Interview: Ahmad bin Byat
How are government-related entities (GREs) looking to improve support for economic diversification in the current global economic environment?
AHMAD BIN BYAT: Dubai’s GREs are moving away from investing in non-core sectors or industries that do not complement the strength of Dubai. The emirate’s economic diversification strategy was key to surpassing the economic crisis. GREs have focused their investments on a variety of sectors in Dubai, which include infrastructure, trade, logistics, tourism, retail and service. This explains Dubai’s current strength and trading advantage. Dubai Holding’s own portfolio investments have adopted a similar strategy. This is evidenced by the strong performance of Jumeirah, TECOM Business Parks and some of the Telco assets we currently have.
To what extent does the telecommunications sector still offer favourable returns given high penetration rates and advanced level of sophistication?
BYAT: The economics of the telecoms sector is increasingly moving away from voice to data. Supporting this is the growth of the mobile internet and application-based mobile consumption, driven by smartphones such as the iPhone and devices running Android. Consumers are putting aside greater levels of monthly income so that they can access information at very high speeds through mobile internet while on the go. So while voice is becoming cheaper, the returns for operators are increasing as consumers demand more data.
What do you say to those who might argue Dubai’s hospitality sector’s growth is unsustainable?
BYAT: Dubai’s tourism story is not a three to four year cycle or a bubble. The tourism sector has been expanding since 1996, when the first Dubai Shopping Festival was organised. It has been growing strongly ever since. Dubai’s tourism flow has steadily increased over the past 16 years, and has not been dampened by the economic crisis. This sector continues to see big investments not just by local players, but by international players as well. Dubai’s strategy has been to boost its tourism offering every few years by adding products such as beach hotels, water parks and shopping malls to keep offerings fresh. There is a good pipeline of projects to continue this in the future.
Reinforcing this is the strength of Emirates Airlines, Dubai Airport and the emirate’s cruise line terminal. The number of passengers at the airport in 2011 reached 50.98m, compared to 47.2m the year before. Dubai Airports in 2011 announced it would invest $7.8bn in an airport expansion programme to boost its capacity from 60m passengers a year to 90m passengers by 2018. Currently, over 9m tourists arrive each year, and I see this continuing to grow at a strong rate.
How much of the recovery seen in certain sectors of the real estate market can be attributed to new-found flexibility in meeting investor requirements?
BYAT: There is a combination of factors which are driving the recovery of certain sectors in the real estate market – a reinforced position of Dubai as a safe haven through the Arab Spring, the expanded pick-up of economic activity over the last 12 to 18 months as a result of the safe haven status, an increased end-user demand for housing units and an ability for end users to move up the product curve to higher-end products due to lower pricing. As a result of this we are seeing greater demand at the top end of the market, such as villas, where there is a shortfall in supply. We are starting to see a small number of new off-plan product launches by developers in market segments where there is a supply shortfall, including villas and luxury apartments.
We are also seeing a more sophisticated regulatory framework, brought in by regulators and favourable for end users. For example, a developer cannot sell off plan units unless the development is funded in full before it is marketed. This of course also adds to confidence for buyers. We are selectively entering back into the market through our property development unit at the top end and will monitor developments closely.
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