Interview: Sami Al Qamzi
What measures are being put in place to ensure the sustainability of Dubai’s economic recovery?
SAMI AL QAMZI: Dubai’s rapid development has seen its fair share of challenges, but the government is confident of its ability to meet them successfully. Debts of government-related entities (GREs) are being restructured or rescheduled through negotiations with creditors. In addition, the government has converted some of its own loans into equity, sometimes providing new equity. By mid-2013, more than two-thirds of Dubai’s debt had been restructured or rescheduled. Furthermore, the government is enforcing stricter fiscal discipline to reduce the deficit by rationalising the spending of GREs, without impinging on the quality of public services.
To ensure better internal coordination and avoid incurring any systemic risk, Dubai has set up the Higher Fiscal Committee, with a mandate to monitor borrowing by all government entities and promote fiscal discipline. By 2012, the government had reduced its own current and capital expenditures by more than 15% from their peak level in 2009, and it is expected to balance its budget by 2014. The government is also focused on improving the governance of GREs, by overhauling executive boards, appointing key government officials on boards of directors and improving accountability.
To what extent does the real estate sector give cause for optimism for the years ahead?
AL QAMZI: The performance of the property sector is directly linked to the traditional growth sectors of the economy. The global financial crisis had an impact on Dubai’s core sectors because we have functioned as an open economy. The impact of the global slowdown, in terms of business and tourism, as well as in the financial markets, was also felt in the property sector too. However, the Dubai government streamlined the property supply to protect the interests of investors and developers, and acted to enhance investor confidence.
The introduction of escrow accounts and the focus on community management underlined how serious the government is about its commitment to investors. The government has also introduced additional measures such as setting up a fast-track rental dispute centre and passing a new decree for the Dubai Land Department, to provide a more attractive investment environment by implementing international standards.
In what ways will Dubai’s aspiration to become a centre for Islamic economics augment its economy?
AL QAMZI: Whereas earlier conceptions of Islamic economics were confined to aspects of banking and finance, these are just two areas where the potential of Islamic economics can be harnessed. Of course, Islamic banking as an industry has made great strides in recent years, growing 10-15% per annum on average, but the Dubai government is fully aware of the wider scope of Islamic economics and the considerable benefits that it could bring to the economy beyond this direct contribution to the financial sector. This vision reflects an innovative approach which looks to integrate Islamic economics into overall development policy.
In addition to finance, this approach potentially involves a whole range of manufacturing and logistics activities, alongside products that are expected to cater to a large international niche market beyond the domestic market. The government is stepping up its effort to strengthen the sharia-compliant regulatory framework with regards to production and management, according to a detailed definition of Islamic standards.
Thanks to its outward-looking orientation as well as its capacity to adjust in a timely manner to shifts in demand, Dubai is poised to seize the economic opportunities of the future. It will do so not only by attracting foreign as well as domestic players, expanding economic activity and accelerating growth, but also by continuing to diversify its economy so that it becomes more resilient to external shocks. Although it may be difficult to quantify these ambitions, the general consensus is that it will make a significant difference to the size as well as the structure of Dubai’s economy.
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