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Budget aims to meet 2015 strategy plan

By Safura Rahimi



The budget for Dubai announced on Saturday by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, is in line with the Dubai Strategic Plan 2015 announced last year.

The planned allocations for the Dubai Government departments, pegged at Dh26.5 billion this year, will be distributed according to the strategic plan.

The Dubai Strategic Plan for 2015 is an ambitious project that aims to increase the emirate’s real per capita gross domestic product (GDP) – which takes into account inflation – 41 per cent, from $31,000 (Dh113,770) to $44,000, by 2015.

The move requires real economic growth at a rate of 11 per cent per year, to a GDP of $108 billion (Dh396bn) in 2015 from the 2006 level of Dh137.25bn, to succeed. 

One of the ways the initiative aims to achieve this goal is by creating 882,000 new jobs to bring total employment to 1.73 million by 2015.

Dubai’s real per capita GDP, which stood at $31,400 in 2005, has seen annual average growth rate exceeding six per cent over the 2000-2005 period, according to the Dubai 2015 Plan report. The emirate’s 2006 GDP grew by 16 per cent as compared to 2005.

In 2005, reduced dependence on oil and diversification of the economy saw the non-oil sector contribute 95 per cent to the

GDP that year, as compared to 90 per cent in 2000. According to the report, the service sector was the key driver of economic growth, making up $27.6bn or 74 per cent of Dubai’s GDP in 2005.

Dubai’s per capital income today compares favourably with that of many developed countries such as Singapore ($26,836) and Hong Kong ($25,493), both countries which required a much longer period of time to reach their current levels, the report said.

Other aims of Dubai’s Strategic Plan 2015 include increasing labour productivity by four per cent each year and creating new sectors with sustainable competitive advantage.

Infrastructure spending

According to government figures, the emirate’s population increased to 1.422 million in 2006 from 1.130 million in 2005. The figure is expected to reach three million in 2020.

Studies indicate the number of vehicles on Dubai’s already congested roads will triple in the near future. The Dubai Strategic Plan 2015 report stated investment earmarked for the Dubai Metro project is estimated at Dh15.5bn, while more than Dh6bn is being allocated to the current roads network. The RTA has said it will spend Dh95bn as part of its 2020 plan, which includes the construction of nine ring roads and 95 interchanges across the emirate, while a further 25 interchanges are set to undergo modification.

About Dh15bn is being spent on the ongoing expansion of Dubai International Airport, and Dh30bn estimated for the new Jebel Ali International Airport, recently renamed Maktoum International Airport.

The emirate in 2005 announced plans to invest more than Dh22bn in infrastructure-related projects in the medium term, including roads and transportation, telecommunication networks, education and healthcare.

The infrastructure budget will allocate Dh16.5bn for the light rail transit development, of which around Dh1.83bn will be spent on roads and bridges, Dh1.1bn on drainage and irrigation and Dh2.56bn on general projects, the government said.

The Dubai Electricity and Water Authority (Dewa) has said it plans to spend $5.45bn by 2012 to expand power generation capacity by 6,000MW and desalinated water production by 800 million gallons per day to meet growing demand created by Dubai’s steady growth.

In a report on infrastructure spending in the Middle East, North Africa and South Asia, private equity firm Abraaj Capital says future economic growth will be driven by spectacular infrastructure spending. Abraaj says: “Unlike the 1970s and 1980s, governments are investing a significant proportion of the excess capital locally rather than in external markets. One effect of this should be to support the long-term growth and development of the region.”

Investment bank Merril Lynch adds: “In line with other emerging markets, we believe the key secular investment themes in the Mena region are infrastructure spending and consumer services. Oil revenues are being used to finance another boom. The good news is this time around, there is more private sector investment and greater public sector restraint, which should make the spending more durable. As in other emerging markets, the need to improve infrastructure and increase the supply of housing in the Gulf is huge, as capital expenditures have not kept up with rapid population growth.”

Abraaj adds: “Although growth rates are expected to be sustained in the near- to medium-term, these countries are still in the preliminary stages of development and require considerable investment to sustain recent economic performance. Furthermore, while these countries have been indirect beneficiaries of the oil boom, they do not have the benefit of large levels of sustainable natural resource revenues, making the government funding of infrastructure development an even greater challenge.”

Federal budget

In November, the UAE Cabinet approved the biggest federal budget

in the country’s history at Dh34.9 billion for 2008, 44 per cent of which would be contributed by the emirates of Abu Dhabi and Dubai. The budget in 2007 stood at Dh23.8bn.

Special amounts have been earmarked to implement the federal strategy of governance and these amounts have been included

in the budgets allocated for various ministries and federal


This was done in co-ordination with the Prime Minister’s office.

The budget also contains provisions for a 70 per cent increase in salaries for all federal employees, including civilians and military personnel as well as pensioners as per the directives of the President His Highness Sheikh Khalifa bin Zayed Al Nahyan and orders of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai.