Speech by Oliver Cornock at The Launch of The Report: Dubai 2014

UAE: Dubai

Event

26 Jan 2014
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Your excellencies, distinguished guests, it's a great pleasure to be here with you today. Your excellency thank you for your kind words. 

I echo all that both Andrew and Basak have said, and thank all of our partners, without whom our  research would be much more difficult to do, and my life as editor, much harder!

I'm tasked with setting the scene now before our panel discussion. I promise to be brief, but the achievement of the Expo 2020, and the opportunities it presents are difficult to sum up in the short time I have.

Relentless buildup, mounting anticipation, and long months of planning and promotion culminated in the announcement that Dubai had won its bid to host World Expo 2020. From X-ray machines to electric cars, World Expos have historically marked the high points in technological advancement and human innovation. We have the Eiffel Tower and Musee d’Orsay because Paris hosted the Expo in 1889 and 1900, while the city of Chicago celebrated both its recovery from a devastating citywide fire, and the advent of electric power, at the World’s Columbian Expo in 1893. 

And, now, Dubai will be the first city in the Middle East to enjoy such an honour.

The Expo 2020 announcement was a highlight moment in a year marked by renewed optimism and promising economic growth. It’s no secret Dubai suffered upheaval, turmoil, and uncertainty in the wake of the financial crisis of 2009 but recovery has been remarkable. Dubai’s GDP grew 4.9% in the first half of 2013, the best six-month performance since pre-crash 2008. This growth surpassed the IMF’s earlier projections, and trounced average annual growth rates of 2.3 to 3.5% over the previous five years. Led by buoyant trade, non-oil investments in finance, construction and real estate, and a booming tourism industry, Dubai is poised to thrive in 2014.

The tourism, construction, real estate, financial, and retail sectors are all in expansion mode, including new metro lines, hospitality and residential developments in Mohammed Bin Rashid City, and airport upgrades that will increase capacity exponentially. Separate from millions of Expo 2020 visitors, Dubai’s government hopes to be welcoming 20m visitors annually by 2020. 

So, Dubai’s next six years will certainly be interesting.  But now that the fireworks are over and the dust has settled, how will the emirate continue its recovery and meet its 2020 targets?

There is more to Dubai than shopping and skyscrapers, as evidenced by the 7.9m visitors who came to the emirate during the first nine months of 2013. Dubai International Airport sits in second place behind Heathrow as the world’s busiest airport—a title Dubai is expected to claim early this year. And with the opening of the Al Maktoum International Airport to passenger traffic in November 2013, the sky is literally the limit with what is being termed “the world’s first purpose-built aerotropolis”.

Expo 2020 is expected to bring in 25m visitors, while simultaneously creating more than 200,000 jobs. In addition to airport capacity, providing beds for 25m arrivals will require perhaps more than double the 16,000-plus hotel rooms already under construction, in addition to the estimated 10,000 five-star rooms in need of refurbishment. Developments such as Mohammed bin Rashid City will be key to this. Indeed Emaar Property’s recent MoU with Dubai World Central to develop an integrated urban centre and leisure development at MBR City, demonstrate that Dubai’s big dreams are grounded in reality.

These big dreams are the same that saw the Gulf’s first metro line open in 2009. Today the Dubai Metro covers 75 km with 47 stations, and carries over 100m passengers annually and is expanding again: the entire system is planned to have a 422-km-long network of rail and trams with just under 200 stations by 2030.

In addition to hospitality and transportation developments, Expo 2020 will make a significant impact on the emirate’s real estate market. In fact, the effect is already showing with local media reporting that in the days following the Expo bid win that asking prices at some of the emirate’s freehold master developments saw a sharp spike. For example, at MBR City, prices jumped from 120 to 300 dirhams per square foot. 

There are of course challenges facing sustainable development in Dubai. Although estimates of the total cost of staging the event vary, Sheikh Ahmed bin Saeed Al Maktoum, chairman of the Dubai Expo 2020 High Committee, recently told local media that Expo 2020 infrastructure, both permanent and temporary, will cost a total of Dh29.7bn, that’s $8.1bn. Gowever, the amount of money the event will bring into the emirate and needed the country is probably incalculable. Those who have tried put a figure of 2% of GDP on it – and that could well be a conservative view.

The issue of debt remains. Dubai’s debt level, if government and GREs are added together, stands at 102% of GDP, a significant challenge for any nation. The Dubai Group’s recent debt restructuring is an extremely positive sign for sustainable financial recovery and development—as indeed are the plans for asset disposal. It is a long and complex process and worth more than just a few short sentences here. However, suffice it to say that there is light at the end of tunnel. 

The transportation sector is also facing several questions: Will both the Dubai International and Al Maktoum airports both remain open in the long-term? When will Emirates shift its operations? Can we expect sustainable growth in passenger numbers post-2020?

And while property developers at Dubai World Central have offered incentives including flexible payment plans as a result of price gains, the risk of an overheated property market—and indeed, economy—is one to be taken seriously.  How can Dubai ensure its promising growth levels continue without falling back into a volatile boom and bust cycle? At this early stage, there are more questions than answers. But that’s what we’re here to explore.