Dubai’s high standard of living and dynamic society makes it a secure Middle Eastern destination. Largely located along the western coast of the UAE, Dubai is now home to more than 2 million people. The expatriate population of the city that is drawn from all corners of the world helps to drive the local economy and contribute much to the lifeblood of this thriving metropolis.
The success of Dubai’s economic development is attributable not to its hydrocarbon reserves, but to its growing status as a trading hub for the Gulf and beyond. Dubai’s total revenues from oil and gas account for less than 2% of the Emirate’s GDP, and form just 2% of the UAE’s total gas revenues. In order to provide for the long-term future of Dubai, the diversification of the local economy was long ago recognized as being vital to its success. The construction boom that resulted from Dubai’s ambition to become a tourism and trading destination to rival any major city in the world has been in part complemented by its swiftly developing financial sector.
In 2011 the GDP of Dubai grew by 3.4%, reaching $84.7 million, indicating that the Emirate is showing signs of recovery following the challenging 2008-2010 period. Regional political uncertainty has served to bolster the recovery in 2012, with rising oil prices boosting the UAE’s economy, while the security of Dubai’s infrastructure is attracting trade, hospitality, and financial investment into the city.
Dubai has historically been an important regional emporium, and the city’s Jebel Ali Port is one of the world’s largest trading hubs. The Dubai International Financial Centre (DIFC) is an offshore free zone designed to make Dubai a world-class financial hub and has helped strengthen investment in the finance sector. The DIFC operates under a unique legal and regulatory framework, and businesses operating in the “city within a city” can be wholly owned by foreign entities and benefit from zero income and profits tax. Other free zones attracting foreign investors to Dubai include Dubai Internet City, home to giants such as Microsoft and IBM, and Dubai Media City, where CNN, BBC, and Reuters all have offices. Dubai Healthcare City, in collaboration with DuBiotech, was established to be a center for world-class medical practice and research excellence and is attracting investments from a number of different private clinical practices.
Tourism has long been and looks set to remain one of the key strengths of Dubai’s economy. A 2011 report from CBRE indicated that Dubai is now on par with London as the most popular shopping destination in the world. Dubai Duty Free is the largest retailer in the world, and there are over 70 shopping malls in the city. It is estimated that by 2015 Dubai will attract 15 million tourists yearly. The hotel industry has reported strong occupancy rates in 2011 and 1H2012, and it was far less affected by the global financial crisis than the real estate market.
Following the opening of the new Green Line metro extension in 2011, UAE Vice-President and Prime Minister and Ruler of Dubai HH Sheikh Mohammed Bin Rashid Al Maktoum symbolically took to the lines in an effort to encourage residents and tourists alike to make use of the city’s advanced transportation infrastructure. The drive to encourage the use of public transport in the city is also part of the wider UAE government’s increase in diplomatic engagement concerning climate change issues. In 2009 the UAE won the bid to host the headquarters of the International Renewable Energy Agency, and it continues to promote research and investment in the UAE for renewable energy sources.
The Dubai government continues to direct considerable energy into the diversification of the local economy, and while the real estate sector is fighting hard to show signs of recovery, the wider economy is expected to show healthy growth of 4.5% in 2012. There are sizeable investments being directed into infrastructure, including road, rail, airport, and civil aviation development. Investments in these areas are set to make up a total of 43% of the government budget. The Dubai World Central’s Al Maktoum International Airport also began passenger operations in 2011 and is expected to have a capacity of 5 million passengers a year by 2017. Dubai has benefited from increased trade with markets across South and West Asia, and this trend looks set to continue over the medium term. A drop in investor confidence in the greater Middle East has also served to strengthen Dubai’s economy over 2011, and as long as the market remains stable, business-friendly, and convenient to access, it will continue to draw in investors looking to serve the surrounding regions from a reliable base of operations. All these indicators are supportive of Dubai’s bid to host the 2020 World Expo, which will attract even more attention to the achievements of the past half century.
© The Business Year