DUBAI ECONOMIC OUTLOOK
REMARKS
Iyad Malas1
Your Excellency, Ladies and Gentlemen, thank you for inviting me to speak here today, I think I have a
double challenge now because:
1) I probably have to find something that other’s haven’t said which is difficult,
2) Everyone is obviously waiting for this session to end, to have lunch so I will have to keep it
exciting enough for everyone to keep interested.
It’s clear by now to all of us that Dubai has established itself as a tourism, trade, services and logistics hub
and in fact, with the infrastructure that has been built, I believe Dubai had the advantage of using the
global liquidity when it existed and built an infrastructure today that’s second to none. Positioning Dubai
has to be in the context of similar hubs around the world. If we look at Dubai, I want to look at two
elements and compare them to global hubs that many of the previous speakers have talked about: 1) is
what we have seen in terms of population growth in Dubai over the last ten years and 2) is GDP growth
compared to Hong Kong and Singapore. Dubai has effectively doubled its population over the last 10
years at an annual growth rate of 8%, if you look at Hong Kong it has barely seen any increase and
Singapore had a 2% cumulative annual growth rate. During the same period GDP growth in Dubai
actually more than doubled at 10% growth over the period that compares with 3% in Hong Kong and 9%
in Singapore.
To understand what happened in Dubai, we need to look at where the contraction came from over the last
three years? If we look at GDP in terms of consumption, investment, government sector and the trade
sector, consumption in fact has remained the steady component and that’s a very important element in
terms of the Dubai positioning. Then what we have seen is quite a big spike in investment driven by a
construction boom and that fizzled in 2010. What is interesting during that period government sector has
increased and now the government sector is again, is reducing in line with government spending. This is
important because the government is a facilitator in terms of building infrastructure and other things and
catching up with the developments of the economy, the government had to spend and do some of that. As
we see net trade is increasing.
If we break down the GDP of the economy, I think one of the most stable elements in the economy has
been wholesale and retail and maybe some of us would say I am biased as I write for Majid Al Futtaim
given our focus on the retail sector, however, I believe that retail is a major driver in terms of the tourism
and services industry. We don’t have the numbers for 2010 I believe though that wholesale and retail have
continued to take a larger share of the economy. Obviously, real estate and business services have come
down in percentage, the construction industry having suffered the most, manufacturing being more or less
flat, but transportation and communication again on the logistics side increasing while the banking sector
was reducing some given the problems in the banking sectors.
Looking at the importance of the retail sector, only taking the two malls which we have in Dubai, this is
before we opened Mirdiff City Centre in March 2010. As you can see, there has been tremendous growth
in retail sales on a monthly basis that reached the peak in 2008 and started dropping. However, I have to
say that from August 2010, we have seen a very strong pickup in activity and I am very happy to report
that January, February and even March this year have seen even stronger retail sales and footfalls across
all malls, despite the arrivals of new malls like Dubai mall and Mirdif City Centre.
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CEO, MAF Holdings
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Again looking at retail spending and this is only looking at credit card sales we have seen a big growth
between 2006 and 2008 flattening into 2009, and another 11% increase in 2010. Obviously we are seeing
retail pickup very strongly. A few years ago, I believe some work has been done on the positioning of
Dubai across a number of clusters and how competitive Dubai is in this context. These clusters were
tourism, transport, logistics, finance, real estate and construction. What is very clear is in tourism, Dubai
has really delivered on that element. We have seen major pickup in terms of number of rooms. We have
seen, that now tourism is no longer only high end, we have seen the arrival of three stars and four stars
hotels which also bring all kinds of tourists which is very important in the context of having a hub that
covers the region that many of the previous speakers talked about.
Again, Dubai as a transport and logistics hub, has picked up very well, it still has 12% of GDP in
transport and logistics. On finance, there are probably some questions; is Dubai really a financial services
centre? The services side is very clear because it is really servicing a broader region but whether it can
actually be a real financial centre like Hong Kong or London or New York, I believe this remains to be
seen.
The biggest sector where I think there was some view that maybe Dubai can lead on a regional basis is the
real estate construction sector, real estate and construction are more of a domestic industry so you can
easily export that business and become a leader in as a global player, actually there are very few global
real estate operate because the markets that they operate in are very different and therefore we have to
question whether this is a sustainable business model.
Just to confirm the strengths of retail and hospitality. It is very interesting to note that Dubai actually has
the highest number of international retail brands after London, This is a very strong indicator of how
strong the retail market is, and how actually global retailers see Dubai and are continuing to come in to
Dubai. Many new brands have come to Dubai even post crisis. When we opened Midriff City Centre we
had new brands like Crate & Barrel, Pottery Barn and others and we continue to see global retailer that
are very interested in coming to Dubai. Dubai has clearly the highest shopping mall space per million
square meters in the MENA Region. People will now ask whether this is already over retailed or not. At
the end of the day this depends on how many people we can attract as a regional hub. 50% of actual sales
in Mall of the Emirates come from foreign tourists so that’s obviously a very important component of
how much of the business is driven by tourists. In terms of footfalls more people come from residents
because they live here and come on a regular basis.
I said there is clearly an improvement in the number of hotel rooms available with about 70,000 rooms
now in Dubai alone. We have talked about logistics. Clearly having an airport like Dubai is a key element
of making Dubai a logistics hub and the strategy in terms of being a regional and global hub. Today
Dubai is at number 12 globally with 47 million arrivals or transiting people at the airport. The interesting
part, it is actually the second highest growing market if you compare it with the other airports, Dubai is
interestingly enough way ahead of Changi which is in Singapore.
Similarly, in terms of cargo transport Dubai is very well positioned and the most interesting statistics
from my perspective is the top 10 container ports in the world. Dubai ranks 9 th, all the others are actually
Chinese ports and Singapore, so to have that kind of an port in this kind of city is clearly an investment
the leaders of Dubai have envisioned and delivered on it many years ago. I believe we have talked about
many of the strengths using the world competitiveness report. There are a number of areas where Dubai
clearly scores very high in terms of infrastructure, in terms of the existence of institution, market
efficiency and we have covered those. There are other areas that as we continue to position Dubai in
global economy, where we can clearly improve. Some of them have been mentioned like innovation,
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financial market development, market efficiency, the strengthening of institutions and education and
training.
I want to end with a few points on some specific initiatives or actions that both the private and public
sectors can do more to continue to position Dubai into the future and continuing to increase the ease of
doing business. To be honest with you today, in the context of what’s happening in this region, if we look
at the biggest issue, it is employment and at the end of the day, there is no employment without
investment. 1)Every job that has to be created has to be on the basis of someone investing money, if you
are talking about governments offering jobs to the unemployed these are not sustainable jobs, so
encouraging investment and increasing the ease of doing business. 2) It is important to continue to
develop policies to strengthen and sustain, in the long term, the resident population that has been a major
driver of growth in Dubai and I think something has to be done in this area. 3) We need to continue to
accelerate investment and reform in education and training and that’s been mentioned by some others.
4) The soft infrastructure: the judicial, education, healthcare, are key areas that we need to work on. The
accelerated development of the legislative bodies, bankruptcy and insolvency laws, long term residency
are areas that need to still be worked on.
We need to definitely increase transparency. Speakers have talked about governance and strengthening
in corporate governance, increasing cooperation between the GCC. I think it is very difficult to talk about
regional hub when we have 35 million people that have 7 equity markets and 8 states on the airlines and
136 different banks. If we want to create a regional hub we need the GCC Countries to work together on
making sure that we create the scale markets that then become global markets for companies to raise
capital etc.
Finally I think there is more areas of cooperation between the public and the private sector on the policy
side and especially on the execution side as many have said it is important to grow by having an SME
sector and encouraging SME’s is vital in the context of an economy like Dubai.
Thank you very much.
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