UAE economy: Pioneering country does the impossible
Sheikh Rashid bin Saeed Al Maktoum drew the Jebel Ali port project with his stick in the sand – the rest is history. Two years ago when His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, took over the reigns of Dubai, he charted the future with the magic wand that seems to have been handed over to him by his father – and the rest is the future.
In his very unconventional way of governing, as Sheikh Mohammed has gone beyond all boundaries.
Holding the Federal National Council strategic meetings in far-off resorts, Sheikh Mohammed has inspired his team of councillors and ministers to think, focus and achieve what was once believed to be unexpected, if not unachievable.
Leading from the front, Sheikh Mohammed inspired the UAE to be “a pioneering global city” that would be “free of the direct influence of oil price fluctuations”.
Stating this in his address to the FNC, he announced the UAE Government Strategy that is expected to take the Arab World’s second biggest economy to the next level of excellence by 2010.
“With the passage of time, changes in perceptions have enticed us to think differently and adopt international best practices in all areas of governance. A strategy is, therefore, needed to take us to the next level,” Sheikh Mohammed said while unveiling the plan in Abu Dhabi.
The plan, divided into six sectors, lays out specific objectives in social, economic and government services; justice and safety; infrastructure and rural areas, including streamlining public service regulations and strengthening co-ordination between federal and local authorities. His strategic approach to governing the country is an objective approach with room for praise and self-criticism. With unprecedented openness, Sheikh Mohammed has conveyed his critical comments on governance, but has always inspired with solutions that are pragmatic, achievable and lasting.
Spelling out his expectations during the final session of the extraordinary cabinet meeting, in Liwa, west of Abu Dhabi, he urged ministers to focus more on fieldwork “to confront problems hindering provision of quality services head-on, and to move away from bureaucracy and red tape”.
“By the grace of Allah the Almighty, we have achieved the strategy right on the scheduled time. This great success would have not been achieved without your efforts, teamwork spirit and innovative ideas,” Sheikh Mohammed told ministers.
“At the end of this informal retreat meeting, I want to hear new ideas that will help propel plans to serve citizens in the best possible way. Thanks to Allah the Almighty, our country is blessed with rich resources, capable men, education and knowledge,” Sheikh Mohammed added, in the true sense of his gallant leadership that is taking him from a national leader to an international visionary. (Vigyan Arya)
Government leads private sector and supports it at the same time
Establishing a modern economy in the UAE has been a significant achievement. With a futuristic vision, the UAE leadership created basic conditions to empower the economy with elements of growth and expansion.
Thanks to the economic vision of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, the economy has witnessed tremendous growth. “Sheikh Mohammed is a pioneering example in the Arab World in mobilising all government resources to support economic sectors. He turned the government sector to serve the private sector and introduced advance management styles to ease procedures,” Dr Jamal Zarouk, economic researcher at the Arab Monetary Fund, told Emirates Business.
The UAE economy is now the second largest in the Arab World, with oil revenues pumping liquidity in the development process.
“Prospects of UAE economy are very promising regarding new trends in international economy, in particular the increasing role of China and India. The UAE is in a strategic position, and this is reflected in the rise in exports and re-exports,” Zarouk said.
Dr Ahmed Al Banna, an economic expert, said: Sheikh Mohammad created a vision of the modern governmental practice to improve the economy, created the Ministry of Governmental Sector Development, instructed ministries and government institutions to prepare strategic plans on the short-to-long-term and toured all ministries, which shows his keenness to improve the performance of the government.”
He said new projects announced by Sheikh Mohammad will lead to sustainable development in the future and will improve the performance of different economic sectors. The UAE leadership was also able to avoid the turmoil of geopolitical issues in the region.
Hajaj Bu Khodour, a Kuwaiti oil expert based in Dubai, told Emirates Business:“What distinguishes the UAE is its ability to stay a step ahead of risks. The UAE has been able to predict political situations and economic developments so it overcame challenges that faced the region. While several other countries suffered the impact of regional turmoil, the UAE turned them to their advantage.”
The UAE, particularly Dubai, was able to diversify economic activity and was well prepared to benefit from resources in building massive projects not only in the construction sector, but in tourism, industries, commerce and services as well.
“The non-oil sector represented 40 per cent of the UAE’s GDP in 2007. This figure will reach 45 per cent in 2008 and 50 per cent in 2009. This puts the UAE economy in a competitive position,” said Zarouk.
“The UAE investment incentives will encourage local and foreign investors to create new projects in the country. I expect the UAE to rank high in World Bank’s list of doing business,” he added.
Al Banna pointed to the UAE’s success in creating a very attractive investment climate.
There are large projects on the way such as ports, airports, transportations and communications. Introducing e-government services, e-commerce,and easing government procedures will attract international investors in the coming years. The UAE is emerging as a centre for international investments with high profits, low risks and flexible bureaucracy,” he said.
“The tourism sector will witness continuous progress with a large number of hotels, airlines and recreational facilities entering the market. There is also specialised sorts of tourism, including exhibitions, conferences and sport,” Al Banna added.
He says oil revenues will represent around 25 per cent of the UAE’s GDP in 2008 and seven per cent of Dubai’s GDP. Several international financial institutions have issued reports in support of the UAE’s economic boom, and said the trend will continue in the coming years.
UNPRECEDENTED OIL REVENUES
Bu Khodour said: “The average oil price in 2007 reached $72 a barrel in 2007. I expect the average will range between $82 and $85 a barrel in 2008. The prices could increase more than $ 100 some time this year, mainly due to geopolitical factors.”
Regional issues will dominate the oil market. The war in Iraq, tensions between the US and Iran over Tehran’s nuclear programme and unrest in Pakistan will push the price higher. Prospects of increased oil demand from China, India and the US will also increase prices of oil this year.
Bu Khodour said the UAE’s oil revenue will reach $140 billion (Dh513.8bn) in 2008, which in turn means large liquidity in the economy.
“The UAE will be the leading country in the region to maximise oil resources. The UAE economy is well-prepared to inject such liquidity.”
RECOVERY OF STOCK MARKETS
The most important thing in any economic development is the stability and a certain set of attractive factors for investors. “Sheikh Mohammad has proven in the past years that his leadership led to a significant change in all sectors. This role manifests itself in the manner of enhancing the performance and removing obstacles,” said Wadhah Al Taha, head of Strategies and Business
Development at Emaar Financial Services. An example of his exemplary role is his decision to put five per cent cap on rent to control inflation.
Such positive leadership is a new model where the government leads the private sector and supports the private sector at the same time. This mixture between the government and private sectors creates the added value in Dubai and the UAE,” said Al Taha.
He expected large international funds to shift their investments to the UAE stock markets.
“There are two main positive factors attracting foreign investments to Dubai and Abu Dhabi stocks. The first is the clear shifting of some international funds into the UAE following the sub-prime crisis,” he said.
Al Taha said these funds are looking for a safer place to invest in and they are selecting stock markets with weak coloration or no coloration with the US stock markets. Since September 2007, foreign liquidity is increasingly coming to the UAE markets. In Dubai, Dh550 billion were traded last year, a record since the launch of the market.
“I think the second factor is the maturity of investors and the increase in the number of institutional investors will add value to the UAE markets,” Al Taha said. He said that in 2008, assuming regional risks will remain narrow, the traded value will hit Dh660bn, and may rise to Dh700bn. “New [initial public offer] IPOs in Dubai and Abu, which will add value and liquidity to the stocks.”
REAL ESTATE SECTOR
Despite several reports predicting a set back in the real estate market, experts in the country assure that the demand will continue to increase.
“I have been hearing this for the last 10 years but the market has been expanding. Massive projects in the country, especially in Dubai, such as new airports, industrial and free zone areas and specialised cities attract more professionals who need residential buildings.
This will enhance the real estate market,” Waleed Atallah, a real estate expert told Emirates Business. He said real estate projects will continue to expand on the short-to-medium term. New property laws will lead dramatic changes in the market.
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