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TESS VIGELAND: The recession and credit crunch claimed a glittering victim today. The Gulf state of Dubai, once an icon of wealth in the Middle East, was forced to beg the indulgence of its creditors. The government asked for more time to pay its debts.
From London, Marketplace’s Stephen Beard has more.
Stephen Beard: At the height of its hubris, Dubai built the world’s tallest tower, and thousands of luxury hotels and shopping malls. But all that was built on massive amounts of debt. Today, the government-owned company Dubai World asked for a six-month debt moratorium.
Chris Davidson an expert on the city-state.
Chris Davidson: What we’ve seen today is pretty much a government-backed company defaulting on a loan, being unable to pay it or refinance it by the scheduled date.
Dubai World is thought to owe more than $100 billion, 100 percent of the city’s GDP. But Dubai is part of a federation of Gulf states — the United Arab Emirates. And the richest of its fellow emirates, Abu Dhabi, has already started bailing out Dubai.
Jan Randolph is with IHS Global Insight.
Jan Randolph: Dubai in some ways is lucky to have Abu Dhabi as a richer, more sober brother, if you like, that is willing and able, certainly, to help the government out. But there may ultimately be a political price.
That price may be that Dubai becomes subservient to Abu Dhabi. Certainly the city’s ambition to become a leading financial center has been dented, says Chris Davidson.
Davidson: Whether or not it will be a major economic capital in the Gulf and something of an autonomous city-state, that’s far less certain.
He says Dubai will continue to be a successful port city on the edge of a desert. But the dream of building a vibrant consumer economy on the sand seems to be crumbling.
In London, this is Stephen Beard for Marketplace.