How has Dubai and the broader United Arab Emirates fared over the past year?
Let’s be honest with ourselves - 2016 was a difficult year not only for Dubai and the UAE, but it was a difficult year for business globally. The global growth rate has slowed to a level we haven’t seen since the recent global recession, and US businesses in international locations have been hit particularly hard. In the Middle East, we’ve seen a significant amount of human capital restructuring and retrenchment to adapt to what are seen as new business norms. Don’t get me wrong; there was still business being done, but with the oil price where it was across 2016, many important projects were put on hold and government spending dried up. Senior Executives are trying to be a little more optimistic for 2017, particularly for businesses based in the Gulf Cooperation Council (GCC) region, where countries have very forward-thinking, long-term plans in place and milestones that need to be achieved. The US and American businesses are seen as reliable and respected partners that can bring best practices and innovation to where they are needed, particularly in areas where countries are moving away from a reliance on oil and gas.
"The philosophy of the UAE is to fully diversify away from oil and gas"
What are some of these steps toward diversification, given the historical reliance on oil and gas?
The philosophy of the UAE is to fully diversify away from oil and gas. His Highness Sheikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, recently stated that the UAE will celebrate the export of its last barrel of oil because that will allow it to focus on the future and growth of other industries like aerospace and renewable energy.
What are some of the industries you see as the most exiting within this reprioritization?
The UAE has recently been all about technology and innovation. Anything hip and new, really. Dubai likes the idea of being a hub for new technology and advancements in industry. More traditional sectors of healthcare and education will also continue to be a priority, because they are pillars of mature economies and societies. Transportation, aviation, aerospace, solar and renewable energy, water technology, and manufacturing will also be interesting to keep an eye on. The GCC is still a blank canvas to a certain extent. His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of UAE and Ruler of Dubai only a few years ago has said that Dubai was just 10 percent of his vision for the future, so clearly the expectations are quite high, and that makes things exciting for residents, investors, and businesses alike. The future for the country will be completely diversified, with oil and gas playing no real role in the country’s future GDP.
What kind of a time horizon is there for this vision of Dubai’s future?
The evolution of Dubai is a continuous process. The emirate is careful to roll out its strategy in an intelligent and calculated way. Dubai was constantly in the news during the boom days, incurring a great deal of debt to build the infrastructure it currently enjoys. Dubai has since learned a few good lessons in both terms of spending and growing at an appropriate pace. With UAE being such a young country, the leadership is maturing and learning as it goes, taking measures to pace growth sustainably and implementing regulations to prevent future economic bubbles. A phased rollout strategy for the nation’s growth is essential. In just a couple years, Dubai will host the World’s Fair, Expo 2020. The US government has not been involved in the Expo for decades, but the private sector has stepped in to represent. We at the American Business Council of Dubai & the Northern Emirates are advocating for government participation in the 2020 World Expo. The event is a six month exhibition which is expected to attract 26 million visitors, so preparation will be key. Dubai will need to build significant infrastructure such as hotels, bridges and tunnels, as well as expanding and improving public transportation. Forward thinking steps will be needed to maintain the proper levels of resident and tourist populations to utilize this infrastructure even after Expo concludes. It would not surprise me if UAE bids on the Olympics or the Soccer World Cup in the run up to 2020.
What are some of the opportunities for foreign companies to support this short-term vision?
There are many great opportunities for companies to ride the wave ahead of Expo 2020. The UAE realizes it will not be able to achieve success on its own. As a result, we at the American Business Council are uniquely positioned to act as a bridge between the UAE and American companies and professionals. One exciting example is the planned implementation of Hyperloop. In fact, the UAE leads the pack in terms of countries looking to launch it first.
You mentioned infrastructure and transportation, are there other industries that are focal points of UAE’s future development plans?
The past ten years have been the era of Fortune 100 and Fortune 500 companies. At the time, Dubai was just establishing itself, and relied heavily on those big names. Today, if a Fortune 100 company doesn’t have a presence in Dubai, something is being missed. We’re seeing a calculated move toward the SME market, particularly because the country understands that it can’t have a fully mature economy without a mature SME segment. The multinationals already based here are helping by serving as a magnet for their partner SMEs to establish a presence in the market. Infrastructure and transportation will be the first phase of Dubai’s buildout, serving as a foundation for the country. Phase two will see small and medium-sized enterprises (SMEs) enter the market and provide much needed services to continue the spur of growth.
What are some of the other big flashpoints for 2017 and the near term in Dubai?
Dubai has a comprehensive plan entitled Vision 2021, and I would encourage all companies to use this document as a blueprint for their own growth in Dubai. The Prime Minister regularly convenes with his ministers to ensure the goals of Vision 2021 are on track. Smart American businesses should think about how their company can help Dubai achieve those goals. There are similar plans across the GCC region, such as Saudi Arabia’s vision for a post oil economy, Saudi Vision 2030, so there are opportunities not only in the UAE, but also throughout the region.
What do you find that foreign companies misunderstand about Dubai and the GCC region. What are the areas of risk?
UAE is a very young country that is learning as it goes and constantly improving laws and regulations it quickly outgrows. One of the major pitfalls of US businesses that are eyeing the market here is not realizing that things change at the pace they do. The American Business Council regularly advocates on behalf of US businesses, and is a relied upon conduit to the UAE government. The last thing a US business needs is for a code or standard to change, which could result in a significant disruption to business and operations. A misunderstanding of the market is a serious risk, and we are uniquely positioned help make companies aware of potential changes.
“One pillar of the Islamic economy is hospitality.”
What areas would you call out as being particularly worthy of foreign attention?
The UAE often announces draft legislation to the public, so staying on top of these issues will be very important, given their potential impacts on industry. There is a great deal of movement toward the Islamic economy and Sharia compliance, as well as legislation regarding Halal. This won’t necessarily impact US businesses in a negative way, but business will have to adapt where applicable. Dubai is aiming to be the capital of the world Islamic economy, and if US businesses take time to understand this, there is significant opportunity for reward.
What are some aspects of the Islamic economy?
Holistically speaking, there are seven pillars: financial services; the Halal industry; tourism; digital infrastructure; knowledge; standards and codes; and Islamic arts. There are sub-industries as well. The Dubai Center for Islamic Economy Development is tasked with making Dubai the hub of the Islamic economy. The Emirates Authority for Standardization and Metrology (ESMA) is tasked with building regulation codes and standards, and it has announced it is drafting legislation around Halal to ensure products and services are compliant.
How can American companies win by taking advantage of this?
One pillar of the Islamic economy is hospitality. A Sharia-compliant hotel would be alcohol-free, and may have separate floors for male and female guests. This is a very foreign concept to American hotels and hospitality chains. Understanding and building a product that caters to this may help to create first-mover advantage in a region billing itself as the future global hub of the Islamic economy. That said, Dubai is by no means doing away with the conventional hospitality industry. Rather, the Islamic economy is just another aspect to consider in Dubai’s plan for the future.
You mentioned healthcare and renewable energy as exciting new areas in Dubai. What opportunities do you see for foreign companies?
The infrastructure (healthcare, energy, education, etc.) that currently exists caters to the current population of the UAE and its visitors. In order to achieve its planned potential, Dubai must double its resident population, and receive several times as many visitors. In order to meet that level of growth, Dubai needs to expand across all industries, as well as introduce new ones not present or undeveloped. From hospitals to power generation – it all needs to grow. Late in 2016, the Mayo Clinic partnered with a local American hospital in Dubai. That was just one example of the many tremendous opportunities for specialized partnership and joint ventures. There is growing demand to not have to travel far in order to receive high quality healthcare. There has been a recent spurt of investment to better serve the regional population and this is also true of other services.
From an American perspective, the Trump Administration and its fairly nationalistic & protectionist approach to business has certainly helped fuel this demand for high quality local offering. With proposed travel bans and political rhetoric in the news, many are opting not to travel to the US for healthcare, education, and entertainment & tourism. Dubai recognizes it is in a great position to absorb some of that capacity of people looking for alternatives. Multiple theme parks that rival Disney World and other American theme parks are currently under construction. The same emphasis is clearly evident for renewables and even nuclear energy. Given the sunny weather, solar will be a very important component of the country’s future energy needs.
Do you think there are areas where the Trump Administration will have direct or indirect effects on the development of the business environment in the GCC region?
BS: There is certainly a high potential for President Trump’s actions or decisions to have impact here. President Trump is a businessman who knows this region quite well. He has initiated several projects in the region prior to his election that are now being launched. His sons recently inaugurated the Trump golf course here, his first golf course in the region. Trump understands this market, and has mentioned Dubai several times in important speeches during his presidential campaign and during his first month of in office. He could potentially be good for the region, and leaders in the area are optimistic. That said, he campaigned on the promise to put America first, and so we at American Business Council in Dubai are trying to position ourselves as brokers of the relationship between Dubai and the United States. We hope to keep the economic relationship strong, despite whatever else might be happening politically.
What are some of the priorities of the American Business Council moving forward this year that companies should be aware of?
As an affiliate of the US Chamber of Commerce in the region, an important aspect of what we’re doing is ensuring that companies are well connected to the local government and its various ministries. We want to ensure the relationship remains strong, as well as communicating the opportunities that exist to our US business members as effectively and quickly as possible. The competition in the region is stiff, with companies from all over the globe moving in very quickly. Dubai is very far away from the US geographically, so it is very difficult for companies to make that move. This is what makes the work GetGlobal does all the more important. We at the American Business Council support GetGlobal and the mission of the conference to help set global agendas and facilitate global trade and investment.