There is a definite buzz in Dubai’s business community.
I spent most of last week in Dubai and as I met with Emirati, Australian and other expatriate colleagues, the atmosphere was reminiscent of the good old days before the GFC. For the first time in a long time, people are talking about growth, expansion and opportunity.
So, what’s driving this new mood of optimism?
Well, for one thing, Dubai’s construction industry is booming again. In its ‘GCC Powers of Construction 2013’ report, Deloitte reveals that the UAE has, for the first time since the crash, overtaken Saudi Arabia as the biggest construction market in the Middle East. The economic impact of this positive shift in the UAE’s construction industry has been significant. According to Business Monitor International (BMI), the UAE’s construction industry value is forecast at approximately $US41 billion in 2013, representing real annual growth of 4.5%.
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In Dubai alone, the property and construction sector accounted for 21% of the Emirate’s GDP growth this year, putting it second only to the retail and wholesale sector. As a result of this solid performance, investor confidence is building. Project turnaround has increased, developers across the board are looking to expand their portfolios and Fitch Rating says that Dubai’s property sector is on track to maintain its 2013 momentum through next year.
Keep calm: There’s no bubble
This renewed confidence in the property and construction sector seems to be warranted. Although there has been much debate in recent months about whether the UAE is entering another ‘property bubble’, it is clear that current market fundamentals are actually far stronger today than they were in 2008. “An estimated 100,000 new residents added to Dubai’s population every year and a healthy GDP growth of more than 4% will support the recent market growth,” says Wouter Molman, exhibition director for Dubai’s Cityscape Global conference.
This view is confirmed by Standard Chartered, which says that growth in the real estate market is being driven by improvements in economic fundamentals rather than speculation. According to Standard Chartered, development is being fuelled by stronger economic performance, a growing population and an improved regulatory environment.
Expo 2020: Connecting minds, creating the future
Anticipation of the result of Dubai’s Expo 2020 bid, themed Connecting Minds, Creating the Future and due to be announced today, is also creating significant excitement. A positive result will put the international spotlight firmly on Dubai and draw new people, new visitors and new interest to the city. At the very least, a win will be a wonderful public relations event for the UAE and at the very best a springboard to establish Dubai as an internationally recognised global city.
As Dubai waits to hear the final decision, industry experts are speculating about the ripple effects that winning the bid is likely to have on the economy. Much has been said and written about the potential boom in jobs, salaries, tourist influx and property prices. If Dubai is successful in winning Expo 2020, the UAE economy is tipped to see over AED 100 billion in revenue and 277,149 jobs are expected to be created between 2013 and 2021. And 40% of those employment opportunities would be in the travel and tourism sector and the Expo itself expects to attract 25 million visitors.
Hospitality will be a clear winner should the decision be made in Dubai’s favour. Although Dubai’s position as a world-class tourist destination has been cemented, the Expo will undoubtedly increase the city’s share of international tourism. Retail will also greatly benefit from the rise in resident and tourist spending, opening up the possibility of more tourism and leisure destinations in Dubai and throughout the UAE.
Almost without exception, the expatriate and Emirati businesspeople I met with seemed confident that Dubai would host Expo 2020 and that this would give a further boost to the local economy. A number even said that they believed that the simple process of bidding for Expo 2020 had bolstered the local economy by increasing business confidence. They also said however, that regardless of the outcome, Dubai would continue to thrive. As Dubai poises to take off again, smart investors should watch this space.
Cynthia Dearin is managing director of Dearin & Associates, a boutique international market entry consulting firm.