2(2): 138-152.

Jayati, G. (2009). Dubai; From growth to Crisis. Web.

Ministry of Information and Culture, United Arab Emirates (2004). United Arab Emirates.

Nasser, A. (2009). Dubai turning corner in economic recovery. Web.

Rivlin, P. (2009). The Rise and Fall of Dubai. Web.

United Nations Development Program-UNDP (2002). The Arab Human Development Report: Creating Opportunities for Future Generations. New York: United Nations Publications.

World Bank (2002). Columbia: Toward a city development strategy. Washington, DC; World Bank publications. Yearbook. London: Trident Press Ltd.

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