Trading places

As the balance of global commercial power tilts from West to East, and from the developed to the developing world, Vision explores how Dubai is at the very crux of this new economic dynamic

Emerging markets – trade
One-third of world trade now takes place between countries that are termed ‘emerging markets’. The UAE estimates its two-way trade with China will hit US$100bn by 2015, and Dubai in particular has established vital economic and political ties with the reawakened economic dragon.

Chinese companies have flooded into Dubai to take advantage of its strategic location and favourable business environment. There were 11 Chinese companies registered in Dubai at the end of 2005; that number jumped to 2,346 at the end of 2009. Dubai is also investing in China, in areas including finance, property and construction.

India is now the emirate’s largest trade partner, supplanting China in 2009. In the first 10 months of 2010, the value of total exchanges between Dubai and India amounted to just under US$33.5bn, representing 26 per cent of Dubai’s total trade with the outside world.

Dubai is doing its part to foster stronger transaction flows across the Middle East

Asia is not the only emerging territory with which Dubai is forging tighter trade bonds: the emirate is developing relations with key South American markets including Brazil. Tried-and-tested techniques include using Emirates Airline to build trade and tourism routes, and running roadshows to highlight Dubai’s unmatched infrastructure and free zone advantages.

Emerging markets – tourism
Two thousand years ago they claimed that all roads led to Rome; in 2010 it could be argued that all lead to Dubai. Close to 50 million travellers on 133 airlines passed through the emirate in 2010, but Dubai is becoming ever more popular as a destination in its own right.

In particular, the rise of a wealthy middle class in emerging economies such as China and India has prompted a boom in package tours to the Middle East. Snap-happy holidaymakers are flocking to see attractions including the Burj Khalifa, the world’s tallest building, and the man-made Palm Jumeirah island.

Despite the global economic downturn, the number of hotel guests in Dubai reached 4,181,326 in the first half of 2010, a nine per cent increase from the same period in 2009. What’s more, government figures show the emirate recorded a 57 per cent increase in the number of Chinese tourists in the first half of 2010, and the number of travellers from India is also swelling. Dubai has long enjoyed a significant trade relationship with India, and now travel agencies on the subcontinent are encouraging customers to take advantage of Dubai’s reputation as a retail hub, of its large and established Indian community, and of its proximity to home.

Intra-Arab trade
Intra-Arab trade and investment is well below its potential, according to the Economist Intelligence Unit (EIU). While trade between the GCC and the wider Middle East has grown 11 per cent on average over the last three decades, trade with the Middle East only accounted for around 3.9 per cent of Gulf trade in 2009. However, the EIU forecasts that the UAE’s non-oil exports will rise by a third over the next five years. Much of this increase will come from Intra-Arab trade, and Dubai is doing its part to foster stronger transaction flows across the Middle East.

Emirates Airline launched its 110th international destination in early February 2011, adding Basra to its route map. The flights should prove popular: Iraq ranked 16th on the list of Dubai’s top trading partners in 2009, as the emirate’s non-oil trade with the country exceeded US$5.7bn.

Dubai-based firms are also looking to maintain legitimate trade with neighbouring Iran in the face of unilateral US sanctions. A joint US-UAE committee has been formed to assess how Dubai might conduct business with Iran without contravening sanctions, after exports to Iran from the UAE dropped to around US$8bn in 2009, a US$2bn reduction from 2008.

The UAE is also strengthening trade ties with Syria. According to the UAE government, trade between the two countries increased from around US$259m in 2005, to approximately US$322m in 2009 – a growth rate of 24 per cent.

Finally, the UAE is also determined to boost investments in Egypt, dependent on the resolution of the current troubles. In December last year the UAE Minister of Economy revealed that UAE investments in Egypt stood at US$10bn, and signed a memorandum of understanding to enhance cooperation in the fields of industry and agricultural development, energy, infrastructure and urban expansion.

Islamic finance
When Dubai Islamic Bank opened its doors on the shores of Dubai Creek in 1975, it was the world’s first private bank to be based on Sharia principles. Today, while the Sharia-compliant finance industry is worth close to US$1trn and spans the globe, Dubai is playing an equally progressive role in its development.

According to EIU estimates, there will be US$100bn in outward investment from East to West over the next five years, and Islamic financing is expected to feature in much of the capital raising taking place between Asia and the Gulf. Dubai will be at the centre of this maelstrom: its 
adherence to international best-practice standards, and Auditing Organisation for Islamic Financial Institutions mandates, has established it as a trusted location for international firms to conduct Sharia-compliant business.

With this dominance in mind, Dubai has long been working with Asia on issues such as regulation and cross-investment, and in 2010 a delegation of top-level Malaysian officials visited the emirate to promote opportunities in Malaysia’s Islamic finance sector.

The Dubai Department of Economic Development (DDED) is also developing the export of Islamic finance products and services to Europe. In Germany, the Muslim population is approximately 4.3 million, and holds wealth of around US$35bn. According to a survey by Dubai Exports, more than 70 per cent of Muslims in Germany are interested in Islamic finance products.

Trade with Africa
February 2011 marked a major milestone for the tiny African nation of Djibouti. The inaugural flight of its new national carrier, Djibouti Air, took to the skies with Dubai as its destination. The airline results from a partnership between a Dubai investor and the Djibouti government, and is the latest in a series of projects that have brought Dubai closer to the second most populous continent on Earth.

Djibouti has already received more than US$300m of investment in infrastructure from Dubai. The emirate is also using the expertise it accumulated during its own rapid development to help African countries in areas such as infrastructure and road development.

Meanwhile, Dubai is courting investors from Africa. South African fuel giant Sasol, restaurant chain Nando’s and construction firm Murray & Roberts all run their Middle East operations through Dubai.

Gold and diamond imports into Dubai from South Africa, Botswana and other African nations are also on the rise. In the third quarter of last year, official figures indicate that a total of US$741m-worth of gold was sold in the UAE, the majority of it in Dubai. Financial firms too are utilising Dubai’s advanced infrastructure and enviable location to generate business between Africa and Asia. Standard Chartered Bank has branches in 13 African countries but its Africa regional office is based in Dubai.