Dubai: Growth in regional trade

The emirate’s external trade figures hit record levels in 2012, assisted by its strong transport and logistics infrastructure and underpinned by areas of the economy that remain in recovery mode. Attention is now turning to widening the scope of trading partners to further strengthen this important sector.

Data released by the Dubai Ports, Customs and Free Zone Corporation on March 25 showed non-oil trade totalled more than $336.18bn in 2012, a 13% increase on the previous year’s figure of $296.43bn. A breakdown of that total shows exports rose by 47% to $44.37bn, imports were up 12% to reach $200.62bn and re-exports increased 5% to $90.92bn.

According to Florence Eid, CEO of London-based research and advisory firm Arabia Monitor, Dubai has strengthened its role as a regional trade centre, which could serve to propel growth in the emirate. “The economy now appears to be embarking on another wave of growth, during which it will serve similar functions as Hong Kong and Singapore in Asia, supporting and profiting from growth in industry and trade in a large region surrounding it,” Eid told Reuters on March 28.

Dubai’s location in the region, along with its well-developed transport and logistics infrastructure, are among the reasons for its growing trade performance, said Fahad Al Gergawi, CEO of Dubai FDI, the agency tasked with promoting and supporting foreign direct investment (FDI) in the emirate.

“Dubai’s well-integrated, multimodal logistics platform and quick connections to 2.2bn consumers across the Middle East, North Africa and South Asia have emerged as significant drivers of global commerce, as well as the emirate’s economic development,” he said in a statement in late March that also announced a 16.6% increase in total FDI in 2012 over 2011.

However, one business advisory body has warned Dubai needs to do more to diversify its client base if it wants to maintain its strong position as a trade centre. In a statement issued in late March, the Dubai Economic Council (DEC) highlighted the need, in its view, for the emirate to broaden the base of its trade activities, citing concerns over a reliance on some partners, such as Iran and India. “In the event of changes in trade regulations, regime or preferences in these countries, it has the potential of undermining the future sustainability of Dubai as a regional trading hub,” the DEC said.

The DEC also highlighted the fact that a number of the emirate’s neighbours are all moving to improve their logistics infrastructure, which could help them challenge Dubai’s position as the region’s leading re-export centre.

“Evidently, Dubai ports and airports have the advantage of being already in place and competitive for international standards. However, if not supported by adequate trade policies, this advantage may erode,” the DEC statement said.

The DEC’s warning on Iran gained credence from the 2012 figures, as trade plunged as a result of tighter sanctions. Bilateral trade dropped by 31%, going from $9.8bn in 2011 to $6.8bn in 2012, the Financial Times reported. While some of this fall is due to the sharp devaluation of the Iranian currency, greater restrictions on what goods could be exchanged also impacted trade figures. This, in part, limited Dubai’s trade growth to 13% in 2012, which, was down on the 22% increase recorded in 2011.

The emirate’s external trade figures are undoubtedly solid, though they do suggest a narrow focus for the sector, one that could be exposed to external shocks. Still, strong improvement in trade with Arab nations and fellow members of the GCC in 2012, up 26% and 28%, respectively, show promise that Dubai will be able to expand its pool of trading partners and its overall export and import volumes.

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