Nowhere has enjoyed as much success with diversification as Dubai. Take a look at the city's sky-line as proof, home to an ever-increasing number of wonderful structures. Go shopping in one of the emirate's malls; tourism attractions in themselves as well as havens for those in need of some retail therapy. Or consider taking out an Islamic finance product; Dubai is one of the leading lights in this sector too. The emirate is full of ‘biggests'. The world's biggest airport is being constructed there, as is Dubailand, the world's largest entertainment and leisure complex. All this activity comes from within an emirate blessed with a fortuitous geographical location, within a five-hour flight of 1.8bn people – a quarter of the world's population – and a stable and liberalising government that realised long ago the importance of diversifying away from a total reliance on oil.
ISBN: 978-1-902339-05-4
ISSN (Online): 1755-2788
ISSN (Print): 1755-277X
TABLE OF CONTENTS
COUNTRY PROFILE
This section provides a quick overview of some facts about the country, its population, language, natural resources, geography, climate and history.
POLITICS
Prime minister and ruler of Dubai and vice-president of the UAE, Sheikh Mohammed bin Rashid Al Maktoum has, by preserving the liberal principles adopted by his father, transformed the emirate into a model for fast-track development and successful diversification policies. Indeed, Dubai, the second-largest emirate, sits happily at the forefront of international business and is, to some extent, managed along lines similar to those of a corporation, with Sheikh Mohammed in the role of CEO. Key to Dubai's success is its efficient public sector, its minimal bureaucratic procedures and the tax-free environment it provides for investors. Issues such as climate change are currently on the agenda. As of January 2008 all developers must comply with new green building standards while Dubai has adopted an Emiratisation strategy to strengthen the role of locals in management and production jobs. At the same time moves are being made to improve the rights of expatriate workers. On the international front, Dubai is enjoying growing trade links with China, which Sheikh Mohammed visited in April 2008. Dubai's ruler also recently visited Tehran for talks with Iranian leaders. To the future, rising inflation remains a challenge, while the government ponders whether or not it should de-peg the dollar or revalue the dirham. However, with Dubai making good progress in addressing the issues set out in the Dubai Strategic Plan (DSP) for 2015, such as maintaining economic growth at 11% per year, and the next generation of leaders in the shape of the current ruler's son, Sheikh Hamdan bin Mohammed Al Maktoum, taking on an increasing role in governmental affairs, Dubai's light looks set to continue to shine. And the emirate is ready to share its success with others less fortunate through the Dubai Cares initiative, launched by Sheikh Mohammed, with the goal of providing education to 1m children in poor countries.
The chapter includes interviews with Dominique de Villepin, former Prime Minister of France; and Donald Tsang, Chief Executive, Hong Kong Special Administrative Region.
THE ECONOMY
The Dubai economic model consists of focusing on areas where the government can quickly cash in – hydrocarbons for example – and then, by way of diversification, investing the ensuing wealth into an economy largely based on the service sector. Indeed Dubai's non-oil sectors grew by over 15% on average during 2000- 2005. Two segments of the service sector that shine especially brilliantly among the many bright lights of Dubai's economy are real estate and tourism. Take Dubailand, the emirate's most ambitious development project to date. Set to be the world's largest entertainment and leisure complex, it displays exactly how the two sectors assist each other. Part of the attraction of Dubai for developers and tourists alike is its location; an estimated 1.8bn people, over one-quarter of the world's population, living within a five-hour flying distance of the emirate. Also capitalising on its geographical advantages are Dubai's world-class ports, such as Jebel Ali, which the government far-sightedly attached a free zone to, a model for those which have followed. Dubai's position also makes it an attractive market for the emerging powerhouses of India and China while Dubai's local companies look outwards. In recent years Dubai International Capital (DIC), part of the state-owned conglomerate Dubai Holdings, has purchased stakes in the UK's HSBC Holdings and Standard Chartered, as well as Munich-based European Aeronautic Defence and Space. Dubai's biggest economic challenge lies in managing to curb its double digit inflation. It is, meanwhile, expected that a single currency, modelled on the euro, will be in place by 2010, following the launch of the GCC common market in January 2008.
The chapter includes an interview with Lars Thunell, Executive Vice-President and CEO, IFC, World Bank Group; Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates Group; and Kamal Nath, Indian Minister of Commerce and Industry.
BANKING
The banking sector has played a vital role in turning Dubai into a thriving advanced service sector economy and the emirate is now ready to stake its claim as the undisputed financial centre of the region. This comes off the back of a strong performance in the sector locally. Domestic banks are thriving thanks to a growing and increasingly banking-savvy population. The number of banks in the UAE, both foreign and local, reached 52 in 2007; the year in which Emirates Bank and National Bank of Dubai (NBD) merged into a single entity, Emirates NBD, leading to speculation that the sector is on the verge of a wave of consolidation. The Dubai Chamber of Commerce and Industry, however, accepts that more competition is inevitable and, in a 2008 report, recommended that the UAE open its banking sector to new entrants to sustain current growth levels. There is some dispute over whether retail or corporate banking will be the main driver of growth in years to come. Whichever, both are in rude health. The retail sector remains far from saturated with strong consumer spending, negative real interest rates and product innovation while corporate loans and project finance deals remain popular. The unstable global economic climate does not appear, thus far, to have affected the UAE banking sector; international banks are establishing local offices in the UAE with Deutsche Bank, Credit Suisse, Citibank, Lazard and JP Morgan establishing a presence in Dubai. The mortgage segment, meanwhile, is gearing up in the wake of the continuing property boom and increasing interest in home ownership. Innovatively, Dubai announced plans in 2009 to set up an international arbitration and mediation centre offering dispute resolution services to businesses and commercial sectors and providing a cost-effective and time-saving alternative to going to court.
The chapter includes interviews with Rick Pudner, CEO, Emirates NBD; Arif Alharmi, CEO, Amlak Finance and Shayne Nelson, Regional CEO, Middle East and North Africa, Standard Chartered.
CAPITAL MARKETS
Dubai's capital markets performed well in 2007 and the first two quarters of 2008 and are back to pre-2006 correction levels, despite the volatility on the global markets. The drivers for growth are internal and the same as the drivers for many of the flourishing sectors of Dubai's economy: solid economic foundations; rapid non-oil related GDP growth and high oil prices in the medium term. External factors are assisting the emirate too: low returns in other equity markets and worldwide interest in Dubai, spurring overseas investment. Two trends are, therefore, likely to become apparent: a move in trade activity away from the big players and a shift in the investor profile from local to foreign. In the future, the number of IPOs is likely to be boosted by efforts towards maintaining greater transparency and oversight and new regulations on majority control. Segments to watch are the debt market and sukuks; the Dubai International Financial Exchange (DIFX) is building on its position as the world's largest sukuk (the Islamic, sharia-compliant equivalent of a bond) exchange by establishing the first state-of-the-art product platform in the GCC to offer sharia-compliant structured products. Meanwhile Borse Dubai is set to benefit from the most up-to-date trading technology as a result of its deal with the American stock exchange NASDAQ. The chapter includes share analysis and data for some of Dubai's leading companies: Deyaar (real estate); Dubai Financial Market (trading); DP World (logistics); Du (telecommunications); Emirates NBD (banking) and KHI (tourism).
The chapter also includes interviews with Keba Keinde, CEO, Millennium Finance Corporation; Eric Kolts, Vice-President of Commodity Indices, Standard & Poor's (S&P) while Henry T Azzam, CEO, Middle East & North Africa, Deutsche Bank, shares his views on Gulf sovereign wealth funds as a source of stability for world markets.
INSURANCE
The insurance market in the UAE, although underdeveloped by international standards, is growing at a rate of over 25% a year and is expected to expand rapidly in 2008-09. This will be the case nowhere more so than Dubai, where the pace of economic growth is boosting the demand for ever-more sophisticated insurance products. Indeed Dubai leads in terms of insurance market share per emirate, accounting for 51% of business in 2006, largely through real estate insurers, as opposed to Abu Dhabi's 32%. Sharia-compliant insurance products, or ‘takaful', are flooding the market and this segment is seen as the driver of future growth in the industry. Life insurance is on the up, while of the non-life segments, dominated by local companies, accident and liability account for more than half of total premiums collected, followed by fire policies and the marine, aviation and transport segments. Given that Dubai's car-ownership rate is growing quickly, motor insurance possesses the potential to become big business. Health care is likewise set to expand, with the Dubai Health Authority hinting that legislation forcing employers to pay mandatory insurance for workers could come into place soon. In the midst of all this activity, the UAE Insurance Committee has been formed to improve the regulatory environment.
Simon Harris, Team Managing Director for Insurance-Europe, Middle East and Africa, Moody's Investors Service, shares his views on the sector's potential.
ISLAMIC FINANCIAL SERVICES
Dubai's bid to become the world capital of Islamic finance looks to be on track – take the 2008 launch of the Dubai-based Noor Islamic Bank as testament to this – and the market appears thus far to be emerging unscathed from the global financial downturn. Indeed the Dubai government is very much behind the promotion of Islamic finance in Dubai, owning a 25% share of Noor – a further 25% is personally owned by Sheikh Mohammed bin Rashid Al Maktoum. Competition in the sector is intensifying; alongside Noor, Hilal recently launched on the domestic market while most conventional banks now operate Islamic windows to serve customers seeking sharia-compliant services. Sukuk, (the Islamic, sharia-compliant equivalent of a bond) issuance is the fastest-growing area of Islamic finance, with corporations and non-Muslim governments including Japan, Thailand and the UK considering issuing them as a means to tapping the Gulf's oil wealth. Takaful, or Islamic insurance, is likewise seen as a growth area, despite the fact that it currently makes up the smallest slice of the pie in terms of the overall Islamic finance market. All in, the Islamic financial services sector looks set to continue on its upwards trajectory – it is expected that Islamic banks will soon have one-third market share of the UAE's total banking assets and that that number could hit 50% by 2020 – with massive infrastructure projects in not just Dubai but the surrounding Gulf region all requiring huge amounts of funding and many corporations looking to sharia-compliant products to supply this.
The chapter includes an interview with Ebrahim Fayez Al Shamsi, CEO, Emirates Islamic Bank.
TRANSPORT
Dubai's transport sector is on the right tracks and the emirate's infrastructure will receive another boost in 2008-09 when many of its large projects come into operation. Dubai's position as an aviation centre looks guaranteed through the expansion of the existing Dubai International Airport (DXB) and the construction of Al Maktoum International Airport set to become the world's largest aviation facility. Economic development is adding pressure to the emirate's road networks however, so the government is looking towards public transport solutions. To this end, the Road and Transport Authority (RTA) was created in 2005, charged with enhancing the existing public transport system and offering new solutions to congestion. Dubai metro, the longest driverless system in the world, is vital to this strategy and will open in 2010, while the bus system will be upgraded and waterbuses and water taxis are getting in the swim of it. Trams will also play a part, with the RTA investing $1bn for the construction of a state-of-the-art tram network along the Al Safooh Road . On top of the public transport initiatives, the emirate's road networks are being improved through projects such as the landmark Sixth Crossing over Dubai Creek, a two-bridge, 12 lane structure that has been tagged a ‘marvel of world engineering' and will extend over 1.7km and rise to 205 metres at its highest point. Logistically, Dubai's innovative Logistics City is set to commence operations at the end of 2008, with companies able to distribute cargo via land, sea or air, all from one location.
The chapter includes an interview with Paul Griffiths, CEO, Dubai Airports; Mattar Al Tayer, Chairman of the Board and Executive Director, Roads and Transport Authority and Robert M Uggla, Managing Director, Maersk.
ENERGY
Although its importance as an energy producer is dwindling, with less than 20 years' worth of oil and gas supplies left, Dubai is set to become a financial and corporate centre for the global energy industry thanks to its fortuitous location at the centre of one of the world's largest energy-producing regions and its position between Europe and Asia, two of the globe's largest energy markets. The Dubai Mercantile Exchange (DME) has just established two new crude oil futures spread contracts while the government has embarked on a massive liquefied natural gas (LNG) storage facility project. Meanwhile the Dubai Multi Commodities Centre (DMCC) is considering launching an LNG futures contract on its exchange. The emirate's goal of establishing itself in such a way appears to be bearing fruit; oil industry heavyweights such as Halliburton have relocated their corporate headquarters to Dubai while companies such as British Petroleum and Shell have a strong presence in the emirate. At the same time as positioning itself as a global energy centre, Dubai is exploring renewable energy options, such as solar and wind power and hydrogen and nuclear-based power stations as an alternative to fossil-fuel based energy sources. Indeed, keeping the lights on is proving something of a challenge in Dubai given its expanding population and busy construction sector, with electricity consumption rising by 30% in 2007 and demand set to double by 2015. In an effort to supply this thirst, the Dubai Electricity and Water Authority (DEWA) plans to increase production capacity by 2.5 times between 2008 and 2012, a project which will require approximately $19.9bn in capital expenditure, funded by capital markets and bank loans.
Ahmad Sharaf, Chairman, Dubai Mercantile Exchange (DME) and Saeed Khoory, Group Chief Executive, Emirates National Oil Company (ENOC).
CONSTRUCTION & REAL ESTATE
Dubai remains perhaps the most buoyant construction market in the world – one third of the world's supply of construction cranes are currently in operation there – and, despite rising costs and labour and materials shortages, the sector has more than $1.1trn of projects underway. Indeed, the industry is predicted to grow by 29.6% between 2007 and 2010. Stealing the headlines are man-made islands rising from the sea: The World, for example; the Palm Jumeirah; and the Palms in Jebel Ali and Deira. However there are projects situated on dry land that match the islands' ambitions in terms of size and scale: the Business Bay project, being developed by Dubai Properties and conceived as a new central business district (the “Manhattan of the Middle East”) and, of course, Dubai World Central, which will be the largest development of its kind anywhere in the world, with the infrastructure to support 900,000 residents and 700,000 workers. Meanwhile Dubai is at the forefront of promoting environmental issues in the region and as of January 2008 all builders and developers in the emirate must meet a set of green building regulations.
The real estate market in Dubai has witnessed unprecedented growth since 2003, driven by a growing population, rapid economic expansion and increasing interest from foreign investors following the liberalisation of the sector. In terms of the residential segment, much new stock is set to come on the market, particularly at the high-end, which should lessen the steep demand to supply ratio and keep the market buoyant. The commercial segment too is witnessing growth, and, with the emirate expanding its business infrastructure with the aim of becoming a financial services centre to rival London, New York and Tokyo, this looks set to continue. The tourism sector is a primary driver of the real estate industry in Dubai, and, with millions more tourists expected to flock to Dubai's shopping and beach attractions over the coming years, demand for luxury hotel rooms is on the rise and several large-scale developments should satisfy this. Likewise the retail market is important for the real estate sector and again, there is no sign of the excitement letting up here with large-scale malls becoming attractions in themselves rather than just places to shop. In the midst of all this activity, the government is seeking to impose some semblance of order on a largely unregulated property market by introducing a raft of new laws, which, it hopes, will encourage investment.
The chapter includes a photo gallery of some of the emirate's most eye-catching developments.
TELECOMS & IT
The UAE's telecoms market has grown rapidly in recent years, off the back of an expanding population and economy. Etisalat has expanded commensurately, developing from a small local company into one of the world's leading telecoms providers, while du, which marks its first full year of operations in the UAE in 2008, is expected to capture around 25% of the mobile market by the end of 2009. Meanwhile the UAE Telecommunications Regulatory Authority has announced plans for a third mobile operator. Etisalat is taking its ambition overseas, establishing a presence in 16 different countries, including Egypt and Afghanistan. Anyway, at present there appears to enough telecoms pie to go round on the domestic front; the national penetration rate is believed to stand at 151% while the fixed-line market rate continues to grow with some 70,700 new lines added during the first nine months of 2007, a year-on-year growth rate of 67%. To the future, providers are looking towards the arrival of mobile television – television beamed to a mobile phone handset – and the TRA stated in January 2008 that a licence for a new operator would be issued over the course of the following year.
Information technology in the UAE has seen much investment over the past decade; take Dubai Internet City, which has attracted some of the world's top IT companies through its free zone status, as proof. And Dubai's IT sector looks set for continued growth through 2008-09 with free zones attracting new investors and the biggest growth areas predicted to be IT solutions, service centres and e-commerce. The debate over whether voice over internet protocol (VoIP) services should be allowed outside free zones continues with the TRA hinting at liberalisation. Meanwhile the government has embarked on a project to computerise its services, setting itself the goal of offering 50% of them online by the end of 2008; 90% by the end of 2010; and 100% by 2013. Microsoft recently announced its decision to open an innovation laboratory in Dubai, to develop, in conjunction with Emirates Airlines, information technology solutions for the aviation and travel industries – more proof that Dubai's IT sector is well and truly connected. The chapter includes an interview with Malek Sultan Al Malek, Executive Director, Dubai Internet City (DIC).
The chapter includes an interview with Osman Sultan, CEO, du.
INDUSTRY
With its thriving service sector, few people associate industrial endeavours with Dubai. However industry is making significant advances across the UAE as whole with the sector contributing nearly 20% to the country's non-oil GDP in 2006, making it the third largest economic contributor. Dubai is making a name for itself as a haven for small and medium-sized enterprises (SMEs) and realises the importance of a healthy industrial sector; to this end, developers are working on the 52-m-sq-metre Dubai Industrial City (DIC), which, when it is opened in 2015, will, it is hoped, become a centre for the region's industrial and manufacturing sectors, including chemicals, heavy industry and food and beverages. Meanwhile Dubai Maritime City, set to open in 2012, will be the world's first industrial centre dedicated to maritime and associated industries. Dubai Aluminium Company (Dubal) is another feather in Dubai's industrial cap; it is the largest single non-oil contributor to Dubai's economy and has recently completed a major expansion drive. Opportunities also exist for local steel producers, given the building surge; the food and beverage industries, thanks to the growing population; and fertilisers, producers of which can capitalise on Dubai's geographical proximity to Saudi Arabia, a rich source of phosphate.
Hamad Buamim, Director-General, Dubai Chamber of Commerce and Industry provides an interview.
TOURISM
Bigger, better, brighter – that's Dubai's tourism sector! Contributing an estimated 18% of the emirate's direct GDP and 30% of its indirect, according to the Dubai Department of Tourism and Commerce Marketing (DTCM), Dubai's hotels and apartments attracted around 6.5m visitors, the majority of whom were European, in 2007, generating more than $3.5bn in revenues. Dubai's tourism sector is powering ahead in every segment; retail, through events such as the annual Dubai Shopping Festival; sports, through the likes of the Desert Classic Golf Tournament; meetings, incentives, conferences and exhibitions (MICE), set to receive a boost when the Dubai Trade Centre Jebal Ali is completed in 2010; and medical tourism. One thing the visitor to Dubai knows to expect is quality– Dubai is home to the world's only seven-star hotel and luxury locations such as this will soon be added to by Dubailand, set to be the world's largest entertainment and leisure complex. To cater for all this activity, the Al Maktoum Airport, slated for completion in 2015, is expected to be the world's largest airport complex with six runways, a port, attached residential areas and hotels as well as a free trade zone with the capacity to handle between 120m and 150m passengers.
The chapter includes an interview with Khalid bin Sulayem, Director- General, Department of Tourism and Commerce Marketing; Colm McLoughlin, Managing Director, Dubai Duty Free (DDF) and Helal S K Almarri, CEO, Dubai World Trade Centre Corporation.HEALTH & EDUCATION
Demand for healthcare services in Dubai has increased quickly over a relatively short period of time thanks to rapid population growth and an increasingly unhealthy populace which, analysts believe, will make the demand for hospital beds double by 2025. In the face of this, the UAE government has overhauled the public health infrastructure at primary, secondary and tertiary levels and there are nine major hospital projects underway at a value of $596m. Dubai has invested heavily in specialist care units for the treatment of cardiovascular diseases and cancer over the past few years as its population starts to develop the healthcare woes associated with an affluent society; plans for a specialist cancer care unit in the emirate have been announced along with the opening of the UAE's first dedicated heart attack speciality unit – the German Heart Centre, located in Dubai Health Care City (DHCC). The motto ‘prevention is better than cure' is part of the emirate's healthcare mantra, with health education becoming a priority in schools and various public health initiatives underway. Money is also being spent on research and development in Dubai at DHCC, a $1.8bn public-private partnership with the Tatweer group, that houses a collection of medical teaching institutions, private hospitals and clinics, pharmaceuticals offices, research facilities, spas and rehabilitation centres. To the future, the private sector is expected to play an increasingly crucial role, with health care providers from around the globe eyeing the Dubai market as a potentially lucrative option.
Dubai's education sector is expanding off the back of some heavy government investment alongside increased private sector involvement at all levels through the creation of education and research free zones attracting some of the best known institutes from around the globe. Dubai Knowledge Village, for example, is host to some 20 international universities from 10 countries including Canada, Ireland, the UK and Belgium. There is an increasing focus in the emirate on marrying what is taught with what employers require; thus the opening of the Dubai Real Estate Institute. The UAE government has now localised education efforts to some extent, with each of the seven emirates encouraged to establish bodies to liaise between local educators and the federal government on the implementation of modernisation programmes. To this end, Dubai has created the Knowledge and Human Development Authority (KHDA).
The chapter includes an interview with Andrew Jeon, CEO, Harvard Medical International (HMI).
RETAIL
Within a short space of time, Dubai has built up an international reputation as a major retail and shopping destination. Awe-inspiring shopping malls occupy prime space, while competitors rise up to enjoy their own bit of retail therapy. Tourism and shopping have become inextricably linked, with many of the developments offering the visitor both. The Mall of the Emirates has set the benchmark, incorporating an indoor ski resort, while the under-construction Mall of Arabia, developed by Emaar, will host a dinosaur theme park in association with the Natural History Museum in London. All this comes on top of the shops themselves; offering globally recognised brands at tax-free prices. Challenges remain though: rising inflation; competition from other countries in the region which are emulating Dubai's successful retail model; and the worldwide credit crisis, which could discourage wealthy Europeans from heading to Dubai to do their shopping. However with a young, growing brand-aware population, Dubai's unique retail sector looks set to remain a success for a while to come.
Anders Moberg, CEO, Majid Al Futtaim Group (MAF) provides an interview.THE BUSINESS GUIDE
This section looks at the opportunities provided by the growing commercial sector and the legislative environment within Dubai, with help from Holman Fenwick Willan. Christian Taylor, head of Holman Fenwick Willan 's real estate team, shares his views on achieving the correct balance between entrepreneurship and regulation. Oxford Business Group also analyses the UAE's tax laws, with assistance from Grant Thornton. Farouk Mohamed, Managing Partner, Grant Thornton-UAE shares his views on the country's current fiscal and business issues.
THE GUIDE
This chapter takes a look at some of the emirate's leading hotels, as well as providing listings for various agencies and government offices, emergency numbers and tips for those planning to visit the emirate.
