COMMENT: Investing in Dubai: Investing in the future

By Zoe Lazarou

 

Modern Dubai is considered to be one of the most desirable cities for starting a business and investing in the world. Today’s Dubai is the product of 20 years of intensive development. Prior to that, Dubai was only a small trading centre, whereas now it is the home of some of the largest man-made constructions in the world and is often referred to as “City of the Future”. Overseas businessmen – including Cypriots – are attracted to the great potentials and incentives this city has to offer.

Dubai’s economy was solely based on oil extraction and even though prices in oil were noticeably declining in the mid eighties, the first step towards creating today’s city was taken. An airline company was established despite the risk of investing in such a critical period. Surprisingly enough, this clever maneuver launched the beginning of a new industry – tourism – with an amazing 6% annual growth. (Over 7 million tourists in total and an increase of 8% visiting in 2006). Today, with estimations that oil reserves in Dubai will run down in 2016, Dubai‘s Department of Tourism states: “We are now ready to live without oil’.

Next, Sheikh Maktoum bin Rashid Al Maktoum and Ruler of Dubai took another brave step and invested an enormous budget in creating the Dubai Internet City, Dubai International Finance Centre and the Dubai Media City. This action resulted in another big success and managed to draw service industries such as IT and finance from foreign investors from all over the world.

Entering the new millennium, Dubai innovated by constructing the first ever man-made residential islands in the world. The Palm Islands of Jumeirah, Jebel Ali and Deira have now become the symbols of this city. Additionally great energy and effort was focused in building what has become the largest airport, mall, harbour, 7-star hotel, theme park and skyscraper in the world. Construction today is still moving at lion’s speed, just take into consideration that currently one-third of the world’s cranes are operated for building Dubai.

With no personal, corporate or sales taxes, foreign exchange controls and trade barriers, investments have strongly expanded. Foreigners from many countries, including Cypriots, have great expectations and Dubai is currently one of the first choices when it comes to investing, with $18 bln worth of foreign investments in 2005 alone. With incentives such as full repatriation of capital and profits, assistance in labour recruitment, sponsorship and housing, 100% foreign ownership in the free trade areas, it is no surprise that Dubai is considered an excellent market for foreigners to invest.

Strong links between Cyprus and Dubai are slowly formed, as Dubai considers Cyprus – and especially Cyprus banks – as tempting acquisition targets. Already Marfin Popular Bank’s major shareholder has become the Dubai Investment Group. This could be the beginning of a prosperous relationship.

Some economists observing from afar are amazed at the courage of the Dubai leadership, for investing in large projects in the face of global recession. Others have been waiting for the “bubble to burst” in vain. Dubai leaders are convinced that having the spirit to invest now, will pay royalties later.

In all fairness, Dubai’s conversion will remain in history as one of the most dramatic metamorphoses. This old-world town was transformed into a thriving cosmopolitan city and sophisticated market, proud of its accomplishments. Will Dubai win the race towards perfection and become the world’s “City of the Future”? Nothing suggests that Dubai will not be able to win this challenge.

 

* Zoe Lazarou has a BA in Economic Science and is currently Business Information Executive at Creditinfo Cyprus.