By Massoud A. Derhally
Emirates chairman says growth built on tourism, trade and hospitality; DP World chairman cites property recovery
The economies of the UAE and Dubai, in particular, will continue to expand on the back of services, trade and tourism, HH Sheikh Ahmed bin Saeed Al Maktoum has said.
“All indications show that UAE and Dubai economy will continue growing in 2013 by 3.8 percent," Sheikh Ahmed told Arabian Business. “Tourism, hospitality and trade will continue to play a major role in the growth."
Sheikh Ahmed is chairman and CEO of Emirates Group, chairman of Emirates NBD, and chairman of Dubai World. He is also deputy chairman of the Dubai Executive Council.
The UAE's economy was projected to have grown 4 percent last year and is estimated to slow down to 2.6 percent according to the International Monetary Fund.
A partial rebound in the property market, a resurgence in consumer confidence and improved bank performance has helped the Dubai stock market reach a 39-month high.
The publicly listed Dubai Financial Market (DFM) posted a AED35.2m (US$9.6m) profit in 2012 after recording a loss of AED6.9m the year before.
"The performance of the economy has recorded a remarkable and rapid improvement, with the majority of its sectors growing at high growth rates," said the bourse's chairman Abdul Jalil Yousuf Darwish. Last year was "the beginning of recovery by the real estate sector, as well as the constant improvement in the performance of the banking sector. These two sectors represent the key pillars for DFM."
After a plunge of nearly 60 percent in prices when Dubai was hit by a financial crisis, the pace of the real estate market's recovery and that of the economy is increasing. Emaar Properties has seen its share price surge to a 51-month high this month.
The property developer's profit increased 18 percent last year. In its latest report, real estate advisory firm Jones Lang LaSalle said there were “promising signs of recovery from the end of last year in Abu Dhabi and Dubai, with upward prices in the residential, retail and hotel sectors". Apartment sale prices increased about 7 percent in 2012, according to the property consultants.
The UAE attracted about US$7.7bn in foreign direct investment in 2011 compared with US$5.5bn in 2010, according to the United Nations Conference on Trade and Development.
Tourism and logistics have also helped the economy improve.
Emirates, Dubai's flagship carrier, doubled its first-half profit of its financial year, with net income rising to about US$463m. The airline carried 18.7m passengers since April 1, an increase of 15.4 percent from the same period a year earlier.
“We expect businesses to do good in 2013... we expect the economy to do very well in all aspects especially in real estate which was suffering and is expected to recover even better," DP World chairman Sultan Ahmed Bin Sulayem told Arabian Business.
“I think this is due to many economies in the world coming out of recession or experiencing growth. China and the Far East in general is seeing growth, Latin America is seeing growth, Africa is experiencing growth. The only place not seeing growth is Europe," added Bin Sulayem. “In general we expect business to be better. Dubai has really performed better than what is expected, Dubai has this ability, whatever everybody expected with the crisis that its going to paralyse Dubai - it didn't."
Emerging markets and developing economies are projected to grow about 5.6 percent this year, up from 5.3 percent last year, while Europe contracted 0.4 percent last year, and the US economy increased 2.2 percent, according to International Monetary Fund (IMF) estimates.
“I have no doubt that a recovery is under way; it began as much as twelve months ago and it's still building momentum," said Simon Williams, the Middle East chief economist for HSBC. “Its driven by the export oriented service sector principally that's been lifted by strong regional demand and international demand. The real challenge will be to manage the pace of growth and its direction."
HSBC's forecasts the UAE's economy is set to expand by 4 percent. Dubai will probably grow by the same pace, Williams said.
“Part of the reason that Dubai has been able to turn its fortunes around as quickly as it has is not only to due to its excellent service sector but that sector being able to compete effectively," Williams added.
Aramex, the largest courier company in the Middle East and North Africa, has benefited from the resurgence in business activity.
“On the logistics side there is definitely a massive comeback from the recession days," Aramex CEO Hussein Hachem told Arabian Business. The company is growing locally and internationally, he said.
The company reported a fourth quarter net profit increase of 15 percent, climbing to AED65.7m (US$17.9m) as revenue grew on the back of ecommerce and buoyant economies in the Gulf states and Asia.
“What's fuelling it on the local side is a retail boom, there is more demand on logistics and - the Jebel Ali free zone and the port and the new Dubai World Central Airport - all integrated together, is attracting new companies who are positioning their operations out of Dubai."
“We're very happy with the economic climate in Dubai," said Hachem, adding: “We're definitely on the right track”.
I'm glad that some countries know what they're doing. what my country, United States, really needs to figure out is what it is that we have to offer to the world? What are some unique, desirable products that we can export to countries like UAE, China, other countries that are doing well, those countries will be our customers, its all part of the exchange. We can pour, and spend money on our economy with, universal healthcare, and go around trying to stimulate the economy by giving tax breaks. What we really need is a motive for American companies to export more, keep jobs on our lands, and bring in money, instead of in-sourcing money.