Dubai shifting to core competencies

With the decline of the construction sector in Dubai, the engine of the economy is shifting back to the core competencies of re-export, trade and logistics, tourism and, to a lesser extent, finance, according to a research report by Rasmala Investment Bank.

In the longer term, many areas of the Dubai economy still look healthy.

According to the report, the model of domestic investment and business-friendly policies will ultimately bring stability to the country.

Dubai isn’t all about property though, and the UAE isn’t all about Dubai. The Dubai property market remains flat, but other sectors appear to be finding their feet, the report said.

It said, even though clear evidence for recovery in the short term has yet to be established, the long-term fundamentals for a stable economy are in place.

In said Dubai can achieve and sustain fiscal breakeven without damaging its prime draw for corporates and individuals alike -- the zero tax regime.

While most of the property sector is still down, the rest of the economy is surviving.

"We believe that renewed focus on marketing the free zones, in particular, should begin to turn around the rate of migration. This is all the more true now that the cost of living has declined sharply in both absolute and relative terms," the report said.

With the property sector taking a back seat, it’s now the to other areas to drive growth, and that will depend on the attractiveness of Dubai for domestic investment.

In this respect, the report said Dubai is a more attractive proposition than it has been recently.

The healthiest areas of the economy are sectors such as trade, tourism, and logistics, and these should be the key drivers of the economy, although the latest data is mixed.

The most important of these for Dubai, however, is likely to be tourism. 

While luxury leisure tourism is the largest element, business tourism may have a disproportionate impact on the wider economy, as it is part of the wider MICE industry.

The value of a tourist to the economy includes most simply his flight and accommodation, but also a substantial amount of consumer spending, particularly with Dubai marketing itself as a luxury shopping destination.

“We believe there has been an improvement in the underlying economy, but this has been over-shadowed by the focus on the current restructurings," the report said.

However, the report said the main challenge for the emirate is attaining sustainable growth: fiscal stability without relying on asset inflation.