Countries in the Gulf Cooperation Council (GCC) still look up to the Dubai model for their respective developmental plans, according to a latest report.
Similarly,
data released by Riyadh-based GCC Secretariat on the GCC common market showed that the UAE was the most attractive for investors in its joint-stock companies, with the number of GCC shareholders in its listed firms exceeding 382,000 at the start of 2009, more than half the GCC’s total.
The number accounts for nearly 80 per cent of the total investments and other economic activities licensed for citizens in the six-member countries.
This will certainly boost Dubai’s image, which has recently suffered bad press following the debt scheduling proposal by state-controlled investment firm Dubai World. On November 25, global markets went into a tailspin while local shares took a pounding after Dubai World sought to reschedule payments on some of its $26 billion debt owed to creditors.
Yet lost in all the drama is the fact that Dubai is an important economic experiment in a strategically vital region, according to the 100-page report on the GCC common market.
“Admittedly, the financial crisis could help spur greater transparency – a feature that’s the weakest part of Dubai’s economic model,” says Swiss bank UBS’s research chief, Saud Masud. Masud said that Dubai has “realised it’s no longer about building the world’s tallest tower.”
“Now it’s about Dubai’s legacy and its long-term future,” he said.
Dubai shines as region’s business hub
It is also hard to see Dubai losing its role as the region’s leading business hub. Masud however says that Doha and Riyadh are faster scoring some successes in attracting banking and other businesses.
“With greater access to capital, theses cities may able to close the infrastructure gap with Dubai,” he adds.
During a recent television debate titled: ‘Dubai a bad idea’, top businessman Mishal Kanoo was at pains to defend the emirate’s financial strength. In the wide-ranging session, Kanoo, the Chairman of the Kanoo Group, one of the largest independent groups of companies in the Gulf, attacked the motion saying Dubai was where every Arab wanted to be.
The city, he said, had become a beacon of prosperity for international companies and “a viable alternative to nationalism and extremism.” Some international media made hay over the debt standstill proposal, with some predicting the collapse of the emirate's economy.
Kanoo particularly seemed peeved by comments made by Simon Jenkins, a former editor of The Times newspaper, who predicted in one of his articles that “The massive construction of real estate projects made Dubai vulnerable to a backlash.”
The common market report said UAE's growth in recent years had been a much-needed success story for the GCC.
In a region of countries depending on the boom-and-bust cycles of the oil industry, Dubai stands out for creating an open economy that has diversified well beyond energy.
“Dubai is the business gateway for a region with a $1 trillion economy,” Masud says.
“A-list multinationals have flocked to Dubai because of its open culture, top-notch infrastructure, and hassle-free business climate,” Masud added, citing top players like Microsoft Corporation, General Electric and Cisco Systems.
GCC set to become $2 trillion economy
At the Dubai International Financial Centre, virtually every leading investment bank has been licensed to operate there, including Masud’s Swiss UBS bank.
Figures in the GCC - report data showed an increase in investment portfolios, with analysts suggesting that the surge in GCC economies was due to the opening up of new sectors to foreigners.
The report showed most of the investment rise last year was in the UAE, when investment and economic licenses nearly doubled to 22,044 at the beginning of 2009 from 11,083 at the beginning of 2008.
Meanwhile, a report released by NCB Capital, the investment banking arm of National Commercial Bank of Saudi Arabia states that the GCC is set to become a $2 trillion economy in the next decade.
“The GCC region is on track to establish itself as a $2 trillion economy in the course of the coming decade, a near-doubling of the current size,” said the report.
“The GCC countries are well positioned to assume a critically important position in the emerging new world order.”
The GCC’s combined share in global GDP has continued to increase, said the report. In 1990, GCC countries contributed 0.85 per cent compared to 1.08 per cent in 2000 and 1.54 per cent in 2008.
By 2020, NBC Capital believes the figure could reach 1.8 per cent.
“Oil will continue to fuel the region’s economic growth with more than 281 projects worth $304 billion in the pipeline, said the report.
But it warned that Iraq’s increasingly ambitious plans could constitute ‘the main risk factor’ to the region.
While Dubai’s current problems may be severe, the viability of its economic model remains sound.
“Don’t count the city out yet,” says Masud.
Consider also reading:
Global economy sees ‘tectonic shift’ to emerging markets
Saudi, other Arab states optimistic on economy
Gulf currency union likely to be adopted in 2015: poll
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