uae insight report - 14 dec 2016

World Business Times INSIGHT: United Arab Emirates

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Markets resist urge to merge UAE bourses weather perfect storm but still face liquidity challenge

World Business Times is a leading global provider of business intelligence and insight

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Bankruptcy law in the UAE New legislation aims to avoid past pitfalls and reassure investors

United Arab Emirates

UAE unfazed by economic challenges ahead

Sheikh Mohammed Bin Zayed Al Nahyan Crown Prince of Abu Dhabi

With the second largest economy in the Arab world, the UAE has pursued a conscious strategy to develop away from an oil-dependent economy since the country’s founding in 1971.

Lower oil prices have made the UAE’s economic diversification practically prescient, and helped to place it ahead in the region with a GDP growth rate of 2.6% in 2017. That doesn’t mean the UAE is unscathed by the oil slump.

The IMF has downgraded its forecast for the country’s economic growth twice in 2016, from 2.6% to 2.4%.

The IMF praised the UAE’s consistent diversification efforts, but warned that

government anticipates generating over $3.3 billion in revenue, or roughly 1% of the UAE’s current GDP. The UAE also recently established the Federal Tax Authority, which has led to speculation that the country will follow the IMF’s recommendations to implement additional taxes.

Taxation, even VAT, will have serious consequences for the UAE’s private sector. Additionally, how VAT revenue will be divided between each emirate and whether emirates may establish individual policies remains to be seen. Any move toward emiratespecific tax policies could undermine the UAE’s economic unity.

SMEs are the heart of the UAE’s post-oil economic vision and each emirate hosts its own free zones with regulations set according to their own economic objectives. However, SMEs across the UAE have felt the pressure of the strong US dollar and slow global economy. SMEs make up 86% of the UAE’s total workforce and 60% of its GDP, according to Sultan bin Saeed Al Mansouri, the UAE’s Minister of Economy. Though they account for 94% of the UAE’s

operating companies, SMEs have felt the brunt of delayed payments, increased governmental fees, stagnant employment, and lower liquidity.

Considered central to the UAE’s diversification policy, SMEs have struggled since oil prices hit their lowest point in 2014 and have yet to bounce back. New incorporations were up 18% in Q1 of 2016, but no data exist regarding how many have closed. Instead, the Emirates NBD sponsored Purchasing Managers Index (PMI) gives some insight.

Lower oil prices slowed private sector growth as governments across the GCC tightened belts with cautious overtures toward austerity. The PMI showed the UAE’s non-oil private business sector activity falling from 54.1% in September 2016 to 53.3% in October 2016, the lowest level in six months. Though the PMI showed promising signs for a stronger Q4, employment stagnated and new work was subdued. The reduction in cash deposits with banks also had a negative impact on the private sector’s liquidity whilst governments sought relief from low oil prices through sovereign bonds

Geopolitical uncertainty How will political upheaval in the UK and US affect the UAE? Though Brexit may prove enriching for overseas investors, expatriates with UK-based real property and other investments, including pension plans, will see a significant reduction in value with no rebound in sight.

The only certainty is change, especially following the UK’s decision to part ways with the EU and the surprise election of Donald Trump as President of the United States of America. The UAE now faces an uncertain era with two key allies embracing isolationist nationalism over international cooperation, whilst three on-going conflicts threaten stability throughout the MENA region. Though the long-term effects of these unprecedented events will take years to establish, the UAE, and the Middle East, can expect to see its relationships with the US and UK change on a fundamental level.

In June, the world was shocked when the UK voted to leave the EU. Though it will be years before analysts and pundits can gauge Brexit’s full effect, in the short term, the move has proved a boon for UAE investors who have long favoured the UK property market. The British pound fell steeply following Brexit’s announcement and has failed to stage a meaningful comeback against a strong US dollar.

According to multiple analysts and economists, the British pound is likely to experience fluctuations in value against the US dollar and the Euro as the British government

battles a court case about how Brexit can be triggered. “However, there is a huge amount of uncertainty around [the court case], and from that point of view I think sterling is at the very least likely to see a lot of volatility and still remains pretty vulnerable,” said Rabobank currency specialist Jane Foley. The UAE dirham’s increased purchasing power has already benefitted the portfolios of UAE-based investment funds. Abu Dhabi Financial Group LLC netted significant savings when it closed its purchase of New Scotland Yard due to the pound’s 22.7% fall against the UAE dirham, almost exclusively as a result of Brexit. Charles Pinchbeck, head of West End development at JLL, said the sale shows “continuing international confidence in the London market.”

Though Brexit may prove enriching for overseas investors, expatriates with UK-based real property and other investments, including pension plans, will see a significant reduction in value with no rebound in sight. As the UK government continues to wrestle with how and when to invoke Article 7 of the Lisbon Treaty, uncertainty looms over whether London will retain its

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status as a global financial hub, and whether the EU can survive Britain’s exit as France enters an election cycle where a “Frexit” is a serious possibility and Italy has voted against a constitutional referendum, forcing Prime Minister Matteo Renzi to resign. Though Austria has managed to avoid the same fate by electing the Green Party’s Alexander Van der Bellen as president over far-right, anti-EU candidate Norbert Hofer, the EU’s future is looking increasingly bleak. Whether the EU will manage to survive or not, the UAE should focus on its relationships with member countries, positioning itself for trade negotiations if and when another exit occurs. GCC leaders have already signalled their readiness to continue relations with a post-Brexit UK by hosting UK Prime Minister Theresa May at the GCC Summit. There, Ms. May discussed the UK’s commitment to helping the region counter “Iran’s destablising activities” and working together to achieve joint safety initiatives and bilateral trade ties.

Though the country has always held its own policy in the MENA region, as it exits the EU, direct economic and security interests are likely to take precedence. Of working directly with GCC countries after Brexit, Ms. May said in a recent statement, ‘There is so much we can do together – whether it is helping one another to prevent terrorist attacks, Gulf investment regenerating cities

British Prime Minister Theresa May meets with GCC leaders

across the UK, or British businesses helping Gulf countries to achieve their long term vision of reform.”

What will be more of a struggle is how the political uncertainty introduced

by Brexit will affect the UAE and the region. As Scotland and Northern Ireland discuss breaking from the UK, the UAE could see its former ally fracture into three separate countries with competing interests.

In another surprising move, Donald J. Trump was elected as US President following a deeply contentious, and at times openly antagonistic, campaign. Whether Mr. Trump is committed to implementing any of his campaign promises remains to be seen; however, his vow to “Make America Great Again!” underscores one unchanging theme - an inward-looking, increasingly isolationist America. For the MENA region, American policy has often been a delicate, but largely predictable, tightrope act balancing competing interests and open conflict. American administrations change regularly but its Middle East

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and drawing down on savings, which further stressed the money market.

The construction, hospitality, and tourism sectors supported the economy, but SMEs absorbed most of the pressure. The new federal bankruptcy law may provide relief, allowing ailing SMEs to restructure and removing some criminal liability for company debts. However, an increased focus on relieving day-today economic issues would better serve the UAE’s overall economic vision, such as increasing incubator funding for national and expatriate SMEs, adjusting regulatory frameworks to boost e-commerce, and working with banks to ease borrowing and loan restructuring.

China remains a bright spot in the UAE’s economic landscape. The countries maintain strong bilateral trade ties, and Chinese companies continue to establish regional offices in the UAE to access the MENA market for a diverse range of goods.

The UAE is clearing the way for Chinese investors with a commercial representative office in Shanghai as well as holding several joint

conferences and exploratory meetings.

Chinese construction and engineering companies are now moving into the UAE’s lucrative property development sector. China State Construction Engineering Corporation (Middle East) LLC is a regular joint venture partner with major UAE developers.

Tourism from China has increased significantly, particularly for Dubai and Ras Al Khaimah, but China has suffered its own economic setbacks.

Real growth is at the slowest level in 25 years while debt is high. Though a Chinese economic meltdown is unlikely, there is cause for concern and caution going forward to gauge whether actual growth develops.

The UAE hasn’t discounted longstanding trade partners, including the UK. Prime Minister Theresa May has made overtures to the GCC to set the stage for a new future following Brexit.

She noted that, “As the UK leaves the EU, we should seize the opportunity to forge a new trade arrangement between the UK and the Gulf.” Ms. May recently attended the GCC Summit, becoming the first UK prime minister to attend and the first female leader to meet with GCC leaders collectively.

At the Summit, GCC and UK leaders issued a joint statement, declaring that, “We will make it a priority, when the UK leaves the European Union, to build the closest possible commercial and economic relationship, and [work] even more closely with business to promote actively GCC-UK economic engagement beyond current levels.”

Ms. May also emphasised that, “I want these talks to pave the way for an ambitious trade arrangement.”

Through hard work, the country is better positioned to transition to a less oil-dependent economy, but continued collaboration between emirates and cautious reflection coupled with careful action going forward will ensure the UAE’s vision becomes a reality.

foreign policy remained more or less consistent. Mr. Trump’s election as the new American President casts doubt on a previously steady policy direction.

No one yet knows how a Trump presidency will affect the Middle East.

As the transition begins to take shape, few elements have materialised into substantive policies. One possible point of clarity has emerged with the appointment of Mr. Trump’s foreign policy team. Lt. Gen. Michael Flynn, Mr. Trump’s selection for national security adviser, has shown a singleminded focus on combating “radical Islam,” and has repeatedly claimed Iran supports terrorist groups around the world. Both Lt. Gen. Flynn and Mr. Trump strongly disagree with the Iran nuclear deal, with Mr. Trump threatening to withdraw US backing to the dismay of European partners. Such a move could also anger Russia who has been thawing its own relationship with Iran recently. Though pulling out of the deal is easier said than done, Mr. Trump’s recent announcement that the US will not ratify the TransPacific Partnership indicates he could follow through with his threat, leaving European allies in the difficult position of deciding whether to press on or abandon the deal entirely.

These developments suggest an increased commitment to isolationism with a more transactional relationship set to emerge with regional power players like Saudi Arabia and the UAE. As Lina Khatib, head of the Middle East and North Africa division at Chatham House stated, “It’s an approach based on turning a blind eye to many international issues with the idea of building a

metaphorical wall around the United States and diverting attention to national security in a way that defines national security from a rather narrow perspective.” It’s doubtful Mr. Trump’s administration will expend significant energy tackling difficult international diplomacy when there is business to be done. His son, Donald Trump Jr., met with members of a pro-Russian French think tank in October to discuss resolving the Syrian conflict. Such a meeting suggests that Mr. Trump will support Russia’s plans to lay the groundwork for resolution, in keeping with previous statements to work closely with Mr. Putin.

Mr. Trump’s own personal real estate investments in the UAE suggest he believes the nation continues to offer a financial safe haven in a troubled region. It remains to be seen whether business ties will prove stronger than Mr. Trump’s inflammatory campaign rhetoric. His statements advocating the torture of terror subjects, registering American Muslims, and possibly banning Muslim visitors could decrease GCC investors’ appetite for US-based investments. Still, with both the UAE dirham and the Saudi riyal pegged to the US dollar, any real break with the US is unlikely, leaving the UAE to navigate uncertain terrain for the time being.

For the UAE, the US and the UK have introduced a new element to long-standing relationships – uncertainty. Coupled with depressed oil prices and regional instability, the UAE should prepare itself for a time of global and local transition where anything is possible but nothing is certain.

Lower oil prices are a harsh reality and the UAE’s vision of a diversified economy must now face the true test of implementation. Unity is key to transition in GCC region.

curbing government spending and cutting remaining energy subsidies were essential to future growth and development. As 2017 dawns, the key to ensuring the UAE’s vision will continue to rest on its ability to maintain a strong, unified presence throughout the region and the world.

His Highness Sheikh Mohammed Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Supreme Commander of the UAE Armed Forces, supports the country’s unified economic vision as critical to the success and stability of the nation and its citizens. “Do not be concerned as long as our nation is united.” Though each emirate has pursued individual economic objectives, the country has adopted a collaborative economic plan for a diversified economy. This unified effort means the UAE is introducing the previously unthinkable – taxation.

VAT is considered a game-changer for the country’s own development plans and for the GCC. The UAE will introduce VAT in 2018 for businesses with $1 million of revenue or more.

The rate is expected to be 5% with some industries exempted.

The

Travel, trade and tourism still the dynamo of UAE growth

December 14, 2016

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Al Maryah Island, Abu Dhabi’s business and lifestyle destination

Crossing the three T’s

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Markets resist urge to merge

A triple jump to success DIFC executives believe its business expansion strategy is sufficiently diversified not to be completely reliant on one market for growth.

Although the process of collaboration is at an early stage, it is believed the new market would look to increase liquidity by making itself more attractive to international investors.

Differences in regulatory regimes... and the interest of market constituents have been cited as the reason to keep the status quo

UAE stock markets have weathered a “perfect storm” since the global financial crisis, but have yet to recover the levels reached in 2008.

The worldwide international meltdown in 2008-9, the subsequent collapse in real estate asset values, followed by the fall in the oil price two years ago, all had significant effects for the two principal stock exchanges - the Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange (ADX). Neither has regained the levels seen before the onset of the great credit crunch.

But both have pulled back a lot of the ground lost then. Market experts say that the outlook is improving, and would be even brighter if one basic issue was addressed - the lack of liquidity in regional markets.

Mohammed Al Yasin, managing director of the National Bank of Abu Dhabi’s securities division, says that liquidity levels, as measured by the volume of shares traded, have improved in the second half of 2016.

But he believes more needs to be done to boost underlying levels of liquidity.

“The problem has been that increases in liquidity are not sustained for very long. There is no depth in public markets, and that’s mainly because of the lack of initial public offerings. Slow markets are not good for liquidity or IPOs,” he said.

The third UAE market, Nasdaq Dubai, is aimed at international investors seeking capital markets access in the region. It is home to one of the UAE’s biggest companies, the global ports business DP World, and several other big companies. It has also become a platform for trading sukook (Islamic bonds) and recently launched a trading platform in equity futures.

Abu Dhabi Global Market, the UAE’s newest free zone, finished its first year of business with more than 210 member firms licensed in its base at Al Maryah Island, but knows it must push on in 2016 to take it to the next level in the ranks of international financial centres.

Ahmed Al Sayegh, the ADGM chairman who led the three year process to declare the market “open for business” in 2015, is confident of its basic business rationale.

“We are in a fast-growing region.

The Middle East, Africa, India and Asia remain the key growth engines in an otherwise stagnant world economy for the next few decades. The strong macroeconomic fundamentals will create huge demand for financial intermediation and services such as corporate banking, treasury services, foreign exchange and capital markets,” he said.

ADGM’s mission is to contribute to the Vision 2030 strategic economic plan, which wants to move away from

Some analysts believe that having three markets is too much for a comparatively small investor pool like the UAE, and have advocated merging the two biggest exchanges. (Nasdaq Dubai and DFM already share many trading and back office functions.)

But so far, despite extensive studies on potential consolidation, the authorities in Dubai and the capital have resisted the urge to merge.

Differences in regulatory regimes there are three different regulators covering the UAE’s financial markets and the interest of market constituents, have been cited as the reason to keep the status quo.

Instead, the challenge of liquidity is being addressed in a new way by the Abu Dhabi Global Market (ADGM), the new financial free zone in the capital. Last summer, ADGM and ADX signed a memorandum of understanding to explore the possibility of setting up a new exchange.

Although the process of collaboration is at an early stage, it is believed the new market would look to increase liquidity by making itself more attractive to international investors with their multi-billion dollar equity portfolios.

The UAE has already had a boost from being included in the MSCI emerging markets indices in 2014, and a new market in Abu Dhabi’s “offshore” centre could lure fresh foreign investment into the region.

The Emirates’ government could also play a greater part, Mr. Yasin believes. “The only party that can give an impetus for new listings is the government. It is time for governments to spin off more of their own companies.

They do not have to sell 50%, between 5% and 15% would increase liquidity greatly while allowing the government to retain control. It has worked for Saudi Arabia, where the mere promise to sell a small part of Aramco by a yet undisclosed date in 2018 has given the market a boost,” he said.

oil dependence via the creation of a more diversified economy in multiple sectors, including financial services.

Nonetheless, ADGM has been working to define its specific attraction in an increasingly crowded market place. Why would a big global financial institution opt for ADGM, rather than the other, more established financial centres in the Arabian Gulf?

The answer, in a word, is capital. Abu Dhabi is the wealthiest emirate in the UAE, and is home to some of the richest sovereign wealth funds and investment companies in the world.

One of those, Mubadala Development Company, recently put its weight behind the new free zone by basing its Mubadala Capital offshoot there. Other Sovereign Wealth Funds could follow suit.

In addition, Abu Dhabi has a first class reputation for financial prudence and stability, in a region often at the mercy of macro economic factors like the price of oil, international real estate trends, or global banking liquidity.

The oil-rich UAE capital of course has to make its economic strategic plans in the light of global energy prices, and there has been rationalisation and consolidation over the past couple of years as the price of crude plummeted.

The new austerity has not

December 14, 2016

Dubai International Financial Centre (DIFC)

DIFC and ADGM are complementary for each other, and will help create a cluster of financial businesses in the UAE The Dubai International Financial Centre is well on the way to meeting the ambitious goals it set itself two years ago, when it declared it would aim to triple in size - in terms of physical capacity, financial firepower and member firms - by 2024.

Essa Kazim, the governor of the DIFC and one of the architects of Dubai’s strategy in the financial industry, was able to report a record 2015 year for the centre, with a 16% gain in member firms and a 14% jump in number of employees to more than 21,000. That performance means it is already more than 40% nearer reaching its target in just two years.

Mr Kazim said: “We are the gateway to the world’s fastestgrowing markets across the Middle East, South Asia and Africa. This is reflected in our latest results and initiatives, which represent a major milestone in delivering on the centre’s forward-looking 2024 strategy.”

To reach its target, DIFC

Essa Kazim Governor, DIFC

calculates it has to keep growing at a minimum of 10% per year - which looks eminently achievable set against current growth rates.

One of the main elements of the “Triple” strategy has been to tap the growing financial sectors in Asia to attract them to DIFC, and that has been a significant success. Asian and Middle East firms now make up a third of DIFC’s membership - a significant

trend compared with the pronounced Western-leaning emphasis on DIFC in its first decade of business.

Banks and other financial institutions from China, India and elsewhere in Asia have been persuaded of the DIFC’s positioning as a bridge between Asia, the Middle East and Africa, part of the new “south-south” pattern of global trade that has been augmented by China’s “One belt, one road” economic strategy.

Most of the top Chinese banks are registered in DIFC, and many have the top Category 1 licence, which means they can provide the full range of financial services including deposit taking and credit provision.

Visits to China by DIFC executives earlier this year further cemented relationships between the DIFC and Asia’s biggest economic and financial centre, but attention is also being paid to India, which has the highest economic growth rates of all the big global economies.

In physical terms, the development of DIFC’s location in the heart of Dubai’s business district continues apace. Two big projects remain as the final pieces of the jigsaw: the $272 million plan to build Gate Avenue, a retail and leisure development running along the “spine” of the financial hub, connecting the iconic Gate building virtually to the Emaar Square district, and the development of Gate Village 11, which will add another commercial and retail hub to the Village, an area rapidly turning into the social and cultural heart of DIFC. Once those two are complete sometime in 2018 - the DIFC will have the capacity to push towards its 2024 goal of 50,000 employees on the site.

Since its launch in 2004, the DIFC has had to meet occasional challenges, none more than the financial crisis of 2009, which put a temporary check on its growth. What might the challenges be between now and 2024?

In a highly leveraged world, the threat of another global financial crisis is always there, and the eastward tilt towards Asia carries with it an element of risk in that some economists believe China will face problems in its transition from being an export-led economy to a domestic consumer-oriented society.

But DIFC executives believe its business expansion strategy is sufficiently diversified not to be completely reliant on one market for growth.

Might the threat to growth come instead from increased competition from other financial centres in the region, perhaps from a revamped Qatar Financial Centre or even the recent new comer Abu Dhabi Global Market?

At least with regard to ADGM, Mr Kazim is sanguine about the prospects for competitive rivalry.

“DIFC and ADGM are complementary for each other, and will help create a cluster of financial businesses in the UAE,” he said.

The new capital of gulf finance As the UAE’s newest financial centre, Abu Dhabi aims to become a hub for investment services and a regional leader in financial technology.

significantly affected the pace of growth at ADGM, however, and its first year record should be seen against this background.

Mr. Al Sayegh indicated as much recently when he referred to “the backdrop of slow global economic growth, volatile market conditions and the reduction of global footprint by financial institutions.”

ADGM’s regulatory framework, drawn up under Richard Teng, chief executive of the financial services watchdog, gives it capacity to conduct business across the full spectrum of the industry, from investment banking and brooking, through to foreign exchange and equities trading.

But, at least in its initial phase, ADGM has focused on wealth and asset management, and private banking as its main business platforms. The logic is that, as the great wealth markets of Asia come into their own, the asset management industry should move eastwards with them, and Abu Dhabi is the perfect geographical and timezone hub for the growing ranks of Asian and Middle Eastern high net worth individuals.

There is also a sense that western regulators in the USA, European Union, and Switzerland (once home of the industry) have become too heavy-

handed in their approach.

The ADGM regulator, while rigorous in the application of its custom-made rule book, is also committed to creating a business friendly, flexible environment for the world’s super-rich.

The strategy notched up a significant gain in November when ADGM announced Aberdeen Asset Management, one of the best known brands in the global wealth business with $360 billion in funds under management, announced it was to set up in ADGM’s jurisdiction.

Martin Gilbert, Aberdeen founder and chief executive, gave his take on the appeal of ADGM: “I’m impressed by the regulatory regime, by the legal framework and by the fact that Abu Dhabi seems a great place to live and work. And the fact that we’d be among the first to be here. I like to be among the first into a new place. You’ve got to be where nobody else is yet,” he said.

Another big part of the ADGM strategy, and a first for the Gulf region, is the focus on the booming market for financial technology (fintech). This - the global phenomenon of the application of modern digital technology to the financial industry - is one of the fastest growing businesses in the world, and is worth billions of dollars and rising.

From basic mobile apps to

facilitate customer banking to sophisticated systems like Blockchain that revolutionise big banks’ payment processes, fintech is number one on many bankers’ priorities list.

Mr. Al Sayegh announced ADGM’s ambition to be the regional fintech capital, with the creation of a special regulatory laboratory to encourage start-ups in this field. The first batch of firms in this fintech “incubator” is just beginning work on Al Maryah.

One firm that needed little convincing of the attractions of ADGM is Abu Dhabi Financial Group, the fast growing investment manager, which launched its “Goldilocks” fund on the market, the first fund to be based there in what could be the start of a trend.

Jassim Alseddiqi, ADFG’s chief executive, said: “We are an Abu Dhabi institution and we have a high regard for the credibility of ADGM. There is real wealth in Abu Dhabi, which is the hub of banking in the GCC.” Other funds are believed to be considering ADGM as their home,

especially big infrastructure funds which hope to benefit from Abu Dhabi’s long expertise in funding big developments like roads, bridges and other transport facilities, as well as hospitals, schools and other forms of social infrastructure.

ADGM executives insist it is not in competition with other financial centres - notably the Dubai International Financial Centre and the Qatar Financial Centre - but inevitably, with a growing number of regional centres competing for similar business in financial services, there will be a natural rivalry.

In its first year, ADGM has performed well in comparison to these other centres, at least matching their start-up growth rates. Now the challenge is to build on that to maintain its momentum.

Ahmed Al Sayegh Chairman, ADGM

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Which port of call?

Port expansion and capacity limits mark growth of key UAE ports.

Khalifa Port

Jebel Ali Port, located in the Jebel Ali Free Zone (JAFZA), is

the largest marine terminal in the Middle East and was the critical first

step in Dubai’s development from regional trading post to global hub.

The iconic port is now operating at an estimated 90% capacity with expansion plans for Terminal 3 delayed into 2017 and no further developments forthcoming for expanding Terminal 4. A mere 50 kilometres away, Abu Dhabi’s Khalifa Port, part of the Khalifa Industrial Zone (KIZAD), has announced ambitious plans for expansion, including adding 1,000 metres of quay wall, 600,000 square metres of space for cargo handling and deepening the main channel to 18 metres to accommodate the world’s largest ships. As Jebel Ali Port faces an over-capacity crisis

in the midst of a sluggish economy and places its expansion plans on hold, will Khalifa Port’s plans prove prescient or will they miss the mark?

Jebel Ali Port has long been the leader in the region, but its capacity issue threatens it prime position. As Shailesh Garg of Drewry, a leading UK-based maritime consultancy, notes, the port’s current capacity is 18 million twenty-foot equivalent units (TEUs), but “no port likes to be running at much more than 80%, it’s just too close to the top.” With expansion plans delayed into 2017, there may be an increased drive to utilise other ports with more capacity. Though Saudi Arabia’s King Abdullah

Economic City (KAEC) has seen impressive expansion, handling 1.3 million TEUs in 2015, compared to 500,000 TEUs in 2014, Khalifa Port is preparing to absorb Jebel Ali Port’s overflow.

Khalifa Port steadily increased its handling to 1.5 million TEUs last year. According to Abu Dhabi Ports chief executive Mohamed Juma Al Shamisi, “Building on recent growth at Khalifa Port, we are futureproofing our operations to ensure we can continue to attract the world’s leading operators to use our worldclass facilities that will see Capesize vessels, the largest in the cargo industry, come directly into an Abu Dhabi port for the very first time.”

As Khalifa Port prepares to manage the challenges of the future, perhaps it is learning from Jebel Ali Port’s difficulties, and its expansion plans can help it navigate the ebb and flow of trade through the region. The focus on preparing for future issues will serve Khalifa Port and KIZAD well. As Mana Mohamed Saeed Al Mulla, CEO of KIZAD says, “Abu Dhabi Ports and KIZAD remain committed to providing a superior ecosystem that boosts business growth and the development of Khalifa Port Free Trade Zone will surely help elevate KIZAD’s existing integrated offerings.”

Every cloud has a silver lining As 2017 begins, Emirates Airline is faced with the tough task of managing challenges as it tries to maintain its position as one of the top airlines in the world.

Tim Clark President, Emirates Airline

In August, Emirates Airline Flight 521 crash-landed at Dubai International Airport, bursting into flames. All 282 passengers and 18 crewmembers escaped, but one firefighter was fatally injured when a wing tank exploded. The tragic crash capped off a tumultuous year for Dubai’s flagship airline, which

has seen a 75% drop in its H1 profits and a 64% decline in profit for Emirates Group. Faced with a slump in average passenger seat factor, which fell by 75.3%, Sheikh Ahmed bin Saeed Al Maktoum, Chairman of Emirates Group, said, “Our performance for the first half of the 2016-17 financial year continues to be impacted by the strong US dollar against other major

currencies. Increased competition, as well as the sustained economic and political uncertainty in many parts of the world has added downward pressure on prices as well as dampened travel demand.” As 2017 begins, Emirates Airline is faced with the tough task of managing these challenges as it tries to maintain its position as one of the top airlines in the world.

With budget shortfalls and continued economic crunches across the globe, Emirates Airline is turning to ancillary revenue. Starting this fall, the carrier began charging for seat selection for its lowest fares, a break from its all-inclusive image. Once the territory of low-cost airlines, ancillary income now offers full-service carriers the opportunity to increase revenues in a slow economy. But the move could affect Emirates Airline’s reputation, already hit by regional instability and performance issues with $6.1 billion worth of Rolls-Royce engines for 50

of its Airbus A380 superjumbos. “We used to have one of these businessdamaging events once a year but now we have them more than once a month,” said Sir Tim Clark, president of Emirates Airline. The next batch of A380 superjumbos is due for delivery

Our commitment to rewriting the rulebook and transforming air travel is being recognised and rewarded year after year

to Dubai in early December, with orders extending into the 2020s.

Local rival Etihad Airways is also

feeling the economic sting, which could include slashing up to 2,000 jobs at Alitalia and grounding up to 20 planes on unprofitable routes as it tries to resurrect the European carrier following a $591 million investment. However, its focus on luxury travel and highend service has served it well so far, leading it to win the “World’s Leading Airline” award at the 2016 World Travel Awards. As Peter Baumgartner, Etihad Airways’ chief executive officer said, “Our commitment to rewriting the rulebook and transforming air travel is being recognised and rewarded year after year.”

Etihad’s planned $1.5 billion sukuk (Islamic bonds), starting in early December, should raise significant capital for the carrier and help fund its future development. As for Emirates Airline’s future, the carrier plans to diversify its seat offerings by becoming the first Middle East airline to offer premium economy. Additionally, Rolls-

Royce has agreed to correct any issues with its A380 engines, clearing the path for Emirates Airline’s superjumbo fleet to dominate long-haul travel. The carrier will also continue looking at unbundling services to compete with low-cost airlines, allowing for lower ticket prices whilst the US dollar remains strong. Though 2016 has been a trying year for Emirates Airline, the carrier is adjusting its course for smoother skies in 2017.

Ready to launch The GCC’s e-commerce market is ready to launch, but it can only really develop if payment and behavioural obstacles can be cleared.

E-commerce may be reaching a tipping point in the UAE. With the upcoming launch of Noon. com, the region is poised for an e-commerce breakthrough. Based in Riyadh, Noon.com is backed by Saudi Arabia’s Public Investment Fund and Mohamed Alabbar, the chairman of Emaar Properties, one of the UAE’s leading real-estate companies, known for various largescale projects such as Burj Khalifa, the tallest building in the world.

The $1 billion e-commerce site is set to launch in January 2017 with 20 million products, a dedicated logistics centre in Dubai South (an economic free zone formerly known as Dubai World Central supporting activities including aviation, commercial, exhibition, humanitarian, residential and others), a dedicated payment portal, and same-day delivery planned for shoppers throughout the Middle East.

Mr. Alabbar claims the site will be “game-changing.” For Dubaibased online retailer Souq.com FZ, years of laying the groundwork for e-commerce have led to discussions with US online retail giant Amazon. for the purchase of the site. Though these developments show that the e-commerce sector is ready for exciting growth, fundamental problems could still impede progress.

Online shopping still has a way

to go in the Middle East. 33% of Internet users in the MENA region prefer online shopping, with the UAE and Saudi Arabia leading the market. Dubai residents make up 46% of online shoppers in the UAE according to Awok.com, whilst Network International found that 34% of UAE residents have made an online purchase between one and five times a week, with 5% making a purchase more than five times a week as of Q2 2015. Sam Whitcombe, Vice President of Spiral Click Web Technologies, a leading web development and design agency based in Dubai, feels bullish about the potential of e-commerce in the region in 2017. “We have seen an increase in enquiries from small e-commerce websites to massive online marketplaces, from tech entrepreneurs to the largest retail brands who are all now getting in on the action by opening their online stores to complement their bricks and mortar retail shops.”

Millennials are expected to fuel the e-commerce boom. With high disposable income compared to global peers, UAE-based millennials make up 51% of the current market, which is expected to expand to $10 billion by 2018, being half that only last year. With only 15% of regional businesses having an online presence, and Internet sales accounting for 3.9% of total sales

in 2015, the launch of Noon.com and Amazon’s potential purchase of Souq.com mark a new age for online sales in the Middle East. Mr. Alabbar stated, “We are turning the e-commerce environment in the region upside down,” with Noon. com bringing “nothing less than a quantum leap in retail in the region, and the world.”

However, fundamental problems exist that could affect e-commerce’s growth throughout the region. GCCbased online payment gateway providers have developed but customers are still wary following poor experiences, as reported in a study by Visa. Customers also express concern over security, particularly regarding their card information. Additionally, with the highest number of shops per capita in the world, UAE consumers are accustomed to the “touch and feel” factor when making purchases.

Many customers also still prefer cash payment, which can be difficult to arrange through an online portal.

Yet despite these barriers, Souq. com recently sold 1 million products during its four-day White Friday sale in late November. The GCC’s e-commerce market is ready to launch, but it can only really develop if payment and behavioural obstacles can be cleared.

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For years, the international business community has urged the UAE to adopt a bankruptcy law to allow troubled companies to restructure during economic downturns. This year, the UAE obliged when UAE President Sheikh Khalifa bin Zayed Al Nahyan issued Decree No. 9 of 2016, officially approving bankruptcy protection provisions for UAE mainland and free zone companies (except the Dubai International Financial Centre and Abu Dhabi Global Market free zones). Expected to take effect in early 2017, the law marks a new era for the UAE business community, but whether the new bankruptcy provisions will improve confidence and performance remains to be seen.

Currently, few options exist for struggling businesses to manage difficulties that threaten operations.

If negotiations with creditors break down, business owners and managers face criminal liability for the company’s bounced cheques and unpaid debt. Over the years, many business owners have chosen to flee the UAE, leaving behind over $1.36 billion in bad debts.

Industry insiders and the UAE Banks Federation have long claimed that the UAE’s lack of formal bankruptcy law impedes business development, especially amongst SMEs that weather the worst of any economic downturn. “We commend and welcome the legislation of the bankruptcy law, which the government has recognised as a pre-requisite to the country’s future economic development and as an essential tool to maintain the well-being of the economy,” says AbdulAziz Al Ghurair, chairman of the UAE Banks Federation and Mashreq Bank.

The new law offers struggling businesses the opportunity to restructure or reorganise financially, pre-emptively settle with creditors, or raise new capital through courtmandated proceedings. The new Committee of Financial Restructuring will oversee applicants, appoint experts, and safeguard the rights of

World Business Times is a leading global provider of business intelligence and insight

Bankruptcy law in the UAE Currently, few options exist for struggling businesses to manage difficulties that threaten operations. The law marks a new era for the UAE business community, but whether the new bankruptcy provisions will improve confidence and performance remains to be seen.

01

SECTOR-WISE SPLIT OF WORKFORCE EMPLOYED BY SMEs

SMEs ACCOUNT FOR 95% OF THE BUSINESS ESTABLISHMENTS IN DUBAI, WITH A MAJORITY OF THESE OPERATING IN THE TRADING SECTOR

SERVICES 51%

02

TRADING 33% MANUFACTURING 16%

MEDIUM, 5% LARGE, 5%

03

SMALL, 18%

MICRO FIRMS ACCOUNT FOR 72% OF THE TOTAL BUSINESS COUNT IN DUBAI, FOLLOWED

BY SMALL AND MEDIUM FIRMS ACCOUNTING FOR 18% AND 5% RESPECTIVELY

MANUFACTURING 8%

SERVICES 35%

TRADING 57%

SECTOR-WISE SPLIT OF SMEs IN DUBAI

4 UAE

MICRO, 72%

04

GROSS VALUE ADD BY SIZE OF FIRMS

05

SMALL, 15%

MEDIUM, 17%

LARGE, 60% MICRO, 9%

debtors and creditors as companies work through the bankruptcy process.

The law will also shield owners and executives from criminal liability, including jail time for the company’s debts. However, companies that default on their debts and deliberately avoid filing for bankruptcy risk a fine of up to $272,260 and a prison sentence of up to five years for the owners and executives.

With the UAE government keen to develop the SME sector, the bankruptcy law should reassure the international business community

40%

42%

SMEs COUNT FOR 95% OF THE TOTAL ENTERPRISE POPULATION OF DUBAI SMEs COUNT FOR 42% OF THE WORKFORCE OF DUBAI SMEs COUNT FOR 40% OF THE GDP OF DUBAI

AbdulAziz Al Ghurair Chairman, UAE Banks Federation and Mashreq Bank

of the country’s commitment to diversifying the economy.

However, it will take some time before a real sense of confidence about bankruptcy can develop.

“The law is very well drafted and very comprehensive, with wellstructured provisions equivalent to Chapter 11 [in the US] that will protect insolvent companies from going bankrupt. The main concern is the practicalities,” says Essam Al Tamimi, senior partner at Al Tamimi & Company.

As the first system of its kind

The UAE stands firm in its commitment to respecting diversity at home and abroad.

By focusing on innovation, judicial and service excellence, meeting local and global standards, and establishing the world’s strongest enforcement regime, the DIFC Courts set international standards.

108 during the same period in 2015.

Though overall filings decreased, the total value of claims increased from $1.9 million to $2.4 million, following the introduction of the higher $272,249 threshold. “The DIFC in the first half of 2016 highlights the progress we are making in our mission to become one of the world’s leading commercial courts.

It is particularly pleasing to see the work we have done to be one of the world’s most connected courts leading directly to a record number of businesses turning to the DIFC Courts to enforce monies owed to them,” says Mark Beer, DIFC Courts CEO and Registrar.

Though 2016 has brought muchdeserved growth and recognition, DIFC Courts are not resting on their laurels.

At the beginning of the year, the DIFC Courts announced its five-year plan to become one of the world’s leading commercial courts by 2021. By focusing on innovation, judicial and service excellence, meeting local and global standards, and establishing the world’s strongest enforcement regime, the DIFC Courts strive to set international standards of judicial excellence.

Part of the five-year plan is the GCC’s first “virtual court.” As part of the Small Claims Tribunal, the “virtualcourt” will use easily available digital communication programmes to allow claimants and respondents to attend proceedings whilst residing outside of the UAE. With the UAE’s highly mobile and global business community, this “virtual court” will help businesses save both time and money when managing a dispute. “In this day and age, courts need to stop feeling that they are geographically bound. So, we

in the GCC, the UAE is sailing in uncharted waters. The law itself will depend heavily on US, UK, France, Germany and other international bankruptcy systems, and will need to be adjusted to meet unique local requirements. The UAE legal community must also rise to the challenge of advising debtors and creditors who find themselves before the Committee of Financial Restructuring. The current lack of advocates and legal consultants with bankruptcy practice or experience means that it could be a very sharp learning curve for both companies and their representatives. Public prosecution, the police, each emirate’s Department of Economic Development and judges will also require extensive expert training to prepare for these new proceedings.

Few bankruptcy experts practice in the UAE, calling into question how the government plans to prepare for this seismic shift in the country’s legal landscape.

The new bankruptcy law has also renewed calls for a personal insolvency law that would allow individuals to restructure their personal financial affairs. Such a system is unlikely to emerge in the near future because of concerns raised over bankruptcy abuse and reporting to the applicant’s home jurisdiction. Additionally, though defaulted personal debt does negatively impact the UAE economy overall, it pales in comparison to the SME market, which produces 60% of the UAE’s non-oil GDP. SME defaults also hinder the banks’ appetite for risk and constrain the ability to arrange financing, which further depresses the SME market.

The UAE’s new bankruptcy law should provide an initial boost to the UAE market as a sign of growth and maturity. Though investors can breathe a little easier knowing they now enjoy some protection from criminal liability, implementing this new system will prove challenging.

Pillar of tolerance

DIFC Courts make gains in trust and confidence The Courts of the Dubai International Financial Centre (DIFC) began operations in 2006 and have since developed into the leading judicial forum for the MENA region. The DIFC Courts offer English-language and common law-based commercial courts, arbitration, and the region’s only Small Claims Tribunal. Originally limited to the DIFC free zone, the Courts now have authority to hear commercial cases originating outside the DIFC with the parties’ consent. This move toward elective jurisdiction has created a judicial environment that promotes confidence in the UAE’s business community.

The first half of 2016 saw DIFC Court of First Instance cases totaling $936.5 million in value including arbitration, counter-claims, and enforcement cases, compared to $634.3 million during the first half of 2015. This 48% yearon-year increase in total value shows a higher number of filed cases, but, more importantly, it represents higher claim values compared to previous years.

Businesses are increasingly willing to pursue high value claims through the DIFC Courts, which reveals stronger confidence in dispute resolution through a familiar common-law based system.

Enforcement cases saw the sharpest increase in filings, from 17 for the first half of 2015 to 50 for the same period in 2016 – an increase of 194%. In a region where enforcing a judgment can be onerous and time-consuming, this dramatic uptick in enforcement filings shows trust in the DIFC Courts’ abilities to enforce outstanding judgments.

The Small Claims Tribunal registered a dip in the number of claims filed in the first half of 2016, falling to 79 from

95%

December 14, 2016

Mark Beer CEO & Registrar, DIFC Courts

are working with Microsoft to build the region’s first virtual court. You do not have to be there; the parties can beam in via video technology,” says Mr. Beer. Ultimately, these innovative judicial processes increase confidence and reduce cost, creating a more stable business environment.

As the litigation process grows more efficient and businesses increasingly turn to it for dispute resolution, organisations must also examine how to fund a protracted legal battle. In 2016, the DIFC Courts disclosed that it was drafting formal guidelines for third party litigation funding. A party seeks out litigation funding when it would otherwise struggle to fund costs for a promising case. Originally limited to insolvency cases, litigation funding now provides much needed resources for parties who can’t or won’t fund their own dispute. As the GCC faces an era of limited liquidity, litigation funding offers claimants the option to pursue promising claims. The DIFC Courts’ announcement that it will establish formal guidelines signals that third party funders should feel secure with

the court system and enforcement.

This year also saw the DIFC Wills & Probate Registry at full operation, registering wills, guardianships, and real property-only wills for nonMuslim expats in Dubai. A DIFC will allows non-Muslim Dubai residents to avoid Shari’a principles and law in the event of their death. In 2015, expats registered over 650 wills, and 2016 is on track to outpace 2015’s rate. The Registry has entered into a number of memoranda of understanding with Dubai governmental entities, which should ease worries about the transfer of assets following probate. “[The Registry] is yet another demonstration of our efforts to support the country’s vision and drive for ingenuity, to simplify the lives of Dubai residents and investors,” says Amna Al Owais, Deputy CEO of the Dispute Resolution Authority (DRA), the DIFC’s umbrella body for dispute settlement and centre for legal excellence.

Recognising the DIFC Courts’ success in each area of its jurisdiction, Abu Dhabi Global Markets (ADGM) announced the launch of its own English-language common law-based court system. ADGM has already signed a cooperation agreement with Abu Dhabi judicial authorities to ensure reciprocal recognition and enforcement for judgments and awards between the two jurisdictions.

ADGM has embraced the important role a strong commercial court system plays in the country’s business community, and has decided to follow DIFC’s lead to create a high-quality judicial environment.

Internationally, the Middle East is often cast in the role of the strident fundamentalist, isolated from change and unwilling to welcome outsiders. Of course, such opinion ignores not only the nuances at play throughout the region, but also the very real commitment to tolerance championed by the UAE. As the first country in the world to create a formal Charter of Tolerance, Coexistence and Peace, the UAE seeks to re-cast the Middle East in the play of international relations.

As the home of a massive expatriate community from over 200 nations, the UAE shows a unique expertise in balancing national identity with tolerance. The UAE constitution establishes Islam as the state religion, but also guarantees freedom of religious worship, so long as there is no conflict with public policy.

The recent Anti-Discrimination Law forbids discrimination based on religion, caste, doctrine, race, colour, or ethnic origin as well as actions or speech meant to stoke hatred based on religion. Regarding the contents of the new Charter, “The Tolerance, Coexistence and Peace Charter will contain the most important terms for domestic and international laws related to tolerance, peace, coexistence and harmony on the one hand, and the denunciation of hate, racism, extremism, and terrorism on the other,” says Sheikha Lubna Bint Khalid Al Qasimi, the world’s first Minister of State for Tolerance.

Though the Charter’s creation is to be saluted, the real test of its effectiveness will be in its implementation. The newly created National Programme for Tolerance will work with local, federal, and

international organisations to promote tolerance, and fight extremism and radicalism. The Tolerance Thinkers Council will develop and guide the Programme’s initiatives as well as review and revise existing UAE laws to promote tolerance and combat discrimination, hatred, and extremism. The UAE government has expressed its commitment to upholding the Charter via the creation of a new Cabinet position for the Minister of State for Tolerance, the debut of a new tolerance hand sign and, more importantly for the global stage, high profile meetings and discussions with the Archbishop of Canterbury and the Vatican, and launching the Sawab Centre with the United States to promote moderate voices on social media.

The UAE’s embrace of tolerance is laudable, especially when the current international scene demands the entire region conform to a wellworn script. Tolerance alone, though, can only carry the UAE so far. The country’s large expatriate workforce – at least 80% of UAE residents are not UAE citizens – rely on work visas, provided by employers, to reside in the UAE. With no permanent residency option, UAE residents must depend upon their employers’ sponsorship to remain in the country.

As the UAE seeks to turn the page on the narrative of tolerance in the Middle East, the international community should take note – typecasting no longer holds true in the region. However, as the UAE develops its role as a pioneer for tolerance, its own agenda would be well served by reviewing the position of expatriates at home as well.

UAE 5

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With age comes maturity

Crossing the three T’s

Confidence in UAE’s construction and engineering sectors Trade, travel and tourism – UAE’s continues, with a focus on sustainability. tested three-way strategy to economic diversification still the priority.

2016 proved to be a challenging period for the UAE’s construction industry.

Reduced Government spending, delays to large infrastructural projects in Saudi Arabia and across the region, coupled with the continued low oil prices, saw many of the industy’s key players book reduced profits.

Damac Properties, one of the UAE’s leading real-estate companies saw its net profit drop by 11.7% for the last quarter of 2016. Sub-contracting companies were particularly hard hit with large-scale job losses seen throughout the industry. But as 2017 approaches, the outlook in the UAE isn’t all doom and gloom. With Abu Dhabi’s plan to invest more than $130 million in infrastructure development and several ambitious projects planned for Dubai, the UAE is continuing to actively structure the nation’s growth, keeping environmental sustainability in mind.

The construction industry has been buoyed by the successful completion of large projects in the UAE. The new Sheikh Mohammed bin Rashid Al Maktoum Road highway, phase two of the Dubai Water Canal and the completion of the Dubai Opera House have boistered public opinion that the UAE is still a world leader in innovative construction projects. Speaking with World Business Times, Adnan Mian, President and CEO of Mercury MENA, a leading international engineering firm, shared his opinion, “Perception plays an important role in creating a positive environment, which is much needed after a difficult past few years.”

After ground was broken on the Dubai World Expo 2020 site, measuring 4.38 square kilometres, and other projects linked with it were given the go ahead, the event itself is generating optimism within the industry. With infrastructure and development well underway, including a 15-kilometre extension to the Dubai Metro and continued expansion of Al Maktoum International Airport, the Dubai Government has worked hard to ensure a successful Expo 2020.

Sanjay Bhatia, Managing Director of the financial advisory firm Alpen Capital (M.E.) Ltd. commented that, “As many as 20,000 new businesses are being set up in Dubai to support the event, creating around 275,000 new

jobs across sectors. Such a boost to the economy can benefit the residential and commercial construction industries.”

There is also a focus on efficiency and sustainability, with Dubai Municipality implementing key initiatives with the goal of making Dubai a fully sustainable city by 2021.

Wastewater projects will replace the current tunnel system to centralise flow and treatment with the system designed to last 100 years, and lower electricity usage by 30%, reducing Dubai’s overall carbon footprint. Additionally, several green building regulations are now mandatory for the private as well as the public sector to meet the Dubai Government’s initiative to become the world’s leading green city. Both are examples of Dubai’s commitment to sustainable development for the UAE. Similarly, Dr. Thani Ahmed Al Zeyoudi, Minister of Climate Change and Environment, described Abu Dhabi’s Strategic Tunnel Enhancement Programme (STEP) as one of the UAE’s most important sustainable and efficient infrastructure projects.

As a massive gravity-driven hydraulic wastewater network tunnel, it will triple Abu Dhabi’s existing sewage network in order to manage population growth with an anticipated 1.9 million cubic metres of wastewater flow per day by 2030. The project will allow for a decommissioning of an estimated 35 treatment plants in Abu Dhabi. This is expected to increase the quality of life for residents and significantly reduce the UAE’s carbon footprint.

With the Abu Dhabi Midfield Terminal under construction, sustainability will take centre stage with angled, high-performance glass to reduce heat and state-ofthe-art district cooling plants. These forward-thinking features will ensure the terminal is ready for increased capacity and ensure a reduced environmental impact.

The entire facility is designed to meet the requirements for a Two Pearl Rating under the Abu Dhabi Urban Planning Council’s Estidama programme for sustainable development. As Mr. Mian states, “With the energy costs rising, sustainable design, construction and operations will be critical towards delivering energy-efficient, reliable and robust buildings.”

The UAE’s three-pronged postoil economic development plan has centred on strengthening ties with its regional trade partners whilst increasing investor opportunities at home. The country has also continued to attract more and more tourists, thanks to the

developing the technology over the past decade, highlighting congestionfree commuting and zero accidents as potential benefits. Sheikh Mohammed bin Rashid Al Maktoum, Vice President of UAE and Ruler of Dubai, tweeted earlier in 2016 that: “We have approved today a new strategy for selfdriving transport […] By the year 2030, 25% of transport in Dubai will be smart and without drivers.”

With trade, the UK is reaching out to strengthen ties as post-Brexit economic plans take shape. At the recent GCC Summit, UK Prime Minister Theresa May urged the attending heads of state to create

UAE - UK RELATIONS TIMELINE 1996

2007

2006

DP World’s take-over of UK-based Peninsular and Oriental Steam Navigation Co (P&O)

2011

2009

Dubai becomes one of the largest shareholders of London Stock Exchange

The UAE signs a Defence Cooperation Agreement with Britain

2008

An agreement on peaceful nuclear energy cooperation is signed between the UAE and United Kingdom

sheer amount of attractions available.

With effective advertising campaigns around the world, middle-income families are heading to the country in large numbers. And despite the slowing global economy, the UAE continues to drive progress with ambitious plans for futuristic travel.

Despite bleak predictions from the World Trade Organization (WTO) that global trade rates in 2016 would be at “the slowest pace since the financial crisis”, it still predicted a 3% growth in trade for the UAE. This prediction should prove correct, though the private sector did slow down for the third consecutive month in October.

2010

UAE and Britain sign the Abu Dhabi declaration as reaffirmation of the 1971 treaty of friendship

2015

2013

Sheikh Mohammed Bin Zayed Al Nahyan meets Prime Minister David Cameron at 10 Downing Street

The UK and the UAE signs a Memorandum of Understanding aimed at boosting trade

The ‘Memorandum of Guidance’ (MoG) is signed by DIFC Courts and the Commercial Court of England and Wales

2012

Prime Minister David Cameron held talks with HH Sheikh Khalifa Bin Zayed Al Nahyan during his visit to the UAE

portfolio.

Excitement is also growing as the UAE explores futuristic forms of travel. The construction of the world’s first Hyperloop promises to shoot passenger and cargo pods through a vacuum tube at over 740 miles per hour. With travel from Dubai to Abu Dhabi possible in 12 minutes, this technology could revolutionise regional travel. DP World has made a firm commitment to Hyperloop technology with a $50 million investment. Large -scale testing begins in Jebel Ali in early 2017. Driverless cars are also generating significant interest in the UAE. Several companies have been

Dubai Airport surpasses Heathrow with 70.5 million passengers

2014

UAE-British bilateral trade surpasses annual target of £12 billion (AED 70bn) two years early

2016

Theresa May becomes first British Prime minister and female leader to attend GCC summit

“economies that work for everyone”.

The UAE is the UK’s twelfth largest trading partner, with bilateral trade reaching over $15 billion in 2015.

Whilst reimagining its ties with its European trading partners, the UK is establishing core partnerships outside Europe. The UAE’s long-standing relationship with the UK means it is perfectly positioned as the UK determines its new economic reality.

Dubai also continues to strengthen cross-border trade with India, Africa and China. India is the second largest foreign direct investor in the UAE and is a regional hub for Indian business.

Analysts are expecting the trade

figure between the two countries to move towards the $100 billion mark by 2020. In Africa, the Dubai Chamber of Commerce will soon have four offices on the continent. Trade volume has increased from 1% to 9% within the past decade, and with increased air links to various African cities, along with Dubai’s existing port infrastructure, the emirate is establishing itself as the central hub for the Africa-Asia trade corridor.

Developing ties with China has been the UAE’s primary focus in 2016.

Trade volume between the two nations reached $20 billion in the first half of the year, making China Dubai’s largest trade partner. The UAE is China’s trading gateway, with roughly 60% of China’s GCC imports coming through the country. In late October, the Dubai Chamber of Commerce and Industry opened its seventh international office in Shanghai. Hisham Al Shirawi, second Vice-Chairman of Dubai Chamber summarised the value placed on its Eastern trading partner: “China is our top trading partner and we have worked hard to strengthen trade relations with the country over the last decade.”

The country is also opening its tourism market to Chinese travellers.

To expedite this goal, Chinese nationals will soon receive visas on arrival. Chinese tourists made up 4% of the total passengers in Dubai Airport, though they accounted for 8% to 12% of total travellers’ expenditure. Last year 450,000 Chinese tourists visited Dubai, an increase of 29% from 2014.

With currency devaluation in Europe and geopolitical tensions putting some travellers off the region, the UAE is looking to tap into strong economic tourist regions to the east.

As the global economy continues its sluggish growth, the UAE’s triedand-true three-prong approach to nonoil economic development should continue to serve it well as it focuses on growth during a period of uncertainty.

There’s no place like a second home Luxury real estate prices in Dubai remain buoyant, with recent levels of transactional activity being very encouraging and reflecting a positive bounce in the market.

Rahil Aslam CEO, Select Group

The cycle of price softening in Dubai’s more established secondary -market villa communities – the true luxury sector – appears to be nearing an end in 2016 as transactional fluidity returned throughout the year. After a short period of stagnation, sellers, now operating in a more stable, regulated UAE market, have reset their expectations.

High value-for-money transactions have precipitated the bulk of this year’s

Geopolitical issues are not new in the region and generally speaking, business is likely to carry on in its usual cyclical fashion sales in established communities, such as Palm Jumeirah, Emirates Living, Jumeirah Golf Estates and Al Barari, which are some of Dubai’s most prime villa developments. While there is still well-valued property to sell through tired sellers, Dubai’s prime communities are affluent, so there isn’t a huge prospective pipeline for new-to-market secondary product at discounted prices. Buyers and sellers Studio One in Dubai Marina

Whilst many UAE industries were affected by the 2016 economic slow down, tourism contributed $36.4 billion to the UAE’s economy, roughly 8.7% of GDP, and is expected to grow by 4.4% by the end of the year. The 2017 outlook is also positive, with an increase of 5.4% to the country’s GDP expected year-on-year. Legoland Dubai, Bollywood Parks Dubai, and IMG Worlds of Adventure, the world’s largest indoor theme park, opened recently, expanding the draw of Dubai Parks and Resorts. With the world’s largest Ferris wheel almost complete at the new Blueswater Development, Dubai is expanding its tourism

should expect a supply contraction in these established family areas until demand forces sale prices to move upwards again.

Many reports agree that price stability followed by a gentle incline is expected throughout 2017. Dubai is a comparatively small market, which makes it susceptible to consumer sentiment; however, in settled areas there is little impetus forcing homeowners away from the UAE. In areas where expatriates are buying to live in the property, then, as always, location wins out over other factors and investor confidence seems cautiously bright and level-headed.

While the high level of luxury found in Dubai’s newer off-plan developments is a truly exciting benchmark for quality in the UAE, especially the new Mohammed Bin Rashid City communities, it will take time for these areas to establish themselves and allow a secondary market to flourish there. There will likely be some migration to newer prime communities over the coming years as they begin hand-over, and it will be more important to upgrade older villas with contemporary finishes to compete, or price keenly for buyers to cost in renovations. Speaking to World Business Times, Rahail Aslam, Select Group’s CEO, has found an improvement in quality as the property market has matured. “I have generally found that newer developments are being delivered with [increasing] focus on quality and finishes so many existing owners and investors are reinvesting and upgrading to some of the newer properties. As the market in Dubai matures, the track record of a developer becomes very important.

Customers want to see that they have delivered quality projects in the past.”

The uncertainty triggered by Brexit and the US elections is certainly prolonging the decisionmaking process for buyers who are investing in second homes, perhaps still deciding in which country to base themselves, and analysing where to invest in the mid- to long-term. This

Luxury villa in Al Barari

untethered approach to location is not really down to internal factors in Dubai, so much as a fairly short-term interaction of international market influences. As Mr. Aslam suggests, this is nothing new for the region.

“Geopolitical issues are not new in the region and generally speaking, business is likely to carry on in its usual cyclical fashion. With the opening of theme parks and other entertainment options, Dubai is on track to achieve its Tourism Vision 2020 target of 20 million visitors and with sustained Government spending on infrastructure in the lead-up to Expo 2020, our confidence in Dubai real estate remains firm and we expect the market to pick up in the coming year.”

For those with global options, shopping for second homes undeniably carries an element of currency hedging that is unavoidable at the moment, so the reticence to commit for some may continue until worldwide trends become clearer. However, experience

Palm Jumeirah villa

would suggest that luxury property simply never goes out of fashion.

There are enough well-heeled property investors, either established or new to Dubai, who understand the appeal and opportunity that Dubai living affords them, which ensures steady growth for the luxury sector. Luxury real estate prices in Dubai remain buoyant, with recent levels of transactional activity being very encouraging and reflecting a positive bounce in the market. Overall, Mr. Aslam believes the outlook to be quite straightforward, “Development businesses need to keep a close eye on market fundamentals that could affect commerciality and delivery of [a] project. Businesses need to ensure good planning is in place and at the same [time] remain nimble to adapt to any market changes. [A] case in point is the launch of our latest project Studio One. Though in general the market is slow we were 65% sold out within two days of the launch. So, the market still has an appetite for investment provided it’s the right product.”

6 UAE

December 14, 2016

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If you build it, will they come?

Despite its substantial growth in the sector, the UAE faces a number of hurdles to achieve its full potential as an international medical tourism hub.

Over the past few years, the UAE has focused on scaling the medical tourism rankings, with the government aggressively expanding and revamping its healthcare systems and infrastructure to meet international standards. However, with tough competition from both the West (Canada, UK) and East (Singapore, India), the UAE is in for a tough battle to attract people in what is becoming a key sector in the UAE’s post-oil vision of economic development.

Medical tourism’s global popularity stems from the high cost of health care (particularly in the US), long waiting times for certain procedures, the continuing ease and (relative) affordability of international travel, and technological improvements as well as standards of care in many countries.

According to the Medical Tourism Index, the UAE is one of the top 25 medical tourism destinations in the world, and it is a preferred destination for orthopaedic and sports medicine, ophthalmology, dental procedures, and dermatology. Medical and cosmetic plastic surgery remain the most popular procedures, especially for medical tourists travelling to Dubai.

Speaking to World Business Times, CEO of Dubai Healthcare City’s Investor Sector, Bader Saeed Hareb commented that: “The expansion of the health sector is majorly driven by the Dubai Government’s mission to transform the emirate into a global medical hub. DHCC is playing an instrumental role to achieve the mission of the Dubai Government through developing a global healthcare and wellness destination. Our objective to develop Phase 2, an area of 22 million square feet, into a global wellness destination, is to meet the needs for preventative healthcare offerings such as management of obesity, hypertension and diabetes, and unique concepts and specialised services such as rehabilitation, counselling, sports medicine and elderly care. As DHCC is planning to design a true wellness

Bader Saeed Hareb CEO, Dubai Healthcare City

Dubai Healthcare City, Phase 2

destination experience for residents and visitors there is also a growing need for wellness centres and resorts. “ Dubai has pulled ahead of its regional competition with international medical tourism numbers increasing steadily year-on-year. “In 26 hospitals in Dubai we witnessed traffic of 638,000 medical tourists, of whom nearly 47,000 were international tourists. This high traffic was recorded at just the 26 private and public hospitals and we are not even talking about the medical procedures conducted in over 1,000 clinics and ambulatory care centres in Dubai. Every year the number goes up by 12% to 15%” said Dr. Laila Al Marzouqi, head of Dubai Health Authority’s medical tourism initiative.

Dubai expects an annual increase of 12% and aims to attract more than 500,000 medical tourists by 2020, generating approximately $710 million per annum.

The strength of the UAE’s competitiveness in the medical tourism field rests on several key factors. With a workforce that relies heavily on skilled expatriates, the UAE has cultivated a talented medical field in a remarkably short amount of time, allowing it to compete with countries lacking a

knowledgeable workforce. The UAE’s robust private medical sector has been experiencing a hospital building boom recently. Dubai now has 38 hospitals of which 32 are private sector, and include a variety of specialty offerings, including an all-woman facility.

These private sector hospitals focus on international healthcare standards, and 20 out of Dubai’s 38 hospitals are Joint International Commission (JCI) accredited. With this investment in high-grade facilities, the UAE beats most GCC countries across the majority of healthcare indicators. Dubai’s beds per 1,000 people ratio stands at 1.9, considerably higher than the average ratio of 1.7 across the GCC. Dubai’s ratio for physicians per 1,000 people is 2.7, much higher than the average ratio across the GCC of 1.75.

Additionally, the government’s proactive initiatives drive medical tourism in the UAE. In April, the Dubai government launched the “Dubai Health Experience” (DXH), a single window smart application, allowing medical tourists to manage their procedures, accommodations, visas, leisure activities, and enjoy discounts across a number of partners.

Regarding the DXH app, Dr. Al

Marzouqi said, “The time is perfect to launch this electronic portal that will connect the world with Dubai’s medical facilities.” Location also works to the UAE’s advantage. Dubai is a popular tourist destination and ranks as the fifth most popular city in the world for international travellers. With the third best air transport infrastructure in the world according to the World Economic Forum and located between Europe, Asia, and Africa, the UAE’s position as a global hub means there is an ease of travel lacking in other medical tourism locations.

Despite its substantial growth in the sector, the UAE faces a number of hurdles to achieve its full potential as an international medical tourism hub. A limited number of medical professionals and high recruitment costs have led to poaching between competitors. This trend has also driven up salary expectations, which are not sustainable in the long term and have a negative impact on profitability.

Healthcare SMEs have particularly suffered, finding it difficult to retain staff with high salaries or hire replacements. Regarding professionals in the industry, Mr. Hareh told World Business Times that: “So far more than

5,000 healthcare professionals have been licensed in DHCC to provide patient-centred services across more than 150 specialties. The expansion of the UAE’s healthcare sector brings with it a set of challenges including a growing need for qualified healthcare professionals and the reliance on foreign manpower. To help increase the supply of local talent and increase qualified healthcare professionals in the industry, the free zone provides undergraduate and postgraduate medical education and continuous professional development programs for licensed healthcare professionals.

The free zone is home to medical institutions and learning resources such as the Mohammed Bin Rashid University of Medicine and Health Sciences (MBRU) and Khalaf Ahmad Al Habtoor Medical Simulation Centre.

The UAE will also need to address the issue of pricing for procedures.

Though its prices compare favourably with most Western markets, the UAE’s pricing structures currently cannot compete well enough to attract patients from Asia and Africa. A complex heart surgery costs between $15,000 and $20,000 compared to

The expansion of the health sector is majorly driven by the Dubai Government’s mission to transform the emirate into a global medical hub

UAE tackles infrastructure growing pains

Free zones: UAE’s specialised economic engines

Whilst the UAE is proving that it can still deliver mega projects on time and on budget, more transportation infrastructural improvements are urgently needed to keep the country’s population mobile.

There are over 45 free trade zones (or simply “free zones”) operating in the UAE, many of which are at different stages of infrastructure and development, but an impressively large number serve more than the traditional function of small duty-free areas for warehousing and re-export. Instead, they support business within the UAE and are key drivers of the economy. In 2015 they provided for an estimated 33% of the UAE’s non-oil trade.

However, federal law requires all companies incorporated within the UAE to have at least 51% national ownership and non-nationals must have a visa to remain in the UAE. Free zones permit non-nationals to establish companies without UAE shareholders, and permit non-national entrepreneurs and freelancers to obtain their own visas. The primary drawback of any free zone in the UAE is the extent to which company activities are restricted to that free zone. Depending on the industry in question, this can significantly restrict the available market share to the point of impracticality. Therefore, businesses are forced onto the mainland in their search for new clientele. However, for a business that must perform services more substantially outside of the free zone, this can pose a problem.

There are free zones that merit special attention for their contributions to the UAE’s economy and industry.

DIFC - The Dubai International Financial Centre (DIFC) is beyond a doubt the leader for sheer independence.

Contributing an estimated 12% of Dubai’s GDP, this free zone has its own purpose built, state-of-the-art laws for financial, corporate and civil matters, and its own civil court system based

Transportation has taken centre stage for UAE infrastructure projects in 2016. In 2013, Dubai’s Roads and Transport Authority (RTA) estimated that congestion cost almost $790 million through wasted fuel and time.

With a steadily increasing resident and daytime (tourist and commuter) population, the cost is now most likely much higher. An additional 1 million residents will arrive in Dubai over the next three years, driving up congestion. In response, the UAE is pushing on with an ambitious infrastructure expansion to cope with the quickly rising resident and tourist population. The UAE can expect a significant infrastructure upgrade in time for Expo 2020, but some projects remain left behind.

With 25 million visitors expected to visit Dubai during Expo 2020, the city has begun a large-scale expansion of its metro system. Route 2020 will officially debut in May 2019 and provide critical transportation for Expo 2020 visitors. “We expect the trains will carry 35,000 Expo visitors a day during weekdays. It will increase to 47,000 passengers on weekends.

This will be 20% of visitors coming to Expo 2020,” said Abdul Ibrahim Younes, chief executive of Dubai’s RTA Rail Agency.

The extension project also brings much needed public transportation

Sheikh Zayed Road

services to 270,000 Dubai residents living in newer developments in the south of the city. The Gardens, Discovery Gardens, Al Furjan, Jumeirah Golf Estates, and Dubai Investment Park are currently only accessible by car. There are also plans to extend to Al Maktoum International Airport, Dubai’s growing second airport located on the southern outskirts of Dubai.

In addition to Route 2020, the new Sheikh Mohammed bin Rashid Al Maktoum Road opened on the 30th of November. The 62-kilometre highway, completed a week ahead of schedule, creates an alternative road link between Abu Dhabi and Dubai. The eight-lane highway can manage 8,000 vehicles an hour, which should greatly reduce current congestion between the emirates. “The new motorway will form a strategic link that will provide additional capacity to traffic movement, particularly during peak hours,” said Shamsa Al Shamsi, project manager of the E311 road extension.

But the outlook isn’t universally positive. Progress with Etihad Rail stage two, to connect by rail the southernmost and northernmost points of the UAE, has come to a standstill with no indication when the project will be on track. Additionally, Dubai’s population has increased by an estimated 300,000 over the past three years, and the strain is evident every rush hour. Commuters lose hours stuck in congestion, while overcrowded carriages are common on the Dubai Metro. Al Ittihad Road, the key commuter corridor between Sharjah and Dubai, is a crippling bottleneck for traffic between the emirates.

Despite various improvements to the road over the past decade, severe and sustained congestion is still the daily norm. A radical plan is urgently needed to ease travel between Dubai and Sharjah. Though the proposed Hyperloop offers a glimmer of hope for commuters, any implementation is likely years away and will be launched first between Dubai and Abu Dhabi whilst any connection with Sharjah is pure conjecture at this point.

Whilst the UAE is proving that it can still deliver mega projects on time and on budget, more transportation infrastructural improvements are urgently needed to keep the country’s population mobile. Luckily, Dubai is in an enviable position, compared to its international counterparts, because it has room for expansion and considerable will to do so.

$7,000 to $8,000 in India. The UAE can compete easily with these lower priced destinations with easier access and luxury accommodations, but if the procedures continue to outprice competitors, the sector’s growth will remain stunted. This issue is reflected in the local population’s own preference to travel abroad for medical services. Whilst Asia is the most cost-effective option, Europe and America bring an element of prestige. UAE nationals themselves have the option to embrace medical tourism. Why not visit Germany and France whilst receiving care from some of the best hospitals in the world? Meanwhile, the family can take in the sites.

The UAE’s medical tourism industry is well positioned to grow as projected and develop as a fundamental sector for the post-oil economy, and according to Mr. Hareh, DHCC will play a key role. “Our dynamic free zone structure, based on a balance between governance and flexibility, strengthens our investment environment and enables us to grow as a healthcare and wellness ecosystem which offers patientcentred world-class care.” However, in order to achieve its objectives, the UAE government should maintain its current momentum, addressing current market drawbacks before they evolve further. Removing these obstacles will allow this sector to expand to its full potential, making the UAE one of the top five medical tourism destinations in the world.

Whilst free zones are a substantial factor in the UAE’s economy, they are potentially hampered by the barriers to entry protecting the UAE’s mainland industry.

on common law, making it the only common law jurisdiction in the Middle East. Its corporate licenses specialise in financial matters, professional services, and lifestyle facilities for the professionals working in the district.

DMCC - The Dubai Multi Commodities Centre (DMCC) offers corporate licenses for most activities and is the UAE’s largest and fastest growing free zone. Named best free zone in the world by the Financial Times fDi Magazine in 2015, it boasts efficient regulatory and administrative infrastructure for doing business in the UAE and beyond. Two of its most successful achievements are the Dubai Diamond Exchange, which has thrust Dubai from anonymity as a diamond trading hub in 2003 to competing with Antwerp for the top position as of 2015, and the Dubai Gold and Commodities Exchange, which was awarded the “Regional Exchange of the Year 2016” by Global Investor magazine recognizing the DMCC’s rapid growth in futures trading when it reached an average daily trading volume of $1.6 billion.

Dubai Design District - The new and exciting Dubai Design District, or “D3,” is a hub for artists, fashion designers and other creative sorts, and aspires to be “a place where bohemians can live, work and play.” However, once again, the problem with this zone is that without 51% local ownership, a D3 licensee may only officially do business within the free zone itself - not in the rest of the UAE. Thus, aspiring creative professionals could be significantly hampered in their efforts to spread brand awareness. Whilst this free zone holds much promise, it is yet to prove

itself as an economic generator.

Fujairah Creative City - This free zone, based in the Emirate of Fujairah, is a popular option for freelancers, marketing, communication and consulting companies, and media professionals. Licensing and operating costs are comparatively low and the free zone operates an office in Dubai to assist with setup. Fujairah Creative City focuses on quick and efficient processing, which make it a good choice for SMEs that do not rely on brick and mortar premises.

Twofour54 - Twofour54 is Abu Dhabi’s media-focused free zone. The emirate has been actively developing itself as a prime filming location, and Twofour54 supports that vision with this dedicated free zone. With unique benefits, such as on-site professional training and a creative lab to encourage young professionals, Twofour54 is becoming a dominant force amongst the UAE’s media free zones.

Whilst free zones are a substantial factor in the UAE’s economy, they are potentially hampered by the barriers to entry protecting the UAE’s mainland industry. With the formation of companies within free zones growing at a rapid rate, the UAE will continue to see major contributions to its GDP but also create a potential issue. If this contribution continues to increase and overtakes mainland UAE as the preferred start-up destination of choice, will the government scale back the power of these specialised economic engines in favour of supporting local ownership, or will they simply allow “unofficial” business to continue as usual?

UAE 7

www.world-businesstimes.com

Better together IPIC - Mubadala merger focuses on a diversified future. This merger will allow Abu Dhabi to streamline operations, cut costs, consolidate holdings, and weather variable oil prices.

The merger comes at the request of Crown Prince Sheikh Mohammed Bin Zayed Al Nahyan.

In June, Abu Dhabi’s government announced plans to merge its two largest sovereign investment funds, International Petroleum Investment Company (IPIC) and Mubadala Development Company PJSC (Mubadala). The merger comes at the request of Crown Prince Sheikh Mohamed Bin Zayed and will create an asset pool in excess of $120 billion, more than twice the size of Russia’s Reserve Fund. With slumping oil prices and OPEC and nonOPEC producers agreeing to cut production, this move consolidates Abu Dhabi’s considerable assets at a vital time in the country’s economic development.

IPIC has focused on growing Abu Dhabi’s international energy assets with investments in Japan’s Cosmo Oil, Spain’s CEPSA, and Austria’s OMV. Mubadala has pursued more diverse strategies with holdings in a wide range of interests, including The Carlyle Group and General Electric.

Together, the combined fund will have an estimated $135 billion in assets, according to the latest financial statements. In line with the UAE’s long-standing drive for economic diversification, Crown Prince Sheikh Mohamed Bin Zayed stated that, “This merger will further develop human capital in key sectors to realise our vision for a globally-competitive and sustainable economy.”

Though among the world’s 25 largest sovereign wealth funds,

IPIC and Mubadala have both suffered losses over the last two years, mainly traced to low oil prices. IPIC reported a loss of $2.5 billion in the 2015 fiscal year whilst Mubadala posted a $326 million loss in the first half of 2016. Additionally, IPIC’s dispute with 1Malaysia Development Berhad (1MDB) is moving forward following IPIC’s filing at the London Court of International Arbitration. “The failure of 1MDB and MOF [Malaysia’s Ministry of Finance] to perform their obligations, cure their defaults or put forward acceptable proposals has left IPIC in the position where it must pursue its claims in arbitration,” IPIC said in an official statement. IPIC’s total claims amount to $6.5 billion, and are based on a $1 billion loan to 1MDB and assuming $3.5 billion of 1MDB’s debt.

The IPIC and Mubadala merger will allow Abu Dhabi to streamline operations, cut costs, consolidate holdings, and weather variable oil prices. As Crown Prince Sheikh Mohammed bin Zayed Al Nahyan expressed in a statement, the motive behind the merger was to “create greater benefits and enhanced economic value to the Government of Abu Dhabi”, The merger also reflects a wider trend across the GCC towards cost rationalisation and operations consolidation, with experts expecting more companies to follow suit across the region. In keeping with this trend, the Abu Dhabi government also announced the merger of National Bank of Abu Dhabi PJSC and FGB (formerly First Gulf Bank) to be completed by March 2017. Additionally, Qatar recently announced the merger of state-owned liquefied natural gas producers Qatargas and RasGas Co Ltd.

Lighting up the UAE In Dubai, the Mohamed Bin Rashid Al Maktoum Solar Park, named after the Vice President of the UAE, is already the largest single-site solar park in the world with a planned capacity of 5,000MW by 2030.

Saeed Mohamed al-Tayer, Managing Director and CEO of Dubai Electricity and Water Authority (DEWA) .

With its ambitious clean energy goals and supersized projects, the UAE has become an international hub for alternative energy.

The UAE’s Vision 2021, a development plan originally announced in 2010, calls for making the UAE “a model for the world in achieving the highest standards of energy efficiency and renewable-energy use”, according to His Excellency Saeed Mohammed Al Tayer, Vice Chairman of the Dubai Supreme Council of Energy.

UAE Vision 2021 calls for 27% of the UAE’s energy to be produced by renewable or nuclear energy sources – a major increase from 0.23% in 2012.

Reaching the clean-energy goals of Vision 2021 will require infrastructure megaprojects, and with the UAE’s love of the remarkable, they will be odds on for success. In Dubai, the Mohammed Bin Rashid Al Maktoum Solar Park, named after the Vice President of the UAE, is already the largest single-site solar park in the world with a planned capacity of 5,000MW by 2030 and a

World-class residential, recreational and leisure destination.

Located on 1,119 hectares of green landscape, Jumeirah Golf Estates is a vibrant community of more than 1,700 luxury properties, with 75% facing two worldclass golf courses. Whilst its home prices are toward the top end of the spectrum, Abdulaziz Bukhatir, Executive Director of Corporate Services at Jumeirah Golf Estates, believes investors receive significant value for money. Mr. Bukhatir noted that, “We set ourselves apart from the competition through the quality of our real estate and offer our buyers the assurance that they are purchasing superior-quality, world-class real estate – backed by the potential for strong returns on investment.”

Redwood Park The Dubai real estate market has softened in recent quarters, with more investors focusing on affordability, but Mr. Bukhatir believes that the sector’s market fundamentals remain strong, “We have seen an increase in demand for affordable luxury. Demand for this type of property is continuing to outstrip supply and therefore Jumeirah Golf Estates has evolved its offering in response to changing market dynamics. We are proud

ADNOC consolidates Oil Giant in Transition.

Undeterred by slumping oil prices, Abu Dhabi National Oil Company (ADNOC) focuses on restructuring

management and developing new revenue streams.

The Abu Dhabi state-run oil

that our development, Alandalus, which combines all of the luxuries of a residential golf community with premium affordable housing, is a truly unique offering within the region.”

Jumeirah Golf Estates recently launched its own leasing and brokerage service, giving it first-hand insight into buyer sentiment.

Though the cyclical nature of the real estate market has naturally impacted purchasing

ADNOC must evolve into a more agile organisation to maintain its competitive edge in today’s global economy company is ranked by Forbes as the 12th largest oil and gas company in the world, with the UAE holding the world’s seventh largest oil reserves.

In January 2016, Dr. Sultan Ahmed Al Jaber assumed the role of CEO at ADNOC and the company announced wide shakeups in leadership, including new directors for the gas refinery, and petrochemicals divisions, as well as new C-level executives for six of ADNOC’s 18 subgroups.

ADNOC has made more moves to streamline operations and raise production to 3.5 million barrels per day, a 17% increase. Additionally, ADNOC

total investment of $13.61 billion. The soon-to-begin third expansion will use photovoltaic technology to bring the project up to 1,000 MW by 2020. The solar park recently confirmed this phase of the project has been awarded to a consortium led by Abu Dhabi-based Masdar. Looking ahead, in November 2016, the Solar Park received more than 30 expressions of interest for the phase four 200 MW concentrated solar power (CSP) expansion, which will be the largest CSP project in the world once it’s completed.

Due to a rapid development and a growing population, the UAE has forecasted significantly expanding electricity needs over the coming years that greatly exceed the demands of the current power supply. Although solar energy is growing quickly, renewable sources will only provide 7% of the power required in the UAE by 2020. To meet demand, the UAE has been exploring nuclear power as a reliable, low-emission alternative to oil and coal, a shining example to the rest of the world on how to meet CO2 emission goals.

Emirates Nuclear Energy Corporation (ENEC), which is wholly owned by the Government of Abu Dhabi, was established in 2009 for the implementation and construction of the Barakah Nuclear Energy Plant in the Western Region of Abu Dhabi. ENEC has named the Korean Electric Power Corporation (KEPCO) as its prime contractor, and is expected to have its first reactor contributing to the grid in 2017, with three more units completed by 2020. ENEC announced in October 2016 that construction of units 1-4 was 71% complete, putting them on path to meet the planned timeline.

ANNUAL FUEL SAVING

$55-87 BILLION

*Discounted Fuel Savings

2.5 billion **BBOE Cumulative Fuel Savings

FUEL SAVING IN 2030

*BBOE 0.4

0.40

0.3

0.06

0.1

* Discount rate 5%; Low price scenario 0 **BBOE - Billions of Barrels of oil equivalent Fossil

2020

Bahrain Kuwait

Saudi Arabia

0.02 2015

UAE

Oman Qatar

0.21

0.2

Mohamed Al Hammadi, CEO of ENEC described the organisation as a “significant enabler of the UAE’s economic development, by providing the critical energy to power the growth of industries and business”. With each plant capable of producing 1400MW, the four combined units could meet an impressive 25% of the UAE’s total energy needs. With such a significant proportion of the country’s energy coming from just four reactors, it’s clear nuclear energy will play a crucial role as the country moves away from its reliance on oil.

Last month a deal was struck between The Barakah One Company (subsidiary of ENEC and KEPCO) and Abu Dhabi Water and Electricity Company for the electricity generated

by Barakah Nuclear Power Plant.

Chairman of ENEC, Khaldoon Al Mubarak commented, “Today is another major step towards diversifying the UAE’s energy mix and making the nation more energy-secure and environmentally sustainable. The Barakah Plant will soon provide the nation with the clean energy it needs to grow, through an established, robust and technologically advanced nuclear energy industry.”

2025

2030

fuel savings from GCC renewable energy targets by year and by country

power, Mr. Bukhatir remains optimistic that 2017 will see positive momentum, “In 2017 and beyond, we expect to see sustained interest from international investors as they consider shifting their gaze to Dubai – with the slowdown in Asia and currency fluctuations impacting the appeal of Dubai, as a gateway to business in the Middle East and Africa. Comparatively speaking, Dubai’s real estate proposition is incredibly compelling with its average price per square foot, capital appreciation and resulting returns positioning it as a first choice for buyers traditionally more acquainted with property purchases in Europe and Asia. We also see huge potential to market Jumeirah Golf Estates across the GCC – particularly in Saudi Arabia, Qatar and Oman as well as in global markets such as India and China, where there is a growing affluent and wealthy population seeking to ‘internationalise’ a share of their assets.”

To assist regional buyers, Jumeirah Golf Estates representatives are reaching out across the GCC to build relationships with

merged its offshore operations, Abu Dhabi Marine Operating Co (ADMAOPCO) and Zakum Development Co (ZADCO). In a statement ADNOC clarified, “The new company resulting from this integration will be more agile, better able to respond to changing market demands, and be well positioned to take advantage of strategic opportunities for future growth.”

Stubbornly low oil prices lingering from the 2014 fallout means remaining cost-effective continues to require changes to industry structures to remain competitive. ADNOC recently announced its mid-term development plan, or “2030 Strategy”. The strategy’s goal is to “ensure oil and gas needs of our domestic and international customers are met and also enhance our downstream and petrochemical businesses, to take advantage of growing demand for higher-value products,” according to Dr. Al Jaber.

Highlighting the theme of integrated vertical production lines, there has been a major focus on strengthening downstream production as a part of

high-profile local lenders and real estate agents, and create mutually beneficial partnerships that boost investment into the Dubai real estate market. With increasing interest from international markets for golf and luxury real estate, Jumeirah Golf Estates will be well placed for regional and global profiling opportunities and investments.

Plans and Projects, 2017 • After the recent handover of Phase 1 of Redwood Park, Jumeirah Golf Estates will continue construction of Phase 2 with a Q4 2017 handover of the townhouses on schedule.

• The first quarter of 2017 will see the opening of Jumeirah Golf Estates’ brand retail centre, complete with community amenities such as a grocery store and pharmacy, underscoring its position as a true lifestyle destination.

• Ahead of World Expo 2020, the Government of Dubai is investing heavily in local infrastructure projects. Jumeirah Golf Estates is working with the Dubai Roads and

Dr. Sultan Ahmed Al Jaber CEO, Adnoc

the 2030 Strategy. ADNOC is seeking to capitalise on the rapidly growing petrochemical market in Asia by expanding their polyolefin production and adding new products, including aromatics. ADNOC’s 2030 Strategy sees petrochemical production growing from 4.5 million tonnes per annum (MTPA) in 2016 to 11.4 MTPA by 2025.

Domestic energy sufficiency has

Transport Authority to provide residents with a dedicated metro stop, as well as bus stops around the community to ensure that all residents have easy transport options in and out of the city and enhancing the accessibility of developments within New Dubai.

Abdulaziz Bukhatir Executive Director, Corporate Services, Jumeirah Golf Estates

also been a major focus of ADNOC’s expansion, which it is addressing by using previously overlooked gas sources, such as sour gas and deep gas. ADNOC’s $10 billion Al Hosn sour gas facility is just over 18 months old, but it already produces 10% of the UAE’s gas production whilst creating sulfur for export. Plans were announced in November to expand capacity by 50% in the next five years, just months after one-time ADNOC partner Royal Dutch Shell cited the low energy prices as a reason for pulling out of the Abu Dhabi Bab sour gas reserve project.

The Al Hosn expansion will also make Abu Dhabi one of the world’s largest exporters of sulfur, which is used widely in agricultural fertiliser.

ADNOC is taking advantage of the current slump in oil prices to diversify their business – a savvy move as oil prices remain stagnant far longer than most predicted.

8 UAE

World Business Times is a leading global provider of business intelligence and insight

December 14, 2016

Stepping into the limelight Sharjah is determined to transform itself into a major travel destination for both international and domestic travellers, pushing to differentiate itself from its urban neighbours to the south.

UAE Foreign Minister Abdullah bin Zayed al-Nahyan (R), Sheikh Ahmed Bin Saeed al-Maktoum (C), chairman of the Dubai Economic Sector Committee, and Sheikha Lubna Al Qasimi, Minister of State for Tolerance

Expo: 2020 vision?

Sustainability is key to ensuring Dubai enjoys lasting benefits long after Expo 2020.

Over 80 percent of our

Al Badayer Desert Camp Project

For decades, the world’s attention on the UAE has been centred on Abu Dhabi and Dubai, but a focus on development as a cultural and educational leader has allowed Sharjah to step out of the shadow of the larger emirates. A simultaneous push for increased tourism has made this quiet emirate an intriguing destination for tourists and residents alike.

Sharjah city centre is roughly 60 minutes from Dubai, though that length can double or even triple as thousands of commuters sit in rush hour traffic on their way to work in Dubai. This has tended to be one of the main drawbacks of Sharjah as residents looking to take advantage of employment opportunities in Dubai whilst paying lower rent in Sharjah have found their commute to be painfully slow. Earlier this year, the Ministry of Infrastructure Development inaugurated a new road as part of the Al Badeaa project implemented by the Ministry at a total cost of around $54.5 million with the aim to ease congestion and travel times for those wishing to travel to Dubai.

However, this reputation as a cheaper suburb for Dubai workers willing to commute is slowly beginning to disappear. Sharjah is determined to transform itself into a major travel destination for both international and domestic travellers, pushing to differentiate itself from its urban neighbours to the south. There is an emphasis on developing the city into an international hub of culture and education. The Sharjah International Book Fair celebrated its 35th edition this year, attracting 2.3 million visitors over 11 days, making it the third largest book fair in the world. Special guests included the New York Times

bestselling author of the Bourne Series Eric Van Lustbader and fantasy author Cassandra Clare, writer of The Mortal Instruments novels.

Sharjah has long been the educational centre of the UAE. The American University of Sharjah remains one of the preeminent higher education facilities in the country, and Skyline University College recently conferred BBA and MBA degrees to 329 students of 30 nationalities.

The emirate is now hoping to showcase some of its natural assets as well. In November, Sharjah Investment and Development Authority (Shurooq) announced the $12.25 million Al Badayer Desert Camp project, billed as a high-end desert adventure retreat. The first stage of the project will be completed in 2017, to provide an “urban oasis” for families looking to explore the dunes of central Sharjah.

Outdoor adventure has been a big part of Shurooq’s plans. The 450 square kilometre Mleiha National Desert Park is expected to bring $68 million in investment over the next few years. Once completed, the park will highlight the archeological wonders

of the area, including several sites of historic significance, some hundreds of thousands of years old.

Even before these projects are completed, Sharjah’s lofty tourism goals are already beginning to yield results. Hotels saw a 19% increase in guests during the first half of 2016, according to Sharjah Commerce and Tourism Development Authority.

The largest new market has been visitors from China, which has seen 75% year on year growth, with 75,000 Chinese visitors during the first three quarters of 2016, thanks to loosened visa restrictions.

The emirate’s attempt to expand its profile has not been lost on developers. Numerous 4- and 5-star hotels are being constructed throughout the emirate and multiple international hotel chains are rumored to be considering the emirate as a possible destination, which will be necessary if the Sharjah Tourism Department is to succeed in its goal of attracting 10 million visitors by the year 2021. So, out of the shadows and into the limelight. Sharjah is uniquely positioned to be the UAE’s next tourism hub.

investments will be retained following the event. This includes the infrastructure, as well as the cutting edge technologies, the roads and public transport systems put in place to host the Expo.

Three years after Dubai was named the host city for Expo 2020, the city is laying the foundations for one of the biggest events in this decades calendar. Expectations are soaring high with 25 million visitors expected to attend, 68% of which will come from outside the Middle East.

His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, declared Dubai would “astonish the world in 2020” with its presentation of the global exposition. With so many in the city counting on the six month spectacle to create a substantial boost for the economy in Dubai, the UAE, and the region, and with an estimated $8 billion budget, the city has spent considerable effort to ensure the event will be nothing short of spectacular. But the real challenge for Expo 2020 is post-event. Will Dubai be able to live up to its 2021 vision of sustainability and create

a lasting Expo legacy? Or, like so many other host cities, will the site become an empty white elephant?

Sustainability is key to ensuring Dubai enjoys lasting benefits long after Expo 2020. The event will act as a stimulator for Dubai’s future growth and development, as Marjan Faraidooni, Expo 2020’s vice president of legacy says, “Over 80 percent of our investments will be retained following the event. This includes the infrastructure, as well as the cutting edge technologies, the roads and public transport systems put in place to host the Expo. We intend to build on those physical and virtual platforms to create an ecosystem that leaves a sustainable legacy.”

Exhibition venues and commercial spaces will foster collaboration between key industry sectors, including transport and logistics, travel and tourism, and real estate. This planned transition from exposition site to commercial, retail, and residential hub combines reusable design with critical infrastructure development.

The site’s infrastructure will use renewables to provide 50% of the overall energy demands.

The legacy of Expo 2020 is not only sustainably but also building relationships based on continued cooperation.

As explained by Gillian Hamburger, Expo 2020 Dubai’s commercial vice president, “Expo 2020 Dubai is a six-month long event, but our vision is that our partner companies continue to have a strong presence on the site five, ten, and even 50 years after the gates close by building out their operations onsite, creating jobs,

and ultimately helping to build a knowledge economy in the UAE.” Dubai’s Expo theme is “Connecting minds, creating the future.” Innovation and embracing new forms of technology will play a crucial part in creating a sustainable future. The modern Expo’s purpose is to address issues of universal concern to all of humanity whilst showcasing cutting edge technology. Recently, $1.36 billion in contracts have been allocated to SMEs by Expo 2020, a huge boost for what is the fastest emerging sector in the country and the world. At the recent thirteenth session of SME World Summit in New Delhi, the UAE delegation, led by Abdullah Al Saleh, UnderSecretary of the Ministry Economy for Foreign Trade Affairs and Industry, outlined the country’s faith in SMEs, “The UAE sees SMEs as key players in shaping the future. The next decade will be the decade of SMEs and therefore, more steps must be taken to ensure that the players in this sector move away from the trading-dominated model and invest in innovation and sustainability.”

Expo 2020’s theme of “Connecting Minds” has taken on extra significance in 2016. At a time where nations are increasingly choosing to disconnect, Expo 2020 is a unique opportunity for Dubai to showcase itself and the UAE to the world as a stable, open and progressive beacon for the Middle East and the world. And Dubai plans to keep that beacon burning long after Expo 2020 is over.

Quay al qasba, Sharjah

Banks, baskets and fintech Saxo Bank A/S, an online brokerage bank headquartered in Copenhagen, is at the forefront of advanced financial technology, and is looking to strengthen its presence in the Middle East.

Mario Camara CEO, Saxo Bank (Dubai)

In an interview with World Business Times, we spoke with Saxo Bank’s new Senior Executive Officer of its UAE subsidiary, Saxo Bank (Dubai) Ltd., Mario Camara, about his outlook on the regional banking sector and the recent trend in the UAE toward consolidation: “There is no question that the UAE is overbanked. There are over 50 financial institutions across the emirates holding banking licenses. Of those about half have ‘first floor’ commercial operations, which are low yield and expensive to maintain. With a population of just over 9.3 million, of which less than 25% are bankable individuals, one infers that

a lot of those first floor operations are being subsidised by their brokerage and investment desks. Such ‘second floor’ operations thrive from infrastructure and large project investments, which are the norm when liquidity is abundant. With lower oil prices, and therefore lower liquidity, mergers start to make sense to save on operating costs through economies of scale. The trend toward consolidation is therefore perfectly logical but is likely to reach stasis in mid-2017 once the economy gains momentum.”

Mr. Camara’s thoughts are backed up with over 20 years of industry experience specialising in finance and regulatory law, a key reason for his Saxo Bank appointment.

We asked him how, in his view, can the UAE adjust to preserve its steady pace of growth and development when facing such a strong US Dollar: “If Trump stays true to his word by going on a spending spree to modernise the infrastructure of the US, the dollar will appreciate even more. Such a rapid increase in the US national debt will cause runaway inflation. Under such circumstances the Fed will be forced to increase interest rates, which will make the green back climb to even loftier heights.

That is if ‘The Donald’ keeps his word. But let us assume that he does; what can the UAE do? Well there has been talk in the

GCC for some time about de-pegging from the Dollar and going instead for a basket of currencies. Now that the Renminbi has come of age and is market driven, it along with the Euro, the Swiss Franc and the recently self-battered British Pound can be the ingredients of a well-balanced currency basket which would prove quite helpful to the entire GCC economy.“ Referring to his strategy for the UAE, Mr. Camara is optimistic that Saxo Bank is positioned to deliver what regional investors want: “We are a bank but we see ourselves first and foremost as a fintech firm that specialises in providing instant electronic access to the international financial markets for medium-high and high net worth individuals at competitive prices.

For instance our recently launched fixed income trading facility will revolutionise the way corporate and government bonds are traded, bringing an under a minute ‘killor-fill’ model to a great asset class to invest when facing such moments of market uncertainty.”

As the UAE continues to embrace fintech and market diversification, Saxo bank’s platform, with Mr. Camara at the helm, can potentially give tech-savy UAE investors yet another competitive edge, whilst opening up valuable opportunities for Middle Eastern markets.

RAK pulls ahead of the pack Traditionally overshadowed by its bigger brothers, Dubai and Abu Dhabi, the Emirate of Ras Al Khaimah (RAK) has now come into its own as a growing investment and tourism hub. Focusing on tourism, free zones, property, and infrastructure, RAK has been quietly creating its own sustainable future.

RAK is the second smallest emirate with a population of only 300,000, but despite these limits, the area boasts impressive tourism sectors. As the second most popular tourism area in the UAE, RAK is expanding its reach to newer markets, including Poland, China, and Saudi Arabia. Between June and August 2016, RAK’s hotels reported an increased occupancy of 15.9%, compared to the previous year, with RevPAR up by 14%. This trend increased into September with a 37% rise over the same month last year.

Haitham Mattar, chief executive officer of RAK’s Tourism and Development Authority, notes, “We’re targeting

Al Hamra Resort

double-digit growth in terms of visitor numbers in 2017.” Partnerships with Emirates Airline, Flydubai, Air Arabia, and Qatar Airways have helped increase traffic, and plans to expand facilities at the RAK International Airport should create further growth for the emirate’s tourism sector. The airport in particular has seen 471,432 passengers pass through in 2016, a record number, which is an increase of 52% compared to 2015.

RAK is already home to corporate giants, such as RAK Ceramics and Gulf Pharmaceutical Industries (Julphar), which have helped it weather the storm

brought by low oil prices, with the former employing 15,000 staff and producing 110 million square metres of tiles and 5 million pieces of sanitary ware across 16 state-of-the-art plants in the UAE, India, Bangladesh and Iran, with an annual turnover of approximately $1 billion. Now the emirate is looking to build on this foundation with further investment in the RAK Free Trade Zone (RAK FTZ). With lower costs compared to Dubai-based free zones, as well as fast-track visas and excellent customer service, the RAK FTZ is now home to over 8,000 companies and growing. Its sister organisation, the RAK Investment Authority (RAKIA), has signed an exclusive deal with the National Media Council, allowing it to grant licenses for media-related companies. According to the chief executive officer of RAKIA, Ramy Jallad, “This marks another step for RAKIA towards creating new business opportunities, coming up with unique competitive solutions and encouraging entrepreneurs, SMEs, and other companies from all over the world to set up and expand their businesses in the Emirate of Ras Al Khaimah.”