04 Feb 2020
A huge amount of excitement, commentary and press attention has been generated since Dubai was selected to host the Expo 2020 in 2013.
With the event expected to contribute approximately Dh122.6bn ($33.4bn) to Dubai’s economy between 2013 and 2031, a wide range of sectors – including financial services, infrastructure, construction, real estate, hospitality, tourism and transport – have already begun to benefit from increased spending and investment in the run-up to the event. The precise impact and legacy of Expo 2020 remains difficult to predict, however.
During a panel discussion held to commemorate the launch of the new report on Dubai’s economy published by Oxford Business Group, four high-level panellists from key industries met at NASDAQ’s MarketSite in the Dubai International Financial Centre to discuss their perspectives on what awaits the emirate beyond 2020.
Hussein Sajwani, Founder and Chairman of DAMAC Properties; Elissar Farah Antonios, CEO of Citibank UAE and Cluster Head for Levant and Iraq; Taha Khalifa, Client Computing Group Sales Director of EMEA Territory at Intel Corporation; Christophe Nicaise, Chief Strategy and Business Development Officer at Seddiqi Holdings, took to the stage to offer their perspectives on the future.
Real Estate
Following a couple of unremarkable years, growth in the real estate sector began to pick up in 2018, increasing by 7%, according to the Dubai Land Department. Despite certain analysts’ projections that growth would remain at around 6% to 10% in 2019-20, oversupply of residential units has put strains on the industry, with various factors including overconfidence in demand, increased competition and a slowing global economy leading some developers to slow their operations or decrease the number of new launches. However, according to Sajwani, demand remains robust, with total unit sales across the sector expected to reach between 25,000 and 30,000 in 2019.
Nevertheless, with the imbalance between supply and demand expected to continue driving prices down in the short to medium term, the future of the industry will likely be determined by the corrective actions taken. “Improved efficiency in the market, driven by the fast flow of information resulting from wider use of digital channels, has enabled investors and buyers to leverage the current market dynamic to bring down prices. An oversupply of a mere 3-4% today can result in a 30-40% drop in prices, as the balance of power moves from developers to consumers,” Sajwani said.
Beyond: A number of measures are in motion to find an equilibrium between supply and demand, including the creation of the higher committee for real estate planning, headed by Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, and individual companies’ engagement to ease new development. While the impact of these measures remains to be seen, Sajwani believes that slowing down construction for approximately 14 to 18 months would effectively mitigate any additional effects on the industry.
Expo 2020’s main contribution to the property market is that it will enable Dubai to showcase its potential to foreign investors, especially those coming from Asia and Africa. Referencing this new trend, Sajwani said, “With over 1.3bn people – 200m of whom can afford to travel abroad – China is one of the markets that has had limited exposure to Dubai’s investment potential. In this context, Expo will showcase Dubai’s potential and attractiveness to new investors which, together with recent changes in visa requirements, should bolster demand.”
Finance
Dubai has seen 92 merger and acquisition deals, worth approximately $97bn, so far this year, for an increase of 43% compared to 2018. In terms of volume, the UAE ranks second in the region, behind Saudi Arabia and ahead of Egypt. With companies seeking to bolster efficiency, increase scale, lower costs and strengthen their balance sheets, it is likely that a number of sectors will follow the example of the banking sector’s recent consolidation spree. “A decade years ago, cross-border acquisitions were the norm; today, domestic transactions have taken the lead, as exemplified by recent events in the financial services arena,” Antonios said.
Beyond: According to Antonios, we are likely to continue witnessing a consolidation of the market as industries adapt to the new reality, and increasingly seek to compete in an international setting. “The creation of domestic champions that can compete regionally and internationally is inevitable as Dubai becomes an increasingly mature market. In this context, the sectors with the best prospects are construction and real estate, as well as education,” Antonios said. Maintaining its dominance in the financial services arena will necessitate flexibility from regulators concerning new technologies. “While Dubai provides two of the most crucial elements sought after by financial service professionals – security and stability – it is imperative that regulation is able to keep up with global trends. Digitalisation, digitisation and technological advancements are not only creating big changes in the digital payments arena, but also in the portfolio and asset management field. While the regulatory environment in Dubai remains ahead of its peers, the discrepancies of dealing with four regulators can be a bottleneck to improving efficiency across the emirate’s financial industry,” she added.
Innovation
As its theme “Connecting Minds, Creating the Future” implies, Dubai aims for Expo 2020 to act as a catalyst for the development of a vibrant tech sector. According to Khalifa, Dubai has already positioned itself as a centre of innovation and entrepreneurship in the region, with clear and measurable objectives focused on the development of new technologies such as artificial intelligence (AI), blockchain and 3D printing.
“Dubai has established itself as a pioneer in innovation, thanks to numerous initiatives backed by the government and supported by the private sector. These include the establishment of a Ministry of AI; the 2031 UAE AI strategy aimed at positioning the UAE as a global leader in AI and bolstering the segment’s contribution to GDP to 10%; a 3D printing strategy that seeks to make Dubai a global centre for 3D printing and have 25% of new buildings in Dubai use the technology; the establishment of a smart cities framework, which has helped to break down the silos that represent one of the biggest challenges to the free circulation of ideas and information; and establish Dubai as one of the key smart cities worldwide,” said Khalifa.
Beyond: According to Khalifa, the biggest challenge the technology sector faces pertains to the number of technology graduates. Encouraging young students to pursue tech education and careers, and promoting science, technology, engineering and maths education in schools will be necessary to grow the local talent pool needed to support all of these technology-led initiatives.
The One Million Arab Coders programme launched by Sheikh Mohammed is a great example of nurturing local talent and promoting tech education among the youth. Dubai continues to be an attractive location for global talent, and the establishment of new rules and regulations to encourage qualified people to come to Dubai will help position the UAE as a global technology and innovation centre. Collaboration between the government and the private sector on key curricula and education directions will be key to support local talent with the industry trends and tools needed to compete globally.
With regards to entrepreneurship, Dubai has quickly positioned itself as a leading innovations ecosystem in the region. Regulatory frameworks, as well as the advent of local incubators and accelerators, have incentivised start-ups from across the world to see Dubai as their regional headquarters. There are many success stories of local companies being acquired by global corporations, highlighting the potential of Dubai start-ups. Dubai’s plan to be a global centre for AI, blockchain and 3D printing is encouraging many start-ups to come and set up a presence in Dubai. The key challenge is how to go beyond Series A financing. “Growing beyond Series A financing to series B and C through scale is important,” Khalifa said. Together with the financial services industry, we are working on creating the necessary framework to leverage the innovation and entrepreneurial potential of Dubai, to develop interesting alleys for growth.”
Retail
Contributing over 23% of Dubai’s GDP, retail is undoubtedly one of industries most affected by the advent of new digital channels, with e-commerce growing by double digits year after year. In spite of this, the emirate continues to bet strongly on foot traffic or store-based retail – which accounts for the lion’s share (95%) of sales – as evidenced by projects such as the Cityland Mall, Nakheel Mall in Palm Jumeirah, Deira Night Souk, Deira Mall and others.
According to Nicaise, one of the major challenges facing retailers in Dubai is that local players are primarily representatives of foreign brands, and that most online platforms are overseen by the brand’s headquarters, in Europe, North America or Asia. This makes local retailers vulnerable to losing market share as e-commerce gains traction.
Beyond: For brands and representatives to compete in a digital world, they will need to develop a more robust, customer-centric approach, integrating in-person and digital experiences. “Local retailers have already begun to revisit their distribution agreements to fulfil a mandate that includes online sales. Moving towards omnichannel agreements that integrate brick and mortar, together with digital platforms, is paramount to ensure sales in a market increasingly dominated by online outlets,” Nicaise said.
Building on the momentum of the last decades and the robust size of its retail sector, Dubai has a real chance to position itself as the retail and e-commerce centre of the region. “Ensuring the highest quality, especially within luxury retail, will require brands to partner with local firms that share their values and that have the know-how necessary to communicate their message to a local audience,” Nicaise added.
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