Dubai City Information Site

Dubai Economy

Moving Faster and Further Than The Rest

Sunil here folks to discuss the Dubai economy,

Kish wanted me to write this discussion.

Frankly she finds this stuff boring!

Me on the other hand the business school nerd is turned on by subjects like “economics”.

Anyhow, the majority of Dubai’s wealth is generated from tourism, trade, manufacturing and financial services.

Many still think (I was one of them before) that Dubai is an oil well like other Middle Eastern jurisdictions.

However, Dubai has less than 2% of the global oil supply I believe. As of 2006 less than 6% of its economy was generated from oil revenues. When I was studying the Dubai economy some time back I found out that the current Sheikh (Mohammed bin Rashid Al Maktoum) figured that soon Dubai will run dry of oil.

Being the great ambitious and entrepreneurial mind he is, he decided to mortgage the present of Dubai by expediting all oil extraction and investing the proceeds in real estate construction and tourism projects. Risky, but what a great idea!

That is how Dubai got on the global landscape overnight. Dubai City caught everyone’s attention through its massive construction projects and touristy attractions.

It even went as far as to cater sports that other nations prefer in its own city.

A perfect example of this is the Dubai Open Tennis Tournament and the Dubai Desert Classic PGA Golf Tournaments. The last time I was in Dubai I saw posters of Tiger Woods and Maria Sharapova all over the place. What a great idea I tell ya! I heard Tiger Woods (and many other celebrities) bought a luxury villa on Dubai’s Palm Islands.

Transformation Into A Business Hub

Because of the boom in construction, tourism and sports, Dubai quickly transformed into a busy business hub. Visitors realized the investment potential in Dubai as well as the city’s future potential and place in the global economy. Thus started the Dubai business revolution.

Today, every single financial institution you can think of has a hub in Dubai. I work for a Fortune 100 Financial Services company in the US and often come across top competitors on a daily basis. I can’t think of one that is not doing business in Dubai in some shape or form.

Geography A Big Aid to Dubai Economy

A big part of Dubai’s success can be attributed to its geographical location. Because of where Dubai is located on the world’s map, it is a convenience and easy place to meet for other countries. Its waterfront area also allows for docking and trade to take place.

Western manufacturers and banking centers all had main hubs by the Dubai ports. These ports are known to “pass anything and everything”. There is not much you can think of that doesn’t take place at these ports.

Dubai’s easy going approach to trade and lax tax, tariff and quota laws makes trade easier and attractive for everyone. Dubai simple collects a small fee and allows its local residents to partake in trade.

Year after year, Dubai is voted on of the top cities in the world as an ideal trading hub. Dubai quickly became the apple of the Middle Eastern eye, bringing in all kinds of trade revenue. What did the ruler do with that money? You guessed it. He reinvested it into the Dubai economy and pushing its success further.

Dubai Stock Market

The Dubai Financial Market (DFM) was established in March 2000. The market trades both local and foreign securities and bonds. In 2006 DFM’s trading volume was approximately 400B shares in the amount of $95B (USD). Total market cap was near $87B.

The establishment of the DMF was a great move by the Dubai Government. It supports further diversification for the Dubai economy (away from trade, manufacturing and oil) and gives more confidence to the real estate investor.

Think about it, if you had a property in Dubai or wanted to buy one, wouldn’t you be more comfortable knowing that The City will continue to remain strong and grow because of its diversified income streams?

Yes, just like that many others realized the same thing and begun to invest in real estate. Dubai experienced record breaking unprecedented real estate appreciation from 2004 onward. Rents rose close to 30% in a two year time span. Properties were becoming (and still are) more valuable by the day.

Things happened so quickly so fast that you would see skyscrapers crop up over night. Some of the largest projects today are in Dubai. Over 70% of the world’s cranes are active in Dubai today!

The Future of Dubai Economy

Mark my words; this place isn’t slowing down anytime soon. Dubai is considered one of the biggest tourist destinations today. The Jebel Ali Free Zone in Dubai (constructed in the 1970s) has the largest man-made harbor in the world.

And if that all is not enough, Dubai City is building mini cities that are focused on certain industries like financial services and IT. Areas like Dubai Internet City, Dubai Marina, Dubai Media City and Dubai International City are all examples of The City’s commitment to further progress. There are all kinds of industry specific free trade zones all over Dubai.

The Dubai Outsourcing Zone - Apparently there is now a region within Dubai City dedicated to companies who are heavily involved in outsourcing activities (hey that is my company too).

Companies can now set up offices in this zone and receive all kinds of concessions from the Dubai Government. Expect this region to grow as more and more companies are getting into outsourcing to cut costs.

Like I said, there is nothing stopping this sonic boom of success anytime soon. If you are well educated and/or entrepreneurial in spirit, now is the time to study the Dubai economy in depth and see if you can find an opportunity.

Trust me, it’s not hard. Opportunity is everywhere in Dubai and it is only increasing by the day. People are job skipping like grasshoppers and businesses are forming every day.

As far as large projects within the city are concerned, stay tuned for the Burj Dubai (most expensive and tallest tower of the world), Dubai Metro (biggest rail system in the world), The New Dubai Airport (biggest airport in the world), Dubai World Islands (man-made islands in the shape of the world), Hydropolis (underwater hotel), Dubailand (biggest theme park in the world), Sports City (all in one sports town) and the recreation of the 7 wonders of the world (bigger and better than the actual wonders) post 2009!

The Dubai economy is indeed a “centrally-planned free market capitalism” economy!

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