The global market may have been hit hard in the 2008-2009 global financial and debt crisis, but the latest international financial turmoil and the 2011 political unrest sweeping across parts of the Arabian region has proven fortuitous for Dubai, which is now largely regarded as a safe haven! As its tourism and service industry have experienced substantial growth during this period, individuals and companies are looking towards Dubai as a key Gulf business hub.
The attraction of Dubai is that it was one of the first Emirates in the UAE to move away from oil as its main source of income. This has allowed it to methodically and determinedly work at transforming itself from an oil rich country into an important trade centre and business port. The financial crisis of 2008-2009 hit the lively city at a time when it was borrowing a lot to build enormous projects, including the world’s tallest towers and the largest man-made islands.
With the disappearance of foreign investors by the end of 2008, transaction volumes plummeted leaving Dubai with its gross domestic product dropping 2.4 per cent. Along with a rapidly increasing debt, Dubai World was forced to freeze payments on approx. $26 billion. With fears of a sovereign debt default about to unfold, the UAE’s two largest home finance companies also stopped offering new loans. The two mortgage lenders accounted for more than 50% of all mortgages in the country.
In 2010 Dubai started a moderate recovery, as the city co-ordinated efforts by reorganising its debt position and quarantining all problem assets. Having learnt from its past experiences, Dubai’s attraction to outside investors and companies especially now the Eurozone is being overwhelmed by its own escalating debt crisis is further solidifying the Emirate’s continued recovery.
According to TRI Hospitality Consulting the tourism and hotel sector in Dubai has seen a strong increase at the beginning of 2011 as the Arab spring has encouraged international and regional tourists to travel to safer destinations. This trend showed high occupancy during summer months, when many tourists avoided the troubled holiday destinations such as Egypt and Syria.
Manufacturing processes such as transportation and logistics from international companies now also provided Dubai with enough leverage to increase its strengths, diversify its economy further and build global competitiveness. These sectors represent an essential part of the economy’s recovery as it comprises of 10.4 per cent of non-oil GDP. (Nabeel Ebrahim, Abu Dhabi University Chancellor)
The trade sector of Dubai has also experienced growth, and according to EFG-Hermes the container traffic improved by 11 per cent in the first quarter of 2011.
“The UAE has remained relatively immune to contagion from recent political unrest in the region. The IMF went further to say that the UAE may actually gain from the current turmoil through increased tourism, as well as from companies relocating to the UAE’s favourable business environment, which now boasts affordable real estate with relatively good infrastructure.” International Monetary Fund, 2011