With its vibrant economy, an emerging class of home grown multinational corporations – which are as able as they are eager to participate in the globalisation process through a spate of multi-billion-dollar acquisitions – and a growing population of entrepreneurs, Dubai is reshaping business as we know it.
Dubai is a rare success story in the Middle East, a region with a history of conflict and stagnation.
It is home to people from 150 countries, who have moved here to live and work. Its economic growth rate, 16 per cent, is nearly double that of China.
If Sheikh Rashid dreamt up Dubai, it is Sheikh Mohammed who not only realised those dreams, but also built upon those, making Dubai the cynosure of all eyes in the region and beyond. Sheikh Mohammed has, indeed, transformed the sunrise vision of his father into a glittering image that has the right to the claim of being the regional hub of trade, tourism and finance.
The construction of Burj Al Arab, the world’s tallest freestanding hotel, as well as the creation of new residential developments, were used to market Dubai for purposes of tourism. Since 2002, the city has seen an increase in private real estate investment in recreating Dubai’s skyline with such projects as The Palm Islands, The World Islands and Burj Dubai.
But it is no longer about marketing or just tourism. The Ruler and his able team of entrepreneurs-cum-administrators are leaving no stone unturned to make Dubai the largest and most successful experiment in economic growth ever. In a short time, Dubai has earned its reputation as a pre-eminent commercial centre with an innovative, dynamic and entrepreneurial business culture.
Strategically located at the crossroads of trade and commerce between East and West, it is ideally positioned to service and access markets that span the Middle East, North and Southern Africa, the Subcontinent and the Confederation of Independent States.
Moreover, it occupies a time zone that allows it to connect markets as disparate as the Far East and the US. To leverage this advantage, it has developed a world-class infrastructure and air and port facilities, making it the most well connected city in the region.
Politically stable, Dubai has a forward-looking, responsive government with a progressive, pro-business attitude and a strong commitment to the private sector. Business-friendly regulations and a favourable tax and customs framework have played a key role in attracting business investment from all over the world in almost every sphere of economic activity.
Strong economic indicators and a relatively low cost work environment have contributed to its rapid development and prosperity. A modern, safe, multi-cultural city with state-of-the-art medical, education, entertainment, shopping and sports facilities that ensure a high quality of life, Dubai is the location of choice for the modern professional and an ideal location for multinationals to establish a regional presence. The government is spearheading an ambitious economic diversification programme with real estate, trade and tourism the main drivers.
REAL ESTATE: THE BUILDING BLOCKS
Leading the growth charts is, of course, the emirate’s real estate sector, dubbed by many as the unreal estate sector. For starters, there’s the most mind-boggling housing project in the world – Nakheel-developed three Palm islands – Jumeirah, Jebel Ali and Deira – the luxury home development made by dredging sand from the ocean floor and turning it into palm-shaped tracts of luxury housing.
The World, a similar landfill project in which investors have the opportunity to each buy the “island” of their choice, follows The Palm trilogy. Some 40 per cent of the world’s dredgers are now in Dubai. That means there’s a lot of property to move, so the city has become one big real estate showcase.
Wherever you are in the city, you won’t be far from an advertisement for one of the ultra luxury villas or uber-techno apartments scheduled to come on stream in bulk come mid-2008. Since 2001, construction and real estate services’ shares in Dubai non-oil GDP have been rising steadily and as do their GDP growth rate.
Clocking double-digit year-on-year growth rates, the combined share of construction and real estate sectors in the emirate’s GDP are reckoned to have been more than 25 per cent in 2007.
This is not a sheer coincidence, but a direct result of the economic strategies and policies of the Dubai Government. There are a number of factors driving this boom, primary among them the enhanced liquidity in local and regional markets that is on the lookout for secure yet handsome investment returns.
The government-instituted five per cent rental cap law [effective January 2008] is expected to help in curtailing inflationary pressures. Last year’s rent cap of seven per cent did, indeed, manage to somewhat stem the rapid growth in rentals that the city has witnessed over the past few years. The real estate and construction sectors are the centrepiece of Dubai’s economy. Around $100bn (Dh367bn) worth of residential projects are under way in Dubai, which will add at least 150,000 new homes. However, with current demand still exceeding supply, freehold house prices have jumped more than 400 per cent since 2003 because only a fraction of homes under development had been completed, creating a supply crunch.
Research reports reckon Dubai is responsible for almost 50 per cent of all property-related activities in the entire GCC. In fact, according to some estimates, the emirate will witness an inflow of more than $300bn (Dh1.1 trillion) in property developments in the next 10 years.
While this pace and the number of units coming on stream has led some analysts to believe that the Dubai real estate market may not be too far from a crash, growing and pent-up demand, coupled with delay in deliveries, will keep the market buoyant for at least the next five years.
The UAE has, indeed, topped the 2007 Country Brand Index, which ranks the world’s best destinations for resorts and hotels. The study found the UAE the best for resort and lodging facilities because it boasts a wide variety of hotel accommodation.
Dynamic Dubai: A new dawn