Dubai will reap the benefits of its early moves to diversify
Words by Andy Gilmore in The Market · Mar. 10th, 2014
Dubai is likely to outperform growth projections by 2020, driven by improved funding, job creation and solid execution of its diversification strategy, according to a recent report by Bank of America Merrill Lynch, GCC 2020: time to Shift Gears.
And it stands out among its GCC neighbours: "Dubai has the right mix to re-accelerate growth," said Stephen Pettyfer, the head of MENA Research at BofA Merrill Lynch Global Research. "Given that there is a certain degree of duplication, competition or lack of distinct differentiation among various projects in the GCC, Dubai's model of diversification stands out, having already achieved a critical mass, scale and a degree of competitiveness."
The emirate's status as a regional hub for transport, logistics and finance further strengthens its position: according to the report, Dubai's success is due in part to its willingness to take risks with forward-looking policies and the benefit of being an early mover.
Already, under Sheikh Rashid, it used its oil revenues to help fund the construction of Jebel Ali Port Complex, in the belief that the country would quickly outgrow Port Rashid. With Dubai international Airport already the fourth busiest in the world by international passenger numbers this year, air traffic levels are expected to continue increasing by 7.2 percent CAGR, according to the report.
Further boosts to the economy will come from tourism and related activities, with an expected annual total of 15 million tourists by 2020, up from 8m in 2011. Notwithstanding an increase of 18,868 hotel rooms in the period, hotel occupancy will rise by 35 per cent, said the report.
All of this bodes well for economic recovery and the attractiveness of the UAE as a place to do business. Dubai's relatively small population of 2.1 million, coupled with the ambitious objectives of many major businesses already established here will lead to job creation and support the property market.
With the emirate aiming to create almost 1m new jobs by 2020, up from 1.3m now, the population as a whole is projected to increase by about four per cent, thus expanding the domestic market and furthering economic growth. Dubai's residential property market, where supply has exceeded demand since 2008, will clearly benefit
Before the summer break, Dubai Executive Council approved a new 10-year Dubai Urban development master Plan-2020, in which the government reconsidered its ambitions for the real estate sector. Prior to 2008, it had earmarked sufficient land for 'mega projects' to accommodate nine million people. this has been revised to 2.9 million.
In its report BofA Merrill Lynch said that Dubai is "one of the best GCC cities in which to develop business". This backs up the world bank's annual doing business report, which lifted the UAE's rank from 35 to 33 in the world for 'Ease of doing business'.