Dubai has an enviable reputation for all things bold, glamorous, tall, large, and the ‘you name it’ so to speak. However, there is something else that has drawn keen eyes from around the world to this city of undiminishable vision and grit, and that is its head start towards a post-Covid economy.
During a global pandemic, if any country has managed to walk the talk on seeing the glass half full it most certainly was the UAE. Gary Reader of KPMG in a recent blog said, “Uncertainty doesn’t have to mean paralysis”. Dubai is a testament to that. The UAE has been a haven for investors around the world. According to the World Bank’s Doing Business 2020 report, the country was listed in the top 20 in the world for the ease of doing business.
Being able to set up a company in about seven days and getting a visa in three when many developed countries around the world are further tightening restrictions in response to the pandemic is nothing short of remarkable. If you know any other country where this is possible in the current climate, please let me know because I sure don’t.
The main differentiator between Dubai and other financial capitals is that the latter have been quick to compare the Covid-19 induced economic climate to the global recession in 2008. While it may seem natural to think so, but let’s take a closer look, is it really the same?
Jon Danielsson, Robert Macrae, Dimitri Vayanos, and Jean-Pierre Zigrand, the writers of ‘We shouldn’t be comparing the coronavirus crisis to 2008 - this is why’, discuss that the coronavirus crisis is an exogenous financial risk.
“Exogenous risk arrives to the financial system like an asteroid might hit the earth – it comes as a surprise, there is nothing we do to precipitate its arrival, and it can cause enormous damage”.
In the same article, the crisis in 2008 is referred to as “a typical endogenous risk crisis”. The crisis that targeted deficiencies of the financial system “was caused by the interaction of market participants, who came to doubt assumptions that had previously usually been made almost without question. The result was synchronized decisions to sell similar assets and to avoid the same exposures, causing an acute lack of liquidity”.
"In the current climate, the very fact that the coronavirus shock was exogenous and not itself the consequence of inherent system weaknesses is encouraging as it requires the coincidental presence of some additional vulnerability,” explains Danielsson et al.
In summary, the 2008 Global Economic Downturn was a ‘Demand Side’ crisis, whereby the supplies were readily available, it was the lack of confidence and absence of liquidity that was curbing the demand. The Covid-19 induced economic situation however is a ‘Supply Side’ crisis. People want to travel – but the travel restrictions and airport shutdowns don’t allow so. People want to go to events, people want to go out and eat, shop and more…but - we get the point.
Once we agree that this crisis is very different from the earlier ones, we can also agree that it needs to be tackled differently. While a financial crisis requires financial stimuli a healthcare crisis requires curbing of the pandemic, strengthening of the healthcare system and vaccinating the population.
While UK, and the USA were busy designing state paid furloughs and handing out stimulus cheques, the UAE was inducing smart lockdowns, increased testing, PCRs on arrival at the airport and Vaccination planning.
Unlike 2008, what countries, businesses, and individuals are navigating through at the core level is a health crisis and not a vulnerable dent in the global financial system. To resolve and work around a problem it is important to understand the true nature of the problem. What Dubai has smartly done is avoid adopting a gloomy prognoses approach about the impact of coronavirus on the economy and introduce ways in which confidence can be restored.
In 2008, demand had dropped drastically which caused many suppliers to pivot or perish. Cut to Covid-19, demand was and is intact, but governments in response to the pandemic had to shut industries, shops, other businesses which led to individuals losing jobs. In this scenario, Dubai has been able to find a working formula to enable individuals and businesses to get acclimatised to a post-Covid economy by taking the first steps towards it.
The UAE was discussing concrete plans for a post-Covid economy as early as August last year. His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, had said that ‘the UAE is striving is to have the fastest-recovering economy in the world and the most stable and diversified economy in the long term'.
Individual emirates and the UAE cabinet had announced fiscal packages and programs to enable businesses to get back up and running. In many ways, the UAE's open with caution approach has encouraged many business owners around the world to move and shift operations here during the pandemic. It is important to be cautious and responsible which does not have to come at the cost of coming to a complete halt with no reassuring end in sight.
According to PwC’s recent TransAct Middle East report, “there is a realistic prospect the Middle East (mergers and acquisitions) M&A landscape will be easier to navigate by the end of 2021”. The report indicates that “the UAE remained the most important focus of M&A activity, with 79 completed deals in 2020, six more than the previous year”. The healthcare and education markets in the UAE are looking promising for this consideration, according to the report.
In the article UAE: Poised for Post-Covid Transformation published by the Institute International Finance (IIF), the UAE economy is poised for a fast recovery from the impact of Covid-19 and an overall transformation. IIF credits the Nation’s friendly business environment, excellent infrastructure, relatively diversified economy by regional standards, and political stability for encouraging Foreign Direct Investment (FDI) inflow.
The UAE has also set an example by boldly investing in becoming a knowledge-led economy and successfully fulfilled the Mars Mission becoming the first Arab nation to do so. Would it have been less risky to postpone the mission for post-Covid time? Yes, but taking calculated risks is something that has earned the country a reputation globally, and a quality that never fails to inspire businesses and residents.
The UAE has expressed an impressive breed of tenacity that is a lesson for all countries and businesses talking about post-Covid recovery. No planning is complete without action and this young Nation has not shied away from taking the right action at the right time without waiting for another country to try and test and lead the way.
The UAE is leading the way towards a post-Covid economy making it a winning bet for businesses and investors both inside and outside the country.
Dr Lal Bhatia (PhD) is a global thought leader, disruptor and innovator with an entrepreneurial flair. He has conceptualised and developed new business models in the most challenging environments.
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