THE United Arab Emirates (UAE) had many reasons to celebrate its 42nd independence anniversary with pride and pomp. The economy, backed by rising oil revenues and entrepreneurship, continues to boom. Dubai, which is a key constituent of the federation, has also made a remarkable comeback. On November 27, the city was awarded the right to host the 2020 World Expo. The other cities that competed for the privilege were Yekaterinburg in Russia, Izmir in Turkey and Sao Paulo in Brazil. Dubai will now be the first city in the region to host a World Expo. The World Expo, held once every five years, is a prestigious event that allows the host city to showcase its economic and scientific achievements and culture. The event is expected to give the construction and tourism sectors in the region a big boost.
The turnaround in the fortunes of Dubai has been quick. Five years ago, the emirate was virtually staring at bankruptcy. Its economy had been derailed by a combination of factors, the most important being the global economic crisis. Unlike Abu Dhabi, the biggest and richest member-state of the UAE, Dubai had built its fortune by setting itself up as a global hub of commerce. The Emirate had embarked on a gargantuan construction spree, including the building of the world’s tallest building and high-end luxury accommodations for the super rich. When the economic downturn hit, property prices plunged more than 60 per cent. Expatriate white-collar workers left in droves, construction activity virtually came to a halt and Dubai’s foreign debt amounted to $100 billion.
Many economists and the Dubai government are confident that Dubai’s return to the good times is going to last. “Hosting the Expo could provide a considerable boost to the emirate’s growth and strengthen its macroeconomic outlook,” wrote Ali Moubaued, head of research for the Middle East and North Africa (MENA) at Barclays Bank, in a report. The bank has forecast a gross domestic product (GDP) expansion of 6.4 per cent over the next three years before rising to an average of 10.5 per cent between 2018 and 2020.
It was the generous loan of $20 billion from Abu Dhabi that helped to save the situation for Dubai. Dubai will have to repay $64 billion in outstanding debts to international financial institutions in the next two years. Abu Dhabi has huge foreign currency reserves and has no doubt contributed to the bulk of the UAE’s foreign exchange reserves, which, says Sheikh Nasser Sultan al Suweidi, Governor of the UAE Central Bank, is “one-third of India’s foreign reserves”. The Emirate is among the top producers of oil and gas.
Dubai, meanwhile, seems to have reinvented itself. Property prices have started rising again and the stock market index has risen by 81 per cent this year. With the expected thaw in relations between the West and Iran, Dubai is set to make further gains. The economic sanctions imposed on Iran and the pressure on the UAE government by the United States administration had heavily circumscribed Iranian business activities and banking facilities. The UAE Central Bank Governor told foreign correspondents in Abu Dhabi that following the sanctions imposed by the United Nations Security Council, trade with Iran had dipped from $45 billion a year to $4 billion last year. Dubai was the main city in the UAE from where Iranian businesses and banks operated.
Historically, the UAE has gained from the turbulence in the region. During the turmoil in Iraq, rich businessmen in that country shifted their assets and activities to the UAE. Prominent Syrian businessmen have now transferred their capital and expertise to the UAE. Dubai’s ruler, Sheikh Mohammed bin Rashid al Makhtoum, who is also the Prime Minister of the UAE, is once again revelling in the public eye. Dubai, he says, is destined to be the “transfer point” between the East and the West and also the “touristic, cultural and economic capital of the two billion people around us”. He had said on previous occasions that Dubai, along with India and China, would be the three engines of economic growth in the Asian region. Dubai is building the world’s largest airport to coincide with the Expo. The airport that is currently in use also compares favourably with the biggest in the world.
The UAE’s Minister of State for Foreign Affairs, Anwar Gargash, is of the view that his nation does not benefit too much from the turmoil in the region. “Stability in the region is more profitable for us,” he asserted. He said his country had learnt some lessons from the Arab Spring. “You have to give opportunities to the young,” he said. The UAE had taken a tough stance on domestic dissent, arresting members and sympathisers of the Muslim Brothers, even when the party was in power in Egypt. The UAE, along with Saudi Arabia and Kuwait, has been a solid supporter of the army takeover in Egypt. It was quick to support the Egyptian government with generous funding totalling over $12 billion. “Chaos has its own dynamics. Religious and ideological parties manipulated the Arab Spring,” said Gargash.
The Minister welcomed the interim nuclear agreement signed between Iran and the U.S. He said the preliminary agreement was good but hastened to add that it was the final agreement that really mattered. He said the international community should be absolutely clear about the nature of Iran’s nuclear programme. He admitted to differences in the Gulf Cooperation Council (GCC) on issues relating to Syria, Egypt and Iran, but added: “No serious differences are there in the GCC. There are some differences on regional issues. We don’t have to agree on every single issue.”
The Minister said there was no cause for worry about the shifting sands in U.S. foreign policy. “There is always a high tide and a low tide in U.S. foreign policy. We are facing the low tide,” said Gargash. The Obama administration, he said, was more focussed on domestic economic issues. The Minister, however, admitted that the Obama administration’s shift of focus to the East was too important to be ignored. He said the Gulf countries wanted the U.S. to remain in the region as “other non-Arab players are involved in the region”. The Minister may have been alluding to the role of Iran and Russia in Syria. “Increasing interference of non-Arab players has complicated the problems in the region,” he asserted.
In the third week of November, the UAE’s two major airline companies, Emirates (owned by Dubai’s ruling family) and Etihad, the UAE’s national airline with Abu Dhabi as its hub, took the aviation industry by surprise and awe by placing huge orders for passenger planes. All the orders were placed during the annual Dubai air show. Emirates has placed an order for 150 new Boeing 777Xs, with an option of buying 50 more, and 50 Airbus A380s, the biggest passenger jet in operation today. The deal, which is worth $99 billion, has been described as the largest-ever aviation deal in history. Emirates had started with one plane in 1985. It today dominates the aviation sector in West and South Asia, having secured a strong foothold in India in the last decade. Etihad put in an order for 143 planes, which includes 30 Boeing 787s and 50 Airbus A380s. Etihad has signed a deal with India’s Jet Airways. It wants to replicate rival Emirates’ success story in India. Both deals, cleared by successive United Progressive Alliance governments, have come in for criticism in India.
The steady growth of the UAE economy may not be good news for everybody if corrective steps are not taken to mitigate the problems of the expatriate labour force and white-collar workers. The wages of the workers in the construction industry and other areas have not risen with the cost of living. The income gap between a small elite and a predominantly expatriate population, comprising mainly those working in the construction and service industries, has been increasing. The local Emirati unemployment rate is only at 2.5 per cent, according to government officials. This is much lower than the figures of the unemployed in neighbouring countries such as Saudi Arabia, Oman and Bahrain.
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