Economy of Dubai - BPB Business Podium Boards: Offshore, Firmengründungen, Beruf & Karriere

jedi · #1 (**permalink**) 05.02.2007, 13:18

Economy

Oil reserves in Dubai are less than one-twentieth those of Abu Dhabi, and oil income represents a small proportion of the emirate's income.

Dubai and its twin across the Dubai creek, Deira (independent at that time), became important ports of call for Western manufacturers. Most of the new city's banking and financial centres were headquartered in the port area. Dubai maintained its importance as a trade route through the 1970s and 1980s. The city of Dubai has a free trade in gold and until the 1990s was the hub of a "brisk smuggling trade" of gold ingots to India, where gold import was restricted.

Today, Dubai is an important tourist destination and port (Jebel Ali, constructed in the 1970s, has the largest man-made harbour in the world), but also increasingly developing as a hub for service industries such as IT and finance, with the new Dubai International Financial Centre (DIFC). Transport links are bolstered by its rapidly-expanding Emirates Airline, founded by the government in 1985 and still state-owned; based at Dubai International Airport, it carried over 24 million passengers in fiscal year 2005.

The government has set up industry-specific free zones throughout the city. Dubai Internet City, now combined with Dubai Media City as part of TECOM (Dubai Technology, Electronic Commerce and Media Free Zone Authority) is one such enclave whose members include IT firms such as EMC Corporation, Oracle Corporation, Microsoft, and IBM, and media organisations such as MBC, CNN, Reuters, ARY and AP. Dubai Knowledge Village (KV),an education and training hub, is also set up to complement the Free Zone's other two clusters, Dubai Internet City and Dubai Media City, by providing the facilities to train the clusters' future knowledge workers. Internet access is restricted in most areas of Dubai with a proxy server filtering out sites deemed to be against cultural and religious values of the UAE - this includes any .il (Israeli) domains. However, areas served by TECOM (an internet service provider) are currently not filtered.

Real estate and property

The government's decision to diversify from a trade-based but oil-reliant economy to one that is service- and tourism-oriented has made real estate more valuable, resulting in the property boom from 2004-2006. Construction on a large scale has turned Dubai into one of the fastest growing cities in the world.

The property boom is largely driven by megaprojects- these are just some of many projects planned for Dubai.

Off-shore such as Palm Islands and The World.

Inland such as Dubai Marina, The Burj Dubai Complex, Dubai Waterfront, Business Bay and Dubailand.

The aspirations of the ruling sheikh are reflected by the ultra-modern architecture of the city; home to iconic skyscrapers such as Emirates Towers, which are the 12th and 24th tallest buildings in the world, and the Burj al-Arab located on its very own island in the Persian Gulf and currently the tallest hotel in the world.

Emaar Properties is currently constructing what will become the world's tallest structure, the Burj Dubai. The final height of the skyscraper is a closely guarded secret - an indication of the developer's resolve to attain the title of the world's tallest building and its intention to hold on to it for as long as possible - but estimates so far point to a height upwards of 810m. Burj Dubai is expected to be completed in 2008. By 17 Jan 2007 it had reached 100 floors. Burj Dubai's neighbour is another behemoth under construction: the world's largest shopping mall - the Dubai Mall.

Also under construction is what is planned to become Dubai's new Central Business District, named Business Bay. The project, when completed, will feature a phenomenal 500 skyscrapers built around an artificial extension of the existing Dubai Creek.

In February 2005, the construction of Dubai Waterfront was announced, it will be 2½ times the size of Washington D.C., roughly seven times the size of the island of Manhattan. Dubai Waterfront will be a mix of canals and islands full of hotels and residential areas that will add 800 km (500 miles) of man-made waterfront. It will also contain Al Burj, another one of the tallest buildings in the world.

Dubai has also launched Dubiotech. This is a new park to be targeted at Biotech companies working in pharma, medical fields, genetic research and even biodefense. The aim of this park is to foster the growth of this sector in Dubai and to utilize the region's talent in addressing this rapidly growing sector.

One of Dubai's recent groundbreaking plans is for a 30-story, 200 apartment skyscraper that will slowly rotate at its base, making a 360 degree revolution once a week. The world's first rotating skyscraper is to be in the center of the Dubailand complex and should be completed by 2009.

The International Media Production Zone is a project targeted at creating a hub for printers, publishers, media production companies, and related industry segments. Launched in 2003, the project is scheduled to be completed in 2006.

A new project was announced on May 1, 2006 by the authorities. It is named Bawadi and will consist of a 27 billion US-dollar investment intended to increase Dubai's number of hotel rooms by 29,000, doubling it from the current figure offers now. The largest complex will be called Asia, Asia and will be the largest hotel in the world with more than 6,500 rooms.

The first villa freehold properties that were occupied by non-UAE nationals were The Meadows, The Springs, and The Lakes (high-end neighbourhoods designed by Emaar Properties, collectively called Emirates Hills).

Expatriates of various nationalities have been pouring capital into Dubai in the past several years, greatly contributing to the city's prosperity. Iranian expatriates alone are estimated to have invested up to US$200 Billion in Dubai.

Dubai interests have also purchased large amounts of real estate in foreign countries, in particular snapping up trophy properties in global centers like New York and London. Purchases in 2005 included New York's 230 Park Avenue (formerly known as the New York Central Building or the Helmsley Building) and Essex House on Central Park South.

See the Dubai Department of Tourism and Commerce Marketing's list of developments in Dubai for more information.

Construction

Since 2000, Dubai's municipality has initiated a plethora of construction phases and plans across the entire city of Dubai, predominantly in the Mina Seyahi area, located further from Jumeirah, towards Jebel Ali. In many areas, it is not easy to see Dubai's sky without at least one crane in your view; Industry experts cautiously estimate that 15% to 25% of the world's cranes are in Dubai. Construction in Dubai and the UAE in general is a much faster process than in any Western country. This is partly because Dubai construction companies hire more labourers for a given job than is typical in the West, and because almost all of these labourers are from the Indian subcontinent and work at least six days a week.

One of the main reasons for the boom in construction in Dubai is its drive to diversify the economy. The Dubai government does not want to depend on its oil reserves which are largely believed to become exhausted by 2010 and, as such, has diversified its economy to attract revenues in the form of expanding commercial and corporate activity. Tourism is also being promoted at a staggering rate with the construction of Dubailand and other projects that include the making of mammoth shopping malls, theme parks, resorts, stadiums and various other tourist attractions.

Another reason for the construction boom is the recent reversal of a law in 2002 that allows non-nationals of the UAE to own property (not land) in Dubai (albeit freehold and 99 year leases are actually sold to people with ownership still remaining with private companies). The larger of the property tycoons are Nakheel Properties and Emaar Properties. In Dubai, demand is currently outstripping supply by a significant margin and is showing no signs of slowing in the near future. Rents have skyrocketed with the recent inflow of professionals and companies from around the world who are attracted by Dubai's no-tax benefits although rises have recently been capped to 7% per annum up to 2007 under a directive from Mohammed bin Rashid Al Maktoum. Legislation in this area is still developing as the property market for foreigners is relatively new.

jedi · #2 (**permalink**) 05.02.2007, 23:06

Dubai economy enters 2-3 year boom phase

Businessmen love to pontificate on where an economy is situated in the boom-bust cycle of capitalism. Dubai is one of those happy places where the best is yet to come.

Where is the Dubai economy in the economic cycle? Some point to 13 years of fairly rapid growth, with just a small dip in 1998 as a sign that today we must be fairly close to the top. And yet all the economic fundamentals suggest the economy has not even begun to warm up.

In an overheating emerging economy there are tell tale signs. You would expect to see excessive creation of commercial credit. You would expect to see real estate prices triple. You would expect a doubling or trebling of local stock prices. You would expect inflation to be rising.

None of this applies to Dubai right now, though it might in a few years' time. The UAE stock market is beginning to reform and pick up steam but remains undervalued; and real estate prices have moved upwards by around just 10% in the new freehold market.

However, building material costs have increased sharply which is inflation at its root cause. But excessive monetary expansion through credit is not evident, although foreign capital inflows are rising.

Indeed, you only need to look at the sums committed to Dubai projects to realize that a boom is just starting. There is some $30-50 billion committed to projects actually underway or in progress.

There is the $4.5 billion new airport; 60-70 residential towers at the Dubai Marina; the Dubai International Financial Centre which will be bigger than London's Canary Wharf; the tallest building in the world, the Burj Dubai and The Residences next door; the Dubai International City; Dubai Healthcare City; Dubai Festival City; and the $5 billion Dubailand theme park, a desert Disneyland.

Plus two Palm Islands, one with 47 hotels including the largest leisure project in the Middle East; and an offshore archipelago of individual islands shaped like a map of the world. Not to mention an underwater hotel, high-rise freehold offices and plenty of freehold villas in landscaped communities.

Where is the Achilles heel to all this development? In the short term there is none, as the money is committed and from sources that will not dry up overnight.

Longer term this investment has to produce a solid return or investors will not invest anymore, or at least take a break while the market absorbs this munificence.

Pessimists might plump for 2007 as the moment of reckoning; others think 2010 is when this boom will run out of steam.

History suggests that economic booms generally last a bit longer than most people think, and then the downturn catches the majority unaware. Why should it be any different in Dubai?

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