By Marcus Hendriks
Dubai’s sky-line is a mixture of architecturally pioneering skyscrapers and cranes. This juxtaposition of present achievements and unfulfilled ambition does more than just evoke admiration; it is a tangible demonstration of the Emir’s vision for the emirate. Having now had 15 years of implementation, challenges posed by the current oil slump provide an opportune moment to assess whether Sheikh Mohammed’s vision of a diversified, flourishing economy, is being realised.
Sheikh Mohammed bin Rashid Al Maktoum’s determination to catch up with and ultimately overtake global rivals is responsible for Dubai’s economy being the most diversified and non-petroleum reliant in the Gulf . In the midst of a formidable oil glut, this stands the emirate in a good position, despite the risks attached to reliance on real-estate and tourism which the 2008 Crash exposed.
Aside from the dramatic effect of the gazelle and lion metaphor on the blurb of the Emir’s book My Vision, it is also undeniably true: “You simply have to run faster than others to survive”, he says, and the fruits borne from this ethos prove its merit.
In 2006, Sheikh Mohammed released My Vision: Challenges in the Race for Excellence. It combines general managerial theory with explaining the approach towards leading Dubai in his first five years, and the future. He cites his father as the source of inspiration for his ambition, recounting anecdotes such as how he began planning Jebel Ali Port before Port Rashid had even been finished. This insatiability manifests itself not only in motivational rhetoric but a leadership philosophy to strive for what is best for the country, regardless of whether it might be deemed ‘unrealistic’ or not. Swearing by Bismarck’s recipe for success – “work, work and work” – Sheikh Mohammed claims that progress is “the permanent, unconditional commitment by a leader”.
This philosophy translates into an envisioned plan of action with three main objectives: continual economic diversification, public and private sector symbiosis, and investing in and encouraging future generations to guarantee future prosperity.
As hinted at, efforts to diversify Dubai’s economy have been a success. According to national statistics, only five per cent of the emirate’s GDP is oil-based, with retail providing 15 per cent and tourism (hotels, retail, wholesale combined) rising to 30 per cent . There are 100,000 hotel rooms in Dubai city alone, and it was the 4th most visited city in the world in 2015, with this ranking only likely to rise given the emphasis being placed on supporting this industry.
It is perhaps somewhat serendipitous that only three per cent of the UAE’s discovered oil is located within Dubai’s territory, as it has never been able to idle complacently on such a ‘freebie’. Nevertheless the reluctance to rely upon Abu Dhabi handouts and instead buttress an increasingly self-sustained economy is prudent and important. The 2008 property bubble burst caused housing prices to crumble 50 per cent and billions of dollars’ worth of building projects to halt, stalling growth and causing thousands of jobs to disappear. Dubai was not able to dig itself out of this crater alone and Abu Dhabi came to the rescue then, with its oil-derived treasure chest.
Real-estate and tourism are prone to the swaying winds of the global market, the vulnerability of which being appropriately exposed in 2008. The imperative nature of continual economic diversification thus further hammered in, the emirate has continued in the right direction by increasing the growth of its transport industry to around 15 per cent of GDP. As a Gulf Business article published in April 2016 warns of a moderate real-estate slump looming in Dubai, we are reminded by the necessity of minimising reliance on any one source by boosting growth in all sectors.
Sheikh Mohammed explicitly mentions his desire to make Dubai the home of financial services in MENA (Middle East and North Africa) and, eventually, the world. A project started by his father as early as 1979 with the construction of the Dubai World Trade Centre, it has since been furthered by developments such as Dubai Internet City, Dubai Media City and multiple other free zones. As a result, in 2006 the Emir was able to highlight how over 50 per cent of the world’s largest companies had made Dubai their regional headquarters.
Since then, progress has been significant enough to merit Dubai being awarded the prestigious role of hosting Expo2020. In addition to symbolic recognition of the emirate’s arrival on the international technology stage, it is also forecast to create 270,000 jobs, bring in 25 million visitors and, according to the IMF’s Middle East and Central Asia adviser Zeine Zeidane, lead to “rapid acceleration” in GDP amidst a general Gulf climate of economic slow-down.
Financial services are also where the Sheikh’s desire for an improved and symbiotic relationship between the public and private sectors is most relevant and directed. Initiatives such as the Dubai Trade Cities and free zones sprouting up around the country represent efforts to do so, on top of the freedom from Capital gains tax which incentivises expatriate migration. There are also many measures which act as a fillip for real-estate investment, such as Property Investor Visas, 100 per cent ownership and flexible payment plans, all of which encourage people to move to Dubai to live and work.
There are, however, still obstacles to overcome. Zeine Zeidane previously called for the further relaxation of restrictions on foreign ownership in the emirate, as well as the potential boon of liberating SME (small and medium enterprises) access to start-up finance. In 2015 a furore erupted as SME owners were fleeing the country with unpaid debts reaching $1.5bn due to liquidity drying up and the severe repercussions of bankruptcy in the emirate.
Since then, however, and as is typical of the evolving and flexible nature of Sheikh Mohammed’s country, steps have been taken to address this issue. Last month the UAE launched a new initiative coined Modus Operandi to bail out 1700 SMEs with debts of almost $2bn , as well as ending the penalty of incarceration for bounced cheques. Abdul Aziz Al Ghurair, the UBF chairman and chief executive of Mashreq, cited experiences in Dubai from 2010-2015 as providing the impetus to improve the situation, particularly as SMEs make up 90 per cent of non-government GDP.
Concerted efforts have also been made to enhance the public sector’s productivity. The Emir expressed his belief in My Vision that the surest way to encourage external investment and incubate the private sector is to create an efficient, seamless public one. In 1997, therefore, he launched the Dubai Government Excellence Programme, an inter and cross-departmental competition which rewards employees of all ranks and departments who improve their performance.
In 2014, the Mohammed bin Rashid School of Government issued a three-part policy brief analysing the results of recent governmental training programmes and process revamps. Overwhelmingly positive, the report concludes that
“The effectiveness of training and its positive impact on organizational performance in the government of Dubai is the result of the central government’s commitment to reach its strategic objectives in making Dubai a financial and economic hub of the MENA region.”
The approach to encouraging the private sector by providing suitable conditions in the public sector is sensible, particularly in a country trying to propel its development in the ‘knowledge economy’ as rapidly as it is. Whilst not yet an achieved goal by any means, significant progress is being made in this regard and, as is apparent in the Emir’s mentality and alacrity with which the government addressed the SME problem, Dubai will continue to nurture the growing symbiosis between public and private.
Healthy social conditions both provide the foundations for, and enhance economic prosperity, and this reality is not lost on the Sheikh. Whilst Sharia Law applies in Dubai and so limits social liberties, it is nonetheless one of the more progressive and modern of the Gulf nations. Furthermore, a strict society is not necessarily synonymous with an unhappy one, and it is in response to this suggestion that ‘happiness’ has received particular emphasis in the emirate, starting in 2014 with the launching of 82 projects as part of the Dubai Happiness Agenda. In February this year,
Dubai’s first Minister of State for Happiness was included in the new cabinet. The ultimate goal of this initiative is to see Dubai become the happiest country in the world by 2019. There is some way to go, however, as this year’s leaderboard saw the UAE (as a collective) drop from 20th to 28th.
Research suggests that there is at least some connection between happiness and spending. Gallup World Polls have highlighted the correlation between happiness/quality of life and consumer confidence, and then consumer confidence and spending . It is therefore in the interest of the government to nurture positivity in society, as it is trying to do, as this should benefit the retail sector.
This connection between social and economic policy is summarised by Ahmed Bin Byat, CEO of the investment group Dubai Holding, who says that “creating happiness is the final result of the smart city agenda. Once we are able to manage and meet people’s experiences, we will be able to rise on the happiness index. It is vital because if people are not happy, they don’t stick around in the city; they leave.”
Sheikh Mohammed’s final stated aim in My Vision is to educate the younger generations and so encourage their involvement in the emirate’s success and future. Schemes such as ‘Happy Learning’ are being phased in to schools. This draws on scientific research in order to maximise the realisation of student potential, so preparing an adaptable, enthusiastic and technology-specialised future workforce.
It is difficult to gauge the success of these efforts due to the lack of statistics available regarding the age composition of Dubai’s governmental divisions. In 2008, however, The Institute for Social & Economic Research at Zayed University published a report on the wage structure in the UAE which stated that “Young workers below the age 40 dominate the UAE workforce” . This is unsurprising when it is considered that 27 is the average age of Dubai’s total population . Given this young population, Sheikh Mohammed is absolutely correct in realising the importance of catering policies to the demographic, and this should produce a social environment which facilitates the emergence of well-educated and motivated citizens ready to contribute towards his vision for the emirate.
As some have been keen to point out , the GCC is facing a difficult economic period. Much has been made of the oil glut’s ramifications for a region of the world which largely owes its prosperity to this energy source. Indeed, the current and consequential austerity measures do reflect that policy redress is required.
Due to the economic diversification achieved during Sheikh Mohammed’s first 15 years as Emir, however, Dubai is in a better position than many of its Arab neighbours. In recognition of this, the IMF’s April statement forecast a 3.7 per cent growth in Dubai’s economy, head and shoulders above the 1.8 per cent average for the GCC. More recently, the Centre for Economic and Business Research ranked Dubai as the 4th most economically sustainable city globally.
The current slow-down in real-estate growth is a reminder that the emirate cannot rest on its laurels, but must push on with the emergence of its other sectors, notably financial services and transport. The weight of Sheikh Mohammed’s ambition and determination, however, should instil a great deal of faith in the project taking place. The next 5 years, leading up to Expo2020 and the deadline of UAE:Vision2021 will be crucial, both in the development of Dubai’s economy and also in demonstrating just how clear-sighted the leader’s vision is, and ever was.