One of Dubai’s success stories, that seems to be under the radar, is the fact that the emirate is fast becoming one of the leading players in the healthcare market. The main drivers are the increased government and international investment which have seen the likes of Dubai Healthcare City beginning to flourish. It has been estimated that this sector will be worth in excess of US$ 11 billion next year – from an almost nil base less than a decade ago.
The reason why Dubai’s economy is flying, whilst that of say the UK is in a flat spin, is best exemplified by Willie Walsh, the beleaguered head of BA, speaking to the UK House of Commons Transport Committee. He pointed out that in 2001, Dubai was the 99th biggest global airport – now it is 4th – and that soon it will overtake Heathrow as the largest in the world because UK politicians are afraid to make tough decisions. One just has to see the quintessential response from HH Sheikh Mohammed bin Rashid Al Maktoum on such matters and that is why the London airport is at full capacity at 68 million whilst Dubai will have almost doubled its size to 90 million passengers.
The increasing stature of Emirates and other ME carriers to the aviation industry was brought home by the Boeing estimate that, over the next two decades, nearly 2,400 new aircraft will be ordered, with a value of US$ 470 billion. As would be expected, because of more long haul flights, 46% of that total would be twin-aisle aircraft compared to the global rate of 23%. Of the remaining order, 45% will be single aisle, 8% the larger craft such as the A380 and 747, with the remaining 1% being regional jets. There is no doubt that ME carriers will continue to outperform the global market.
There is slow visible progress at Dubai World Central, the new mega airport being developed in Jebel Ali. This year, freight tonnage should tip 200k tonnes whilst passenger operations are set to commence next year, although no actual timetable is yet available.
It is reported that Emirates are in potential partnership talks with Fastjet, the former aviation unit of Lonhro plc, which began commercial flights only last month. Despite the discussions being at an early stage, the low-cost African carrier’s share value jumped 7.5% on the London AIM this week.
Also on a similar front, dnata has won contracts to run ground handling services for Iberia and BA at two Swiss airports, Geneva and Zurich. Commencing in February 2013, the Dubai-based company will handle over 9,500 flights. Owned 100% by the Investment Corporation of Dubai, the company is one of the largest combined air services providers in the industry.
Rather surprisingly, Dubai is only ranked 60 of the most popular cities in the world for hosting conventions. Having put on 34 events in 2011, and because of its world-class infrastructure and position as a global travel hub, the local MICE industry will undoubtedly expand.
Dubai is currently hosting the World Conference on International Telecommunications, with over 2,000 attendees discussing pressing issues impacting the ICT sector. The last major overhaul was back in 1988 when there were a mere 4.3 million mobile accounts and the internet was a pipedream. How times have changed – today there are 6 billion mobile accounts and 2.5 billion using the internet. What is decided here in Dubai will dictate the future direction of how the industry is regulated and whether governments will get more actively involved in setting up usage charges. The worrying feature is that the 12-day meeting is being held behind closed doors with the future of the internet being decided by major telecoms – with all other interested stakeholders persona non grata.
The week that Dubai’s Ambassador to France, Mohamed Meer Abdulla Al Raesi, submitted the emirate’s formal Expo 2020 bid to the BIE, there is the announcement that the city will bid for the 2024 Olympic Games.
According to latest statistics (for 2011) from the World Trade Organisation, UAE is now the world’s 20th biggest exporter in merchandise trade – its US$ 285 billion accounting for 1.56% of the global total of US$ 18.215 trillion – and 25th biggest importer with its US$ 205 billion (or 1.12% of the US$ 18.38 trillion total).
The importance of the Chinese influence on the local economy is seen from the fact that their trade with JAFZ has more than doubled in five years from an annual US$ 4.4 billion in 2005 to over US$ 10 billion last year. No wonder then that Talal Al Hashimi, MD of Economic Zones World (EZW) will be leading a delegation to the Bauma Machinery and Construction Equipment Exhibition in Shanghai, in an attempt to attract even more business and raise the “Dubai brand”. (Interestingly the EZW accounts for over 40% of Dubai’s FDI and contributes 25% to its GDP).
It appears that Giordano is another company that has seen the benefits of setting up a regional hub in Dubai. The Hong Kong-based clothing retailer, established in 1993, is set to spend US$ 5 million in developing a logistics centre in Jebel Ali Free Zone (JAFZ).
Following recent announcements of various new tourism, retail and real estate projects, Emaar will expand the world’s largest shopping precinct, Dubai Mall, by a further 1 million sq ft. The development will comprise a new shopping boulevard, hotel, serviced apartments and luxury villas.
The other major property developer, Nakheel, is going green. Following the opening of its US$ 6.5 million park on Palm Jumeirah, it has intimated that they will be building many more recreational areas in their other developments. The newly opened Al Ittihad Park covers an area of 1.1 million sq ft and has a 3.2 km jogging track – it will be interesting to see how many residents will use this facility.
Dubai-based construction company, Arabtec has been awarded a contract in Qatar valued at US$ 630 million for ten buildings as part of a US$ 5.5 billion development of Msheireb Downtown Doha. Such projects will boost the company’s profitability and analysts are expecting an improvement on their rather disappointing Q3 Profit of US$ 9.5 million. Their shares on the Dubai Financial Market Index rose 1.7% on the day.
Meanwhile the Index ended its three day week (because of the National Day holidays), only 2 points higher at 1610 from its Tuesday start. YTD the market is up at a healthy 18.93%.
The business outlook for UAE continues bullish with the latest PMI (purchase managers’ index) standing little changed at 53.7. Any reading above 50 indicates growth whilst under that figure shows contraction – as is the case in the eurozone and other countries mired in the economic malaise. This is another sign that proves Dubai is outperforming most other places.
A further indicator that Dubai is prospering despite the global economic turmoil is that new car sales continue to soar. Latest figures show that for the half year to 30 September, Jaguar and Land Rover sales were up 21% and 33% respectively – their best results since the GFC. This is on the back of previous dealers’ latest results including Bentley sales up 88%, Ford 38%, Nissan Altimas 33% and BMW 15%.
The Road Transit Authority is trying its best to get residents off the road and on to its Metro. Their latest strategy is to start applying the Salik road charge for taxis, previously exempt from the US$ 1.10 toll, every time a cab passes one of the four electronic booths. It is expected that Salik will add almost US$ 1.4 billion to the government coffers next year.
This week, the President, HH Sheikh Khalifa bin Zayed Al Nahyan, directed that over US$ 410 million be used to clear the debts of Emirati nationals, the number of which was not disclosed. As part of the deal, monies will have to be repaid but will not exceed 50% of any debtor’s monthly salary.
The nefarious, Berlin-based Transparency International considers the UAE the least corrupt regional nation and is ranked 27th on the global stage. Predictably, Denmark, Finland and New Zealand were considered the “cleanest” whilst Afghanistan, North Korea and Somalia were at the bottom of the ladder of the 176 countries surveyed. That being the case why do certain western powers continue to pour billions into such profligate countries?
Just to show that corruption is endemic, the EU has imposed a US$ 1.9 billion fine on six companies, including LG, Philips and Panasonic for running two cartels for almost ten years. Evidently, senior management would regularly meet to fix prices and market share.
Then there is the case of Rolls Royce who are in talks with the UK’s Serious Fraud Office about possible bribery cases in China, Indonesia and other countries. If proven, then the US Department of Justice will become involved and that could mean even more trouble for UK engine maker; it was only two years ago that BAE felt the wrath of US justice and incurred a US$ 400 million charge.
Not to be outdone, banks’ shenanigans are back in the news with three ex-employees of Germany’s largest lender, Deutsche Bank, alleging that the bank hid losses up to US$ 12 billion. At the time, during the turbulent 2007 – 2009 period, the false valuation of their derivative positions averted a damaging government bailout. The SEC is studying the allegations. Meanwhile Standard Chartered has agreed a US$ 330 million settlement with US regulators for their flouting of sanctions against Iran.
Better late than never, German Chancellor, Angela Merkel, is beginning to realise the inevitability of a further write-down of Greek debt. As she still wants to be Chancellor after September 2013 elections, there is no doubt that this will not be considered until 2014 at the earliest. No doubt Greece will continue taking the easy way out, knowing that the real severe economic measures, that should be taken, can well be diluted.
Another sign of the global slowdown emanated from the world’s biggest exporter of iron ore and coal. With commodity prices declining rapidly, Australia saw its Q3 growth soften to 3.1% slowing from the 4.0% growth of H1. Although still resilient, compared to most other countries, there are two economies running in parallel universes – the mining sector has committed resource projects valued at US$ 280 billion whilst tourism, manufacturing and retail are struggling because of the lofty dollar, reduced consumer spending and relatively high labour costs.
The ECB President, Mario Draghi, blamed weak consumer and investment growth for a revised eurozone forecast that sees a further shrinkage of 0.5%. The bloc is mired in a recession from which it will find increasingly difficult to escape. Austerity packages result in unemployment rising which has a double whammy for governments – a fall in tax receipts and an increase in benefit hand-outs. The current unemployment level of 11.5% is a disgrace and demonstrates a lack of cohesive action from the Brussels bureaucrats.
There is probably no more bureaucratic organisation than the UN that has again shown its ineptitude with its mishandling of the Syrian crisis as massacres continue. The latest news is that there will be repercussions if the Assad government decide to use chemical warfare. President Obama and US officials have been issuing stern warnings this week but if more than 50,000 have already died, why do we have to wait for a tipping point?
In contrast, all the key economic indicators are pointing north as confidence in Dubai grows with prime real estate up 20%, hotel rates and occupancy up by 10%, the cost of insuring its debt against default more than halving over the past two years and the feel good factor fast returning. Let the Good Times Roll!