Dubai looking forward to a new economic growth cycle

In many respects, 2014 marked Dubai’s transition from strong recovery to promising growth, as the emirate entered a new development cycle fuelled by a booming real estate market and continually strong expansion within the tourism and retail sectors.

Already a regional and global hub for business and finance, Dubai’s successful Expo 2020 win only helped to solidify the emirate’s reputation as a leading global investment destination, and the UAE’s MSCI upgrade from frontier to emerging market status only helped to bolster this reputation.

These milestones are a result of the efforts by local and federal authorities to guide the evolution and refinement of the emirate’s business environment, in partnership with the private sector. With strong foundations built on an open business environment, a diversified economy and a multinational population, the emirate looks set to enter a new period of growth and expansion.

History

While little is known about the UAE’s early history, its inhabitants lived a nomadic life sustained through fishing, herding and date farming. In 1959 a team of Danish archaeologists unearthed a settlement and cemetery dating back to the third millennium BCE. The findings belonged to the Umm Al Nar civilisation that was active between 2000 BCE and 2700 BCE in what is now Oman and the UAE .

By the time of the rise of the Sassanid and Byzantine Empires, Dubai had become a fishing and trading centre. In the 15th century the Portuguese entered the Indian Ocean and Arabian Gulf, commandeering the lucrative commerce of the region from Arab merchants. The decline of Portuguese influence coincided with the rise of Dutch, British and French commercial penetration into the broader region, principally in the form of the Dutch East India Company and English East India Company.

By the 1760s the British had asserted their naval dominance over the region, thereby ensuring the protection of their primary trade route to India. In 1820 Dubai, the other local sheikhdoms and some parts of what is modern-day Oman signed a general maritime treaty with Britain to form the Trucial States, an official protectorate of the British Empire. The treaty was considered to be a major defeat for the Ottoman Empire at the time.

Concurrently, during the 1800s the area known as Dubai was inhabited by the Bani Yas, a well-known nomadic Arab tribe that assumed power in the region. When members of the Bani Yas seceded from Abu Dhabi, the Al Maktoum family, which rules Dubai today, settled in the emirate in 1833.

The Trucial States alliance lasted until the 1960s, when the British announced plans to leave the Gulf by the end of 1971. This provided the catalyst for the political union that gave birth to what is now known as the UAE. Exploratory talks for the founding of the new federation were first made between Sheikh Zayed bin Sultan Al Nahyan, the ruler of Abu Dhabi at the time, and Sheikh Rashid bin Saeed Al Maktoum, the ruler of Dubai from 1958 until his death in 1990. The federation was then extended to include the other Trucial sheikhdoms, and the UAE was finally formed on February 10, 1972.

Government

Under the constitution of the UAE, which was written jointly by the rulers of Dubai and Abu Dhabi in 1971, each of the seven emirates that make up the country retains a substantial degree of political autonomy. The federal government, based in the city of Abu Dhabi, manages a number of areas that require national-level oversight, including national security, defence, foreign relations, fiscal policy, monetary policy, labour relations, air traffic control, immigration, communications regulation and education standards. Outside of these areas, each emirate operates on an individual basis.

In some cases, federal and local regulators and other government organisations work together. For example, the Dubai Health Authority, which develops and manages the emirate’s health sector, works with the federal Ministry of Health. Each individual emirate is also allowed to set its own pace in terms of local development and diversification.

At the same time, a certain percentage of each emirate’s revenues are put towards the federal budget. In practical terms, Dubai has the freedom to focus almost exclusively on the development of its economy. Due to their status as the original founding members of the UAE, Dubai and Abu Dhabi hold a number of additional powers at the federal level and are considered to have more influence on national affairs than the other five emirates.

For example, the rulers of Dubai and Abu Dhabi hold veto power on the Supreme Council, the presiding national body in the UAE, which is made up of the rulers of the seven emirates. Additionally, as a result of Sheikh Zayed’s leading role in the formation of the country in the early 1970s, the ruler of the Abu Dhabi traditionally serves as president of the UAE, while the ruler of Dubai traditionally serves as prime minister and vice-president of the country.

Political Organisation

The federal government is organised into three branches: the executive branch, the legislative branch and the judicial branch. The executive branch consists of the Supreme Council and the Cabinet, which is officially known as the Council of Ministers, and is made up of the nation’s 22 government ministers. The Cabinet, which is overseen by the prime minister and two deputy prime ministers, plays an advisory role to the Supreme Council, in addition to overseeing the operation of the UAE’s federal ministries.

The legislative branch comprises the Federal National Council (FNC), a 40-member, partially elected body consisting of representatives from all seven emirates. Since the UAE’s first public elections in 2006, half of the members of the FNC have been elected by an Electoral College, which is comprised of prominent citizens appointed by the Supreme Council. The other 20 members of the FNC are appointed directly by the Supreme Council. The number of representatives each emirate sends to the FNC is based on the emirate’s size and population. Dubai and Abu Dhabi, as the most populous and largest emirates, each send eight representatives (four appointed by the respective rulers, and four elected by the Electoral College), while Sharjah and RAK each send six, and the remaining three emirates send four representatives each.

The FNC, which plays an advisory role to the federal government, has the power to review and amend federal draft laws and amendments before they are put before the Cabinet and the Supreme Council for approval. Other tasks carried out by the FNC include questioning ministers on their job performance, and developing and discussing the federal budget.

Key Body

The council has been a key beneficiary of the Supreme Council’s efforts over the last decade to boost public participation in the government. For 35 years following the creation of the FNC in the early 1970s, representatives were appointed by the Supreme Council. In 2006 a 6000-strong Electoral College elected 20 members of the council, in what were the UAE’s first public elections. By the time the second round of elections took place in September 2011, the Electoral College had grown to include 129,000 prominent individuals.

In line with this expanded representation, the Supreme Council has also worked to boost the FNC’s powers in recent years. In 2008 a handful of new constitutional amendments both extended representatives’ terms to four years, which had previously been limited to two years, and expanded the council’s responsibilities to include the UAE’s involvement with international conventions, among other alterations. The Supreme Council plans to continue extending the FNC’s powers in the future.

The federal judicial branch of government, meanwhile, comprises the Federal Supreme Court and the Courts of First Instance, both of which operate independently of each other and are separate from the other branches of government, as laid out in the constitution. The Federal Supreme Court engages primarily with federal-level disputes. Meanwhile, the Courts of First Instance, which include a variety of local and regional courts that are spread throughout the country, handle civil, personal status and commercial cases at the local level.

Business Environment

The UAE business environment is regarded as one of the most open in the GCC, and this is reflected in the country’s rankings in the World Bank’s 2014 “Doing Business” report. Overall, the UAE is ranked 22nd, ahead of GCC neighbour Saudi Arabia (49th), as well as European countries such as the Netherlands (27th), France (31st) and Luxembourg (59th).

In the report for the 2013/14 year, the World Bank recognised three changes that the UAE had made to improve its business environment: the introduction of new service centres and a standard contract for property transactions to improve the ease and efficiency of property transfers; the improved access to credit information by starting to exchange credit information with a utility; and new measures aimed at protecting minority investors.

Although the UAE comes in at 22nd place overall, it is in the top five for four of the 10 factors that contribute to a country’s rating, including dealing with construction permits (4th), receiving electricity (4th), registering property (4th) and paying taxes (1st).

Despite these strengths, however, the country’s overall ranking is brought down by weaker rankings on four factors: receiving credit (89th), protecting investors (43rd) and enforcing contracts (121st).

Dubai’s success has largely been due to a unified vision and a strategy that depends on the active participation of the private sector. Building on this progress, the government launched the Dubai Strategic Plan (DSP) 2021 in December 2014 as a framework for the emirate to continue its development. The DSP 2021 is a continuation of the success of DSP 2015, which was launched in 2007.

Geography

The UAE occupies about 83,600 sq km and borders Saudi Arabia to the west and south, and Oman to the east. The country’s coastline stretches approximately 1318 km from the south-eastern shore of the Gulf, nearly reaching the Strait of Hormuz in the north, although Dubai accounts for less than 100 km of the stretch. Most of the country is situated along the Gulf, aside from Fujairah and parts of Sharjah, which sit along the Gulf of Oman. The emirates of Abu Dhabi and Sharjah border Dubai in the south and north, respectively.

By area, Dubai is the second largest of the emirates behind Abu Dhabi, covering around 4110 sq km in total. A series of land reclamation projects beginning in the early 1990s increased the emirate’s geographical area by 200 sq km, and also contributed to an expansion of its coastline.

Fine white sand and gravel blankets the UAE’s terrain, which is generally flat. To the east of Dubai sand dunes gradually grow larger and redder from the iron oxide found there. The UAE does not have any naturally occurring waterways, except for Dubai Creek, which extends 14 km into the heart of the emirate, dividing that part of the city into Deira to the east and Bur Dubai to the west.

Climate

Dubai‘s climate can broadly be divided between the winter and summer months. The former runs from October to May, with the maximum average temperature reaching as low as 23°C over January and February. The latter runs from June to September, with average maximum temperatures peaking in August at around 39°C. Near the coast the weather is hot and humid, and gets steadily drier further inland. As is typical of desert climates, temperatures often drop substantially at night.

Demographics

According to the Dubai Statistics Centre (DSC), Dubai’s population stood at 2.27m as of mid-2014, up from 2m at the end of 2011. Since 2000 the emirate’s population has more than doubled, almost entirely as a result of foreigners settling in the UAE. As of the end of 2012, Emiratis made up around 11% of the population, while expatriates accounted for the remaining 89%.

As a result, the emirate is especially ethnically diverse and hosts dozens of languages and people from around the world. This multinational workforce has served the emirate well; however, the majority of foreign workers in Dubai are male, which has skewed the emirate’s gender mix: as of the end of 2012, men accounted for nearly 70% of the population, according to the DSC.

As is the case with other countries in the Middle East, albeit to a slightly lesser extent, Dubai’s population is very young. Nearly 45% is 29 years old or younger, while almost 80% is younger than 40 years and about 95% is under the age of 50.

Language

Arabic is the official language of the UAE, but many languages are spoken in daily life. English, as the language of business throughout the region, is ubiquitous, while also being present through all levels of government. Road signs, restaurant and bar menus, and a large portion of the media are all presented in Arabic and English.

Given the significant Pakistani, Indian and Filipino population living in the UAE, Urdu, Hindi and Tagalog are all frequently spoken. But the emirate has such a diverse population that a variety of other languages may be encountered, including Chinese, Farsi, Urdu, French, Spanish, German and Russian.

Religion

While Islam is the official religion of the UAE, religious freedom is enshrined in the nation’s constitution, and this is reflected in the diversity of religions practised by the country’s large expatriate population. Christians, Buddhists, Hindus, Sikhs and members of other religious communities are all present within Dubai and the wider UAE.

Islam still strongly influences and informs daily life in the UAE, however, with the Sunni tradition practised as the dominant form of the religion. The country’s legal code was developed as a combination of international legal practices and sharia law.