STEADY SHIP

Dubai 2016 | DIPLOMACY | YEAR IN REVIEW

The drop in oil prices that shocked economies across the region is exactly the scenario Dubai has been preparing for. While the current climate may have dented its armor, the Emirate's role as a center for international commerce and services is keeping the economy growing.

According to the US-based Brookings Institute, Dubai was the fifth best performing city in the world in 2015. And while the IMF cut the UAE's growth forecasts for 2016 on the back of low oil prices, it predicted that Dubai's economy is set to grow faster YoY in 2016, by 3.5%. The secret to Dubai's success has been its ability to reposition itself as a center for trade, commerce, banking, and services, with standout brands like Emirates, which carried 44.5 million passengers in 2013/14, DP World, a ports operator that boasts 77 marine and inland terminals across six continents, and Emirates NBD, a bank with total assets of AED406.6 billion ($110.7 billion) as of end-2015.

Despite fiscal pressure on governments across the world, Dubai upped its budget by 12% in 2015 to AED46.1 billion ($12.55 billion), also maintaining a zero deficit. In 2016, the Emirate even managed a surplus of AED3.4 billion ($930 million). Budgets in recent years have focused on infrastructure developments as the city prepares for Expo 2020. “We look forward to welcoming many more people from all those countries as we proudly host, in four years' time, Expo 2020. Under the appropriate banner of 'Connecting the world, creating the future,' Dubai will showcase to the international community its success in realizing its vision," said HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE, and Ruler of Dubai. Indeed, much of Dubai's success has been attributed to its leadership, which, in early 2016 grabbed the world's attention with a rare cabinet re-shuffle. Among the changes were the creation of a Ministry for Happiness, a Ministry for Youth Affairs (headed by Shamma Al Mazroui, who is just 22), and a Ministry for Climate Change and the Environment. The average age of the new ministers is 38 and the eight new ministers include five women.

Dubai is demarcated into a series of special economic zones (SEZs) that have been key in attracting the foreign investment that has transformed the economic and physical landscape. Dubai has 22 SEZs, the largest of which is Jebel Ali, a free zone for logistics and shipping firms and home to over 6,000 companies. Other standouts include the Dubai International Financial Centre (DIFC), which grew by 18% over 2015 in terms of membership and is in the middle of a $4.1 billion expansion plan, Dubai Airport Free Zone, with 1,300 companies, and Dubai Internet City, with over 1,000.

Dubai does, however, remain cautious, bearing in mind the real estate crisis of 2008 that sent shockwaves through the local economy. Back in 2014, alarm bells began to ring as property prices looked to be rising quickly once again, yet a cooling of rents and prices in 2015 set minds at ease. The government has now capped loans and restricted the practice of property flipping. And if any such concerns remain, they have certainly not stopped executives in boardrooms the world over from deciding to invest in the Emirate. Dubai received AED20 billion ($5.45 billion) in FDI in 2015, according to Emirates 24|7, with two-thirds of that figure coming from Saudi Arabia, the US, the UK, India, and Kuwait. Official figures also show 279 new projects set up in the Emirate, up 16% on the previous year.

Standout sectors include banking, with Dubai home to 27 of the 49 locally incorporated and foreign banks operating in the UAE; transport and logistics, which represents 14.8% of GDP as of 2015; aviation and maritime; and tourism, with the city hosting 14.2 million guests in 2015, up 7.5% on the previous year. And alongside a large expat community has developed a world-class education system, with 173 private schools in the Emirate and 80 new institutions expected to have opened their doors by 2020.

Any quick look at Dubai should also take note of the Islamic economy, of which the city is positioning itself as the global capital. And while the Islamic economy covers a number of sectors, the standout is that Nasdaq Dubai has assumed the position of the world's number-one listing destination of choice for sharia-compliant bonds, or sukuk, with some $42.31 billion in nominal terms listed on the exchange as of end-1Q16. One of three stock exchanges in the UAE, alongside Nasdaq Dubai is the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM). The DFM boasted a market capitalization of $83.92 billion by end-2015.
All in all, Dubai is in good stead—fiscally sound and with a solid growth outlook. With Expo 2020 on the horizon, the sky is the limit as Dubai gears up to show off all it has achieved to the world.