GROWTH POINT

UAE, Dubai 2013 | ECONOMY | INTERVIEW

TBY talks to Sami Al Qamzi, Director General of the Dubai Department of Economic Development (DED), on economic growth.

HE Sami Al Qamzi
BIOGRAPHY
Sami Al Qamzi was appointed Director General of the Department of Economic Development in September 2008. Prior to this, he held the position of Director General of the Department of Finance, where he worked directly with the Ruler’s Court and Executive Council of Dubai to develop strategies for the Department of Finance. He began his professional career with the Central Military Command of the UAE in 1986 in a financial administrative role. He holds a BA in Economics and Accounting, and is extensively involved in business and industry through his board affiliations.

What evidence of stable growth have you witnessed over the past year?

Dubai had experienced rapid economic growth prior to the onset of the international financial crisis in 2008. Thanks to this achievement, Dubai's economy has undergone a radical transformation, enabling the city to become an international reference in terms of trade, logistics, transportation, and tourism. These growth dynamics have also been based on increased diversification. The modern infrastructure put in place during that period required the mobilization of large resources in the construction sector, and the development of real estate added substantially to excessive reliance on construction and real estate as a source of growth and job creation. While pronounced speculative behavior was a major factor in the rapid growth and real estate bubble, the contagion effect resulting from the international financial crisis also played a no less important role, signaling that Dubai's growth couldn't continue as fast as in the previous decade. Notwithstanding the international crisis, the slowdown in growth was expected as Dubai completed the bulk of its planned infrastructure. Therefore, the “boom and bust cycle" label does not appropriately describe Dubai's growth patterns. The economy evolved at a high but steady pace between the years 2000 and 2008. It then slowed down in 2009-2010, and started recovering in 2011, which is much sooner than many expected given the hit that the construction sector took in 2009 and 2010. Then, 2012 came to confirm a strong recovery, led by tourism, trade, transportation, and logistics. According to preliminary estimates, GDP grew at over 4% in 2012, accelerating from about 3.4% in 2011. In line with all relevant indicators, tourism was a leading sector with value-added growing in real terms at more than 16% in 2012. Thus, while the pace and pattern of growth is clearly no longer the same as before 2009, it should be viewed in light of the previously mentioned background and the new international environment. Today, Dubai doesn't need to maximize growth, but rather, pursue healthy growth that is moderately high and sustainable. Given this important objective, we are expecting an annual average growth rate of around 4.6% each year until 2015.

Why is Dubai the preferred hub for the region, and what is the role of the department behind this story of success?

Dubai enjoys a strategic geographic location. It belongs to a region that is well-endowed in energy resources and large oil wealth. It is also centrally situated in a region that accounts for over 2.2 billion inhabitants, and has been the fastest growing in the world. These are very favorable external factors; however, they are not sufficient alone to make Dubai a preferred hub. A clear vision was required to exploit this potential. It is a vision based on the pursuit of economic progress, economic modernization, openness to trade, capital, labor flows, and international competitiveness. The Government of Dubai is led by this vision, and is focused on realizing all factors of success: building the required infrastructure, creating the right business environment, and enhancing the pro-friendliness of government regulations. Without this vision, and the fulfillment of the conditions to achieve it, the objectives, which seemed unrealistic 20 years ago, and which made Dubai the international hub that it is today, wouldn't have been achieved. The Department of Economic Development (DED) works within that vision, and in line with its mandate. It has consistently been in pursuit of business facilitation by streamlining business registration and renewal procedures, making them as business-friendly as possible. Business registration and licensing procedures in Dubai are among the speediest and the least cumbersome in the world, as recognized by international institutions such as the World Bank in its annual Doing Business report. Furthermore, specialized agencies within the DED are constantly exploring avenues and expanding activities to promote exports, enrich the entrepreneurial ecosystem in Dubai, and attract high value-added FDI to Dubai. The DED has contributed, along with other government departments, to the increasing attractiveness of Dubai for FDI, and for sourcing goods and services by other countries.

How has the leadership's vision for a diversified and knowledge-based economy influenced the business landscape in Dubai?

Being less endowed with natural resources, Dubai has pursued economic diversification. The oil sector accounts for less than 3% of GDP, while trade activities—wholesale and retail, domestic and foreign—accounted for more than 30% in 2011. Logistics, transportation; and communications contribute nearly 14%, about the same as manufacturing, while the financial sector's share in GDP is about 11%. This relatively high diversification has played a major role in the resilience of Dubai's economy to the construction and real estate shock of 2009. Despite the significant decline in the value-added of real estate activities in 2009-2010, the economy has indeed rebounded, with growth reaching over 3% in 2011. However, we recognize that we have yet to be established as a fully knowledge-based economy, particularly in sectors such as manufacturing, where we clearly need to develop high value-added activities further and attract knowledge-based FDI. This should be facilitated by creating synergies between key private sector players and academic institutions, and by helping potential FDI to secure the skills—local and foreign—required for knowledge-based international competitiveness. This requires a joint effort by government departments and other relevant entities.

Which economic sectors are seeing the highest growth in the Emirate?

For the period 2009-2012, tourism (hospitality and restaurants) has been the fastest growing sector, growing annually in real terms at an average rate of over 12%. Manufacturing real value-added has also grown by about 10%, transportation and logistics by 6%, and trade by over 5%. These sectors have thus grown faster than GDP, which increased on average by 3.5% annually over the period. As expected, overall GDP growth was held back by the slack performance of the construction and real estate sectors, which are now showing signs of a slow, yet steady, rebound. Dubai's efforts to evolve into a knowledge economy have accelerated growth and expansion in the Emirate's services sector. The Islamic economy is a particularly important sector, for which Dubai aims to be a major hub. Furthermore, Dubai has been a pioneer of sustainable economic development in the region, having unveiled the “Dubai Green Economy Partnership" initiative to promote the development and broader deployment of clean technologies. Dubai FDI is the liaison point in this initiative, and investors interested in providing green solutions have a valuable opportunity in the Emirate.

What recent reforms has the government put in place to enhance business regarding these issues?

The Business Registration & Licensing (BRL), as well as Commercial Compliance & Consumer Protection (CCCP) sectors are two essential and dynamic customer interfaces for the DED. These two sectors are also critical in demonstrating Dubai's competitiveness in terms of the ease and transparency of doing business. The BBRL sector has been contributing substantially to facilitating business, and meeting the demands of rising business confidence in Dubai with service upgrades. In 2012, the DED issued close to 17,000 business licenses, 16% more than were issued in 2011. Service efficiency has also improved considerably, with 95% of the BRL services now available online, in addition to over the counter at DED branches, partner outlets such as legal offices, and a growing network of customer service centers. The pro-business environment in Dubai contributed substantially to the UAE jumping seven spots up to 26th place in the World Bank's Doing Business report of 2012. The World Bank is also citing BRL procedures in Dubai in terms of best practice, and helping other countries in the region to adopt our model. Government delegations from other countries, such as Iraq and Lebanon, have already held discussions with the DED on how to build efficient BRL operations. Retail is a pillar of economic activity in Dubai, and a major attraction driving trade and tourism, and the Commercial CCCP ensures that sales and service outlets in Dubai uphold the best international standards, and grow sustainably, while respecting consumer rights. In 2012, CCCP started classifying businesses according to their consumer friendliness, and more and more business sectors are progressively brought under this program. The Consumer-Friendliness Index, which now serves as a benchmark for service excellence and consumer satisfaction, is a key measure in this classification. As part of enabling retailers to exchange knowledge on best practices and retain customer confidence, CCCP also organized the first-ever Dubai World Conference on Consumer Rights and Power Brands Dubai Exhibition in 2013. The three-day event brought together international experts and local, as well as regional, businesses in discussions on protecting consumer rights, intellectual property rights, and brand integrity.