Two recent events highlight the strength of Dubai’s economic recovery. Expanding export orders for the country has seen the HSBC Purchasing Managers’ Index at 53.8 in October – compared to say China where a similar index is at 53.5 and the eurozone at a disastrous 45.4. This indicates that local companies are growing at a faster pace than many other areas in the world.

The other factor is the phenomenal growth in the building and construction sector which has seen YTD projects announced totalling US$ 65 billion, a third of which has emanated from the UAE, with an expected US$ 30 billion in Q4. No wonder that this week’s Big 5 Show has brought in over 50,000 visitors to see what this sector has on offer.

Then there is the renaissance in the real estate sector which has seen villas post a 23% surge in value over the past twelve months compared to a miserly 4% in the price of apartments. YTD, Dubai Land Department has dealt with transactions amounting to US$ 22.6 billion.

Reports indicate that there are 1.32 million in the Dubai workforce, with the 6,700 companies in the Jebel Ali Free Zone employing almost 13% of that total. Of more interest is that JAFZ contributes about 20% (or about US$ 16.4 billion) to the local economy. It will also benefit in the future from the on-going development of the adjacent Dubai World Central, Dubai’s second airport, which reported strong Q3 figures. Cargo volumes of over 58,000 tonnes, 4,100 air traffic movements and 36 carriers signed on are all well up on corresponding 2011 figures.

One of these free zone companies, JRD International, announced a US$ 410 million investment in seven of its overseas manufacturing plants making polypropylene boards. Within four years, it expects global production at 500k metric tonnes with many of its products boasting a “Made in the UAE” logo.

A strange fact of economic life in the country is that 5% of all cheques issued bounce, for one reason or another. This equates to over 1.5 million instruments for payments in excess of US$ 15 billion. The biggest player in the market is Emirates NBD which deals with about 35% of all cheques issued. No wonder then that some lenders are now calling for a change to the legal system (which makes this a criminal offence) and for an alternative to the present system. The magnitude of the problem can be gleaned from the fact that 5.5% of the 28.4 million cheques issued here were returned compared to 0.5% of the 682 million cheques issued in the UK.

Furthermore, local banks received a slap on the wrist with Moody’s continuing with a negative outlook for the sector. The agency remains concerned with their poor asset quality and low provisioning levels covering any non-performing loans potentially from large stressed quasi-government entities and “old” real estate problem loans which remain outstanding. Whilst Abu Dhabi banks will see higher returns next year and beyond, the outlook for Dubai is less optimistic.

HSBC has bigger difficulties to worry about, reporting a 52% decrease in Q3 profits to US$ 2.4 billion mainly because of plunging Revenue figures and huge investment losses. Its Middle East division fared marginally better with a 32% drop to US$ 276 million. Globally, the World’s Local Bank had to provide a further US$ 800 million to bring the total to US$ 1.5 billion for possible fines for past anti-money laundering practices. In an effort to slash overheads, the bank is exiting its Islamic retail banking in the UAE and is no longer involved in domestic private banking. It was not the only international bank having to set aside funds to provide for future litigation with Standard Chartered increasing this provision to US$ 1.5 billion which went a long way to understand why their Q3 profits more than halved to US$ 2.5 billion.

For so long banks have been the bugbear of the general public but large multinational companies are muscling in on their turf. Some conglomerates, such as Apple, Starbucks, Amazon, Google and Facebook, are making a mockery of international tax laws much to the chagrin of other taxpayers by using tax havens (and very good tax experts).

For example, Apple paid 1.9% corporation tax on all its profits outside the US, i.e. US$ 713 million, on pre-tax profits of US$ 36.8 billion. Starbucks go even further and have reportedly only paid income tax of US$ 13.8 million on sales of US$ 4.96 billion over the past three years. Latest accounts from Amazon show that, despite UK sales of US$ 4.5 billion, no UK corporation tax has been paid by the company. Google has apparently only paid US$ 8 million on UK sales of US$ 3.36 billion.

Unfortunately it seems such companies are only the tip of the iceberg and something must be done to reduce the tax burden of the average person in the street by tightening up on such inequitable practices whilst ensuring morally repugnant companies pay a fairer tax share. Some hope!

There was mixed news from some of the local companies reporting Q3 results this week. The biggest winner was Dubai Investments which saw quarterly profits more than treble from US$ 6.8 million to US$ 22.1 million. The company, which has holdings in at least forty companies, has managed to restructure its debt, sell non-performing assets and is now focused on expanding the company.

Dubai Islamic Bank announced a quarterly profit of US$ 81 million with YTD standing at US$ 233 million. Its total assets came in at US$ 25.5 billion with deposits up 3.3% to US$ 18.2 billion. So far this year, the bank has put aside US$ 23.3 million for possible impairments.

Dubai’s largest listed construction company made a US$ 9.5 million Q3 profit. Although Arabtec saw a 27.3% hike in Revenue to US$ 381 million, its profit was down 10.3% on last year. Part of the reason for this was that the company took a US$ 5.2 million hit in the value of its Nakheel sukuk holding.

One company emerging from its recent problems is Depa which has won an Abu Dhabi contract, valued at US$ 25 million, for the interior fit out of the new Hilton Hotel. So far this year, the Dubai-based company has signed up US$ 105 million of contracts in the capital. Currently the company is in the throes of completing a US$ 68 million contract for the soon to be opened Conrad Hotel in Dubai.

The Dubai Financial Market had yet another tepid week of trading with an 18 point drop in the Index from Sunday’s opening at 1623 to a Wednesday close of 1605.

Wednesday also saw the re-election of the incumbent president but the US markets reacted negatively to the news with a slide in the value of the greenback and a US$ 40 upward movement in the price of an ounce of gold. Dealers expect the continuation of the Fed’s monthly US$ 40 billion bond-buying escapade and are increasingly worried whether Obama can stop the country falling off the fiscal cliff on 01 January 2013, which may force the government to axe spending and raise taxes.

Rising regional tensions have resulted in an increased order book for some US military companies. Having already spent US$ 1.96 billion last year on Lockheed Martin’s defence systems, the UAE has requested a further US$ 1.13 billion worth of kit. It is a pity that other sectors of the US economy cannot produce such orders as US managed to sell US$ 66.3 billion to Gulf countries in 2011!

Also in on the act – but not on such a grand scale – is the UK. PM David Cameron came to the UAE, with his begging bowl, hoping to sell 60 Typhoon fighter jets (valued at around US$ 3 billion) and to establish a defence and industrial partnership between the two countries. I guess he will have more luck, on the next leg of his journey, in Saudi Arabia.

Spain is still beset by huge problems and the inevitability of having to apply for a bailout, despite the protestations of its PM Mariano Rajoy. It is expected that there will be a 1.5% decline in the country’s GDP this year and no improvement on the cards in 2013.

The Greeks are becoming even more stuck between a rock and a hard place with nothing they can do to get them out of this economic mess. It seems counterproductive that the two major unions have called a two-day strike as a protest against the proposed US$ 23.7 billion austerity package, a rise in the retirement age to 67, salary cuts in the public sector and a 15% reduction in many state pensions.

These measures are needed to secure the next tranche of US$ 40.3 billion of the troika’s bailout payment which will be decided next week at a meeting of eurozone finance ministers. Whether they get this next instalment or not the writing is on the wall for the Greeks – It Is Time to Say Good Bye to the euro.