| 10 Aug 2010 |
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Dubai leads non-oil growth sector in the UAE
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Dubai is still leading the non-oil growth sector in the UAE despite the high level of debt and the property market correction, a special report by Standard Chartered Bank said.
The bank said Dubai's three core areas of strength - trade, services and tourism - have shown "considerable resilience" during the crisis, noting that its diversified base will be the emirate's "key growth driver in the future".
"Despite the challenges Dubai currently faces, the emirate has a diversified economy driven by retail, logistics, financial services and hospitality. This leaves it positively placed in the medium and long term," the report, obtained by Emirates 24|7, said.
Currently, more than 98 per cent of Dubai's economy is non-oil based. And with oil reserves expected to be depleted in the next two decades, the emirate has invested heavily in diversifying its economy.
The emirate is already the world's third-largest re-export centre after Hong Kong and Singapore. Trade accounts for close to 40 per cent of Dubai's GDP, while services make up more than 25 per cent of the economy.
According to Dubai Chamber, exports and re-exports continue to show consistent signs of improvement for the first six months of the year with a marked increase of 13.7 per cent compared to the same period in 2009.
Total exports and re-exports in the first two quarters of 2010 stood at Dh103.2bn according to Dubai Chamber's half yearly report.
Standard Chartered said trade was boost by the emirate's ports and airports make up its "excellent" logistics infrastructure. As a regional services hub, Dubai has managed to spear headed the free zone model in the region. It started with Jebel Ali Free Zone, which has become a regional hub for trade businesses, followed by the Internet and Media City initiatives that make up the regional headquarters of many global IT and media outlets, and the Dubai International Financial Centre, which has become one of the region's key financial services hubs.
"In terms of tourism, the emirate has built the region's largest airport, one the world's best airlines, and the region's most impressive offering of hotels, malls and other entertainment venues," it said.
These commentaries were highlighted in the Shale Gas and Implications for the GCC report, which stressed the GCC's need for further diversification.
This would have a significant impact on the GCC economies, which are still driven mainly by the hydrocarbon sector, hydrocarbon-related manufacturing and government services.
In the short to medium term, shale gas does not pose a significant challenge to the position of the hydrocarbon-exporting GCC but historically the business cycles of oil production are volatile. And resource-rich countries have had the tendency to underperform relative to countries with no resources.
Hence economies dependent on conventional oil and gas need to diversify. "Diversification is key to reducing those risks, and is no longer an option, but a necessity," it said. "Even though hydrocarbons will continue to play an important role in the GCC, diversification and demographics are significant growth drivers. The two should not be seen in isolation, as the demographic challenge is one of the key drivers of diversification. Dubai and Bahrain have led the way, mainly by default rather than choice, given their low oil reserves."
It said the resilience of Dubai's non-oil sector is an evidence that diversification plays a crucial role in providing economies with core areas of strength that can offset weaker or cyclical sectors during a crisis.
"Dubai has set the pace for diversification in the UAE and for the wider GCC, it said. "Further heavy investment in developing key infrastructure, such as the new metro system and the stock of available - now relatively affordable - accommodation should keep Dubai's economy very competitive," it added.
By Karen Hart
© Emirates 24|7 2010
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