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High hopes: a second chance for Dubai

High hopes: a second chance for Dubai

With the region's aviation industry gaining momentum, will businesses in Dubai find a way to get their second wind and flourish once again?

November 20, 2011 2:45 by



With the kind of showboating we’ve seen from Gulf carriers in the latest Dubai Airshow, it’s clear that the GCC’s aviation industry is going to be a key element in keeping the Middle East relevant in the global trading route.

So key, in fact, that one billion dirhams ($273.3 million) has been secured for investment into the completion of Dubai World Central.

There are a lot of high hopes for Dubai’s “aerotropolis” as the current airport will be transferred there and it creates links to nearby Jebel Ali Free Zone and opens up the possibility of bigger capacity for business. The area is currently operating only for cargo transport but commercial passenger flights are expected to be in operation next year.

True to form, Dubai builds this project to include five runways, terminals and warehouses, as well as residential and office space, manufacturing zones and, oddly but unsurprisingly, golf courses.

Now zoom out at the bigger picture and it looks like the GCC is going back to basics itself–as much of a ‘basic’ as money can buy at least. Emirates 24/7, for example, reports that the GCC ports are “expected to spend nearly $15 billion on the expansion of their ports within the next five years.”

This sea ports study from the Kuwaiti-based Markaz financial centre noted that Dubai is currently ranked ninth among the top 10 container ports in the world in 2010 (the highest rank among GCC players), although Abu Dhabi has ambitious projects that may overtake Dubai’s current standing and eventually create overcapacity.

The growing strength of China and India’s economies is expected to have hugely positive ripple effects for the GCC’s ports, serving a strategic route for investors wanting to get into and out of these countries.

SPREAD THE LOVE

Now let’s take things up a notch and look at the opportunities existing businesses and sectors in Dubai and the whole of the UAE could potentially grab with this expected growth.

Regional businesses cannot expect the same easy reception investors gave their pitches prior to 2008. This time around, there’s a bit of baggage. For one, there’s the burst property bubble of which all relevant parties still have much to recover.

And there’s also the UAE’s banking sector, which is still in flux as the government pushes for merging most of the existing local financial entities, with Emirates NBD taking in a handful of the smaller financial service companies.

The shockwave from these two sectors alone is unmistakable in other industries, which have experienced loss in profits and, worse, job redundancies.

So with the promise of a strong air and sea ports business–ironically the asset that got the GCC its current stellar global economic status–how are regional businesses going to grab this hopeful second chance?

TAKE THE BULL BY THE HORNS

By the horns, we hope. With a more pragmatic approach, based on clear, open regulation, protection of both parties, a more secured investment–as secure as investments can be, of course.

It’ll be a tough to allay apprehension. But any savvy investor understands that big payoffs can only come from taking risks, albeit well-calculated ones.

The money is there. The willingness to invest is potentially there. Now, with some spit and elbow grease, it’s up to regional businesses to show the world that there’s more to the region then shiny new buildings and money to help throw weight around.

Could this be a second chance for businesses in Dubai? Can’t know for sure, except that the outcome won’t be from pure luck but from true grit from business owners and investors.



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2 Comments

  1. Usman Ahmed on November 21, 2011 1:24 pm

    While the write-up tries to put up a rosy picture on the future of Dubai, one should not forget the hard groud realities and go on speculating and spend and invest the hard earned monies in real estate and DFM without any appreciation or returns. Points to ponder:
    1. The fresh monies daily that was coming during the period 2005-2008 for real estate from all corners of the world had reduced to a mere 15% only.
    2. As of date, the various Dubai government companies owes about USD 29 billion to various banks in Dubai including foreign banks and this needs to be repaid in the next 42 months. They currently generate only USD 3 billion every year.
    3. Expatriates in Dubai who had purchased villas, flats and office space from 2005 and onwards (with loans) have yet to repay their loans (average repayment is around 55% so far) to the banks whereas the market value of their property has reduced by 45%. Expatriats salaries, in the last 18 months, has reduce by 15%. Thus net loss as of now.
    4. Foreign banks which gave loans to government managed companies in the period 2004-08 are set to write-off loans of approx USD 4 billion in the next 3 years due to haircut and restructuring. Thus what ever restructuring they have done, in the hope that their loans will be serviced will dwindle.
    5. The only organisation that has good cash flow is Emirates Airlines and they only can affort to spend on new planes.
    Lesson for expatriates – start saving as long as it lasts.

     
  2. MMMMMMMMMMMMM on November 21, 2011 5:22 pm

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