By Edward Liamzon
Emaar chairman Mohamed Alabbar on the future of the region's economy, and the challenges that lie ahead
This is indeed the perfect time for a realistic and candid evaluation of the state of the economy of the UAE as well as the region. As we move into a post-crisis world, we must ask: “Where is the region going?”
The past few years have been challenging, but, here in the GCC, we need to look around and ask ourselves, honestly: “How have we really been affected?”
Yes, there were critical news reports and headlines. Jobs were lost. Some companies went under. Several projects were cancelled.
Yet look at this: Ireland, the UK and Greece have been forced to impose harsh austerity measures to get back on track. On the contrary, in the GCC, government spending is increasing.
In the US, more than 300 banks have failed since 2008, and the budget deficit is running close to $1.3 trillion. In the GCC, many of our economies are recording a surplus.
In Europe, after Greece, and after Ireland, people are asking: “Who will be next?” Will it be Spain, or Portugal who seek the next bail-out?
In the UAE, our Minister for Economy said this week we’re on track for growth of 3.5 per cent next year. In Dubai, our debt restructuring is now under control. Dubai itself has launched a bond for $1.25 billion. It was many times oversubscribed.
I see the recovery first-hand: my company, Emaar, successfully placed a half-billion dollar bond last month -- our bond was six times oversubscribed.
What does that tell us? It tells us that momentum is on our side. It tells us that we are at the very beginning of a new growth cycle, and savvy investors know this.
It tells that, under strong leadership, our region’s economies aren’t just surviving. They’re thriving.
What have we learned from the crisis?
Incredible heat, and unimaginable pressure, are needed to make a diamond. Dubai has gone through the same process and the end result is something that’s not only valuable and coveted, but incredibly strong and resilient.
Dubai has been criticised, in some quarters, for taking risks. I say Dubai should be celebrated for taking those risks.
The word “risk”, in English, comes from the Arabic, "رزق", meaning 'to seek prosperity'. For those who were born here, for those who come here to work, they are here to seek prosperity. They are here to share in Dubai’s risk.
This city will continue to take risks. Because without risk, there can be no reward.
So, a key lesson I learned from the crisis is: “Take risks, but only if you can manage those risks.”
Among other lessons, running a public company has taught me that transparency, and good governance, are critical to a company’s strength and its success.
It may be difficult, it may be frustrating and even unpleasant, but the pressure of reporting your results every quarter makes you a stronger company.
I have learned that, in business, efficiency is everything. I’ve learned that hands-on management is critical. Delegation is of course essential, but, as a leader, you can’t take your eye off the ball for a second. There are no second chances”.
Finally, I would say that if you haven’t learnt any lessons from this crisis, then you aren’t fit to lead. Quite simply, you’re out of the race.
The state of the property market
In Dubai, we’re cautiously optimistic about the future. There is an over-supply, yes, but that will be addressed over the next 20 months. And, as the city gears up for the next cycle of growth, there will be no speculators, no soaring rents, no “flipping” of off-plan units.
Instead, there will be a mature market, based on real fundamentals such as location, quality and the strong reputations of our developers and contractors.
In other countries where Emaar operates, we are not just cautiously optimistic. We’re positively enthusiastic. India needs 27 million homes. Saudi Arabia’s growing population, and new mortgage law has helped create huge demand there. In Egypt, in Lebanon, in Syria, it’s the same story.
At Emaar, we are now, and have always been, about creating value. In 10 short years, we have created value of nearly $33 billion. For our shareholders, we have reported a cumulative gross profit of more than $8 billion. In the first 9 months of this year, Emaar has reported profits of nearly US$ 600 million.
Our outlook for the future is one of transition from a Dubai-based revenue stream to an international and stable stream of revenue. This will be testament to the successful achievement of Emaar’s expansion and diversification strategy.
Dubai: going forward
What if I asked you in 2006, “What would you do with $100 billion”?
If you invested in AIG, or Bear Stearns, or Lehman Brothers, any number of blue chip finance houses, you’d have nothing left. All gone. Vanished, into thin air.
So, how would you want to lose the same $100 billion in Dubai?
Well, our city built some world-leading airports, and some sixteen-lane highways. Not to mention the region’s largest and best logistics centre and port.
And bridges, of course, crossing the creek, and a modern, mass transit Metro system.
And a finance centre that’s the envy of the region. A city that can be navigated by the names of its five-star hotels, all of which are full. And an airline, Emirates that, at a time when airlines the world over are suffering, is going from strength to strength.
And, of course, the tallest building in the world.
With $100 billion, you can build a vibrant, exciting, modern city that continues to attract the best minds from West and East. If you spend your money that way, you are building not just a city, but a future.
Nation-building can’t be measured in years, or decades. It takes centuries. There are bumps along the way, and we’ve gone over a very big one.
I’d describe it as a hell of a work-out, the kind of rigorous conditioning you’d need for an endurance race. But we’ve come out of it leaner, and fitter
Under the leadership of His Highness Sheikh Mohammed, Dubai has shown determination and resilience. The city, and its leaders, will continue to show those traits.
To close, I’d like to share with you something from a book, The Genius of the Beast: a Radical Re-Vision of Capitalism, by Howard Bloom, that so resonated with me that I passed it on to HH Sheikh Mohammed.
In the book, Bloom explains why capitalism cannot die. However injured, it will lick its wounds, adapt and survive.
The key to next generation capitalism, he writes, lies in a big picture view that’s utterly unlike anything you’ve previously perceived. A big-picture view that will startle you. A big-picture view with which you can ignite the world, and help transform society.
Where better to come up with that big-picture view -- that next generation of capitalism -- than Dubai?
(Mohamed Alabbar is Chairman, Emaar Properties PJSC. The above is an excerpt from his speech at the Arabian Business Economic Forum held in Dubai on November 29, 2010.)
Just brilliantly laid out. Real dynamic and impressive gentleman. Savvy investors look for incisive opportunities. The turnaround time for decision making and changing the long term vision in Dubai is what is spectacular. Dubai appears to be one of those special opportunities.
What about those people who keep paying the banks interest for properties that will never be built ? Ok, so the expatriate developers ran away..but what about Nakheel? What about the bankruptcy laws, bounce cheque criminal offences and discriminatory practices in the Land, so why consider the UAE as a long term investment when it is just a short term oppurtunistic stop for all those who come here to change their fortunes ? Why even build Dubai for 2.5 Million people when the entire local UAE population is just over a million. Are the expatriates supposed to stay as guests and was Dubai's approach risk taking or just short sightedness ? The key to revival of this place is a mindset change..we (expatriates) can live with the rest of the ups and downs.