The goal of this thesis is to identify the main political and economic implications of Dubai’s debt crisis and subsequent bailout by her wealthier and more powerful sister emirate Abu Dhabi. This paper examines the implications of the bailout of Dubai on two levels: Dubai’s relationship with Abu Dhabi and Dubai’s relationship with the international investment community. The paper first provides a brief background on Dubai, one of the seven emirates that make up the United Arab Emirates (UAE), and discusses Dubai’s key characteristics that helped give Dubai her nickname Dubai Inc. – an opportune location, the Al-Maktoum ruling family, and state-led entrepreneurship. It then discusses Dubai’s historically competitive relationship with Abu Dhabi and Dubai’s push to diversify economically away from oil. The paper outlines two key economic developments – the rise of Dubai’s real estate and tourism sectors and the creation of Dubai’s government-related enterprises (GREs), which helped finance the real estate bubble. This thesis suggests that Abu Dhabi now holds unquestionable power over Dubai and can control Dubai’s GREs and their subsidiaries such as Dubai World. This paper also argues that the international investment community will demand increased transparency and higher standards of corporate governance of Dubai’s businesses in light of the entrenched poor practices that the bailout exposed within the tiny-city state's GREs and companies.
