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Emirates: Dubai - NEWS BRIEFINGS
Emirates: Dubai | 08.09.2008
Dubai's overheated real estate sector is facing a slowdown, according to industry insiders, amid moves by the government to strengthen regulation in the market and concerns over the weakening global economy.

Emirates: Dubai

The Report: Dubai 2007  After joining surrounding emirates in 1971 to form the UAE, Dubai has undergone immense change over the past 30-odd years. Renowned as a centre for trade, as well as for its open-door policies, Dubai is now a rich mix of cultures and traditions as diverse as the people who brought them to the emirate. Expatriate workers make up an estimated 90% of its population of 2m. This figure is expected to reach 5m, lowering the amount of UAE nationals to 1% by 2020, enforcing the notion that, unlike neighbouring countries in the Gulf, Dubai is less concerned with social politics and more concerned with its economy, which is continuing to diversify away from the hydrocarbons sectors.

ISBN: 1-90202339-77-0
ISSN (Online): 1755-2788
ISSN (Print): 1755-2788

TABLE OF CONTENTS

COUNTRY PROFILE

This section provides a quick overview of some facts about the country, its population, language, natural resources, geography, climate and history.

POLITICS

Over the last 40 years Dubai has transformed from a quiet trading town to a thriving international metropolis. The relative speed with which the emirate has reinvented itself is a testament to its liberal business and neutral political philosophies, which limit bureaucracy and promote the progress of the state. These values are embraced fully by Sheikh Mohammed bin Rashid Al Maktoum who, after his first year as ruler of Dubai and vice-president of the United Arab Emirates, has proven to share the same inclination to "get things done" as did his father, Sheikh Maktoum bin Rashid Al Maktoum. Dubai has made progress as both a business climate and a political role model. Features from our specialists cover the bourgeoning participation of women in business and politics, the Federal National Council elections, held in December 2006, which are seen as the first steps toward emerati democracy, and the implementation of an e-government initiative that will continue to reduce red tape. This chapter also includes an analysis of the expatriate segment of Dubai, which accounts for approximately 90% of the population, and how the emirate intends to keep its open-door policy while retaining its cultural individuality.

In this chapter OBG interviews Sheikh Hamdan bin Mohammed Al Maktoum, Chairman, Dubai Executive Council; Lee Kuan Yew, Minister Mentor and former Prime Minister of Singapore; and Hussain Lootah, Director-General, Dubai Municipality. Viewpoints are offered by James A Baker III, 61st US Secretary of State, and Anwar Gargash, Minister of State for Federal National Council Affairs.

THE ECONOMY

Towering 141 storeys above street level, the Burj Dubai, currently the world's tallest building, is indicative of the emirate's ambitions to become a world-class centre for business, finance and tourism. Knowing that it cannot capitalise on oil forever, Dubai is making a move to diversify, boosting trade ties with eastern Asia and developing a more knowledge-based economy. Trade with China has grown sixfold since 2000, and leaders are looking toward increased trade with Vietnam, a country that holds high potential for Dubai. On the domestic front, this chapter looks at the problem of rising costs of living in Dubai and the "Dubai strategic plan 2015", which has been developed to resolve the issue. Plans for free zone developments are based on the emirate's strengths and will serve to further diversify the economy.

This chapter includes viewpoints from Sultan Ahmed bin Sulayem, Chairman, Dubai World; Mohsin S Khan, Director, IMF Middle East and Central Asia Department; and Belaid Rattab, Executive Director, Dubai Ethics Resource Centre; as well as an interview with David Rubenstein, Co-founder and Managing Director, The Carlyle Group.

BANKING

Due to a flood of liquidity from the oil markets, the banking sector has seen incredible growth, even outstripping the immense expansion of Dubai's economy. Continued growth in other sectors has propelled the emirate's banks to great success. This chapter investigates the sector's expansion, outlines how it benefits Dubai and flags possible risks associated with such explosive growth. In-depth analysis provides details on the United Arab Emirates' leading banks and discusses the watershed merger between Emirates Bank and National Bank of Dubai, forming one of the largest institutions in the region.

This chapter features insider viewpoints from Guy Longueville, Head of Emerging Countries, BNP Paribas, and Leslie Rice, Chief Risk Officer, National Bank of Dubai, as well as an interview with Sultan Nasser Al Suwaidi, Governor, UAE Central Bank.

CAPITAL MARKETS

After the regional market correction in 2006, Dubai is showing signs of great recovery, with the Dubai Financial Market regaining most of the losses it sustained. With stocks looking cheap again to investors, a return to strong growth going into 2008 is forecast, helped along by a flood of new Western institutional funds into the market. This chapter provides a close investigation of the market. Analysis from our specialists delves into new initial public offerings and explores investor sentiment as well as the movements of three separate exchanges in the UAE. Further analysis can be found on new players in the sector, including an influx of international fund managers and the launching of the new Dubai Mercantile Exchange.

In this chapter OBG interviews Essa Abdulfattah Kazim, Chairman, Dubai Financial Market; Per Larsson, CEO, Dubai International Financial Exchange; and Iyad Duwaji, CEO, SHUAA Capital. SHUAA provides share analysis of six leading stocks on the Dubai Financial Market: Emaar Properties, Arabtec Holding, Dubai Islamic Bank, Tabreed, Tamweel and Union Properties.

ISLAMIC FINANCIAL SERVICES

As the birthplace of modern Islamic finance, it seems only right for Dubai to be the industry leader. In 2007 the emirate broke global records in terms of listed Islamic bonds and multi-billion dollar financing programmes. Aiming to become the world capital of Islamic finance, Dubai is taking new strides toward developing the world's first sharia-compliant stock market. Takaful, sharia-compliant insurance, is one of the fastest-growing areas of Islamic finance in Dubai, with two primary providers of Islamic insurance: Islamic Arabic Insurance (IAIC) and Dubai Islamic Insurance and Reassurance. Life insurance has historically been one of the least successful products due to perceived conflicts with Islam, yet with takaful companies reworking their products as "family insurance", this segment has seen major growth. Dubai has been setting the standards in the recent development of the sukuk (Islamic bonds) market. Leading local companies are using the market extensively. With the rapid growth of Islamic finance, the emirate is facing a real need for experts in both markets and many new training programmes are being developed to promote general knowledge among financial practitioners and ease the burden on sharia scholars.

An interview with Hussain Hamid Hassan, Chairman, Sharia Board, Dubai Islamic Bank, provides further insight on Islamic banking.

INSURANCE

Dubai's growing and diverse economy is responsible for the rapid growth of the insurance sector, with the expansion of some segments by as much as 30% in 2007. In addition to the fast growth in premiums, the industry enjoyed an increase in profits, though for some companies this was tempered by the 2006 regional stock market correction. The emirate's various economic strengths have attracted specialised insurance companies from many sectors. Dubai accounts for more than 50% of the UAE's insurance market, which is one the largest industries of any emerging market. This chapter provides a thorough overview of the sector, focusing on the life, non-life, motor, health and takaful segments.

This chapter includes an interview with Charles Bouloux, President, Middle East, Mediterranean and South Asia, AIG MEMSA.

TRANSPORT & LOGISTICS

As a global trading nexus for much of Europe, Africa and Asia, Dubai's moniker as a "hub for one hundred countries" is rightfully earned. Membership in the WTO, which it joined in 1996, as well as its place in the Gulf Cooperation Council, have been beneficial to Dubai's regional trade. The state's ports have seen tremendous growth over the past few years, and the emirate is set to break records in terms of worldwide transport. The emirate's dominant maritime company, state-owned Dubai Ports World, is continuing with its global strategy, already boasting the acquisition of ports in 21 other countries. Our analysts provide an in-depth overview of Dubai's growth in transport and logistics in this chapter, paying particular attention to its expansion not just within its own borders, such as developing Dubai International Airport into the world's largest, but broadening its interests overseas as well. Furthermore, a comprehensive analysis of the state's current traffic issues investigates how a bustling economy can cause city-wide gridlock and what strategies the emirate is employing to reconcile the issue.

This chapter provides interviews with Mattar Al Tayer, CEO and Chairman, Roads and Transport Authority, and Sir Richard Branson, Chairman, Virgin Group.

ENERGY

While Dubai's officials realised early that oil and gas resources were never going to be enough to build a sustainable economy, oil is still a small but notable contributor to the emirate's revenue stream. During the production peak in the 1980s and early-1990s light and sweet crude oil accounted for approximately one-half of the emirate's GDP. Today hydrocarbons production contributes only 5% to Dubai's annual income. Considering the immense projects down the pipeline and the seemingly endless growth across several sectors, diversification has become the new strategy when it comes to energy production, seen as vital if the emirate wishes to feed its own demand let alone remain viable in the global economy. In terms of its own needs, Dubai has been aided since 2001 by gas from Abu Dhabi and the new Dolphin project is set to deliver natural gas from Qatar, offsetting the loss of gas from the dried-up stream in Sharjah. Energy consumption in Dubai, as in the rest of the UAE, is high, with the WWF stating in 2006 that the UAE has the largest environmental footprint in the world. The emirate is now looking at strategies to improve efficiency and environmental awareness.

An interview with Dave Lesar, Chairman, President and CEO, Halliburton, discusses the decision to move the corporation's headquarters to Dubai and his strategic plan to expand the company's customer relations with national oil companies.

TOURISM & LESIURE

As a hub of transport and industry, Dubai may be world-renowned as a destination for business travellers, but it is steadily transforming itself into a target for tourists as well. High-class shopping, entertainment, sporting events and some of the world's largest attractions all serve to draw pleasure seekers to the emirate for fun and relaxation. This chapter takes a close look at what Dubai is doing to cultivate this sector, assuring that it entices just as much leisurely visitation as it does official. OBG analysts report on the state's investment of over $80bn into tourism and leisure projects - from resorts to amusement parks - as well as drawing in even more business travellers by developing its appeal in the meetings, incentives, conferences and exhibitions segment.

This chapter provides interviews with Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates Airline group, and Gerald Lawless, Executive Chairman, Jumeirah Group.

CONSTRUCTION & REAL ESTATE

The consistent influx of new expatriate labourers and businesses places direct pressure on the emirate's ability to provide places for newcomers to live and work. Furthermore, with demand far exceeding supply, new challenges are faced in terms of providing proper materials and human resources to keep up with the pace of expansion. The Construction & Real Estate chapter examines these challenges, such as value chain delays and rising living costs, and provides insight on the strategies Dubai is employing to meet them head-on. A special gallery section details 27 of the emirate's most ambitious projects, including artificial islands, hospitality and leisure developments and industrial zones.

IT & TELECOMS

With one of the most advanced information technology sectors in the region, Dubai is attracting substantial foreign investment by providing an impressive IT infrastructure in its free economic zones. The IT value chain has come together in a very short space of time, with laws and regulations in place to create and maintain a level playing field. There is widespread penetration and usage of the internet, with about 50% penetration expected by the end of 2007. In Dubai, large corporations such as Microsoft, Siemens, Cisco Systems and IBM coexist harmoniously in the emirate's world-class technopoles and free zones, such as Dubai Internet City or Dubai Media City. Telecommunications giant Etisalat gained a new neighbour in recent incumbent du, ending a 20-year monopoly of the sector. However, whether their relationship will be cordial is yet to be seen. The IT & Telecoms chapter dissects these sectors and includes analyses that outline the ins-and-outs of the growing industries: from government crackdown on software piracy to the development of a VoIP network.

In this chapter OBG interviews Mohammed Nasser Al Ghanim, Director-General, Telecommunications Regulatory Authority, and Osman Sultan, CEO, du. A viewpoint from Victor Font, Managing Partner, Delta Partners provides insider perspective on these sectors.

INDUSTRY

Reinforcing its status as a diversification trendsetter among the UAE and the region, Dubai has developed a viable manufacturing and industry sector to accommodate projected waning returns from petrochemicals. As such, the emirate has become one of the world's top-producers of aluminium. Furthermore, with projects such as Dubai Industrial City and Dubai Maritime City, the emirate is positioning itself for further industrial growth. This chapter delves into further methods Dubai is employing to keep itself and the rest of the emirates viable in the future.

An interview with Hamad M Buamim, Director-General, Dubai Chamber of Commerce & Industry, touches on other underlying factors of the sector, such as cross-border dealings with other GCC nation-states, gender equality and the opportunities provided to women in industry.

RETAIL

Shopping in Dubai is most certainly a draw for tourists. Dubai Duty Free, which provides high-end fare for the most discerning of tastes and is visitors first and last stop in the emirate, is touted as being worth the trip alone. However, the lure of couture does not stop with visitors, as some estimate retail spending may be equal to one half of the emirate's GDP in the near future. OBG delivers an in-depth overview of this burgeoning sector and discusses how the emirate is setting retail as yet another waypoint in its diversification strategy.

In this chapter OBG interviews Colm McLoughlin, Managing Director, Dubai Duty Free, on the draw that retail has on the state and how his company competes with the emirate's world-class malls.

MEDIA AND ADVERTISING

With such a high expatriate population, it can only be assumed that the media and advertising sector will cater to the emirate's various nationalities. Changing the station on a radio in Dubai, the listener is likely to hear programming in languages such as English, French, Urdu, Arabic, Hindi and Bahsa Melayu. Not only does the emirate wish for its audiences to have access to various programming, it also wants its programmers to have various audiences. Sheikh Mohammed bin Rashid Al Maktoum has, on several occasions, publicly expressed his desire for the local press to exercise its freedom of expression to a greater extent. Meanwhile, there is significant growth in the advertising sector, as many global advertisers, such as Saatchi and Saatchi, Impact and Gray are setting up shop in Dubai. This chapter outlines the performance of these vibrant sectors, looking at print, video, billboard and internet penetration as well as projected regulation from organisations such as the Dubai Media Council.

An interview with Abdul Latif Al Sayegh, CEO, Arab Media group, provides further insight on the media industry and its contributions to the growth of the emirate.

HEALTH & EDUCATION

Sheikh Mohammed bin Rashid Al Maktoum's strategic plan for 2015 outlines broad-based health care reforms that include national accreditation for hospitals, better education for health care workers, compulsory insurance and further development of the medical tourism segment, which is estimated to generate up to $1.9bn per year by 2010. The education sector is also facing reforms, which aim to increase the emirate's collegiate profile and draw international students to Dubai, as well as bolster locals' knowledge in endemic interests such as Islamic finance. In this chapter, OGB specialists analyse the health and education sectors and their contributions to Dubai's continuing evolution. By employing proven methods, such as building a cluster model compound like the Dubai Healthcare City, and investigating experimental techniques, such as developing the Dubai International Finance Centre, the emirate remains on the cutting-edge of progress in the region.

This chapter includes a viewpoint from the Yasar Jarrar, Executive Dean, Dubai School of Government, on education reform.

THE BUSINESS GUIDE

PriceWaterhouseCoopers provides OBG with a comprehensive overview of taxation in Dubai. This section includes breakdowns on taxes, Customs duties, free zones, property fees and tax reform throughout the Middle East. OBG's affiliates at Al Tamimi & Company give an overview of the emirate's legal structure in terms of regulations on employee contracts. In addition the company provides insight into foreign arbitration awards and the new Federal Arbitration Law, as well as a comprehensive report on new property laws in Dubai and the flexibility they provide.

Viewpoints are provided by Dean Rolfe, Middle East Tax Leader, PriceWaterhouseCoopers, and Lisa Dale, Partner and Head of the Property Department, Al Tamimi & Company.

THE GUIDE

The Guide to Dubai provides an overview of the culture and customs of the emirate, from dress to transport, visa requirements and how much to tip your server. The Guide also includes a listing of the various hotels and resorts Dubai has to offer, as well as important phone numbers any visiting traveller would be remiss to be without.

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