The Report: Dubai 2014

Economy

As the emirate celebrates its victory in the bid to host World Expo 2020, infrastructure and transport development is expected to attract significant investment over the next few years. GDP growth reached 4.9% in the first half of 2013, the strongest result for the January-June period since 2008. Trade, the strongest of the emirate’s economic foundations, continues to grow, with non-oil foreign trade increasing by almost 10% over the first three quarters of 2013, totalling some $275bn. There are concerns that the circumstances that led up to the post-2008 boom-bust cycle are reappearing, however, measures have already been taken to prevent or at least dampen the kind of speculative fever that laid the emirate low four years ago.

This chapter contains interviews with: Hamad Buamim, President and CEO, Dubai Chamber of Commerce and Industry; and Sami Al Qamzi, Director-General, Department of Economic Development.

Banking

The sector appears to have largely recovered from the 2008-11 economic crisis, with the first half of 2013 seeing net profits in the UAE’s banking sector rising 20% to $3.7bn, while total assets grew 8% to $517bn during the same period, although there are a number of risks that remain outstanding. The introduction of new regulations has helped to improve overall stability in the real estate market, with the Dubai Land Department doubling the transaction fee for freehold properties to 4% in order to discourage speculation in the real estate sector. Remittances offer significant opportunities due to the emirate’s large expatriate population, while high credit card penetration also creates ideal conditions for e-commerce growth. This chapter contains interviews with Sultan bin Nasser Al Suwaidi, Governor, Central Bank of the UAE; Hesham Abdulla Al Qassim, Vice-Chairman, Emirates NBD; and Peter Baltussen, CEO, Commercial Bank of Dubai.

Capital Markets

Driven by enhanced liquidity in the banking sector, rising property prices and an overall improvement in the domestic economy, Dubai’s capital markets began 2013 in full recovery mode. The Dubai Financial Market is a largely retail market at present, but it is preparing for a surge in institutional trading activity and an influx of foreign investment as a result of the MSCI index upgrade to “emerging market”. Although the UAE will not officially be included in the MSCI index until May 2014, the news alone put the country’s three equity markets, which have an estimated $7trn in assets under management, on the radar of global institutional investors. This is expected to boost liquidity and broaden the investor base of exchanges.

This chapter contains interviews with Essa Kazim, Chairman, Dubai Financial Market, and Governor, Dubai International Finance Centre; and Gerald Hassell, Chairman and CEO, Bank of New York Mellon.

Islamic Financial Services

The Islamic financial services (IFS) industry has grown increasingly popular in recent years, with worldwide assets totalling $1.8trn in 2012 and forecast to top $2trn by the end of 2014. Having already established a reputation as a leading regional financial centre with abundant liquidity, Dubai has emerged as a major beneficiary of the IFS growth story. Sharia-compliant project financing, asset management and pension products are other segments poised for growth in the coming years. To realise the full extent of this potential, developing a solid regulatory framework and pursuing harmonisation of sharia-compliance standards at the national, bilateral and global levels will be key for Dubai.

This chapter contains a roundtable with Adnan Chilwan, CEO, Dubai Islamic Bank; Jamal Saeed bin Ghalaita, CEO, Emirates Islamic; and Hussain Al Qemzi, CEO, Noor Bank.

Insurance

Though overcrowded, the UAE’s insurance market is underpenetrated by Western standards, and there is ample room for growth. Driven by an expanding expatriate population, the market is projected to grow 10% in 2014, and anticipated regulatory changes could further boost premium growth in the medium term. Most notably, a boost is expected to come from the introduction of mandatory medical coverage. The market leaders are the best equipped to capitalise on future demand, but with more prudent regulation, many smaller players in the field may also be able to benefit from premium growth without compromising their profits.

Transport

With the population forecast to grow to 3m by 2020 and 25m attendees expected for World Expo 2020, the emirate is focusing on boosting transport options. Aviation and public transit are due for major expansion: the metro is set to increase to more than 422 km by 2030, a tramline is due to begin initial operations in late 2014, and airlines are also dominating the sector as Dubai’s ideal location for transit of passengers is further exploited by both Dubai International and Al Maktoum International Airport. The performance of Jebel Ali Port, the ninth-biggest container terminal in the world, continues to impress, and its ability to handle ships of any size, whether in existence or on the order book, will ensure its continuing ability.

This chapter contains interviews with: Sultan Ahmed bin Sulayem, Chairman, DP World and Ports, Customs and Freezone Corporation; Mattar Al Tayer, Chairman and Executive Director, Roads and Transport Authority; and Ghaith Al Ghaith, CEO, flydubai.

Real Estate & Construction.

Real estate transactions in Dubai totalled $64.2bn in 2013, up sharply from $42bn in all of 2012. The residential, retail, hospitality and industrial segments all experienced solid growth. Property sales jumped by more than 20% in 2013, with serviced apartments also recording strong growth figures. Demand for Dubai property seems to be coming from all corners of the world. According to the Dubai Land Department, Indian nationals invested $2.4bn in Dubai real estate in 2012, followed by the British ($1.3bn), Pakistanis ($1.1bn), Iranians ($826m) and Russians ($640m). Regulatory changes and new loan-to-value limits for residential mortgages are being introduced to cool the market and discourage property flipping. Competition in the $1.5bn facilities management industry is set to increase as new projects come on-line.

This chapter contains an interview with Sultan Butti bin Merjen, Director-General, Dubai Land Department.

Tourism

The total number of visitors to Dubai in the first nine months of 2013 was 7.9m, and the emirate has set itself a target of reaching 20m visitors per year by 2020. The emirate received a major boost towards achieving this goal when its bid to host World Expo 2020 was accepted in November 2013. Of the anticipated 25m World Expo visitors between October 2020 and April 2021, it is forecast that around 70% will be from outside the UAE. The energy going into providing facilities for tens of millions of foreign visitors is relentless and looks set to continue over the coming years, with endeavours to improve the offerings for sport, MICE, cultural and medical tourism all working to make the emirate a desirable destination for tourists.

This chapter contains an interview with Helal Saeed Al Marri, Director-General, Department of Tourism and Commerce Marketing, and CEO, Dubai World Trade Centre.

Retail

Revenues from shopping malls and retail outfits reached $626m in the first nine months of 2013, 22% higher than the same period of 2012. Out of 323 major international fashion retailers, more than half, maintained an outlet in Dubai in 2013, and the emirate is considered by one agency to be second only to London in importance for global fashion retail. Though Dubai was undoubtedly delighted with the acclamation of being named second only to London as the world’s most important home of international brands, the emirate will have top spot in its sights – especially if it can clear the final hurdle by 2020. The entrenchment of global branding and resultant potential is palpable in the retail sector.

This chapter contains an interview with Colm McLoughlin, Executive Vice-Chairman, Dubai Duty Free.

Energy

The hydrocarbons sector accounts for about 80% of all government revenues in the UAE. However, the sector’s GDP share varies substantially, from over 50% in Abu Dhabi to less than 6% in Dubai. Given its modest hydrocarbons endowment, Dubai continues to import most of its energy feedstock. The emirate is working to diversify its energy mix on both the supply and demand side. With 70% of electricity use in the emirate’s buildings committed to cooling, developing efficiencies in this market segment is a main focus of the demand side management strategy, and as a result of this, the district cooling service market is expected to reach 30% penetration at the individual level. Meanwhile, an expansion in production capacity at desalination plants looks set to meet growing demand for water.

This chapter contains interviews with Saeed Mohammed Al Tayer, Managing Director and CEO, Dubai Electricity and Water Authority; Saeed Khoory, CEO, Emirates National Oil Company; and Ahmad bin Shafar, CEO, Empower.

Education

Dubai continues to develop the strong foundations upon which to build a knowledge-based economy. The emirate has built a unique education system to fit its population’s needs by harnessing the capacity of the private sector, while also continuing to develop a more sophisticated regulatory framework to ensure every school is delivering quality education. Enrolment in private schools has grown by an average annual rate of 7.3% over the past 10 years, with 34 new schools opening in the past five years. Growth has been strong and steady, and if projections are correct, there will be a need for continued investments in the development of new schools and the expansion of existing ones in the near and medium term.

Health

As the emirate leverages its diverse leisure activities and central location, medical tourism looks set to grow beyond the $1.69bn in revenue earned in 2012. A number of health and pharmaceutical groups are eyeing Dubai as a regional centre, owing to its well-developed transport and communication links and ongoing advances in technology and research. Insurance is not currently required by law; however, legislation is in the works to introduce an employer-based health insurance mandate. When it is implemented, the law is expected to bring with it a shift in the quantity and type of medical services demanded in the emirate.

This chapter contains an interview with Essa Al Haj Al Maidoor, Director-General, Dubai Health Authority.

IT & Telecoms

Through strong government support, an attractive business environment and innovative free zones, Dubai has established itself as a leading regional centre for information and communications technology (ICT). Improved infrastructure for modernising technology is also helping domestic players diversify their services for an increasingly tech-savvy clientele, with demand for regionally and locally specific applications and content in multiple languages, particularly Arabic, set to grow. Most of this demand will be met by large, established companies, but increasingly start-ups, and even individuals, could begin to play a role in the market as well. For business customers, managed solutions and cloud-based services will steadily replace the traditional model of software and hardware sales throughout the region, with Dubai well placed to benefit from this trend.

This chapter contains an interview with Osman Sultan, CEO, du.

Industry

Easy access to air and sea transport, combined with expansions at the Jebel Ali Port and of the national airline, has helped establish Dubai’s position as both a trans-shipment hub and a destination for export industries. The industrial sector continues to provide a major contribution to non-oil GDP, with heavy industries able to take advantage of low energy prices. The emirate’s free zones are perhaps the most important driver of manufacturing growth, responsible for around 75% of exports and more than 25% of Dubai’s GDP in 2012. Key outputs, including refined petrochemicals products (plastics, fertilisers, synthetics), aluminium, precious metals and processed foods, are expected to trend positively throughout 2014, buoyed by strong economic fundamentals and major planned infrastructure and development projects.

Media & Advertising

Over the last decade, through committed investments and the reduced influence of traditional media centres such as Egypt, Dubai has grown into a centre for media production of all types. The emirate’s cluster of media-oriented free zones has drawn many leading print, digital and broadcasting companies, and the government is expanding its film-making facilities to attract foreign productions. Seen as a base from which companies can serve both local and regional markets, Dubai is home to an increasingly mature, and thus far resilient, print sector, a steady broadcast industry and a growing number of film producers. Despite the challenges, notably a more competitive global marketplace, trends are generally positive, and most indications point towards Dubai’s media sector continuing to see significant growth.

Tax

This chapter contains a rundown of taxation in Dubai, with explanations of the situation regarding income tax, municipal and property tax, and tax treaties, among other topics. It also contains an analysis of the Dubai International Financial Centre.

This chapter contains a viewpoint from Mahmud Merali, Managing Partner, MERALI’s.

Legal Framework

This chapter contains an overview of the draft of the new companies law, which clarifies rules for investment and covers a number of important exemptions in the law. There is also an explanation of the new competition law, which was recently enacted by the UAE government.

This chapter contains a viewpoint from Michael Kerr, Regional Managing Partner, Dentons.

The Guide

The guide contains listings of some of the leading hotels and resorts in Dubai, as well as contact information for important government offices and services. It also contains useful tips for first-time, business and leisure visitors.