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Essay / Research Paper Abstract
This 3 page paper answers a set of questions regarding the difficulties of Dubai and the high level of debt that the state owned holding companies have accumulated, looking at the sources of debt, the reasons for the problems and measures which may be taken to improve the outlook by the Dubai government.
Page Count:
3 pages (~225 words per page)
File: TS14_TEdubaidebt.doc
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Unformatted sample text from the term paper:
government; these came from a variety of sources including the revenues generated from oil, duties and the funds raised by consumption taxes. However, as the revenue from these sources
was limited and there was a potentially high level of growth to be achieved increasing funds were being raised from debt sources, so the second main source was debt, using
banks and the insurance of international bounds. The initial capitalization of the SOHC came from the revenues, however as the firms grew they needed more than the initial capital and
the equity that it was created and this causes a major shift towards the increased use of debt. The growth was also funded by the way in which
the markets were booming and it became the practice for firms and other investors to seek to gain profits quickly, selling and buying off plan and with major projects under
construction often having profits realised before they were even completed. This also created inflation within the industry so money released from the sale was then reinvested into the next project
or investment. This increased demand also drove up priced so project may then need more capital raised in order to get started, such as with the purchase of the
land, impacting on the initial capital needs and increasing the debt required. Question 2 There were several factors which lead to the debt problems; the ultimate issue was a
drying up of revenue as a result in the changing market conditions. However a number of factors left Dubai vulnerable to this, despite the initial resistance shown by the markets.
One f other first factors was the pegging of the currency against the US dollar, exposing the country to currency volatilities suffered by the dollar, and the decline in
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