Oliver Cornock, Oxford Business Group Managing Editor for The Middle East, recently spoke at the Institute of Directors Breakfast Briefing in Dubai, where he provided a macro overview of Dubai’s economy targeted at the London investor.
The event was held at the Albert Hall before the main IOD Annual Convention in the same location.
A fulll transcript of Olivers speech is below::
Your Excellencies, Distinguished Guests – good morning.
My name is Oliver Cornock, Oxford business Group’s Managing Editor. OBG is a leading research house covering 37 growth markets across the world and it’s my pleasure to oversee our Middle East operations.
Now, I was lucky enough to be in Dubai last week. In many ways Dubai is bucking the emerging market trend – far more diversified than its neighbours, not reliant (directly, at least, on oil), but services.
With economic recovery well underway and investment ramping up, Dubai is facing forward. In recent visits I have found that my contacts in the emirate are increasingly optimistic about the future.
Now, this is not to say that the past seven years have been easy going. Indeed, alongside the collapse of Lehman Brothers, Dubai’s debt standstill in 2007/8 was one of the defining moments of the economic downturn. Yes, the emriate continues to deal with significant obligations even today, but these are now considered to be well in hand, and indeed last year it paid back one tranche early.
More broadly though, the UAE as a whole, and Dubai in particular, has seen steady, encouraging economic indicators in recent years. GDP growth topped 4% in 2013 and 2014, and it could reach 5% in 2015, according to forecasts by the Department of Economic Development. In 2014 Dubai was the fifth-highest performing metropolitan economy in the world, based on per capita GDP and employment growth data compiled by the Brookings Institution. Earlier this year the government announced a balanced budget for 2015, marking the first time without a deficit since the downturn.
Perhaps more to the point, the current spate of economic growth appears to be considerably more stable – and therefore potentially long-lasting – than in previous periods. This is sustainable expansion, built on strong fundamentals, rising trade and transport activities, and a thriving services sector. In many senses these are Dubai’s core sectors and the post-crisis era has seen a return to these as the main focuses.
Dubai International Airport has become one of the busiest passenger transports hubs in the world, handling more than 70 million passengers a year in 2014. The amount of cargo moved through Jebel Ali grew by 12% last year, making it by far the busiest port in the Middle East. Dubai’s 22 free zones, including the world’s largest at Jebel Ali, have attracted considerable investment from existing tenants and new investors alike. According to forecasts by Dubai Customs and the Chamber of Commerce, the free zones are expected to generate more than $140 billion dollars worth of trade this year, equal to 37% of the emirate’s total trade, and up 5% from last year. In early 2015 the government announced plans to increase spending by 9%, which has the potential to further boost business activity.
Investors, not least from Britain, have taken notice. Driven in large part by the services industries and infrastructure development initiatives, foreign direct investment into the UAE as a whole topped $14 billion dollars in 2014, up from $12 billion the previous year. Dubai accounted for the bulk of this, bringing in nearly $8 billion dollars in FDI in 2014, according to the DED. On A.T. Kearney’s 2014 FDI Confidence Index, the UAE came in at 11th overall, making it the highest-ranking country in the Middle East by a considerable degree.
Challenges do of course remain. Last year property prices topped 2008-09 highs for the first time since the crisis, spurring concerns about another real estate bubble, for example. You may recall this was one of the main catalysts of the 2007 crash. Recently, however, prices have fallen significantly amidst uncertainty spurred by the rapid decline in the price of oil and global currency market volatility. More recently, instability in stock markets around the world has played out in Dubai’s own capital markets. Nonetheless, according to the UAE’s Securities and Commodities Authority around 10 companies are currently preparing IPOs in Dubai and Abu Dhabi, most of which are reportedly planning to move forward with listing as soon as the market conditions are smoother.
The fact that Dubai’s stock exchange has continued to attract new listings, even during this period of volatility is frankly not that surprising. In addition to its deserved reputation as a safe-haven for business in a volatile region, and a gateway to the Middle East, the emirate is widely acknowledged as one of the easiest places in the world to set up a company and carry out business, and the standard of living for expatriates is famously high. Dubai is legitimately cosmopolitan. Foreigners are not only tolerated, but – in my experience at least – are genuinely welcomed. It is not a fluke that expats account for 85% of Dubai’s total population of around 2 million. The emirate boasts well-developed tourism infrastructure, and education and health facilities that are second to none in the region. It is for these reasons that OBG has had a key regional office in the emirate for the best part of 10 years now.
We are not alone among British companies to set up shop in Dubai. The UK was one of the top five sources of FDI into Dubai in 2014, and overall trade between Britain and the emirate reached nearly $2 billion dollars in 2014. In addition to logistics, services and manufacturing, which form the backbone of the emirate’s economy, in recent years Dubai’s government has focused on attracting investment from innovative companies across a variety of additional fields, including information technology, print and broadcast media of all types, green manufacturing, technology and retail. In the run-up to Expo 2020, infrastructure and services look set to be the emirate’s key areas of focus.
Taking into account the government’s planned expenditure in these areas, plus the emirate’s strong economic performance in recent years and pro-business outlook, Dubai’s economy appears to be poised to buck emerging market trends and continue on an upward trend for the foreseeable future.
Whilst UK growth bucks the moribund European story and amidst weakening Asian demand, Dubai offers significant opportunities to British companies looking overseas. I’d urge you to use the chance today to explore these further this morning.