Impact-of-US-Dollar-Fall-eng by shrakdoc

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									                Policy Study
                    2004




Implications of the Fall of the US Dollar on
      Dubai’s Trade with EU and Japan
       In the Period of 2000 – 2003




              Dr. Eisa Abdelgalil
              Dr. Belaid Rettab
                 04-02-01-04




 Data Management & Business Research Department

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                                                                                      ‫ﻤﻠﺨﺹ ﺘﻨﻔﻴﺫﻱ‬


‫ﺍﺴﺘﺠﺎﺒﺔ ﻟﺘﻭﺠﻴﻬﺎﺕ ﻤﺠﻠﺱ ﺍﻹﺩﺍﺭﺓ ﺘﻨﺘﻬﺯ ﺇﺩﺍﺭﺓ ﺍﻟﺒﻴﺎﻨﺎﺕ ﻭﺍﻷﺒﺤﺎﺙ ﺍﻟﻔﺭﺼﺔ ﻟﻠﻘﻴﺎﻡ ﺒﺘﻘﻴﻴﻡ ﺘﺄﺜﻴﺭ ﻫﺒﻭﻁ ﺍﻟﺩﻭﻻﺭ‬
             ‫ﺍﻷﻤﺭﻴﻜﻲ ﻓﻲ ﺍﻟﻔﺘﺭﺓ 0002 ـ 3002 ﻋﻠﻰ ﺘﺠﺎﺭﺓ ﺩﺒﻲ ﺍﻟﺨﺎﺭﺠﻴﺔ ﻤﻊ ﺍﻻﺘﺤﺎﺩ ﺍﻷﻭﺭﻭﺒﻲ ﻭﺍﻟﻴﺎﺒﺎﻥ.‬


‫ﻴﻌﺭﺽ ﻫﺫﺍ ﺍﻟﻤﻠﺨﺹ ﺃﻫﻡ ﻤﺎ ﺘﻭﺼل ﺇﻟﻴﻪ ﺍﻟﺒﺤﺙ ﻤﻥ ﻨﺘﺎﺌﺞ ﻭﺘﻭﺼﻴﺎﺕ ﺇﻟﻰ ﺍﻟﺠﻬﺎﺕ ﺍﻟﺤﻜﻭﻤﻴﺔ ﻭﺍﻟﻘﻁﺎﻉ ﺍﻟﺨﺎﺹ‬
                                ‫ﻭﺍﻟﻤﺴﺘﻬﻠﻜﻴﻥ ﻤﻥ ﺃﺠل ﺘﺨﻔﻴﻑ ﺍﻟﺘﺄﺜﻴﺭﺍﺕ ﺍﻟﺴﻠﺒﻴﺔ ﺍﻟﻨﺎﺠﻤﺔ ﻋﻥ ﻫﺒﻭﻁ ﺍﻟﺩﻭﻻﺭ.‬


                                                                                     ‫ﺃﻫﻡ ﻨﺘﺎﺌﺞ ﺍﻟﺒﺤﺙ‬


‫ﺘﻡ ﻤﻥ ﺨﻼل ﺍﺴﺘﺨﺩﺍﻡ ﻤﻨﺎﻫﺞ ﺍﻟﺒﺤﺙ ﺍﻟﻤﺘﺒﻌﺔ ﻓﻲ ﺍﻟﻐﺭﻓﺔ ﺤﺴﺎﺏ ﻤﻌﺩل ﺴﻌﺭ ﺼﺭﻑ ﺍﻟﺩﺭﻫﻡ )ﺍﻟﻤﻭﺯﻭﻥ ﺘﺠﺎﺭﻴﺎ(‬
‫ﻤﻘﺎﺒل ﺍﻟﻴﻭﺭﻭ ﻭﺍﻟﻴﻥ. ﻨﺘﻴﺠﺔ ﻟﻌﺩﻡ ﺘﻭﻓﺭ ﺇﺤﺼﺎﺌﻴﺎﺕ ﺍﻟﺘﺠﺎﺭﺓ ﺍﻟﺨﺎﺭﺠﻴﺔ ﻟﺴﻨﺔ 3002 ﺘﻡ ﺤﺴﺎﺏ ﺍﻟﺘﻭﻗﻌﺎﺕ ﻟﻬﺫﻩ ﺍﻟﺴﻨﺔ‬
‫ﺒﻨﺎﺀﺍ ﻋﻠﻰ ﺘﻭﺠﻪ ﺍﻟﺴﻨﻭﺍﺕ ﺍﻟﻤﺎﻀﻴﺔ. ﻴﺴﺘﺨﺩﻡ ﺴﻌﺭ ﺍﻟﺼﺭﻑ )ﺍﻟﻤﻭﺯﻭﻥ ﺘﺠﺎﺭﻴﺎ( ﻓﻲ ﺤﺴﺎﺏ ﺴﻌﺭ ﺼﺭﻑ ﺍﻟﺩﺭﻫﻡ‬
‫ﺍﻹﻤﺎﺭﺍﺘﻲ ﻤﻘﺎﺒل ﻋﻤﻼﺕ ﻜﺒﺎﺭ ﺍﻟﺸﺭﻜﺎﺀ ﺍﻟﺘﺠﺎﺭﻴﻴﻥ ﻟﺩﺒﻲ )ﺍﻟﻴﻭﺭﻭ ﻭﺍﻟﻴﻥ(. ﻭﻤﻥ ﻨﺘﺎﺌﺞ ﻫﺫﻩ ﺍﻟﺩﺭﺍﺴﺔ ﻨﺫﻜﺭ ﺒﻌﺽ‬
                     ‫ﺍﻵﺜﺎﺭ ﺍﻟﺘﻲ ﺨﻠﻔﻬﺎ ﻫﺫﺍ ﺍﻟﻬﺒﻭﻁ ﻋﻠﻰ ﺘﺠﺎﺭﺓ ﺩﺒﻲ ﺍﻟﺨﺎﺭﺠﻴﺔ ﻤﻊ ﺍﻻﺘﺤﺎﺩ ﺍﻷﻭﺭﻭﺒﻲ ﻭﺍﻟﻴﺎﺒﺎﻥ:‬


                                ‫1. ﺼﺎﺤﺏ ﺍﻨﺨﻔﺎﺽ ﺍﻟﺩﻭﻻﺭ ﺘﺤﺴﻥ ﻓﻲ ﻤﻴﺯﺍﻥ ﺘﺠﺎﺭﺓ ﺩﺒﻲ ﺍﻟﺨﺎﺭﺠﻴﺔ:‬
‫ﺼﺎﺤﺏ ﺍﻨﺨﻔﺎﺽ ﺍﻟﺩﻭﻻﺭ ﺘﺤﺴﻥ ﻓﻲ ﻤﻴﺯﺍﻥ ﺍﻟﺘﺠﺎﺭﺓ ﺍﻟﺨﺎﺭﺠﻴﺔ ﺤﻴﺙ ﺍﻨﺨﻔﺽ ﺍﻟﻌﺠﺯ ﺍﻟﺘﺠﺎﺭﻱ ﺍﻟﻐﻴﺭ ﺍﻟﻨﻔﻁﻲ‬
‫ﺒﻤﺎ ﻴﻘﺎﺭﺏ 1 ﻓﻲ ﺍﻟﻤﺎﺌﺔ ﺒﻴﻥ ﺴﻨﺔ1002 ﻭ 2002. ﻭ ﻴﻌﺯﻯ ﻫﺫﺍ ﺍﻟﺘﺤﺴﻥ ﺇﻟﻰ ﺍﺴﺘﺒﺩﺍل ﺍﻟﺘﺠﺎﺭﺓ ﻤﻊ ﺃﻭﺭﻭﺒﺎ ﻭ‬
‫ﺍﻟﻴﺎﺒﺎﻥ ﺒﺎﻟﺘﺠﺎﺭﺓ ﻤﻊ ﺍﻟﺩﻭل ﺍﻟﻤﺘﻌﺎﻤﻠﺔ ﺒﺎﻟﺩﻭﻻﺭ. ﻭ ﻤﻥ ﺍﻟﻤﺘﻭﻗﻊ ﺃﻥ ﻴﺴﺘﻤﺭ ﻫﺫﻩ ﺍﻟﺘﻭﺠﻪ ﺴﻨﺔ 3002 ﻭ 4002.‬


                          ‫2. ﺯﻴﺎﺩﺓ ﺍﻟﻌﺠﺯ ﺍﻟﺘﺠﺎﺭﻱ ﺍﻟﻐﻴﺭ ﺍﻟﻨﻔﻁﻲ ﻟﺩﺒﻲ ﻤﻊ ﺍﻻﺘﺤﺎﺩ ﺍﻷﻭﺭﻭﺒﻲ ﻭﺍﻟﻴﺎﺒﺎﻥ:‬
‫ﺸﻬﺩﺕ ﺍﻟﻔﺘﺭﺓ 0002 ـ 3002 ﺍﻨﺨﻔﺎﻀﺎ ﻤﻠﺤﻭﻅﺎ ﻟﺴﻌﺭ ﺼﺭﻑ ﺍﻟﺩﺭﻫﻡ ﺍﻟﻤﻭﺯﻭﻥ ﺘﺠﺎﺭﻴﺎ ﺒﻨﺴﺒﺔ ﻻ ﺘﻘل ﻋﻥ‬
‫5.5 ﻓﻲ ﺍﻟﻤﺎﺌﺔ ﺴﻨﻭﻴﺎ ﻭﻤﻥ ﺍﻟﻤﺘﻭﻗﻊ ﺃﻥ ﻴﺼﺎﺤﺏ ﻫﺫﺍ ﺍﻻﻨﺨﻔﺎﺽ ﺯﻴﺎﺩﺓ ﻓﻲ ﺍﻟﻌﺠﺯ ﺍﻟﺘﺠﺎﺭﻱ ﻟﻌﺎﻡ 3002 ﺒﻨﺴﺒﺔ‬
                                                        ‫1 ﻓﻲ ﺍﻟﻤﺎﺌﺔ ﻤﻊ ﺍﻻﺘﺤﺎﺩ ﺍﻷﻭﺭﻭﺒﻲ ﻭﺍﻟﻴﺎﺒﺎﻥ.‬


‫3. ﻫﺒﻁﺕ ﻗﻴﻤﺔ ﺍﻟﺩﺭﻫﻡ ﻭﻓﻘﺎ ﻟﺴﻌﺭ ﺍﻟﺼﺭﻑ ﺍﻟﻤﻭﺯﻭﻥ ﺘﺠﺎﺭﻴﺎ ﻤﻥ ﺴﻨﺔ 0002 ﺇﻟﻰ 3002 ﺒﻤﺎ ﻴﻘﺎﺭﺏ‬
                                                              ‫5.61 ﻓﻲ ﺍﻟﻤﺎﺌﺔ ﻤﻘﺎﺒل ﺍﻟﻴﻭﺭﻭ ﻭﺍﻟﻴﻥ.‬


‫4. ﺍﻨﺨﻔﻀﺕ ﻗﻴﻤﺔ ﺍﻟﺩﺭﻫﻡ ﻭﻓﻘﺎ ﻟﺴﻌﺭ ﺍﻟﺼﺭﻑ ﺍﻟﻤﻭﺯﻭﻥ ﺘﺠﺎﺭﻴﺎ ﺒﻴﻥ ﻋﺎﻤﻲ 0002 ﻭ 3002 ﺒﻤﺘﻭﺴﻁ 5.5‬
‫ﻓﻲ ﺍﻟﻤﺎﺌﺔ ﺴﻨﻭﻴﺎ ﻭﻗﺩ ﺼﺎﺤﺏ ﺫﻟﻙ ﺘﺄﺜﻴﺭﺍﺕ ﻋﻠﻰ ﺍﻟﺼﺎﺩﺭﺍﺕ، ﺍﻟﻭﺍﺭﺩﺍﺕ ﻭﺇﻋﺎﺩﺓ ﺍﻟﺼﺎﺩﺭﺍﺕ ﺍﻟﻐﻴﺭ‬
                            ‫ﺍﻟﻨﻔﻁﻴﺔ ﻤﻊ ﺍﻻﺘﺤﺎﺩ ﺍﻷﻭﺭﻭﺒﻲ ﻭﺍﻟﻴﺎﺒﺎﻥ ﻴﻤﻜﻥ ﺫﻜﺭﻫﺎ ﻋﻠﻰ ﺍﻟﻨﺤﻭ ﺍﻟﺘﺎﻟﻲ:‬



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                                                               ‫5. ﺁﺜﺎﺭ ﺴﻠﺒﻴﺔ ﻋﻠﻰ ﺼﺎﺩﺭﺍﺕ ﺩﺒﻲ:‬
       ‫ﺍﻨﺨﻔﻀﺕ ﻋﺎﺌﺩﺍﺕ ﺍﻟﺼﺎﺩﺭﺍﺕ ﺒﻴﻥ 0002 ﻭ 3002 ﺒﻤﻌﺩل ﺴﻨﻭﻱ ﻭﺼل ﺇﻟﻰ – 8.2 ﻓﻲ ﺍﻟﻤﺎﺌﺔ.‬


                                                           ‫6. ﺁﺜﺎﺭ ﺍﻴﺠﺎﺒﻴﺔ ﻋﻠﻰ ﺇﻋﺎﺩﺓ ﺍﻟﺼﺎﺩﺭﺍﺕ:‬
           ‫ﺍﺭﺘﻔﻌﺕ ﻋﺎﺌﺩﺍﺕ ﺇﻋﺎﺩﺓ ﺍﻟﺼﺎﺩﺭﺍﺕ ﺒﻴﻥ ﻋﺎﻤﻲ 0002 ﻭ 3002 ﺒﻨﺴﺒﺔ 2.6 ﻓﻲ ﺍﻟﻤﺎﺌﺔ ﺴﻨﻭﻴﺎ.‬


                                                             ‫7. ﺁﺜﺎﺭ ﺴﻠﺒﻴﺔ ﻋﻠﻰ ﻨﻔﻘﺎﺕ ﺍﻟﻭﺍﺭﺩﺍﺕ:‬
             ‫ﺯﺍﺩﺕ ﻨﻔﻘﺎﺕ ﻭﺍﺭﺩﺍﺕ ﺩﺒﻲ ﺒﻴﻥ ﻋﺎﻤﻲ 0002 ﻭ 3002 ﺒﻤﻌﺩل ﺴﻨﻭﻱ ﻗﺩﺭﻩ 1 ﻓﻲ ﺍﻟﻤﺎﺌﺔ.‬


                                                         ‫8. ﺘﺄﺜﻴﺭ ﺴﻠﺒﻲ ﻋﻠﻰ ﺇﻴﺭﺍﺩﺍﺕ ﺍﻟﻨﻔﻁ ﺍﻟﺨﺎﻡ:‬
‫ﺒﻴﻥ ﻋﺎﻤﻲ 0002 ﻭ 3002 ﺍﻨﺨﻔﺽ ﺴﻌﺭ ﺼﺭﻑ ﺍﻟﺩﺭﻫﻡ ﺍﻟﻤﻭﺯﻭﻥ ﺘﺠﺎﺭﻴﺎ ﺒﻤﺘﻭﺴﻁ ﺴﻨﻭﻱ ﻗﺩﺭﻩ 5.5 ﻓﻲ‬
‫ﺍﻟﻤﺎﺌﺔ ﻓﻲ ﺤﻴﻥ ﺍﺭﺘﻔﻊ ﺴﻌﺭ ﻨﻔﻁ ﺨﺎﻡ ﺩﺒﻲ ﺒﻨﺴﺒﺔ 1 ﻓﻲ ﺍﻟﻤﺎﺌﺔ، ﻭﻴﻌﻨﻲ ﺫﻟﻙ ﺤﺩﻭﺙ ﺨﺴﺎﺭﺓ ﻓﻲ ﺼﺎﻓﻲ ﺍﻟﻘﻭﺓ‬
‫ﺍﻟﺸﺭﺍﺌﻴﺔ، ﻹﻴﺭﺍﺩﺍﺕ ﺍﻟﻨﻔﻁ ﺍﻟﺨﺎﺼﺔ ﺒﺩﺒﻲ ﻤﻥ ﻭﺍﺭﺩﺍﺕ ﺩﻭل ﺍﻻﺘﺤﺎﺩ ﺍﻷﻭﺭﻭﺒﻲ ﻭﺍﻟﻴﺎﺒﺎﻥ، ﺒﻤﻌﺩل 5.4 ﻓﻲ‬
                                                    ‫ﺍﻟﻤﺎﺌﺔ ﺒﺎﻓﺘﺭﺍﺽ ﻜﻤﻴﺔ ﺜﺎﺒﺘﺔ ﻤﻥ ﺍﻹﻨﺘﺎﺝ ﻭﺍﻟﺼﺎﺩﺭ.‬


‫9. ﻴﻔﺘﺭﺽ ﺤﺩﻭﺙ ﺯﻴﺎﺩﺓ ﻓﻲ ﻋﺎﺌﺩﺍﺕ ﺍﻟﺴﻴﺎﺤﺔ ﺍﻟﻘﺎﺩﻤﺔ ﻤﻥ ﺍﻟﻤﻨﺎﻁﻕ ﺍﻟﺘﻲ ﺘﺘﻌﺎﻤل ﺒﻌﻤﻼﺕ ﻏﻴﺭ ﺍﻟﺩﻭﻻﺭ‬
                               ‫ﺍﻷﻤﺭﻴﻜﻲ ﻭﺫﻟﻙ ﻨﺘﻴﺠﺔ ﻻﻨﺨﻔﺎﺽ ﺴﻌﺭ ﺼﺭﻑ ﺍﻟﺩﺭﻫﻡ ﺍﻟﻤﻭﺯﻭﻥ ﺘﺠﺎﺭﻴﺎ.‬


‫01. ﺘﻨﺨﻔﺽ ﺍﻟﻘﻭﺓ ﺍﻟﺸﺭﺍﺌﻴﺔ ﺍﻟﺤﻘﻴﻘﻴﺔ ﻟﻼﺤﺘﻴﺎﻁﻴﺎﺕ ﺍﻟﻌﺎﻟﻤﻴﺔ ﺍﻟﻤﺤﻔﻭﻅﺔ ﺒﺎﻟﺩﻭﻻﺭ ﺒﻨﺴﺒﺔ ﺘﺩﻫﻭﺭ ﻗﻴﻤﺔ ﺍﻟﺩﻭﻻﺭ‬
                                                         ‫ﺍﻷﻤﺭﻴﻜﻲ ﻤﻘﺎﺒل ﺍﻟﻌﻤﻼﺕ ﺍﻟﻌﺎﻟﻤﻴﺔ ﺍﻷﺨﺭﻯ.‬




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                                                                                            ‫ﺍﻟﺘﻭﺼﻴﺎﺕ‬


‫ﻟﻠﺤﺩ ﻤﻥ ﺍﻵﺜﺎﺭ ﺍﻟﺴﺎﻟﺒﺔ ﻟﻬﺒﻭﻁ ﺍﻟﺩﻭﻻﺭ ﻭﺒﺎﻟﺘﺎﻟﻲ ﺍﻟﺩﺭﻫﻡ ﻋﻠﻰ ﺍﻗﺘﺼﺎﺩ ﺩﺒﻲ ﻓﻘﺩ ﺘﻡ ﺍﻟﺘﻭﺼل ﺇﻟﻰ ﺍﻟﺘﻭﺼﻴﺎﺕ ﺍﻟﺘﺎﻟﻴﺔ:‬


                                                                                   ‫1. ﺍﻟﺤﻜﻭﻤﺔ:‬
‫- ﻭﻀﻊ ﺒﺭﺍﻤﺞ ﺘﺭﻭﻴﺠﻴﺔ ﻤﻥ ﺃﺠل ﻓﺘﺢ ﺃﺴﻭﺍﻕ ﺠﺩﻴﺩﺓ ﻟﻠﺼﺎﺩﺭﺍﺕ ﻭﻤﻨﺢ ﺘﺴﻬﻴﻼﺕ ﻤﺜل ﺩﻋﻡ ﺍﻟﺼﺎﺩﺭﺍﺕ‬
                                                          ‫ﺇﻀﺎﻓﺔ ﺇﻟﻰ ﺍﻟﻘﺭﻭﺽ ﻭﺍﻟﻀﻤﺎﻨﺎﺕ.‬
                                     ‫- ﺘﺸﺠﻴﻊ ﺇﻴﺠﺎﺩ ﺒﺩﺍﺌل ﺠﺩﻴﺩﺓ ﺍﻗل ﺘﻜﻠﻔﺔ ﻤﻥ ﺃﺴﻭﺍﻕ ﺍﻟﻭﺍﺭﺩﺍﺕ‬
‫- ﺘﺸﺠﻴﻊ ﺍﻻﺴﺘﻐﻨﺎﺀ ﻋﻥ ﺍﻟﻭﺍﺭﺩﺍﺕ ﺍﻟﻤﺴﺘﻬﻠﻜﺔ ﺩﺍﺨﻠﻴﺎ ﻭﺍﻟﻌﻤل ﻋﻠﻰ ﺍﺴﺘﺒﺩﺍﻟﻬﺎ ﺒﻤﻨﺘﺠﺎﺕ ﻭﻁﻨﻴﺔ ﺒﻁﺭﻴﻘﺔ ﻻ‬
                ‫ﺘﺨل ﺒﻨﻅﺎﻡ ﺍﻟﺴﻭﻕ ﺍﻟﺩﺍﺨﻠﻲ ﺇﻟﻰ ﺠﺎﻨﺏ ﺍﻗﺘﺭﺍﺡ ﺇﺼﻼﺤﺎﺕ ﺍﻗﺘﺼﺎﺩﻴﺔ ﺘﺴﺎﻴﺭ ﺍﻟﻌﺼﺭ‬
                                           ‫- ﺍﻟﻤﺴﺎﻋﺩﺓ ﻓﻲ ﺇﻗﺎﻤﺔ ﻤﺨﺯﻭﻥ ﻟﻠﻭﺍﺭﺩﺍﺕ ﺍﻻﺴﺘﺭﺍﺘﻴﺠﻴﺔ‬
  ‫- ﺍﻟﺘﻨﺴﻴﻕ ﻤﻥ ﺃﺠل ﺍﻟﻘﻴﺎﻡ ﺒﻤﺸﺘﺭﻴﺎﺕ ﻤﺸﺘﺭﻜﺔ ﻋﻨﺩ ﺍﻻﺴﺘﻴﺭﺍﺩ ﻭﺫﻟﻙ ﻟﻤﻨﺢ ﻤﺯﻴﺩ ﻤﻥ ﺍﻟﻘﻭﻯ ﺍﻟﺘﻔﺎﻭﻀﻴﺔ‬
                                                                       ‫ﻟﻠﻤﻭﺭﺩﻴﻥ ﺍﻟﻤﺤﻠﻴﻴﻥ.‬
                  ‫- ﺘﻨﻭﻴﻊ ﺍﻻﺤﺘﻴﺎﻁﻴﺎﺕ ﺍﻟﻤﺎﻟﻴﺔ ﺍﻷﺠﻨﺒﻴﺔ ﻟﺘﺼﺒﺢ ﺴﻠﺔ ﻤﻥ ﺍﻟﻌﻤﻼﺕ ﺍﻟﻌﺎﻟﻤﻴﺔ ﺍﻟﺭﺌﻴﺴﻴﺔ‬




                                                                             ‫2. ﺍﻟﻘﻁﺎﻉ ﺍﻟﺨﺎﺹ:‬
                                   ‫- ﺍﻟﺘﻨﺴﻴﻕ ﻤﻊ ﺍﻟﺠﻬﺎﺕ ﺍﻟﺤﻜﻭﻤﻴﺔ ﻓﻲ ﺘﺭﻭﻴﺞ ﺍﻟﺘﺠﺎﺭﺓ ﺍﻟﺨﺎﺭﺠﻴﺔ‬
                        ‫- ﻤﺭﺍﺠﻌﺔ ﺍﺴﺘﺭﺍﺘﻴﺠﻴﺎﺕ ﺍﻻﻨﺘﺎﺝ ﻭﺍﻟﺘﺴﻭﻴﻕ ﻋﻠﻰ ﻀﻭﺀ ﻫﺒﻭﻁ ﻗﻴﻤﺔ ﺍﻟﺩﻭﻻﺭ‬
                ‫- ﺍﻟﺘﻭﺼل ﺇﻟﻰ ﻋﻘﻭﺩ ﺍﺴﺘﻴﺭﺍﺩ ﺘﺠﺎﺭﻴﺔ ﻁﻭﻴﻠﺔ ﺍﻷﻤﺩ ﻻ ﺘﺘﺄﺜﺭ ﺒﺘﻘﻠﺒﺎﺕ ﺃﺴﻌﺎﺭ ﺍﻟﻌﻤﻼﺕ‬
                             ‫- ﺇﻋﺎﺩﺓ ﻫﻴﻜﻠﺔ ﺍﻟﻤﺅﺴﺴﺎﺕ ﺍﻟﺼﻨﺎﻋﻴﺔ ﻟﻠﺤﺩ ﻤﻥ ﺍﻟﻤﺨﺎﻁﺭ ﻁﻭﻴﻠﺔ ﺍﻟﻤﺩﻯ‬
                                                                           ‫- ﺘﻌﺯﻴﺯ ﺍﻟﻤﻨﺎﻓﺴﺔ‬
‫- ﺇﺩﺍﺭﺓ ﺍﻟﻤﺤﺎﻓﻅ ﺍﻟﻤﺎﻟﻴﺔ ﻤﻥ ﺨﻼل ﺍﻻﺤﺘﻔﺎﻅ ﺒﺎﻷﺼﻭل ﻭﺍﻻﺴﺘﺜﻤﺎﺭﺍﺕ ﺒﻌﺩﺓ ﻋﻤﻼﺕ ﻋﺎﻟﻤﻴﺔ ﺭﺌﻴﺴﻴﺔ ﺒﺩﻻ‬
                                                       ‫ﻤﻥ ﺃﻥ ﺘﻜﻭﻥ ﺒﺎﻟﺩﻭﻻﺭ ﺍﻷﻤﺭﻴﻜﻲ ﻓﻘﻁ.‬


                                                                                   ‫3. ﺍﻟﻤﺴﺘﻬﻠﻙ‬
                                  ‫- ﺘﺄﺠﻴل ﺘﺤﻭﻴﻼﺕ ﺍﻟﻌﻤﻼﺕ ﺍﻷﺠﻨﺒﻴﺔ ﻏﻴﺭ ﺍﻟﺩﻭﻻﺭ ﻤﺎ ﺃﻤﻜﻥ ﺫﻟﻙ‬
‫- ﺘﺄﺠﻴل ﺍﺴﺘﻬﻼﻙ ﺍﻟﻭﺍﺭﺩﺍﺕ ﺍﻟﻤﺸﺘﺭﺍﺓ ﻤﻥ ﺃﺴﻭﺍﻕ ﻻ ﺘﺘﻌﺎﻤل ﺒﺎﻟﺩﻭﻻﺭ ﻭﺍﻟﺘﻲ ﺃﺼﺒﺤﺕ ﺫﺍﺕ ﺴﻌﺭ ﻤﺭﺘﻔﻊ‬
                                                                ‫ﺍﻵﻥ ﻭﺫﻟﻙ ﺇﻟﻰ ﻭﻗﺕ ﻻﺤﻕ.‬




                                                 ‫3‬
Executive Summary


Based on the directives of the Board of Directors, Data Management and Research
Department took the opportunity to assess the impact of the fall of US dollar on the
economy of Dubai, vis-à-vis the EU and Japan, between 2000 and 2003.


This executive summary lists the main findings and policy recommendations for
government, private sector and consumer.


Major Findings


Based on DCCI methods, the Dirham (AED) Trade-Weighted Exchange Rate Index
(TWERI) vis-à-vis the EU Euro and the Japanese Yen have been computed. Due to
the lack of foreign trade statistics for 2003, extrapolation is used to arrive at
reasonable estimates for 2003 based on the past trends. AED TWERI is the effective
exchange rate index of AED vis-à-vis currencies of Dubai trading partners (the Euro
and Yen in this case). The study resulted in the following impact on Dubai vis-à-vis
the EU and Japan:


   1. Dollar fall coincides with an overall improvement of Dubai trade
       Dollar fall coincides with an improvement of Dubai trade deficit between
       2001 and 2002 of 1 percent.


   2. Dollar fall coincides with trade deficit with EU and Japan:
       The US dollar witnessed a noticeable decline during 2003, and so was the
       AED, and as a result it is expected that Dubai trade deficit vis-à-vis the EU
       and Japan to increase by 1% in 2003.


   3. In 2003, the AED depreciated by about 16.5 percent in trade weighted terms
       relative to its value in 2000 as compared to major Currencies (Euro and Yen).


   4. Between 2000 and 2003, AED TWERI declined at an average of 5.5 percent.
       The implications of this decline for non-oil export, import and re-export are as
       follow:


                                           4
5. Dollar fall coincides with a decrease in export earnings from EU and Japan:
   Dubai export earning from EU and Japan declined yearly between 2000 and
   2003 at an average of 2.8 percent.


6. Dollar fall coincides with an increase in re-export earnings from EU and
   Japan:
   Dubai re-export earning from EU and Japan increased yearly between 2000
   and 2003 at an average of 6.2 percent.


7. Dollar fall coincides with an increase in import expenditure on EU and
   Japanese goods:
   Dubai import expenditures on EU and Japanese goods increased yearly
   between 2000 and 2003 at an average of 1 percent.


8. Dollar fall has negative impact on purchasing power of oil revenues:
   Between 2000 and 2003, AED TWERI fell by an annual average rate of 5.5
   percent while the price of Dubai crude oil rose by an annual average rate of 1
   percent. This means that there is 4.5 percent net loss of oil revenues
   purchasing power regarding imports from EU and Japan, given a constant
   quantity of production and export.


9. Income of tourism from non-dollar regions should have increased due to the
   fall in AED TWERI.


10. The real purchasing power of the international reserves kept in US dollar will
   fall by the percentage fall in the value of the US$, regarding the Euro and Yen
   denominated imports.




                                        5
Policy Recommendations:


To mitigate negative effects of the depreciation of the dollar, and consequently the
Dirham on the economy of Dubai, the following recommendations are made:


1. Government:
   -   Initiation of export promotion programs to new markets and export facilities
       such as export subsides, credits and guarantees.
   -   Assistance in exploring new alternative but less expensive import markets.
   -   Encourage non-distorting import substitution and economic reform
   -   Assistance in building buffer stocks of strategic imports.
   -   Coordination of joint import procurements that gives more negotiation power
       to local importers.
   -   Diversify foreign reserves into a basket of major international currencies.


2. Private sector:
   -   Liaison with government entities in promoting foreign trade
   -   Revision of production and marketing strategies in the light of the falling
       dollar
   -   Initiation of long-term import trade contract that are less sensitive for currency
       fluctuations
   -   Industrial restructuring to mitigate long-term risks
   -   Enhancement of competitiveness
   -   Portfolio management by holding their assets and investments in different
       major international currencies instead of the US dollar only


3. Households:
   -   Postpone their non-dollar foreign transfers, if possible.
   -   Delay consumption of now expensive non-dollar imports to a later period.




                                           6
Table of Contents


Executive Summary (Arabic) ................................................................................. 1

Executive Summary (English) ............................................................................... 4

Table of Contents .................................................................................................... 7

1. Introduction ......................................................................................................... 8

2. Theoretical Background ..................................................................................... 10

3. Objective and Method of the Study ................................................................... 12

4. The Cost and Benefit of the Falling US Dollar ................................................. 13

5. The US Dollar Future Outlook .......................................................................... 21

6. Conclusions .......................................................................................................... 22

7. Policy Recommendations .................................................................................... 23



Appendix 1 ............................................................................................................... 25

Appendix 2 ............................................................................................................... 27




                                                              7
1. Introduction


Historically, the UAE currency (henceforth denoted by AED) has been pegged to the
US dollar since the 1980s. This means that any fall of the dollar is directly resulting
in a fall of the AED purchasing power. Therefore, it is expected that the fall of the
dollar and its future direction will have an impact on the economy of Dubai and the
U.A.E economy as a whole.


There are some positive as well as negative implications for this and the net effect
depends on many factors that will be elaborated in the following sections of this
study.


Weakening US dollar has been the overriding trend in currency markets since 2001,
with a remarkable drop in 2003. Some experts expect that this trend will dominate for
at least another year until the US current account and budget deficits are brought
down to more sustainable levels. They estimate that this process will require a further
20% fall in the dollar trade weighted exchange rate, which means that the Euro will
peak at 1.30 and the yen will reach 901.


The trade weighted exchange rate, also known as the effective exchange rate,
measures the average foreign exchange value of country's currency relative to a group
of other currencies; which measures in this case the relative demand for the dollar
against other currencies.


On December 31st 2003, the Euro was trading at US$ 1.2579, up from US$1.05 dollar
at the end of 2002, and US$1.1719 when it was first launch on 1 January 1999. Figure
1, appendix 1, shows that the dollar stood at 107.3653 Yen on 31 December 2003,
compared with 118.76 Yen at the beginning of 20032. There are many factors
explaining the fall of the dollar and these are, among others:

1
    AME Info by Daniel Hanna, Dec. 2003

2
  See "Dollar Faces Further Pressure under US Deficits, Protectionism" by Michael R. Sesit in Wall
Street Journal, 2 January 2004.




                                                8
    1. The rising US current balance deficit.
    2. The US increasing government budget deficit.
    3. The US households increasing debt.
    4. The burst of the U.S. stock market bubble.
    5. The historically low interest rate.
    6. The US corporate accounting scandals and the consequent loss of investors'
        confidence.
    7. The impact of the US unilateral global stance and its military interventions in
        several places around the world that creates an atmosphere of uncertainty
        regarding the future prospects of the US economy.


Since the US dollar, and consequently the AED, has been falling against the Euro and
the Yen, then the movements in the AED exchange rate and the accompanying trends
in Dubai foreign trade flows with both the EU and Japan will the focus of this study.
Therefore, Dubai non-Euro and non-Yen denominated foreign trade is not included in
this study.




                                             9
2. Theoretical Background


According to economic theory, the fundamental problem of a falling currency is that a
country spends more on imports than it earns from exports and it does not save
enough out of its national income to cover the difference. Therefore, to cover that
difference they have to borrow from other countries or sell them assets like bonds,
stocks and other properties. The end result is a growing current account deficit, that is,
the net amount a country owes to other countries for goods, services, interest and
dividends.


Whether this growing current account deficit can be sustained through foreign capital
inflows or not, depends on the willingness of foreigners to lend and invest in that
country.


   •   When a country runs a long-term current account deficit the value of its
       currency (that is, its price in terms of other currencies or the exchange rate)
       will fall since the supply of the currency that is held by foreign countries
       increases relative to the demand for it.
   •   This fall of the currency would make the country's exports cheaper, imports
       expensive and investments in its assets (like bonds and stocks) less attractive.
       This adjustment process will eventually restore the country's current account
       balance, since the country is supposed to export more and import less and pay
       less investment income to foreigners. This is the case of the original country
       which issues the currency, which is the US in this case.
   •   As for the other countries that peg their currencies to the US dollar, like the
       UAE, the situation may be different. If they are experiencing a current account
       deficit like the US, then economically speaking their situation is consistent
       with that of the US and will undergo a similar adjustment process, provided
       that their economies have been operating below their full productive capacity.
       On the other hand, if their current accounts are not undergoing problems like
       the US, then they may find themselves in awkward situation. In other words,
       they may find themselves taking a medicine for an illness that they do not
       have.



                                           10
In theory, a weak currency may stimulate an export-led economic growth through
relatively competitive exports in the world market. But on the other hand, it may also
fuel inflationary pressures through expensive imports. Which of these scenarios is
more plausible depends on the structure of the economy. For example, to what extent
the productive capacity of the economy is responsive to world demand for its exports
and how imports intensive is the production process.


According to economic theory, the fall of the US dollar, and consequently the AED,
against the Euro and the Yen is expected to have an effect on Dubai trade flows with
the EU and Japan. Therefore, in this study we will be tracing the recent trends in AED
exchange rate vis-à-vis the Euro and the Yen and Dubai trade flows with the EU and
Japan.




                                         11
3. Objective and Method of the Study


The depreciation of the dollar has different economic implications, some of which are
adverse and some are favourable for the economic situation in the Emirate of Dubai.
This raises several questions which are relevant for the government, the private sector
and the households. The objective of this study is to answer the following questions:


   1. To what extent has the US dollar fluctuated against major world currencies?
   2. Does the fall of the dollar affect Dubai foreign trade and in which ways?
   3. In terms of cost benefit analysis, what is the net effect on Dubai?
   4. What is the future outlook for the dollar in world currency markets?


In this study, a quantitative method is used to reach answers to the above posed
questions. The trade-weighted exchange rate index (TWERI), which is the effective
exchange rate index of the Dirham vis-à-vis the Euro and the Yen is calculated for the
period 2000-2003. Secondary data from different sources is used to construct the
AED TWERI. An explanation for the methodology used for the calculation of the
TWERI is explained in appendix 2 at the end of the paper.


Since the dollar has been falling vis-à-vis the Euro and the Yen, then Dubai foreign
trade with both the EU and Japan, and not Dubai total trade, will be the focus of this
study. There are many factors that influence trade flows with EU and Japan beside the
depreciation of the US dollar, and consequently the AED. Therefore, the objective of
this study is to observe what has happened to AED TWERI on one hand and what
happened to Dubai trade with EU and Japan on the other hand during the same period
of time. The study is not claiming to establish any causality between the two, but from
economic theory we know that there is a relationship between trade flows and the
exchange rate. In principle, it is possible to disentangle the effect of the depreciation
of the AED on the Dubai foreign trade, but this needs a sophisticated macroeconomic
model for Dubai economy and a good data set for Dubai foreign trade for the period
2000-2003. Unfortunately, both requirements are lacking for the time being, and so
the ambition of the study is limited to tracing recent trends in AED TWERI and trade
flows with EU and Japan.



                                           12
4. The Cost and Benefit of the Falling US Dollar


Table 2, in appendix 1, shows the results of the calculation of the TWERI for the
Dirham vis-à-vis the Euro and the Yen for the period 2000-2003, with different base
periods, using the methodology described in appendix 2. As table 2 shows, the
TWERI falls by an annual average rate of 5.5% during the period 2000-2003, when
the change is measured from the year 2000, irrespective of which year is used as a
base. This is a very consistent result through out the period. Note that the 5.5% annual
decline rate is calculated using unrestricted decimal places, i.e. unrounded figures.
Figure 2, shows the TWERI with year 2000 as the base from which the change is
measured. It shows that in 2001, the Dirham appreciated by about 6% in trade
weighted terms and then fell back in 2002 to its 2000 level. In 2003, the Dirham
depreciated by about 15% in trade weighted terms relative to its value in 2000.


What are the implications for Dubai foreign trade with EU and Japan of the 5.5%
annual average decline rate during the period 2000-2003? To answer this question we
need to calculate by how much the export and re-exports earnings and import
expenditures, with EU and Japan, have changed during the same period. The results of
these calculations are presented in table 3.


Regarding export earnings, from EU and Japan, they have been declining at an
average annual rate of 2.8%, while the TWER has been falling by 5.5%, which gives
an elasticity of about 0.5 (i.e. the percentage change of export earnings divided by the
percentage change of the TWER)3. The positive sign of the elasticity indicates that the
two variables go in the same direction. In other words, when the Dirham depreciates
(i.e. its value falls) by 1% there is an accompanying fall in export earnings by 0.5%
(c.p).


On the other hand, re-export earnings move into the opposite direction of the AED
TWER, as indicated by the elasticity negative sign. This means that as the AED
depreciates there is an accompanying rise in re-export earnings. The accompanying


3
   In all elasticities calculations, it is assumed that other things remain equal. In other words, it is
assumed that all the changes in export and re-earnings and import expenditures are attributed only to
the change in the AED TWER.


                                                  13
response of the re-export earnings to the depreciation of the Dirham is relatively high
as indicated by the relatively high magnitude of the elasticity. When the AED TWER
depreciates by 5.5% there is an accompanying rise of re-export earnings by 6.2%;
which gives an elasticity of about -1.1. Economically speaking, this result sounds
plausible because what is re-exported to EU and Japan is imported from other
countries and denominated in US dollar, whose exchange rate with the Dirham has
not changed. For EU and Japan, these re-exports are relatively cheap due to the fact
that the dollar, and consequently the Dirham, depreciates vis-à-vis the Euro and the
Yen. The high response of re-exports relative to that of exports may be explained by
the fact that more time is needed to expand domestic production capacity than to
import from other countries and then re-export.


As for the import expenditures, on EU and Japanese goods, they move into the
opposite direction of the AED TWER, as indicated by the negative sign of the
elasticity. When the AED TWER depreciates by 5.5% there is an accompanying
increase in import expenditures by 1%, which gives an elasticity of about -0.2. A
modest increase of 1% in the cost of imports is not likely to fuel domestic inflation.
Seemingly, Dubai has a very high import-GDP ratio compared to UAE average.
According to our calculations, Dubai has an average import-GDP ratio of 125%,
compared to UAE ratio of 46%, during the period 1998-2002. This apparently high
import-GDP ratio may be explained by two things. First, most of these imports are re-
exported; according to our calculations Dubai has an average import-re-export ratio of
about 30% during the period 1998-2002. Second, most of UAE imports come through
Dubai, but they are not necessarily used in Dubai economy. If we assume that the
imports of other Emirates through Dubai is 30% of Dubai total imports, then Dubai
import-GDP ratio can fall to 50% [i.e. 125– 125*(0.30+0.30) ], which is close to the
UAE average.


Using the extrapolated non-oil trade figures for 2003, our calculations have shown
that the 5.5% annual depreciation of the AED TWER is accompanied by about 1%
annual increase in Dubai trade deficit vis-à-vis the EU and Japan. This does not take
into account the effect on oil revenues, transfers, investment returns and international
reserves costs. However, this is a medium term analysis and the long run one may
give a different picture.


                                          14
Non-oil trade figures reveal an interesting contrast in Dubai trade with EU and Japan.
Figures 3 and 4 show that Dubai re-exports to EU more than it exports to it, while it
re-exports to Japan less than it exports to it. This may be explained by geography. The
proximity of Dubai to most Asian countries places it in a good position to be a depot
for the exports of these countries to the EU. However, this geographical advantage
does not hold true vis-à-vis Japan, which is more nearer than Dubai to most Asian
countries.


Now that we have checked for the impact of the change in TWERI vis-à-vis Dubai’s
trade with EU and Japan, we may broaden the scope to look at the overall trade with
the rest of the world.


Dubai total non-oil trade with the world, including that with EU and Japan, has
improved between 2001 and 2002. This period recorded a fall in TWERI with EU and
Japan with an annual rate of 5.5 percent as explained above. This world trade
improvement of Dubai equals a trade deficit improvement between 2001 and 2002 of
1%. This trend is expected to continue in 2003 and as such will compensate for the
rise in the trade deficit with EU and Japan. The explanation for this overall
improvement is a substitution effect, which means that Dubai has substituted
relatively expensive imports from the EU and Japan with cheaper imports from the
rest of the world trading in Dollar.


The above discussion has concentrated on the non-oil trade with the EU and Japan,
but what about the oil trade? The fall of the US dollar has direct negative implications
for the oil revenue purchasing power of EU and Japanese goods. Therefore, Dubai has
to be concerned about the fall of the dollar since the oil price is denominated in US
dollar, which is falling against the Euro and the Yen. Members of OPEC may try to
compensate for the fall of the dollar by raising the oil price above their official target
range of 22-28 dollar per barrel. It seems that the recent rise in the price of oil is an
indication of the trend that as the dollar declines in value the price of oil tends to rise
to compensate for the value loss. The OPEC reference basket price, which is the
average of seven selected oil crudes including that of Dubai, stood at more than 30 US
dollar per barrel in January 2004. As for Dubai crude oil, the average price was 26.25



                                            15
dollar per barrel in 2000 and 26.77 in 20034, which gives an annual average increase
rate of about 1%. Given that the AED TWER depreciated by an annual average rate of
5.5% during the period 2000-2003, that means there is a net purchasing power loss of
4.5% of the oil revenues regarding the EU and Japanese goods.


In principle, it is also possible to calculate how much purchasing power the
international reserves of Dubai have lost in real terms due to the fall of the dollar, if
we know the currency composition of these reserves. There is more loss of purchasing
power the more reserves are held in US dollars relative to other international
currencies, against which the dollar is falling.


The private individuals or households have also incurred cost due to the falling dollar,
and it is possible to calculate that cost if we know how much of their assets are
denominated in dollars. For example, if an individual has a balance of 1,000,000 US
dollar in his bank account in year 2000. At that time one US dollar could buy about
1.2 Euro, and thus his bank account should have 1,200,000 Euro (i.e. 1.2 X
1,000,000). At the end of year 2003, one US dollar could buy about 0.8 Euro and thus
his bank account should have 800,000 Euro (i.e. 0.8 X 1000,0000). This means that
the balance of his bank account has declined by 400,000 Euro or fell by 33% during
the period 2000-2003. If this individual has three bank accounts, say one in US
dollars, one in Sterling Pound and one in Swiss Franc respectively, then his net
position will depend on how much the Dollar has fallen and how much the Sterling
Pound and the Swiss Franc have risen in value. This is the same idea which is applied
to Dubai economy when we have calculated the AED TWER. The message here is
that the more you diversify your currency holdings, the less risk you run in case one
of them has depreciated. This is the basic idea behind the concept of "Basket of
Currencies", which is meant to minimize the foreign exchange risk in the face of
currency fluctuations.


Since the UAE currency is pegged to the US dollar, as the dollar falls in value so does
the Dirham against the world major currencies, like the Euro and the Yen. The dollar's
fall and its future direction will have mixed effects on the economy of Dubai. But


4
    See "Market Indicators", OPEC Data Service Dept., at the website http://www.opec.org.


                                                   16
which are the costs and which are the benefits of the falling US dollar for Dubai
economy?


The answer to this question is summarized in the table 1. The table basically traces the
movements on the balance of payments components that have accompanied and/or
expected to accompany the fall of the AED TWER. These components are exports
and re-exports, imports, investment income, transfers and international reserves. The
first column specifies which item we are talking about, and whether it is cost or
benefit item. The second column elaborates on the cost or the benefit items. The third
column spells out under which conditions the cost or the benefit is realized. Column
four suggests policy measures that can mitigate the cost or enhance the benefit.
Finally, column five lists the expected impact on the economy of Dubai.




                                          17
                                                       Table 1: Cost and Benefit of the Falling US Dollar
         Item                       Cost/Benefit                         Conditions                      Mitigating Measures                    Impact on Dubai

1.1. Exports (benefit)    1.1. Exports become relatively      1.1. The fall in the real price of    1.1. Enhancing export                1.1. Export earnings should
                          cheaper and thus more               exports stimulates world demand       competitiveness by maintaining       increase by more than 5.5%
                          competitive in the world            for these exports and this            a reasonably depreciated             annually if the adverse impact of
                          markets. The increase in exports    generates more exports in terms       currency and other export cost       the falling dollar is to be more
                          volume may more than                of volume, assuming that the          reducing measures.                   than offset.
                          compensate for the fall in their    productive capacity of the
                          real price, and as result more      economy is responsive to the
                          foreign exchange is gained.         world demand and there is
                                                              excess capacity.



1.2. Exports (cost)       1.2. Falling exports earnings and   1.2. Domestic supply of exports       1.2. Supply side measures that       1.2. Export earnings fell by 2.8%
                          loss of foreign exchange.           does not respond to the world         ensure exports supply                annually.
                                                              demand due to structural factors      responsiveness. For example,
                                                              and supply bottlenecks. This will     economic restructuring
                                                              result in lower export earnings,      economic reform, infrastructural
                                                              if the volume does not change         investments in transport and
                                                              while the price is falling.           logistics sectors and provision of
                                                                                                    incentives that can reduce
                                                                                                    production cost and thus
                                                                                                    stimulate export oriented
                                                                                                    production.
1.3. Oil revenue (cost)   1.3. Declining real purchasing      1.3. The magnitude of this cost       1.3. This cost can be                1.3. The Dirham TWER fell by
                          power of oil revenue in terms of    depends on the share of oil in        compensated for by raising oil       an annual average rate of 5.5%
                          imports which are denominated       total exports. If the share is        prices; i.e. what is lost in         during 2000-2003 while Dubai
                          in currencies against which the     relatively large so is the cost,      purchasing power of oil              crude oil price rose by an annual
                          dollar is falling, e.g. the Euro.   and the cost is low if the share is   revenues is made up for by the       average rate of 1% during the
                                                              relatively small.                     rise of oil revenues.                same period. So there is a net
                                                                                                                                         purchasing power loss of 4.5%
                                                                                                                                         of oil revenue during 2000-2003.




                                                                                      18
2. Re-exports (benefits)   2. The response of the re-export      2. Re-export earnings increase as    2. Enhancing re-export               2. When the Dirham TWER
                           earnings to the depreciation of       the Dirham TWER depreciates.         competitiveness by maintaining       depreciates by 5.5% the re-
                           the Dirham is relatively high, i.e.   That is, there is an inverse         a reasonably depreciated             export earnings rise by 6.2%;
                           there is a relatively high            relationship between the two         currency and other re-export cost    which gives an elasticity of
                           elasticity of export earnings with    variables.                           reducing measures.                   about of 1.1%.
                           respect to the depreciation of the
                           Dirham.
3.1. Imports (cost)        3.1. Expensive non-dollar             3.1. Relatively high imported        3.1. Businesses switch to lower      3.1. Imports expenditure has
                           denominated imports. The rising       inputs content of domestic           cost suppliers (substitution of      risen by average annual rate of
                           imports cost may lead to cost         production and substantial rise in   imports origin).                     1%. Given the 5.5% decline of
                           push inflation since expensive        imports cost. This may hold true                                          the Dirham TWER, this gives an
                           inputs may raise the cost of          for intermediate and capital                                              import expenditure elasticity of
                           production.                           imported goods.                                                           -0.2. This is in addition to the
                                                                                                                                           cost of shifting to new low cost
                                                                                                                                           suppliers.

3. 2. Imports (benefit)    3.2. Substitution of expensive        3.2. These imports have              3.2. Non-distorting imports          3.2. This impact is not likely to
                           imports by relatively cheap           domestically produced close          substitution incentives for          be strong in the short term. This
                           domestically produced                 substitutes of reasonable quality.   domestic producers.                  is because time is needed to
                           substitutes.                                                                                                    expand existing capacities or to
                                                                                                                                           set up new ones.
4. Investment returns      4. Declining real investment          4. Returns on dollar                 4. This decline can be made up       4. The value of the dollar
(cost)                     returns from the dollar               denominated assets are not high      for if the returns from these        denominated gross fixed capital
                           denominated assets and                enough to compensate for the         assets are rising relative to the    formation, both private and
                           properties. Investors who are         falling purchasing power of          returns from the non-dollar          public, falls by the percentage
                           holding these assets get low          these returns. These assets are      denominated assets. Also, this       decline in the value of the dollar.
                           yield in real terms since the         not appreciating in value to         fall may be made up for by           And its replacement cost will
                           purchasing power of their             make up for the real fall in their   capital gains if these assets rise   rise if the dollar continues to
                           investment income is falling.         returns. And that there is no        in value. Active assets portfolio    slide by the time the fixed
                                                                 portfolio management of assets.      management will minimize the         capital replacement is due.
                                                                                                      risk of losing their value.
5.1. Tourism spending      5.1. Bill of Dubai tourists, those    5.1. Substitution of dollar          5.1. This can be mitigated if the    5.1. Dubai tourists' spending in
(cost)                     who are visiting non-dollar           tourism destinations for non-        tourists substitute dollar tourism   non-dollar destinations will rise
                           destinations, is expected to rise     dollar ones is not possible for      destinations for non-dollar          by at least the percentage fall in
                           due to the fall of the dollar.        one reason or another.               destinations.                        the value of the dollar.




                                                                                         19
5.2. Tourism spending   5.2. More tourists from non-         5.2. Substitution of dollar         5.2. Tourism promotion with the         5.2. More spending by tourists
(benefit)               dollar destinations, like EU, will   tourism destinations, like Dubai,   objective of convincing tourists        visiting Dubai from non-dollar
                        be attracted to dollar               for non-dollar ones is possible.    to substitute dollar tourism            destinations because of their
                        destinations, like Dubai, since it                                       destinations for non-dollar             rising purchasing power in real
                        is becoming relatively cheaper                                           destinations, specially                 terms.
                        now.                                                                     emphasizing the safety and
                                                                                                 security in Dubai.
6. Transfers (cost)     6. The cost of transfers that are    6. The transfers are made in        6. If possible, delay the transfers     6. Transfers made from Dubai,
                        made in non-dollar currencies,       currencies against which the US     till the dollar starts to rise again,   in currencies against which the
                        like the Euro, will increase since   dollar has been falling.            which is not likely to happen           dollar has been falling, will rise
                        it takes more dollars to buy                                             within 2004.                            by at least the percentage fall in
                        Euros.                                                                                                           the value of the dollar.
7. International        7. Fall in real purchasing power     7. Large proportion of              7. Diversification of these             7. Real purchasing power of
reserves (cost)         of Dubai international reserves.     international reserves is kept in   reserves into major international       Dubai international reserves,
                                                             US dollars.                         currencies, like Euro, Yen,             which are kept in dollars, will
                                                                                                 Pound Sterling and Swiss Franc.         fall by the percentage fall in the
                                                                                                                                         value of the dollar.




                                                                                     20
5. The US Dollar Future Outlook


Currency analysts predict that the dollar will continue its slide against major international
currencies like the Euro and the Yen through 2004. It is estimated that restoring the US external
balance requires a further 20% fall in the dollar trade weighted exchange rate. It is predicted that
US dollar will be trading at 1.30 for the Euro and 90 for the Yen5. Some experts expect that this
trend will dominate for at least another year until the US current account and budget deficits are
brought down to more sustainable levels. Therefore, it is not expected that the dollar will
experience a major reversal of fortune in 2004 after its tumbling fall in 2003. But there are those
who argue that the US deficit is no problem at all. One of them is Paul O'Neill, America's Ex-
Treasury Secretary, who argued that "the deficit merely reflects the fact that foreigners, attracted
by superior returns, want to invest in America. The current-account deficit is no more than the
accounting counterpart of that net inflow of capital. The deficit is created by the rational saving
and investment decisions of private firms and individuals: there is no reason why the government
should know any better than they do"6.




5
    See Standard Chartered Bank Economic Updates, 9 December 2003.
6
    See "America's current-account deficit: The O'Neill doctrine", The Economist, 25 April 2002.



                                                          21
6. Conclusions


From the above discussion we can conclude that the fall of the US dollar has positive as well as
negatives effects on Dubai economy, vis-à-vis the EU and Japan. There are the gains in re-
exports earnings, but there are costs of the loss in export earnings and the expensive imports. The
imports cost is modest and is not likely to fuel inflation. At the same time the depreciation of the
dollar, and consequently the Dirham, helps boost the growth of re-exports to the EU and Japan.
When we take into account the costs of oil revenues, transfers, investment returns and
international reserves, it is more likely that the costs will exceed the gains. However, the overall
trade with the world seems to compensate for these costs. This analysis is for the medium term
and the long term one may give a different picture. Also, it is important to note that these
conclusions are based on the figures used for the calculation, part of which is extrapolated from
past trends, but it seems that the results are consistent through out the study period.




                                                22
7. Policy Recommendations:


To mitigate negative effects of the depreciation of the dollar, and consequently the Dirham on
the economy of Dubai, the following recommendations are made:


7.1. Government:


Government entities should anticipate that such negative impact of the fall of the dollar is a
structural economic challenge to be faced. Initiation of new measures to assist the private sector
mitigate the losses are then required. Such measures are:


1. Export promotion programs to new markets with the purpose of exploring new export
opportunities/ regions. Development of new export opportunities are best achieved through
export facilities such as export subsides, credits and guarantees.


2. Assisting the private sector to explore new but less expensive import markets through
engagement in new economic cooperation deals.


3. Encouraging non-distorting import substitution activities and economic reform. Economic
reform entails improving investment environment and the introduction of economic incentives to
take new long-term oriented risks.


4. Initiation and encouragement of buffer stocks for strategic imports to dump price fluctuation
effects.


5. Initiation and coordination of joint import procurement programs that give more negotiation
power to local importers.


6. Diversify foreign reserves into a basket of major international currencies.




                                                 23
7.2. Private sector:
   1. Liaison with government entities in initiating new trade promotion programs
   2. Revision of production and marketing strategies in the light of the falling dollar
   3. Initiation of long-term import trade contract that are less sensitive for currency
       fluctuations
   4. Industrial restructuring to mitigate long-term risks
   5. Enhancement of industrial competitiveness at the work floor
   6. Portfolio management by holding their assets and investments in different major
       international currencies instead of the US dollar only


7.3. Households:
   7. Postpone their non-dollar foreign transfers, if possible
   8. Delay consumption of now expensive non-dollar imports to a later period.




                                               24
Appendix 1



                               Figure 1: US Dollar vis-à-vis Euro and Yen




Source: Wall Street Journal, 4 January 2004



  Table 2: Trade Weighted Exchange Rate Index of the Dirham vis-à-vis Euro and Yen
                            (with different base periods)
                                                                  Average Annual
                  2000        2001          2002          2003     Decline Rate
                                                                       (%)a
   2000 base       100         106           100           85           5.5
   2001 base        94         100           95            80           5.5
   2002 base       100         105           100           84           5.5
   2003 base       118         125           119          100           5.5
  Source: Own calculations
  a. Average annual decline rate is measured between 2000 and 2003 and the calculation is based on unrestricted
   decimal places, i.e. un-rounded figures.



     Table 3: Changes in Export Earnings and Import Expenditure during 2000-2003
                              Annual average percentage change (%)            Elasticity with respect to TWER (a)
    Export earnings                           -2.8                                             0.5
    Re-export earnings                        6.2                                             -1.1
    Import expenditure                        1.0                                             -0.2
  Source: Own calculations
  (a) In all elasticities calculations, it is assumed that other things remain equal. In other words, it is assumed that
   all the changes in export and re-earnings and import expenditures are attributed only to the change in the AED
   TWER.



                                                          25
                     Figure 2: Trade weighted exchange rate index
                            (Dirham vis-a-vis Euro and Yen)


   2003

   2002

   2001

   2000

             0    10     20       30      40       50      60        70      80    90      100 110

Source: Own calculations


                              Figure 3: Trade w ith EU During 2000-2003
                                         (thousands Dirham )


  2003

  2002

  2001

  2000

         0        5,000,000      10,000,000      15,000,000     20,000,000    25,000,000      30,000,000

                                       exports    re-exports    imports

Source: Own calculations


                             Figure 4: Trade w ith Japan During 2000-2003
                                          (thousands Dirham )


  2003

  2002

  2001

  2000

         0       1,000,000    2,000,000   3,000,000      4,000,000   5,000,000    6,000,000    7,000,000

                                       exports    re-exports    imports

Source: Own calculations



                                                    26
Appendix 2


The following is the formula for calculating the trade weighted exchange rate index (TWERI) at
time t, using a geometric average7:

                                                                      Wit
                                               eit   n           
                           Index t = 100 Π                      
                                                                  
                                         i =1  eib               
Where Π is the product over the n foreign currencies in the index, eit is the number of units of
currency i per Dirham at time t; eib is the number of units of currency i per Dirham in the base
period; and wit is the weight assigned to currency i at time t.


The foreign currencies which are used in the calculation of the TWERI are the EU Euro and the
Japanese Yen. Since the Dirham is pegged to the US in fixed exchange rate, and therefore its
exchange rate has not changed, the US Dollar is not included in the calculations. These two
currencies are chosen because their countries are major trading partners of Dubai. And the dollar,
to which the Dirham is pegged, has been depreciating vis-à-vis both the Euro and the Yen in the
recent years.


Dubai non-oil trade data (exports, re-exports, imports) is used as the basis for weighing the
importance of these two currencies. The oil trade is excluded because it is a US dollar
denominated trade, whose exchange rate with the Dirham has not changed. The non-oil trade
data is not available for year 2003, and so we extrapolated by taking the average for the period
2000-2002.


The EU and Japan average trade shares for a four year period are used to calculate the weights
for their currencies and these weights are kept constant in the calculation of the Dirham
exchange rate changes. The base period for calculating the currency weights is 2000-2003. A
simple average is taken for the trade shares of these major trading partners for a four year period.
7
 See " A question of Measurement: Is the Dollar Rising or Falling" by C. Coughlin and P. Pollard, Review of
Federal Reserve Bank of St. Louis, July/August 1996.


                                                    27
The base year for calculating the Dirham exchange rate changes is 2000. This is because the year
2000 marks the time in which the Euro has effectively become a recognized international
currency and used for international exchange, although it is officially launched in 1999. The year
2000 is also the time in which the Euro reached lowest levels against the US dollar and the
Japanese Yen, about 0.827 cents and about 101.6 Yen respectively, see figure 1.




                                               28

								
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