The Report: Dubai 2015

Economy

With Dubai’s economy growing by 4.6% in 2013, and the emirate posting a GDP of $88.65bn, opportunities in various sectors, including Islamic finance and infrastructure and hospitality development, are drawing the attention of investors. The emirate is building up its reputation as an international centre for Islamic finance and under a new Islamic finance master plan it intends to focus on seven pillars, including finance, halal products and tourism. Meanwhile, Dubai International Airport is currently undergoing a major expansion of its runways that will see it surpass London Heathrow Airport in terms of capacity. The government has also put an increased focus on SME development and growth as it seeks to cultivate a spirit of entrepreneurship.

This chapter contains interviews with Sultan bin Saeed Al Mansoori, UAE Minister of Economy; Hamad Buamim, President & CEO, Dubai Chamber; Lim Hng Kiang, Singapore Minister for Trade and Industry; Le Luong Minh, Secretary-General, Association of South-East Asian Nations (ASEAN); and Donald Trump, Chairman and President, The Trump Organisation.

Banking

Dubai’s banking sector, which forms part of the wider UAE banking system, has continued to recover since the global financial crisis. Banking sector assets climbed 13.1% in 2013, from $487bn to $552.5bn, while deposits rose from $318bn to $348bn, a 9.5% advance, and capital adequacy ratios remained strong, at 18.3% overall. New regulations designed to protect financial institutions from systemic risk, including caps on lending to government-related entities, have been put in place, while single borrower exposure has been limited to 25% of available capital. A growing expat population and favourable exchange rates have supported growth in Dubai’s remittance industry, while the Dubai Gold and Commodities Exchange has seen strong expansion of forex trading activities in recent years.

This chapter contains an interview with Peter Baltussen, CEO, Commercial Bank of Dubai.

Capital Markets

The UAE’s 2014 upgrade from frontier to emerging market status by the MSCI is a major accomplishment for the state and one that has brought both more liquidity and greater international attention. Rules for listings are being relaxed to encourage more private sector companies to join the exchange, particularly SMEs, and a spot gold contract is due to be launched in the near future. In 2013 the emirate announced an ambition to crown itself as the capital of the global Islamic economy, and the Dubai NASDAQ is currently the third-largest market for sukuk worldwide in terms of capitalisation.

Islamic Financial Services

Islamic finance is a highly competitive market in Dubai and the emirate is angling to become a leading centre for the sector. The UAE’s Islamic banks hold about 7% of global Islamic banking assets and have a market share of roughly 25% locally. The takaful segment has grown steadily since 2009 and this trend looks set to continue: total takaful contributions reached $1.16bn in 2013, up from $1.03bn in 2012. The UAE has been the world’s second-largest issuer of sukuk behind Malaysia, with $47.88bn issued between 1996 and 2013. Dubai has taken on a leadership role in shaping the future of sukuk as a financial instrument. In 2014 the emirate sponsored discussions and roundtables, with an eye to ultimately establishing a globally integrated sukuk market with harmonised structures that are less risky and easier for investors to understand.

This chapter contains an interview with Adnan Chilwan, CEO, Dubai Islamic Bank.

Insurance

The introduction of compulsory medical insurance in 2015 will provide universal coverage for all residents of Dubai by 2016, with the health insurance market expected to grow from 1.5m to 4m covered individuals by that time. The UAE’s insurance sector is the largest in the region, accounting for some 45% of all gross written premiums in 2013, but its low penetration rate highlights the market’s potential for further expansion, and indeed the sector continues to outpace the state’s GDP growth. Regulations that took effect in November 2014 raised minimum capital requirements for insurance brokers, from $272,000 to $1.36m and $2.72m for local and international brokers, respectively, with these changes expected to improve market standards going forward.

Maritime Industry

Dubai’s maritime industry adds $3.92bn in economic value annually and the emirate’s government has placed a strong emphasis on the sector in the last decade. Long-term goals include implementing smart technology, maintaining high-quality infrastructure and developing local human capital. In the first initiative of its kind in the Middle East, the Emirates Maritime Arbitration Centre in Dubai will provide dispute resolution and deliberation based on a legal regime drawing from global best practices. It is designed to give parties access to a range of maritime regulatory guidelines and standards and to boost the emirate’s ambition of becoming a leading global maritime cluster.

This chapter contains an interview with Sultan Ahmed bin Sulayem, Chairman, Ports, Customs and Free Zone Corporation; and President, Dubai Maritime City Authority (DMCA).

Construction & Real Estate

The value of infrastructure contracts awarded in the UAE in 2014 is expected to increase by more than five times, to $15.2bn. This rising trend is reflected in Dubai’s construction sector, which accounted for about 8% of GDP in 2013. The sector’s growth has been driven by projects linked to higher tourism numbers and upcoming international events, and Dubai Expo 2020 in particular. Expo 2020 preparations are expected to generate $23bn, or 24.4% of current GDP, between 2015 and 2021. The real estate market was severely affected by the crash in 2009, which saw property values fall by 40% in the first three month of 2009. Things have improved significantly since then, and tighter regulations, coupled with strong fundamental demand, have ensured that the future of the emirate’s real estate market is a bright one.

This chapter contains an interview with Hesham Abdulla Al Qassim, CEO, wasl Asset Management Group.

Tourism

Dubai’s tourism offering has continued to expand in recent years, and with the emirate consistently rising to meet new challenges and break new records, this trend looks set to continue. Visitor numbers have increased every year since 2003, resulting in a CAGR of 8.3% for 2003-13. Investment into the sector is rising quickly as well: 6.2% of total investment in the UAE during 2013 was directed to the tourism and travel sector, with estimates suggesting investment growth could reach 9.7% for 2014. Preparations for Dubai Expo 2020 are underpinning large infrastructure projects like the airport expansion, upgrades to tram and train links, and major ongoing hotel developments. An increasingly wide variety of sporting competitions are also being hosted by Dubai, and new stadiums and facilities are set to boost the emirate’s image as a sports hotspot.

This chapter contains an interview with Helal Almarri, Director-General, Dubai Department of Tourism and Commerce Marketing (DTCM).

Transport

Dubai’s transport, communications and storage sector is a leading contributor to the economy, accounting for 14.8% of GDP in 2013. Dubai’s reputation as a transport and logistics hub was bolstered in 2010 with the launch of a logistics corridor connecting Jebel Ali Port, Jebel Ali Free Zone and the new Al Maktoum International Airport. The corridor will be supported by the development of Etihad Rail, a new nationwide rail network whose 628-km second phase will connect Mussafah Port in Abu Dhabi with major ports in Dubai. Plans announced in 2014 for the expansion Al Maktoum International Airport will increase its yearly passenger capacity to more than 200m, making it the biggest airport in the world upon completion. The Roads and Transport Authority is planning to launch up to 35 mega-projects to meet the demands of Dubai Expo 2020, with infrastructure development set to be allocated up to $4bn.

This chapter contains an interview with Mattar Al Tayer, Chairman and Executive Director, Roads and Transport Authority (RTA).

Retail

The retail and wholesale sector continues to be the largest driver of the emirate’s economy, with figures for the first quarter of 2014 showing that retail contributed $6.32bn in the first three months of the year, up 4% from the same period in 2013. Major plans were announced in 2014 for the world’s biggest mall, while the number of community-focused malls is also on the rise. Looking ahead, Dubai Expo 2020 is expected to further boost the retail and hospitality sector. Official estimates suggest tourism numbers could double from 10m people staying for three-and-a-half days to 20m tourists staying for four days.

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

Energy

Hydrocarbons continue to meet the large bulk of Dubai’s energy needs, with the UAE sitting on 5.8% of the world’s crude oil reserves. However, the UAE Vision 2021 sets out goals including the reduction of the emirate’s carbon footprint and a desire to play a pioneering role in the development of energy-efficient technologies. The 1200-MW Hassyan clean coal power plant is expected to come on-stream by 2021, while solar power has also begun to play an increasingly prominent role in the sector. The first 13-MW solar plant opened in 2014, and a further 200 MW is anticipated by 2016, with the whole solar park expected to have a capacity of 1000 MW by 2030. In March 2014, new green building regulations were introduced, which included requirements that 50% of external glazing must be north-facing, 5% of construction materials should be recycled, and smart meters should be used for water and electricity.

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

Health

The rollout of universal health insurance commenced in October 2014 with the first of three deadlines for employers to ensure their staff are covered by health insurance, and is due to be completed by mid-2016. The universal cover will offer improved treatment options for many expatriate workers, while also enabling the government to make changes to funding mechanisms and priorities. A range of new hospitals and health care facilities are set to come on-line in the coming years, with three new hospitals and 40 new health care centres due to be built as a part of the Dubai Health Strategy 2013-25, announced in May 2013. Another key goal of Dubai Health Strategy is the development of medical tourism, as the emirate aims to leverage its geographical location, its status as an air travel hub, and its reputation as a luxury retail and hospitality destination as part of its offering.

This chapter contains an interview with Raja Al Gurg, Vice-Chairperson, Dubai Healthcare City Authority (DHCA).

Education

The government and private providers are investing to meet growing demand as the emirate estimates that the number of students attending private schools in Dubai will double from 183,000 in 2010 to 366,000 in 2020. Underpinning this sustained growth in school pupil numbers has been a shift in behaviour by the expatriate labour force in recent years from temporary stays to more permanent residence. As the number of tertiary institutions in the sector continues to rise, competition to attract students has intensified, with private universities are likely to come under increasing pressure to publish graduate employment data. The higher education industry is working to foster stronger links between industry and higher education providers and to look for ways university research may be tailored to benefit businesses in the emirate.

Telecoms & IT

The emirate continues to benefit from well-developed telecommunications infrastructure with high penetration rates for both mobile and fixed-line services and a local population that is highly concentrated, tech-savvy, and global in both composition and outlook. With saturation rates reached in the local market, telecoms players are looking overseas for growth opportunities. The e-commerce segment is on a strong growth trajectory, with companies hoping to capture a share of the MENA retail market, which is set to reach $15bn by end-2015, up from $12bn in 2012. Online content streaming is becoming another important revenue generator. The launch of Dubai Smart City initiative in 2014 aims to complete the “third phase” of the emirate’s development, propelling it to be a leading global smart city as it integrates more than 100 initiatives and 1000 government services into a single platform.

This chapter contains interviews with Osman Sultan, CEO, du; and Ahmed Bin Humaidan, Director-General, Dubai Smart Government.

Industry

The manufacturing sector has recorded consistent growth in recent years, accounting for 13.7% of the emirate’s GDP in 2013. Free zones such as the Jebel Ali Free Zone and the Dubai Auto Zone continue to play an important role in the sector, with incentives helping to draw in international players. According to the Jebel Ali Free Zone Authority, its 625 automotive companies generated trade worth around $4.6bn in 2013, up 13% on 2012, while Dubai Auto Zone recorded a 63% rise in trade in the first half of 2014, illustrating the emirate’s continuing development as an export and re-export centre for the automotive sector. The emirate’s growing logistics and transport capabilities as it gears up to host Dubai Expo 2020 are also expected to help drive further growth. This chapter contains an interview with Khamis Juma Buamim, Chairman, Drydocks World and Maritime World.

Media

Dubai plays host to more than 2000 major media companies, including 120 TV channels and broadcasters, and 180 production houses. While the effects of the global financial crisis have resulted in some residual caution among market players, there is plenty of upside for Dubai’s media and advertising outfits to tap into. In first-quarter 2014 newspapers had the highest advertising expenditure, pulling in $227m, or 57% of the total amount spent in those three months. Major potential for Arabic language content and a thriving pay TV sector, which in 2013 had an 85% penetration rate in the UAE, are expanding the sector’s offering.

Tax

This chapter contains an overview of the tax framework in which local and foreign investors operate, including an outline of the incentives available in the free zones and a look at the opportunities in the Dubai International Financial Centre. This chapter contains a viewpoint from Mahmud Merali, Managing Partner, MERALI’S.

Legal Framework

This chapter contains an outline of the legal framework in which local and foreign investors operate in Dubai. It includes a look at how the emirate is positioning itself as a leading Islamic financial centre, a breakdown of regulations on foreign ownership and an overview of the smart city initiatives. This chapter contains a viewpoint from Michael Kerr, Regional Managing Partner, Dentons.

The Guide

The guide includes listings of some of the leading hotels and resorts in Dubai and contact details for important government offices and services. It also contains useful tips and information for business and leisure visitors alike.

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