There was a time, not very long ago - at the height of the global economic crisis - when the United Arab Emirates (UAE) was shunned by investors, and hung out to dry by the world press. However, just a few years on, the UAE has emerged from the crisis far better than most, with investors clambering to get a piece of the pie. Joanna Andrews looks at how the country’s meteoric rise to become a global leader across many sectors may have some of its critics eating their words.
The global economic crisis is appearing to be just a mere blip for the United Arab Emirates (UAE). The country’s growth story is phenomenal. Forty-three years ago this December, the seven Emirates were united under a flag to form the UAE. Little did the leaders know then just how much that unity would help the country prosper.
The International Monetary Fund (IMF) said recently that the UAE’s macroeconomic outlook is once again “positive”. It said economic growth is expected at 4.8 per cent in 2014 and about 4.5 per cent in coming years, supported by a number of megaprojects announced over the past 18 months and the successful bid for the World Expo 2020.
The executive directors of the IMF agreed that Dubai in particular has made significant progress managing financial obligations from the 2008-9 crisis.
The city has re-established itself as the Middle East’s prime destination for the regional headquarters of multinational corporations.
In another positive sign, the UAE and Qatar were upgraded by global index compiler MSCI in May to Emerging Market status from Frontier Markets.
Official figures show Foreign Direct Investment (FDI) in the UAE has tripled since 2009 and is expected to rise again by 20 per cent this year, to nearly US $15 billion.
A recent report by AT Kearney said that investor appetite in the UAE is improving. The country moved up three places to take 11th position in the 2014 AT Kearney Global Foreign Direct Investment Confidence Index (FDICI). The US held onto the top spot from last year followed by China, Canada, the UK and Brazil. Germany, India, Australia, Singapore and France.
In the Middle East, AT Kearney said the UAE has risen steadily in the index since 2012 after a dip in confidence experienced after the global financial crisis. Nearly 40 per cent of global investors said that UAE as an FDI destination had a more favourable outlook than in 2012. The report highlighted the UAE's well-developed infrastructure, strategic location, and tax-free base as reasons for increased international investment.
"The UAE's traditional strengths of well-developed infrastructure, talent base, strategic location, and ease of doing business offers international investors easy access to many of the world's fastest-growing markets including the Middle East, Central Asia and Africa,” said Anshu Vats, partner at AT Kearney Middle East.
“Additionally, the UAE has developed investment opportunities, diversifying the industrial base and attracting innovative SME industries to the region. These efforts have delivered very positive results: Dubai securing Expo 2020 and Abu Dhabi's 2030 strategy being tangible examples of the value proposition the country has presented to international industrial and investment communities.
"Continued progression of this strategy could see the UAE progress even further on its upward trend in international confidence," said.
In a move to further bolster FDI, the government is considering what is being dubbed as a ‘golden visa’ for investors. Major-General Mohammed Ahmed Al Marri, Director-General of the General Directorate of Residency and Foreigners Affairs (GDRFA) - Dubai, said, “The Ministry of Interior is studying the proposal to issue 'Golden Visa' for businessmen and we are looking to implement it at the federal level… the future will be different and things are subject to changes and modification to obtain visitors satisfaction.”
His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE, and Ruler of Dubai once joked that Dubai - the most active economy of the seven Emirates - should change its symbol from a falcon to a crane (a pun on the vast amount of cranes that were helping build the city). Look out the windows today, and the cranes are out in force, trying to keep the city up to speed with the growing demand for accommodation, hotels, schools, and rentable office space.
Dubai has broken many world records. It is home to the world’s tallest tower, the Burj Khalifa; the world’s largest indoor ski facility, Ski Dubai; the world’s largest airport in size, Dubai World Central - and the world’s biggest shopping mall, Dubai Mall, which saw 65 million shoppers enter its doors last year.
In recent weeks the government announced another shopping mall in the making; Mall of the World, which will surpass Dubai Mall to become the world’s biggest shopping centre. Not only billed to be a consumer haven, the mega development aims to marry retail with tourism.
“We announced recently that we plan to transform Dubai into a cultural, tourist and economic hub for the two billion people living in the region around us; and we are determined to achieve our vision,” said Sheikh Mohammed, when he unveiled the development.
Mall of the World, occupying a total area of 48 million square feet, will be the world’s first temperate-controlled pedestrian city, and it will break multiple world records, including becoming the world’s largest mall and the world’s largest indoor park. It will also contain cultural theatres and wellness resorts and have a capacity to host more than 180 million visitors per year.
However, Bank of America Merrill Lynch raised concern over mega structures like the Mall of the World saying they are reminiscent of past plans. “We worry about potential policymaking complacency and that such ambitious projects could lead to another boom-bust real estate cycle, particularly as there has not yet been major deleveraging in the economy,” Jean-Michel Saliba, an economist at the bank, cautioned.
But the UAE is on a roll. A few days later, HH Sheikh Mohammed came up with a new plan – for a new UAE Space Agency will be created to coordinate the UAE’s space technology sector and supervise an unmanned mission to Mars by 2021.
“The next seven years will witness the UAE’s entry into the international space sector in which it will compete with other major countries to discover outer space. We will prove that we are capable of delivering new scientific contributions to humanity,” Sheikh Mohammed said.
He added, “Our priority will be on focusing on development of specialised and well-trained Emirati cadres in space science and technology, as Emiratis will be responsible for carrying out the two space projects,” Sheikh Mohammed said.
For the UAE, the sky isn’t the limit; it wants to reach, much, much further. It is successfully diversifying away from an oil-based economy, has established itself as a lucrative investment hub for international and regional investors. It has carved out a name for itself in the global aviation sector, and has beaten off other nations to host the World Expo 2020. It has proved the world wrong in the past, and is confident that its ambitious mega projects will not fail.
As Sheikh Mohammed said, “Our success will reflect positively on the trustworthy reputation we have established. This is a message for the new Arab generation to trust in their capabilities and what they can achieve."