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Dubai At the Top of Growth in UAE’s Non-Oil Sector

Dubai : 11 August 2010

Standard Chartered Bank very positive about growth over the mid-term for UAE

Even though the debt level remains high and the property market has corrected itself, the Standard Chartered Bank reported that Dubai still leads in the UAE’s non-oil sector growth.

Dubai has three strong areas at its core, namely trade, tourism and services that have remained strong throughout the recent crisis.  The bank’s special report noted that Dubai has diversity that will help to generate growth in the economic times ahead.

Specifically logistics, finances, hospitality and retail were named by the report and it also noted that although the emirate is dealing with challenging times, this diversity lands it in a positive place over the medium to long term forecast.

Right now over 98 per cent of the economy in Dubai is not based in oil.  Since oil reserves are projected to approach depletion over the next 20 years Dubai has made significant investments to diversify their economy.

Dubai currently holds the third largest spot in the global re-exporting industry, just behind Singapore and Hong Kong.  Almost 40 per cent of the GDP in the emirate is trade related, and services account for over 25 per cent of the economy.

Figures from the Dubai Chamber report that growth in exports and re-exports still indicate continuous improvements over the first half of 2010, showing a full 13.7 per cent rise from the first half of 2009.

A combination of both exports and re-exports was calculated to be Dh103.2 billion over the opening six months of 2010, as stated by the Dubai Chamber in their semi-annual report.

Trade was boosted due to the positive atmosphere and logistical infrastructure present at the ports and airports in Dubai.  Being the hub for the region gave Dubai an opportunity to lead in the area with their free zone models.  First Jebel Ali Free Zone grew to be a hub for trading firms and business, then the Internet and Media City took initiative and became the local headquarters of many international IT and media outlets.   Finally the Dubai International Financial Centre is attracting many as the key financial services firms in the area.

With the area’s largest airport, a world class airline and touted as the Gulf Region’s best for hotels, shopping centres and other entertainment, Dubai is focused on tourism.

These comments were included in the Shale Gas and Implications report for the GCC, which also noted that the GCC needs to diversify even more.

The report mentioned that shale gas as used in the US energy maker was unconventional and higher priced than other natural gases.  And also that other sources being developed will help to reduce the Middle East and Russia’s reliance on natural gas being supplied.

Since the GCC economies are still mostly centered in the oil sector, including production, manufacturing and services to the government, this change would drastically impact their economies as well.

Over the short and mid-term shale is not a threat to oil exports in the GCC, but oil production has a pronounced cycle of volatility.  And nations with plenty of resources are known to perform below the levels of some with no resources at all.

Therefore the oil-dependent economies should diversify to get the risks down.  The report said this is essential and necessary, despite the fact that oil and gas will still have a major role throughout the GCC, those diversified areas and local demographics are driving growth hard.  It noted that diversification and demographics should be combined when planning since the demographics offer a structure for diversifying.  Bahrain and Dubai are local leaders, mostly due to necessity as their oil reserves are so low.

The report said that the health of the non-oil sector in Dubai shows that diversifying is critical for economic stability as stronger areas can help to balance out weaker or more volatile ones in a crisis.

Dubai is a leader in diversification throughout the whole GCC and certainly in the UAE itself.  Many things are working to maintain the competitiveness of Dubai’s economy, including heavier investments in key infrastructure developments like the latest metro system and more available and affordable housing and accommodations.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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