By Ed Attwood
Dubai Chamber president and chief executive Hamad Buamim, who represents the interests of the private sector in the emirate, explains why Africa is so vital to Dubai’s trading interests, how the bid to become the capital of the Islamic economy is shaping up, and why he believes that there’s no need to worry about the property market
Hamad Buamim recalls having a meeting with the chief executive of the Hong Kong General Chamber of Commerce back in 2007.
“He told me that he knew Dubai is the gateway to the Gulf and the Middle East, but that it would add a lot more value to the Far East if Dubai is the gateway to Africa,” he says. “And that’s really how the whole thing really started.”
Seven years on, and the lessons of that conversation have clearly been learnt. Buamim, the president and chief executive of the Dubai Chamber of Commerce and Industry (DCCI), which represents the private sector in the emirate, has been spearheading a drive into Africa that has already resulted in steadily rising trade between Dubai and perhaps the world’s biggest frontier market.
The reasons for the growing ties with Africa are clear. The continent contains six out of the world’s ten fastest-growing economies. But foreign direct investment is still not matching up to the obvious opportunities on the ground. The African Development Bank thinks that as much as $93bn needs to be spent every year on infrastructure on the continent up to 2020, although only about half of this is actually coming through.
If you then look at the deep pockets of investors in the Gulf, who are looking to deploy their cash outside the region, as well as the interest from Asian investors who see Dubai as a gateway to Africa, then the opportunities are clearly significant.
This week, at the Africa Global Business Forum, seven African heads of state will be speaking in Dubai, alongside three prime ministers and seven other ministers. Other speakers include Blackstone Group chairman Stephen Schwarzman, Colony Capital boss Tom Barrack and Air Asia supremo Tony Fernandes.
“The whole world is looking at doing business with Africa, but at the same time, the whole world is also finding challenges in Africa too,” Buamim adds. “Information is key, and that’s one thing we’re trying to address through this forum.”
Of course, many Gulf firms have already trodden a path to a series of African nations. Earlier this year, Al Futtaim Group bought a majority stake in one of Kenya’s biggest car dealerships. Dubai’s DP World, the third-biggest ports operator on the planet, runs seven terminals on the continent. Retail giant Majid Al Futtaim is thinking about building Dubai-style malls with ski slopes in countries like Angola, Mozambique and Kenya. In early September, the Investment Corporation of Dubai (ICD) bought a $300m stake in Dangote Cement, a firm run by Africa’s richest man. Ras Al Khaimah’s Julphar recently opened a pharmaceuticals manufacturing plant in Ethiopia. And logistics firm Aramex has been busily buying up assets in East Africa.
But while individual companies are investing heavily in Africa, the region’s sovereign wealth funds have not followed suit in quite the same emphatic fashion.
To take advantage of the African opportunity, the Dubai Chamber itself has been expanding in the region. As well as an office in the Ethiopian capital, Addis Ababa, the agency has also opened a presence in Uganda and Mozambique.
“When you talk about Ethiopia, you are talking about 80 million consumers,” says Buamim, pointing out that the Chamber had recently helped the Al Ghurair Group set up a $50m aluminium factory in the country. “If you take all the Gulf countries together, it’s just a fraction of that.
“If you look at the Middle East, it has opportunities, but it also has challenges, with everything going on around us. Africa also has risk, which nobody can deny, but it also has huge opportunity. And business is starting to realise this.”
“We realised that maybe in the past we used to be just importing nations. We realised that in order to grow into the second phase of development, we would need to go regional and even international, and Africa is a key market for that.”
Another major issue in Buamim’s overloaded intray is Dubai’s bid to become the capital of the Islamic economy, an initiative launched two years ago by HH Sheikh Mohammed Bin Rashid Al Maktoum, the UAE’s vice president and prime minister, and ruler of Dubai. This year, for the first time, the World Islamic Economic Forum will be held in Dubai at the end of October.
Some concrete steps along the path to becoming the hub for the Islamic economy have already been taken, Buamim says, although there is still some way to go. He points out that of the $237bn worth of sukuk issued worldwide (with around $100bn issued last year alone), Dubai attracted $20bn last year.
“That’s quite a sizeable number,” he says. “Going forward, the expectation is that within five years the total number will triple to $750bn worldwide. There are a lot of opportunities there. There is demand but there is not enough supply and that’s where the business opportunity exists.”
While Islamic finance tends to grab the headlines, Buamim also says that there are plenty of other aspects, such as food, fashion and hospitality, that are of equal importance. Last week, the Dubai Chamber released a research note that suggested that the global Muslim population’s spending on clothes would rise from $224bn in 2012 to $322bn by 2018.
“The forum will talk about two things that are crucial to the Islamic economy; the need for innovation, which is very important, and the need for greater partnerships. Everybody needs to collaborate. Dubai is not here to compete with Bahrain and Malaysia and other places — the cake is enough for everyone to have a piece.”
For the Dubai Chamber as a whole, the first half of 2014 was a record one, with 8,700 new companies joining as members, a 24 percent increase on the same period last year. Over the past five years, the number of African companies setting up shop in the emirate has jumped from 3,000 to just under 8,000. Members’ exports and re-exports rose by 2.8 percent during the first half to just under $41bn. Buamim thinks, on a conservative basis, that by the end of the year, more than 15,000 new companies will sign up.
While trade with some nations, particularly the likes of Yemen, Libya and Iraq has dipped due to instability, other markets, such as those in Africa, have stepped forward to take their place.
“The stabilisation of key markets like Iran is key to us, and I would say the opening up of Iran will be a boost to the Dubai economy. Obviously there is instability in Iraq, Syria and so on, but the good thing is that it’s not impacting negatively the growth we’ve been having.”
What sort of companies have decided to base themselves in Dubai this year? Buamim cites trade and, especially, tourism, as being major drivers. In addition, the recovery of the property market has encouraged the return of the various segments (like brokerage outfits) that had been absent for some years.
Much of the growth in new licences is, of course, due to the recent strong performance of the UAE economy. The Dubai Chamber thinks that the emirate’s gross domestic product (GDP) will grow by about 5 percent this year, a little higher than the International Monetary Fund (IMF)’s estimate of 4.4 percent for the UAE as a whole.
“We believe that it will remain similar going forward, especially with Expo 2020 on the horizon, but maintaining around 5-6 percent is very healthy and very sustainable,” Buamim says.
Another bonus has been the steady rise of the country on the World Bank’s Doing Business rankings, which compare and contrast 189 economies across the globe over a range of business-related issues, such as the ease of starting up a company, getting credit, enforcing contracts and so on. The UAE ranked 24th on the latest rankings, overtaking Saudi Arabia to become the easiest country in which to do business in the Middle East.
As Buamim points out, the UAE performs particularly well in some areas — paying taxes, dealing with construction permits, trading across borders and so on.
“We’ve been doing great in starting a business and conducting a business,” he says. “But I think we have to do more when things don’t go right. So areas like resolving disputes and closing businesses, so issues like bankruptcy.”
In the World Bank’s rankings, the UAE comes in 101st position for resolving insolvency and 100th for enforcing contracts. However, the introduction of a long-awaited new companies law, which is awaiting the signature of the country’s president, and new bankruptcy legislation, which is currently being considered by the Ministry of Justice, may alleviate those areas of concern.
“We’re lacking, we are aware of that,” Buamim says. “We are aware of these issues as a chamber of commerce. The government is aware of it, I know they are working on it. Laws are not the fastest thing because you have to coordinate them on the federal level, but these are obvious areas of importance.”
Another concern that reared its head again earlier this month was that of the criminalisation of bounced cheques. In the UAE, and in much of the rest of the Gulf, cheques (often post-dated) are the most common form of payment for rents, cars and property purchases. However, if the cheque is not honoured, the issue becomes a criminal rather than a civil matter.
“We cannot [decriminalise bounced cheques] due to the lack of alternative methods to guarantee payments,” UAE Banks Federation chairman Abdul Aziz Al Ghurair told reporters. “The whole country’s trade system is based on the cheque system. It is the tool for recovering one’s money. What else is there to protect properties otherwise?”
As the representative of the private sector in the UAE, Buamim isn’t in full agreement with the UAE Banks Federation’s stance.
“I would say that’s maybe the view of the banks,” he says. “Looking at it from the business perspective, I think the whole world is evolving and the issue of blank cheques, or even the mechanism of the cheque itself needs to be reviewed, has to be readdressed and we have to look at best practices happening around the world.
“But again, I think also we are still lacking a few other tools that have to be available in this market. One of those is the credit bureau, which has just started. There will be more information and other ways of dealing with businesses and consumers and then we will be able to evolve from that.”
Buamim also hails what appears to be a stabilisation in the real estate market, with the latest reports from analysts suggesting that Dubai property’s boom over the last 18 months or so is becoming more sustainable. “The good thing is supply is definitely matching demand,” he points out. “We don’t have a shortage like in 2005, 2006 and 2007. We are not worried about it. Maybe at the beginning of the year, we talked about concerns over inflation, but these concerns have now been dealt with in a good way. Inflation is 3 percent, which is also healthy because we are also in a recovery. So we have the right balance.”
Last but not least, the Dubai Chamber is also working hard to help with the development of Expo 2020. Buamim thinks that the showpiece event isn’t just going to help Dubai, it’s also an opportunity for his members, such as those from Africa, to showcase their own potential areas of investment. In addition, he also sees the other Gulf countries benefitting from the event as well.
“It’s a region, we’re all together and we all work together,” he says. “When you look at the Expo site, it’s as close to Abu Dhabi as it is Dubai, so Abu Dhabi is definitely benefitting. And Sharjah has always benefitted from Dubai.
“And we believe that with the World Cup in Qatar we have strong infrastructure that nobody else has in this part of the world. People will be able to live in Dubai, go watch a match in Qatar and come back the same day. So the entire region is really benefitting from these big events.”