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Why Dubai Failed

Updated on December 16, 2016
ZIa Ahmed khan profile image

A high caliber industry professional with an experience amounting over 20 years, majorly across various facets of Investment

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When we are talking about Dubai Crash, I would like to put different reasons at the core of failure. One of the core reasons is their Business Model. The Dubai believes in Cart before horse. This is why when downturn comes, it cannot withstand.

Dubai is far ahead in developing it infrastructure. The Dubai’s attitude towards development is really fascinating. It has put lot of efforts on bringing innovation and development. Dubai has one of the best infrastructures in region.

Dubai has world’s biggest Airport. It has one of the finest airlines Emirate. Dubai has the best port operator and one of busiest port. It has built very good Metro and other infrastructure. It has One of the busiest tourist destinations in region. It is known for all-round development. It has put extreme efforts in developing talent in people. It is one of most happy country (Nationals) in world. This all has built to make better living standards for Nationals.

In the process of development unfortunately Dubai has missed or forgotten one very important component of their society expats. Expats constitute almost 90% of the total work force, no one is really worried for their wellbeing, rights, and happiness. Making foreign workforce feel happy and homely will remain single most important and difficult challenge for Dubai.

  • Business Model

The Business Model for Dubai is building the infrastructure ahead of needs and then creating the needs. It is typical is Capitalist Economy where Luxury is developed to sell. It has brought all wealthy and rich from across the world to invest in this. It has GCC rich, where they have all their assets in Dubai, can travel every weekend. The affected rich of Arab Spring from Egypt, Yemen , Libya, Syria and from other countries has invested in these assets.

  • Luxury

Dubai has created one of the best luxuries in world. The best villas, foreign ownership and free hold properties and free zone remain at core of the business model. It built world’s tallest tower and also some of the finest hotels. It has one of best designed homes, gated communities (living ideas) in the world. This class of people will never be short of cash. It has built on these ideas of Rich. Unfortunately this concept of richness has their problem. The crisis shows Rich as one of the most vulnerable class and can slow down every activity designed around them.

Rich has stopped spending During Financial Crisis, it has multiple effect in Dubai, it affected Dubai. This slow down in spending by rich is first reason of Dubai’s collapse.

Dubai does not have any captive customers for such assets. (Nationals)

  • Tourism

The tourism is single largest contributor to the Dubai’s economy. Every year almost 15 million visitors arrived in Dubai. This huge numbers is the key to Dubai’s success. The weekly travelers, from GCC countries are the most important of all. The tourism industry revolves around three corners.

  • Entertainment
  • Shopping
  • Events

Dubai is known as new Theme Park Capital. It has built huge theme parks. Tourist visit Dubai to see and enjoy them. There are many theme parks in Dubai

The second important attraction is shopping. Dubai Shopping Festival is one of the biggest shopping events in world. Dubai has built huge shopping malls, these shopping malls during holidays and events works 24/7. It has huge foot print and sales from these malls. All worlds top Brands are present in Dubai. This makes Dubai one of the most sought after destination for Shopping.

  • Huge Infrastructure Project

Dubai Has built huge infrastructure project. Dubai is first country with Metro. It has world’s busiest port. Dubai has biggest airport. It has huge Free Zone, Finance Center and other projects. These huge projects gave the Dubai. It gives open environment to business. Many Businesses and organization has set their headquarters in Dubai. All these gave Dubai and edge over other countries in attracting investments and projects.

  • Debt

Dubai has debt worth $140 billion. It has developed all infrastructures by taking debt. Dubai does not have Oil. It is not rich country because of its Oil and Mineral resources. These loans are taken by Companies owned by Government. This means, it has sovereign guarantees, it is not stated explicitly. When global market crash, Dubai also crashed, it was unable to service huge debt and collapsed. This is still unsettled challenge of Dubai. It is not able to restructure these entire loans. This is single most important challenge for future of Dubai’s Development.

  • Legislation , Ownership and Bankruptcy Act

Another important lacuna is legislation. There needs to be better legal system, the legal dispute between buyer/investor and companies are still not settled. There is no clarity on consumer rights and protection under Dubai laws.

There is no Company Bankruptcy Law and Individual Bankruptcy act, in open economies like Dubai there is need of strong legal system. The system must deliver justice, fast and affordable. The free hold properties , ownership and inheritance are not clear. There is need of more transparency in corporate world. The corporate governance and ethical audits must be made compulsory. There is need of Anti Corruption Act and also Accountability Act for government employees. Without improvement in legal system , Dubai will remain a week destination.

Labor Laws and Labor Exploitation

The Dubai labor law needs updating, specially labor rights, salaries and regular payments. Dubai remains one of the top destinations in world where exploitation of labor is very high. It need to upgrade its system where labor rights and human rights are protected.

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Why Dubai Failed

Many people may have given many reasons for failure of Dubai. Dubai was glaring example of flourishing economy and success. This story is deceptive. The success is build on very shaky foundation, basically there are no foundations there and any structures built without foundations is going to collapse one day or other. Dubai builds whole business on Haram element – (Prohibited) by Allah for which failure in both the worlds are clearly mentioned.

These reasons are as below.

  1. Interest based financing – high leveraged financing.
  2. Economy based on gambling and Prohited (Haram) trade
  3. Tourism – serving of alcohol and drugs
  4. Nightclub
  5. Trade in Prohibited ( Haram) Food

(Income from Prohibited (Haram) source is Prohibited (Haram))

The Punishment for Dealing with Riba (Interest and Usury)

“Those who devour usury will not stand except as stand one whom the Evil one by his touch hath driven to madness. That is because they say: “Trade is like usury,” but God hath permitted trade and forbidden usury. Those who after receiving direction from their Lord, desist, shall be pardoned for the past; their case is for God (to judge); but those who repeat (the offence) are companions of the Fire: They will abide therein (for ever).”
- Quran Verse 2:275 (Chapter Al-Baqara)

To understand the wisdom behind such prohibition we need to be first aware of 2 key Islamic principles on wealth-creation.

1. Islam permits increase in capital through trade and, at the same time, it blocks the way for anyone who tries to increase his capital through lending on interest (riba) - whether it is at a low or a high rate.

Allah Almighty says : “O you who believe, do not consume your property among yourselves wrongfully, but let there be trade by mutual consent…?
- Quran verse 4:29 (Chapter An-Nisa)

I would also like to point to another prohibited means of earning - ‘gharar’ (transactions based on speculation/gambling).

The Hadith of Prophet says:

Do not buy fish in the sea, for it is gharar. (Ibn Hanbal)

Buying ‘fish in the sea,’ or alternatively, ‘what is in the womb’ highlights the speculative nature of the transaction.

2. ‘Gharar’ (speculation/gambling) violates the principle that all parties have both complete knowledge and access to the product before the transaction.

In summary, Quran forbids both risk-less gain, as in the case of Riba (Usury), and transactions based entirely on risk, as in ‘Gharar’ (Speculation/Gambling). Islamic Shari’a encourages Muslims to be “risk neutral” and earn profit through neither seeking speculative gain nor hoping to lock down all risk with fixed returns.

Ibn Majah recorded that Abu Hurayrah said that the Messenger of Allah said,

(Riba is seventy types, the least of which is equal to one having sexual intercourse with his mother.)

Continuing on the subject of prohibiting the means that lead to the unlawful, there is a Hadith that Ahmad recorded in which `A'ishah said, "When the Ayat in Surat Al-Baqarah about Riba were revealed, the Messenger of Allah went out to the Masjid and recited them and also prohibited trading in alcohol.'' The Six collections recorded this Hadith, with the exception of At-Tirmidhi. The Two Sahihs recorded that the Messenger of Allah said,

`Ali and Ibn Mas`ud narrated that the Messenger of Allah said,

(May Allah curse whoever consumes Riba, whoever pays Riba, the two who are witnesses to it, and the scribe who records it.)

(276. Allah will destroy Riba and will give increase for Sadaqat. And Allah likes not the disbelievers, sinners.) (277. Truly, those who believe, and do deeds of righteousness, and perform the Salah and give Zakah, they will have their reward with their Lord. On them shall be no fear, nor shall they grieve.)

Allah Does Not Bless Riba



Allah states that He destroys Riba, either by removing this money from those who eat it, or by depriving them of the blessing, and thus the benefit of their money. Because of their Riba, Allah will torment them in this life and punish them for it on the Day of Resurrection. Allah said,

(Say: "Not equal are Al-Khabith (evil things) and At-Tayyib (good things), even though the abundance of Al-Khabith may please you'') ﴿5:100

Ibn Jarir said that Allah's statement, (Allah will destroy Riba) is similar to the statement reported of `Abdullah bin Mas`ud, "Riba will end up with less, even if it was substantial.'' Imam Ahmad recorded a similar statement in Al-Musnad.

Giving Short Measures

The community of the Prophet Shu‘ayb (sws) was known for practicing it with impunity. Consequently, they were destroyed for their persistence in deceit and disbelief in Allah and His Messenger. Allah the Almighty has repeatedly commanded exactitude in weights and measures. One of the verses says: And give full measure when you measure, and weigh with a just balance. That is good and better in the end. (17:35)

So the earthquake seized them and they lay (dead), prostrate in their homes. Those who belied Shu 'aib, became as if they had never dwelt there (in their homes). Those who belied Shu aib, they were the losers.

Then he (Shu 'aib) turned from them and said: "0 my people! I have indeed conveyed my Lord's Messages unto you and I have given you good advice. Then how can I sorrow for the disbelieving people's (destruction)." Surah 7: 91-93

The Prohibition of Gambling

[The Quran 5:90] O you who believe, intoxicants, and gambling, and the altars of idols, and the games of chance are abominations of the devil; you shall avoid them that you may succeed.

Dealing in Prohibited (Haram) Items
Forbidden to you [for food] are: dead meat, the blood, the flesh of swine and that on which name of other than Allah has been mentioned. (5:1)

The Prophet (sws) is also reported to have said; Allah and His Messenger made illegal the trade of alcoholic liquors, dead animals, pigs and idols. (Bukhari, No: 2082) The Prophet (sws) also said; If Allah makes something unlawful, he makes its price also unlawful. (Ahmad, No: 2546)

"They ask thee concerning wine and gambling. Say, 'In them is great sin and some benefit for men; but the sin is greater than the benefit."

(Qur'aan 2:19)

FROM THE HADITH

  • On the authority of Abu Huraira (may Allah be pleased with him), who said: The Messenger of Allah said: “Allah the Almighty is good and accepts only that which is good. Allah has commanded the Faithful to do that which He commanded the Messengers, and the Almighty has said: “O ye Messengers! Eat of the good things, and do right..” (Quran 23:51). And Allah the Almighty has said: “O ye who believe! Eat of the good things wherewith We have provided you..” (2:172). Then he mentioned [the case of] a man who, having journeyed far, is disheveled and dusty and who spreads out his hands to the sky [saying]: O Lord! O Lord!-while his food is unlawful, his drink is unlawful, his clothing unlawful, and he is nourished unlawfully, so how can he be answered!” (Muslim).


Zinna - Prostitution



Islam has prohibited certain professions and industries to its followers because they are harmful to the beliefs, morals, honor, or good manners of the society.

Prostitution:Prostitution, for example, is legal in many countries of the West; permits and licenses are issued to those who ply this trade, and prostitutes enjoy rights similar to other professionals. Islam absolutely rejects and condemns this practice, and forbids any female, free or slave, to earn money by selling her sexuality.

Dancing and Other Erotic Arts:Similarly, Islam does not permit sexually exciting dancing or any other erotic activity, such as suggestive or obscene songs, provocative dramas, and every type of rubbish which some people today term "art" and "progress."

The fact is that Islam prohibits every sort of sexual contact and sexual relationship outside marriage. This is the secret behind the significant words of the Qur'an prohibiting fornication and adultery (both of which are known as zina in Arabic). And do not come near zina; indeed, it is an abomination and an evil way. (17:32) This indicates that not only is zina forbidden, but likewise anything which brings one near to it. Everything to which we have referred above, as people are well aware, for example, provocative dances and songs, constitutes "coming near zina;" these things are certainly intended to tempt, excite, and lead one toward such sin. And what havoc they wreak in the lives of people!

Manufacturing Intoxicants and Drugs:Earlier we saw that Islam prohibits any participation in the promotion of alcoholic beverages, whether it be in their manufacture, distribution, or consumption, and that anyone who participates in any of these is cursed by the Messenger of Allah (peace be on him). The case of other intoxicants and drugs, such as hashish, cocaine, and the like, is the same; manufacturing, distributing, or consuming any of them is haram. In short, Islam prohibits the Muslim to work in any industry, business or profession which deals in, or promotes, anything which is haram.

Any economy based on Haram can’t succeed.

Definition of best human according to Islam –The meaning of the Quran - 49:13 “O mankind! We created you from a single (pair) of a male and a female, and made you into nations and tribes, that ye may know each other (not that ye may despise (each other). Verily the most honored of you in the sight of Allah is (he who is) the most righteous of you. And Allah has full knowledge and is well acquainted (with all things).”

Sura: 69. Al-Haqqah

(69:5) Then the Thamud were destroyed by an awesome upheaval;

(69:6) and the Ad were destroyed by a furiously raging wind-storm

(69:18) That will be the Day when you shall be brought forth (before Allah) and no secret of yours shall remain hidden.

(69:19) On that Day, he whose Record is given to him in his right hand *12 will say: “Lo! Read my Record! *13

*12 The record's being given in the right hand will by itself show that the concerned person's account is clear and settled and he is appearing in the Divine Court as a righteous man and not as a culprit. It is probable that at the time the records are distributed the righteous man himself will extend his right hand forward to receive his record. For on account of the good treatment that he would have received right from the moment of death till his appearance in the Plain of Assembly at Resurrection, would have given him the satisfaction that he was there to be blessed and not to be punished. At many a place in the Qur'an it has been explicitly stated that right at death itself it becomes clear to every man whether he is entering the next World in a blessed or wretched state. Then from the moment of death till Resurrection the righteous man is treated like a guest and the evil man as a culprit under custody. After this, froth the time the second life starts on the Day. of Resurrection, the condition and state of the righteous is entirely different from the condition and state of the disbelievers, hypocrites and culprits.
*13 That is, he will be overjoyed as soon as he receives his record and will show it to his companions. In Surah Al-lnshiqaq: 9, it has been said "He will return to his kinsfolk rejoicing."

(69:20) Verily I was sure that I would be handed over my account.” *14

*14 That is, ". He was fortunate because he had been conscious of the Hereafter in the world and had lived his life with the belief that he would have to appear before God one day and render his account to Him.

(69:25) As for him whose Record will be given to him in his left hand, he will exclaim: “Would that I had never been given my Record,

(69:26) and had not known my account.

(69:35) today he has been left here friendless;

(69:36) and has no food except the filth from the washing of wounds,

(69:37) which only the sinners will eat.”

Allah Has Destroyed People Who Involved in Haram ( Prohibited)

(7:4) How many a township We have destroyed! Our scourge fell upon them at night, or when they were taking midday rest.

(7:5) And when Our scourge fell upon them their only cry was: 'We are indeed transgressors.' *5

*5. People can learn a lesson from the tragic fate of those nations that spurned God's Guidance, and instead followed the guidance of others; and they became so degenerate that their very existence became an intolerable burden on the earth. Eventually, God's scourge seized them. and the earth was cleansed of their filthy existence.
(7:10) We assuredly established you in the earth and arranged for your livelihood in it. Little do you give thanks.




A morsel of Halaal food

Eating haraam gives rise to every type of infamy. Whereas, the halaal morsel is the cause of every kind of goodness and charity. Numerous traditions praise the acquisition of livelihood through lawful means. For example the Holy Prophet (s.a.w.s.) says, "Worship consists of seventy parts and the best part is earnings by lawful means." (Safinatul Behaar) The Messenger of Allah has also said, "When a man eats halaal food an angel stands over his head and prays for his forgiveness till he finishes eating." (Safinatul Behaar) The Prophet has remarked in a similar vein, "One who strives to earn his livelihood in a lawful manner from morning till night, achieves salvation." (Safinatul Behaar) The Holy Prophet (s.a.w.s.) states that Allah has said:

"I will not care on the Day of Qiyamat from which door he enters Hell, the person who does not care from which door he earns money in this world." (Behaarul Anwaar) The Prophet of Allah (s.a.w.s.) has also mentioned the following tradition: "One who does nor care from which way he earns wealth in this world will be sent to Hell in Qiyamat and I shall not care from which way he is made to enter it." (Behaarul Anwaar)

(Surah Nisa 4:2) It should not be that in a hurry to obtain livelihood you obtain it through illegal ways, before Allah provides you with the halaal sustenance that He had decreed for you."



Dubai

Dubai High and Tall

© 2010 Dr. Zia Ahmed

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    • ZIa Ahmed khan profile image
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      Dr. Zia Ahmed 7 years ago from Kuwait

      Dear Zaheer

      This is start of end of capitalism, unfortunately we are in Islamic Finance do not have capacity and not ready to replace it.

      From this crisis it is very clear system based on greed will not go far, end is soon.

    • ZIa Ahmed khan profile image
      Author

      Dr. Zia Ahmed 7 years ago from Kuwait

      Thank you very much for your guidance, comments very much appreciated.

      Jazakallah khair

    • Mr.Gadget profile image

      Mr.Gadget 7 years ago from Taxas City

      Great work ! You have just made a big fan...

      Keep doing what yoou are doing ...

      Ill do what ever i can to support your cause ..

      Loved your website...

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