Investment opportunities in Dubai

Syed Fahd Shah

Eisa Abdelgalil

Economic Research Department. April 2010

The views expressed in this study are those of the author(s)1 and do not necessarily reflect the position of Dubai Chamber of Commerce and Industry.

5 ...... ملخص تنفيذي

EXECUTIVE SUMMARY ...... 7

Section 1: Introduction ...... 9

1.1. Background ...... 9

1.2. Research Objective ...... 9

1.3. Research questions ...... 9

1.4. Methodology and data...... 10

1.5. Outline of Study ...... 10

Section 2: Dubai and UAEs economic environment and prospects ...... 11

2.1. Economic history of UAE ...... 11

2.2. UAE Growth outlook and forecast: ...... 12

2.3. UAE’s Business environment ...... 14

Section 3: Detailed Opportunities for Investment in Dubai by sector ...... 16

3.2. Detailed sector opportunities in Dubai ...... 18

3.3. Investment in Travel and Tourism ...... 19

3.3.1. Sector profile ...... 19

3.3.2. Future projections ...... 20

3.3.3. Investment potential and opportunities ...... 21

3.4. Investment in Financial Services Sector ...... 22

3.4.1 Sector profile ...... 22

3.4.2. Future projections ...... 23

3.4.3. Investment Opportunities ...... 24

3.5. Investment in Professional Services ...... 25

3.5.1. Sector profile ...... 25

3.5.2. Investment Opportunities ...... 25

3.6. Investment in Transport, logistics and storage sector ...... 26 2

3.6.1. Sector profile ...... 26

3.6.2. Future projections for UAE transport and logistics industry ...... 28

3.6.3. Investment Potential and Opportunities ...... 29

3.7. Investment in Trade and Storage ...... 30

3.7.1. Sector profile ...... 31

3.7.2. Future projections ...... 32

3.7.3. Investment potential and opportunities ...... 32

3.8. Investment in construction ...... 33

3.8.1. Sector profile:...... 33

3.8.2. Future forecasts ...... 35

3.8.3. Investment Potential and Opportunities ...... 35

3.9. Investment in infrastructure ...... 35

3.9.1. Sector profile ...... 35

3.9.2. Future projections for UAE infrastructure sector ...... 36

3.9.3. Investment Potential and Opportunities ...... 36

3.10. Prospects for investment in utilities ...... 37

3.10.1. Sector profile ...... 37

3.10.2. Future Forecasts ...... 39

3.10.3. Investment Opportunities ...... 39

3.11. Prospects for investment in Manufacturing ...... 41

3.11.1. Sector profile ...... 41

3.11.2. Future projections ...... 42

3.11.3. Investment Potential and Opportunities ...... 42

3.12. Public Private Partnerships in Dubai and the UAE ...... 43

Section 4: Investment Regime in UAE and Dubai ...... 46

4.1. UAE Investment regime ...... 46

4.2. Options in setting up a business in UAE: ...... 48 3

4.2.1. Formation of a UAE company: ...... 48

4.2.2.1. UAE Branch office: ...... 48

4.2.2.2. UAE Professional: ...... 48

4.2.2.3. Investment in UAE Free-Zones: ...... 48

4.3. Forming a company ...... 49

4.3.1. Licensing: ...... 49

4.3.2. Options for Legal Structure ...... 49

4.4. Dubai’s investment regime ...... 51

4.4.1. The special case of Free-Zones ...... 52

4.4.2. An overview of investment regime in JAFZA ...... 53

4.4.3. An overview of the investment regime in the DIFC ...... 54

4.4.4. An overview of investment regime in DMCC ...... 56

4.5. Lessons from other countries ...... 56

Section 5: Conclusion ...... 58

References ...... 60

Website references ...... 62

Appendix 1: Useful publications and websites ...... 64

Appendix 2: UAE selected double taxation treaties ...... 65

4

ملخص تنفيذي

 رٙذف ٘زٖ اٌذساعخ ٌزسذ٠ذ ِٕٚبلشخ آفبق االعزثّبس فٟ دثٚ ٟاإلِبساد ِٓ لجً اٌّغزثّش٠ٓ األخبٔت

 فٟ اؼٌمٛد اٌم١ٍٍخ اٌّبض١خ شٙذد دثٚ ٟاإلِبساد رمذِب الزصبد٠ب ِطشدا ٍٝػ خٍف١خ اإلصالزبد اٌزٟ لصذ ثٙب ر١ّٕخ اٌج١ٕخ اٌزسز١خ ٚر٠ٕٛغ االلزصبد. ٚلذ زممذ ٘زٖ اإلصالزبد ٔدبزب ٚرضإِذ ِغ خٛٙد ٌزؼض٠ض اٌزدبسح ٚاالعزثّبس رّثٍذ فٟ إلبِخ اؼٌذ٠ذ ِٓ إٌّبطك اٌزدبس٠خ اٌسشح ٚاٌزٟ ِٓ أثشص٘ب ِٕطمخ خجً ٍٟػ اٌسشح، ٚخؼٍذ ِٓ دثٟ ِشوضا ٔشطب ٌالعزثّبس ٚاٌزدبسح.

 ِٓ ٔبز١خ ِضاٌٚخ األػّبي، رؼزجش اإلِبساد زغت ِؤرّش األُِ اٌّزسذح ٌٍزدبسح ٚاٌز١ّٕخ )اٚٔىزبد( راد الزصبد ِزمذَ ِّب ٟٕؼ٠ أْ ٌذٙ٠ب إِىب١ٔبد وج١شح فٟ خزة االعزثّبس األخٕجٟ اٌّجبشش ٚرز١ّض ثأداء ِزطٛس فٟ االعزثّبس األخٕجٟ اٌّجبشش.

 لبِذ اإلِبساد ثخطٛاد سئ١غ١خ فٟ رسغ١ٓ ث١ئخ األػّبي. ففٟ خالي ػبَ ٚازذ فمظ، ِٓ 2008 إٌٝ 2009، زغٕذ اإلِبساد ِٓ رشر١جٙب فٟ ِؤشش رغ١ًٙ ِضاٌٚخ األػّبي ثأْ لفضد 14 ِشرجخ، ٚزغٕذ ِٓ رشر١جٙب ثـ 74 ِشرجخ ِٓ ز١ث رأع١ظ األػّبي، 29ٚ ِشرجخ فٟ اٌزؼبًِ ِغ رصبس٠ر اٌجٕبء 8ٚ ِشارت ف١ّب ٠زؼٍك ثبٌزدبسح ػجش اٌسذٚد.

 رىّٓ فشص دثٟ االعزثّبس٠خ اٌشئ١غ١خ فٟ اٌمطبػبد اٌزٟ زذدرٙب خطخ دثٟ اإلعزشار١د١خ ؼٌبَ 2015 ثبػزجبس٘ب اٌٍجٕبد اٌشأع١خ ٚرشًّ اٌغفش ٚاٌغ١بزخ، اٌخذِبد اٌّب١ٌخ، اٌخذِبد ا١ٌّٕٙخ، إٌمً ٚاٌذػُ اٌٍٛخغزٟ، اٌزدبسح ٚاٌزخض٠ٓ ٚاالرصبالد.

 ثبٌٕغجخ ٌمطبع اٌغ١بزخ، رٛلغ اٌّدٍظ اؼٌبٌّٟ ٌٍغفش ٚاٌغ١بزخ ثأْ ّٕٛ٠ إٌبرح اٌّسٍٟ اإلخّبٌٟ ٌمطبع اٌغ١بزخ فٟ اإلِبساد ثؼّذي ّٛٔ عٕٞٛ زم١مٟ لذسٖ 4.5%، فٟ ز١ٓ ٠زٛلغ أْ ّٕٛ٠ االعزثّبس اٌشأعّبٌٟ فٟ اٌغفش ٚاٌغ١بزخ ثؼّذي ّٛٔ عٕٞٛ زم١مٟ ٠جٍغ ٚ %6.4أْ ّٕٛ٠ إٔفبق صائشٞ اٌذٌٚخ ثٕغجخ 2.9% فٟ اٌغٕخ ٚرٌه فٟ اٌفزشح ِٓ ػبَ 2010 إٌٝ 2020.

 أِب ف١ّب ٠زؼٍك ثمطبع اٌخذِبد اٌّب١ٌخ، فئْ ٕ٘بٌه اؼٌذ٠ذ ِٓ اٌفشص عٛاء ضّٓ ِشوض دثٟ اٌّبٌٟ اؼٌبٌّٟ أٚ خبسخٗ. ٚرشًّ اٌفشص اٌٙبِخ اٌّزبزخ ٌششوبد اٌزىٌٕٛٛخ١ب ِثً اٌششوبد اٌّب١ٌخ اٌزٟ رغزثّش فٟ رسذ٠ث ٚرسغ١ٓ رىٌٕٛٛخ١ب اٍٛؼٌِّبد ٚاالرصبالد، ٚاٌفشص اٌّشرجطخ ثزط٠ٛش عٛق عٕذاد اٌّؤعغبد اٌغبئٍخ ٚوزٌه فٟ ِدبي اٌز٠ًّٛ اإلعالِٟ.

 رشًّ فشص االعزثّبس فٟ إٌمً ٚاٌذػُ اٌٍٛخغزٟ إِىب١ٔخ رط٠ٛش طشق ِزؼذدح فٟ دثٚ ،ٟفٟ اٌّشبس٠غ راد اٌصٍخ ثّزشٚ دثٚ ٟوزٌه اٌّشبس٠غ اٌّزؼٍمخ ثّشاػبح عٍغٍخ اٌزٛس٠ذ ٚاٌزٛص٠غ ٌٍج١ئخ، ٚخٍك فشص ٌٍششوبد اٌزٟ رزّزغ ثبٌخجشح فٟ ِشبس٠غ اٌز١ّٕخ اٌّغزذاِخ.

 ٠غزّش الزصبد دثٟ اٌّزٕبِٟ فٟ اٌسبخخ إٌٝ ِض٠ذ ِٓ االعزثّبساد فٟ اٌج١ٕخ اٌزسز١خ ٕٚ٘بن إِىب١ٔخ ٌٛخٛد فشص اعزثّبس٠خ ِشثسخ فٟ رط٠ٛش لطبس االرسبد ٚرط٠ٛش ٚرٛع١غ ٚإػبدح رط٠ٛش ِٛأئ ِٚطبساد ٚأٔظّخ طشق.

 وزٌه ٕ٘بن فشص خ١ذح ٌالعزثّبس فٟ لطبػبد اٌخذِبد ا١ٌّٕٙخ، ٚاٌّشافك اؼٌبِخ ٚاٌصٕبػبد اٌزس١ٍ٠ٛخ اٌزٟ رسزبج ٚ ٌٍّٕٛاٌزٛعغ رّبش١ب ِغ اعزّشاس ّٛٔ الزصبد دثػٚ ٟذد اٌغىبْ فٟ اإلِبسح. رشًّ اٌخ١بساد اٌّزٛفشح ٌالعزثّبس فٟ ِدبي اٌّشافك اؼٌبِخ االعزثّبس ػجش ص١غخ اٌششاوخ ث١ٓ اٌمطب١ػٓ اٌخبص ٚاؼٌبَ، ٚاٌزٟ ٠ّىٓ أْ رىْٛ ِف١ذح فٟ رس٠ًٛ ِخبطش اٌغٛق إٌٝ اٌمطبع اٌخبص، فٟ ز١ٓ ٠سزفع اٌمطبع اؼٌبَ ثبٌّخبطش اٌزٟ ٠ّىٕٗ ِٛاخٙزٙب.

 ؼ٠زجش ٔظبَ االعزثّبس فٟ دثٟ ِالئّب ٌٍغب٠خ ِغ ٚخٛد اؼٌذ٠ذ ِٓ إٌّبطك اٌسشح اٌزٟ لبِذ ٌزغ١ًٙ االعزثّبس. ٠غزغشق األِش أ٠بِب لالئً ٌزغد١ً ػمبس فٟ ز١ٓ أْ عٛق اؼٌّبٌخ ؼ٠زجش ألً خّٛدا ثبٌّمبسٔخ ِغ ِٕطمخ اٌششق األٚعظ ٚشّبي أفش٠م١ب. أ٠ضب، ٠زٛلغ أْ رصذس اإلِبساد لش٠جب لبٛٔٔب خذ٠ذا ٌالعزثّبس األخٕجٟ، ِّب ٠غ١ٍّػ ًٙخ االعزثّبس، ٚص٠بدح اٌشفبف١خ ٚفزر ثؼض األٔشطخ االلزصبد٠خ اٌزٟ رؼذ ززٝ ا٢ْ غ١ش ِغّٛذ ٌالعزثّبس األخٕجٟ ثذخٌٙٛب.

 رٛضر اٌذسٚط اٌّغزفبدح ِٓ دٚي أخشٜ أْ دثٚ ٟاإلِبساد ٠ّىّٕٙب االعزّشاس فٟ ارخبر ِٕب٘ح اعزجبل١خ ٌزسغ١ٓ اٌزٕبفغ١خ ٚخزة االعزثّبساد. رشًّ اٌخطٛاد اٌّّىٕخ ل١بَ خٙخ ٚازذح ٠ّىٕٙب رغ١ًٙ اعزفغبساد اٌّغزثّش٠ٓ ٍٝػ وبفخ 5

اٌّغز٠ٛبد ٚص٠بدح وفبءح ١ٍّػخ االعزثّبس. ٕ٘بٌه خطٛاد اخشٜ رشًّ رٛف١ش ِض٠ذ ِٓ اٍٛؼٌِّبد زٛي ظشٚف األػّبي ٚاٌج١ئخ االلزصبد٠خ، اٌشفبف١خ ٚرٛف١ش ِض٠ذ ِٓ اٌسّب٠خ ٌٍّغزثّش٠ٓ. رسغٓ اٌخطٛاد اٌّزوٛسح ِٓ اٌمذساد اٌزٕبفغ١خ ٚاٌشفبفف١خ ٚرمًٍ ِٓ رىب١ٌف ِضاٌٚخ األػّبي ِّب ٠دؼً ِٓ دثٚ ٟخٙخ أوثش ِالءِخ ٌالعزثّبساد فٟ إٌّطمخ ٚاؼٌبٌُ.

6

EXECUTIVE SUMMARY

 The objective of this study is to identify and discuss the prospects for investment in Dubai and UAE by foreign investors.

 Dubai and UAE have experienced rapid economic progress in the last few decades on the back of reforms meant to both develop infrastructure and diversify the economy. These reforms combined with efforts to boost trade and investment by having several free-trade zones, of which Jebel Ali Free Zone is the most significant, have been successful and have made Dubai a hub for investment and trade.

 In terms of doing business, UAE is regarded by The United Nations Conference on Trade and Development (UNCTAD) as a ‘front-runner’ economy which means it has high Foreign Direct Investment (FDI) potential and also high FDI performance.

 UAE has made major strides in improving the business climate. In only one year, from 2008 to 2009, UAE has improved its ranking by 14 ranks in overall ease of doing business, while it has improved its ranking by 74 ranks in terms of starting a business, by 29 ranks in terms of dealing with construction permits and by 8 ranks in terms of trading across borders.

 Dubai’s main investment opportunities lie in those sectors which are defined as vertical building blocks by the Dubai Strategic Plan for 2015. These include the Travel and Tourism, Financial Services, Professional Services, Transport and Logistics, Trade and Storage and Construction sectors.

 For the tourism sector, the World Travel and Tourism Council (WTTC) projects that UAE tourism GDP will grow by a real annualized growth rate of 4.5%, while capital investment in travel and tourism is forecast to grow by a real annual growth rate of 6.4% and spending by inbound visitors by 2.9% per annum respectively in the period 2010 to 2020.

 For the Financial Sector, there are many opportunities both within and outside the Dubai International Financial Centre (DIFC). Important opportunities include for technology companies as financial firms invest in upgrading and improving ICT technology,

7

opportunities related to the development of a liquid corporate bond market and also in the area of Islamic Finance.

 Investment in transport and logistics include opportunities to develop various roads in Dubai, in projects associated with the Dubai metro and also projects involving greening of the supply chain, creating opportunities for companies which have experience in sustainable development projects.

 Dubai’s growing economy continues to require greater investment in infrastructure and lucrative possibilities could exist in development of the Union Railway, development, expansion and redevelopment of ports, airports and road systems.

 There are also good opportunities in the professional services, utility and manufacturing sectors which need to grow and expand as Dubai’s economy and population continues to grow. Choices available for investment in utilities include investing through the Public Private Partnerships (PPP) structure, which could be useful in transferring market risks to the private sector, while the public sector keeps the risk that it can best manage.

 The investment regime in Dubai is considered very favorable, with many free-zones established to facilitate investment. It takes fewer days to register a property and the labor market is comparatively less rigid than the Middle East and North Africa (MENA) region. Also, it is expected that the UAE will soon release a new Foreign Investment Law, easing the investing process, increasing transparency and opening up some economic activities that are now off limits to foreign investment.

 The lessons from other countries show that Dubai and UAE must continue to take a pro- active approach to improving competitiveness and attracting investment. Possible steps include creation of a single body which could facilitate investor queries at all levels and increase the efficiency of the investment process. Other steps include provision of more information about business and economic conditions, transparency and greater protection for investors. These steps to improve competitiveness, transparency and reduce the cost of doing business could make Dubai the most favored destination for investment in the region and the world.

8

Section 1: Introduction

1.1. Background

Dubai has long been regarded as a hub for investment and trade. The purpose of this increased investment has been to increase the GDP of Dubai, to diversify the economy and to project Dubai at the global stage in terms of logistics, tourism, financial market and trading infrastructure. The global economic downturn has reduced the risk appetite for investors globally, led to large correction in the real-estate and construction sectors around the world and led to significant uncertainty about the future.

As Dubai and the UAE also emerge from the impact of this downturn and recover, it is important to assess which sector opportunities can be availed by foreign investors, the regulatory regime that applies to foreign investors and which projects are available for investment from overseas.

UAE is regarded as an FDI ‘front-runner’ according to UNCTAD which means that it has high FDI potential and also high FDI performance. Thus the UAE has performed to its potential and it can be expected that it will continue to be a front-runner in the future. As such UAE and Dubai will continue to be important candidates for foreign investment from developed countries and also in the future from the developing countries of Asia and Latin America including India, China and Brazil.

1.2. Research Objective

This study is meant to address issues that an investor may face in Dubai with respect to the investment regime and opportunities. It highlights key sectors of interest and also opportunities in the pipeline for the future. The focus of this study is on Dubai but where relevant analysis will also be done for the UAE. At the most basic level, investment opportunities are considered with respect to their rate of return in relation to the risk. While this differs greatly by the specific project, some general observations will be made by sector, with regards to the sector’s position in the risk-return space.

1.3. Research questions

This study will answer the following research questions:

9

1. What are the future economic growth prospects of Dubai?

2. What investment regime applies to investment in Dubai?

3. What are the key sectors of interest for investors?

3. What opportunities exist in specific sectors for investment in Dubai?

1.4. Methodology and data

This study uses a descriptive and analytical approach to describe and analyze future investment opportunities in Dubai for investors. An analysis of past economic data and future forecasts will be conducted to assess UAE and Dubai’s prospects. The study would use government sources to help in identifying sectors of interest to foreign investors. The study also uses well known databases like MEED to present future projects in the pipeline. Data is also collected from national, regional and international sources.

1.5. Outline of Study

Section 2 presents an overview of macro-economic conditions and future prospects for UAE and Dubai. Section 3 will show major investment opportunities and projects for investment in Dubai by sector. Section 4 presents an overview of the investment regime for Dubai and the UAE. Section 5 concludes with recommendations for government.

10

Section 2: Dubai and UAEs economic environment and prospects

Dubai and the UAE have experienced rapid economic progress in the last few decades on the back of reforms meant to both develop their infrastructure and also diversify the economy. This section explores the current economic environment and the prospects for future macro-economic growth. This macro-economic analysis helps create a framework for later sections regarding the investment regime and specific investment opportunities

2.1. Economic history of UAE Table 2.1 below shows important macro-economic variables for the UAE. UAE total GDP stands at 228.6 billion USD in 2009. As shown in the table industry and services are the two important sectors in the UAE, with agriculture playing a marginal role. The growth in services shows that the UAE (and Dubai in particular) has had success in diversifying the economic base. This is a trend that is expected to continue as Dubai and the UAE continue to try to look at diversifying into new sectors. This is likely to create long-term business opportunities which will be explored in later sections.

Table 2.1: UAE basic economic data (2009) UAE Total GDP (USD billion) current prices 230.0 Agriculture (%) 1 Industry (%) 52 Services (%) 47 GDP per capita at current prices (USD) 46,857 Employment by economic activity1 Agriculture (%) 4 Industry (%) 24 Services (%) 72 Source: IMF/EIU, ILO, Australian DFAT, UAE Ministry of Economy, UN and other international sources Some 2009 data is based on forecasts

1Data for sector employment share is for 2008

11

2.2. UAE Growth outlook and forecast: Table 2.2 below shows the outlook for the UAE economy based on forecasts by the Economist Intelligence Unit (EIU). As shown below real GDP is expected to grow at a healthy rate and growth is expected to pick up pace in 2012 and beyond.

Table 2.2. UAE projections for key economic variables (% real change) 2010 2011 2012 2013 2014 % change % change % change % change % change Real GDP 3 4 6 6 6

Agricultural sector real GDP 2 2 2 2 3

Industrial sector real GDP2 3 4 6 6 6

Manufacturing sector real GDP 4 3 4 6 6

Services Sector real GDP 2 3 5 6 6 Source: EIU Country data3

Table 2.3 shows important developments that have happened in Dubai’s economy and the future prospects. Also identified are important sectors identified as vertical building blocks. These sectors include Travel and Tourism, Financial Services, Professional Services, Transport and Logistics, Trade and Storage and Construction and efforts to boost trade using for example Jebel Ali Port and Jebel Ali Free Zone as a key mechanism to achieve this objective

Table 2.3: Key developments in the Dubai economy at a glance  Dubai’s historical growth rate from 2000-2008 has been rapid and has outpaced other economies in the region.

 Dubai’s strongest sectors in terms of international competitiveness are tourism, transportation, construction, financial services and professional services.

 The effort to boost trade and investment in Dubai by having several free trade zones, of which the Jebel Ali Free Trade Zone is the most significant, has been a successful exercise. It has put Dubai on the map as a logistics and trade hub.

 Building on the economic gains that Dubai has made, the Dubai Strategic Plan for 2015 sets out a

2 This variable measures the percentage change in real mining, quarrying, manufacturing, construction and utilities value-added, over previous year. 3 Figures are based on nominal numbers. 12

target for 11% growth per annum and an increase in Dubai’s per-capita GDP to USD 44,000. It may be noted here that plans have been announced to update the DSP 2015, taking into account the impact of the global economic downturn. However, the update has not been announced as yet. Investors are encouraged to look for the update for a further view of important sectors and investment prospects in Dubai4.

 For the future, the Dubai Strategic plan for 2015 identifies the following sectors as important for a strategic thrust as building blocks. These include Travel and Tourism, Financial Services, professional Services, Transport and Logistics, Trade and Storage and Construction

Source: Dubai Strategic Plan for 2015, Rettab and Kwaak (2005) and identification of sectoral investment opportunities in Dubai, Dubai Chamber, 2007.

Figure 2.1 below shows the value of Dubai’s sectors from 1975 to 2007. According to this data, there has been rapid growth from 2000 onwards. In terms of magnitude this growth has been led by Trade and Construction and real estate.

Figure 2.1. Historical GDP values in Dubai’s key sectors (AED mn.) 50000

40000

30000

20000

10000

0

1996 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Manufacturing Construction Trade Transport, Storage & Communication Real Estate The Financial Corporation Sectors Government Services Sector Source: Dubai Chamber based on UAE Ministry of economy

When the data in figure 2.1 is compared with the sectors identified as strategic sectors, there is an overlap as the sectors identified for strategic thrusts are the ones that have grown rapidly in the past. Therefore, Dubai knows where its strength lies and wants to build on that strength. Although potential opportunities

4 http://www.dubai.ae/en.portal?topic,hm_dxbstgplan,1,&_nfpb=true&_pageLabel=general

13 exist in almost every sector, this information will inform any prospective investor about the sectors in which he is more likely to find sound long-term investment opportunities.

2.3. UAE’s Business environment The UAE has made significant strides in the ease of doing business when compared to the 183 economies of the world (table 2.4). The change in rank is over one year and the measurement period is normally from June 2008 to June 2009 (reported in Doing Business 2010 UAE)5. As shown in table 2.4, in one year, the UAE has made large gains in the ease doing business (i.e. overall). This has made it improve its ranking by 14 points. It has also improved its ranking by 74 points in terms of ease of starting a business and its ranking by 29 points in dealing with construction permits. Significant improvements were also experienced in the ranking for trading across borders.

Table 2.4. Ease of doing business in UAE 2010

UAE: Ease of... Doing Business 2010 rank Doing Business 2009 rank Change in rank

Doing Business 33 47 +14

Starting a Business 44 118 +74

Dealing with Construction 25 54 +29

Permits

Employing Workers 50 45 -5

Registering Property 7 7 0

Getting Credit 71 68 -3

Protecting Investors 119 114 -5

Paying Taxes 4 4 0

Trading Across Borders 5 13 +8

Enforcing Contracts 134 135 +1

Closing a Business 143 143 0 Source: Doingbusiness.org, World Bank Group.

5 One of the exceptions is for the Paying Taxes indicator that refers to the period January to December of 2008 (doingbusiness.org) 14

Table 2.5 shows the important indicators for starting a business in the UAE as compared to the MENA region and also the OECD. As shown in the table it takes almost the same number of procedures to start a business in the UAE as compared to the MENA region. In terms of days, it takes 15 days to start a business in the UAE as compared to 20 for the MENA region. Table 2.5. Starting a business ranking Indicator UAE MENA OECD Procedures (number) 8 7.9 5.7

Duration (days) 15 20.7 13.0

Cost (% income per capita) 6.2 34.1 4.7 Source: Doingbusiness.org, World Bank Group.

Table 2.6 shows the ease of enforcing contracts in the UAE. As shown here, it takes 49 procedures to enforce a contract in the UAE, this compares with 43.4 procedures in Middle East and North Africa. But again, it takes fewer days to enforce contracts in the UAE.

Table 2.6: Ease of enforcing contracts

Indicator UAE MENA OECD Average

Procedures (number) 49 43.4 30.6

Time (days) 537 679.9 462.4

Cost (% of claim) 26.2 23.7 19.2 Source: Doingbusiness.org, World Bank Group.

Table 2.7 shows important indicators for investor protection. These include the extent of disclosure index, extent of director’s liability index, index for ease of shareholder suits and also for strength of investor protection. In these indices, higher numbers indicate greater disclosure, greater director’s liability and also greater strength of investor protection, which generally imply greater investor protection. Table 2.7: Level of investor protection

Indicator UAE MENA OECD Average

Extent of disclosure index (0-10) 4 6.3 5.9

Extent of director liability index (0-10) 7 4.8 5.0

Ease of shareholder suits index (0-10) 2 3.7 6.6

Strength of investor protection index (0-10) 4.3 4.9 5.8 Source: Doingbusiness.org, World Bank Group.

15

Section 3: Detailed Opportunities for Investment in Dubai by sector

Dubai, in its role as an entrepot, has attracted foreign investment in a variety of sectors. More recently the activity has been in construction and real estate sectors, although as part of the Dubai Strategic Plan (DSP) for 2015, Dubai is also encouraging investment and development of other sectors of the economy as well. This section contains a list of data collected about opportunities in various sectors. Some projects may be past projects for which contracts have been awarded and some may be in design or still in planning phase (i.e. the contract may not have been awarded yet). These projects serve as examples of the kind of investment activity by sector. It is up to the individual investor to do their due diligence and search for the most appropriate investment opportunity, given their particular risk-return requirements. It may be noted here that plans have been announced to update the DSP 2015, taking into account the impact of the global recession. However, the update has not been announced as yet and investors are encouraged to look at this update for a further view of important sectors and investment prospects in Dubai6.

6 http://www.dubai.ae/en.portal?topic,hm_dxbstgplan,1,&_nfpb=true&_pageLabel=general

16

Table 3.1: Summary of Dubai’s main competitive advantages

 Dubai’s main advantage is its strategic location in between major economies of Asia, Africa and Europe.  Dubai has successfully leveraged this strategic location using the Jebel Ali Port, the sixth largest port in the world and also the newly built Al-Maktoum airport.  In the longer run, it can be expected that the Al Maktoum airport will become a multi- modal logistics hub for about 12 million tons of freight. A corridor will link Jebel Ali Port to the Al-Maktoum airport, greatly cutting down transit time. Efficient multimodal transportation will be one of Dubai’s important competitive advantages.  According to research done at Dubai Chamber, Dubai’s main Revealed Comparative

Advantage lies in its re-exports from its free-zones (Azzam, Rettab and Morada, 2010).

 The Jebel Ali Free Zone lies in between Jebel Ali port and Al Maktoum airport. The free

zone offers commercial facilities such as office space, light industrial units and warehouse

and showroom facilities. It also offers 100% foreign ownership, no currency restrictions

and unrestricted repatriation of both capital and profits.  A business located in the Jebel Ali Free Zone benefits not only from the incentives and facilities offered in the zone but also its location between the worlds two major logistic hub, i.e. Jebel Ali Port and the Al Maktoum airport.  Dubai continues to invest in infrastructure and make it easier to do business making it an attractive location for service the billions of potential customers in the regions surrounding Dubai

Adapted from: Invest in Cananda. Sources: Jafza.ae, Azzam, Rettab and Morada (2010), Gulf news and Zawya.com

Table 3.2 below shows FDI inflows into Dubai by sector. Although the time period is between the years 2005 and 2006, which places it before the global downturn, it does serve as a guide to which sectors have been attractive in terms of investment recently. As the table shows, while construction has the largest amount of investment in 2005, it is closely followed by financial intermediation and insurance in the same year and then by wholesale and retail trade sector. In 2006, it is financial intermediation and insurance that has the largest share, followed by construction, followed by wholesale retain and trade which has the highest amounts of investment.

17

Table 3.2: FDI inflows into various sector of Dubai (2005-2006) 2005 2006 % change Agriculture 16 13 -19% Mining 1,098 1,302 19% Manufacturing 737 1,061 44% Electricity and Water 39 46 18% Construction 13,239 14,652 11% Whole sale and retail Trade 7,939 8,696 10% Hotels and Restaurants 3 38 1,167 Transportation and Communication 603 851 41% Financial intermediation and Insurance 12,931 15,025 16% Others 830 780 -6% Total 37,435 42,463 13% Source: Dubai Chamber based on FDI bulletin 2005-06, Dubai Statistics Centre

Table 3.3 below shows important indicators for companies that have made FDI in Dubai, such as Dividend Payment, Income Payment and Compensation of employees among others. These variables generally show a large percentage increase from 2005 to 2006.

Table 3.3: Major indicators for companies that have made FDI in Dubai Main Sector 2005 2006 % change Foreign Direct Investment 37,435 42,463 13% Dividend Payment 1,738 2,394 38% Income Payment 6,835 10,085 48% Sales of Goods and Services 53,054 55,822 5% Purchases of Goods and Services 32,378 39,400 22% No. of Employees 56,430 70,445 25% Compensation of Employees 2,601 3,636 40% Source: Dubai Chamber based on FDI bulletin 2005-06, Dubai Statistics Centre

3.2. Detailed sector opportunities in Dubai

This sub-section covers detailed sector opportunities for investment. Although opportunities exist in other sectors, the opportunities in Dubai are concentrated in certain sectors given Dubai’s location, logistics and free-zone advantages. These sectors are also among those mentioned earlier and are part of the Dubai Strategic Plan for 2015. The format for the subsection for each sectors is as follows. First we start with a sector profile, followed by future projections and finally an overview of some investment opportunities (past and future) in each sector, generally focusing on specific projects.

18

These sectors are as follows:-

1) Travel and Tourism 2) Financial Services 3) Professional Services 4) Transport and Logistics Services 5) Trade and Storage 6) Construction 7) Utilities 8) Industry (Manufacturing)

3.3. Investment in Travel and Tourism

This section covers investment prospects in Dubai’s key Tourism sector. This sector has also been identified as a important vertical building block in the Dubai Strategic Plan 2015.

3.3.1. Sector profile According to the Department of Tourism and Commerce Marketing (DTCM) survey of international overnight visitors for 2006-07, most visitors who came to Dubai were male (75%), aged 26-25 (68%) and nearly a third came here on business trips (32%). Most visitors came for leisure breaks (68%) with a third on business trips.

For investors in Dubai’s Tourism sector it would be interesting to note that during this period, 95% of visitors arrived through Dubai International Airport. 77% of visitors stayed in hotels. Most of these visitors stayed in 5 start hotels (31%), while 16% in four star hotels and 28% in 3- star hotels or below.

Outside their accommodation, 71% of visitors ate at restaurants. Visitors also went to food courts in shopping malls, but these were more popular amongst visitors who came for leisure rather than visitors who came for business visits. In terms of spending time, 79% of visitors spent their time in shopping, 70% sightseeing, 53% in visiting heritage sites and 44% spent time in guided activities. Shopping malls were the most popular destination (86%) while clothing was the most popular item purchased followed by souvenirs (35%).

19

In terms of expenditure, for the period for which the DTCM overnight survey was undertaken, in 2006-2007 the expenditure per day per person was AED 1,021.74 per day per person. This was a large increase of about 104% over the figures for 2002, when average expenditure was AED 500.10. American visitors spent the most per person per day, AED 2,430. On average the business visitor spent AED 1,439.88 while leisure visitors spent about AED 840.22. Visitors generally came to Dubai for the first time (61%), and a large proportion, 62% said they will return to Dubai for a visit.

Table 3.4: Important companies for Dubai’s tourism sector Company name Major activities Opportunities Emirates airlines Emirates is part of the airline industry. It is now Emirates plans to increases fleet of reportedly expanding into hotels and resorts. Has aircraft. In addition tour operators and built a hotel in Dubai and a luxury conservation resorts can link up with Emirates airline resort in the Blue mountains in Australia to offer

Air Arabia Airline industry Although based in Sharjah, Air Arabia has flights going to Kenya among other locations. There is possibility for Dubai tour operators and hotels to exploit opportunities for growth in tourism from Asia and Africa.

Accor hotel group Ibis , Novotel, Sofitel, Pullman Can potentially partner with this large international chain in food and beverage and event/conferencing areas. Source: BMI UAE Tourism Sector Report, 2010.

3.3.2. Future projections The World Travel and Tourism Council (WTTC), forecasts that in the next ten years the UAE travel and tourism sector GDP is expected to achieve high levels of growth. These are summarized in the table 3.5 below. It is also important to note that UAE tourism sector is ranked 6 out 181 countries by the WTTC in terms of expected growth in the tourism sector, implying potentially lucrative opportunities for tourism related businesses to profit from.

20

Table 3.5: Expect values and real growth rate for UAE tourism Expected values in 2020 Annualized Real Growth Tourism Economy 27,723 4.5% GDP (USD mn.)

Demand for travel and 203,830 5.5% tourism (USD mn.)

Employment in 745,000 5.7% Tourism sector economy (number of employed)

Capital Investments in 61,113 6.4% Travel and Tourism (USD mn.)

Spending by inbound 44,742 2.9% international visitors (USD mn.) Source: WTTC

Table 3.6 shows the top economies in terms of Tourism growth among all the economies of the world. As shown below, the tourism sectors of China and India are expected to grow at the highest rate. Also two countries in Africa, Zimbabwe and Malawi are also expected to grow at highest rate as well. Dubai sits in between these two regions and in its position as a tourism hub can benefit from increased tourism between Asia and Africa. This is only one of the potential opportunities and there can be many more that can be exploited by investors in utilizing Dubai’s strategic location at the cross-roads between East and West.

Table 3.6. Forecast: Fastest Growing Tourism Sector Economies 2010-2020 Tourism Economy 10 Year Real Growth Expected spending by visitors in host 10 Year Real Growth GDP Annualized % country Annualized % China 9.0 Montenegro 11.4 Zimbabwe 8.7 Solomon Islands 10.1 Malawi 8.7 Brazil 9.6 India 8.5 Chile 9.5 Mongolia 8.1 Zimbabwe 9.5 Source: World Travel and Tourism Council

3.3.3. Investment potential and opportunities The potential for investment in Tourism in Dubai is for two reasons. One is the potential for growth within the UAE itself. The other is exploiting Dubai’s position as hub for tourism

21 elsewhere in the region and even beyond. International investors can gain by partnering with some of the major companies in UAE and

Table 3.7 shows a list of projects in Dubai’s Tourism sector. Many of these projects would have been awarded to potential investors but they serve as examples of the kinds of projects that foreign investors can look for in the future.

Table 3.7: Important investment projects and opportunities Project name Project value (USD mn.) Contract parties DCA - Dubai World Central (Al 120 Department of Civil Aviation (DCA) Maktoum International Airport) - Helipad & Tunnel 300 I&M Galadari Group - Restless Dubai Tourism Projects Development Planet (City of Arabia) Company (DTPDC)*I & M Galadari Group (Dubailand)

Tanmiyat – Dubai land: Living 3,5007 Dubai Tourism Projects Development Legends Company (DTPDC)*Tanmiyat Group

Falcon City of Wonders - Central 300 Salem al-Moosa Group*Dubai Tourism Park Towers Projects Development Company (DTPDC)

Dubai Sports City - Multi-Purpose 150 Dubai Tourism Projects Development Indoor Stadium Company (DTPDC)*Private Developer 5508 Dubai Tourism Projects Development I&M Galadari Group - Wadi Walk Company (DTPDC)*I & M Galadari Group (City of Arabia) (Dubailand) Source: Meedprojects.com

3.4. Investment in Financial Services Sector

Dubai’s Financial Services sector is another important vertical building block in the Dubai Strategic Plan for 2015. Most of the material in the sub-sections below is taken from the BMI UAE Insurance Report Q2 2010 and the UAE Commercial Banking Report Q2 2010.

3.4.1 Sector profile The Central bank of the UAE is responsible for supervising monetary, credit and banking policy. This is in order with the UAE’s policy to use these policy tools to help support the economy and support currency stability.

7 This is budgeted value, not contract value 8 This is budgeted value, not contract value 22

In insurance, UAE has several small insurance companies and so they don’t have benefit of economies of scale. A profile of some important companies in the UAE banking and insurance industry is provided below.

Table 3.8: Selected companies in UAE banking and insurance sector Company name Major activities Opportunities Emirates NBD Leading bank in UAE in Management at Emirates NBD has mentioned that it wants to shift terms of assets towards more investment in emerging markets. This could create opportunities for investors as the bank could possibly also look to combine with foreign partners Mashreq bank Lending by Mashreq has Mashreq is targeting organic growth in deposits and loans. grown substantially.

Dubai Islamic Bank Islamic banking products Opportunities for expansion due to continued growth in Islamic and services banking and finance. Has growing product range

Emirates Islamic Bank Islamic banking products Opportunities exist in Islamic finance as this industry grows and new and services products and services are designed. EIB also provides internet banking, Etisalat online payment services, corporate banking and business banking services. The wide range and growth opportunities in these products and services create opportunities for other companies to collaborate with EIB.

AIG Operate in many countries Premiums could rise as the demand for life and non-life insurance and has global network of services increase life and non-life insurance Allianz Alliance is another global As with AIG, there could be opportunities as premiums improve due company offering to greater demand for insurance products. insurance, banking and asset management products Source: BMI UAE Insurance report, Q2 2010.

3.4.2. Future projections This section covers future projections for the UAE insurance and banking sub-sectors. For the UAE Commercial banking sector it may be noted that BMI notes a projected Compound Annual Growth Rate (CAGR) of about 9% for assets, 7% for liabilities and 9% for deposits, from 2010 to 2014. Table 3.9: Future projections for the UAE Insurance industry 2011 2012 2013 2014 Non Life insurance 24,342 24,231 28,742 30,776 premiums AED mn % annual growth 17 12 6 7

Life insurance 3,180 3,603 4,955 6,554 premiums % annual growth 17 13 38 32

Total 27,523 30,833 33,696 37,330 % annual growth 17 12 9 11 Source: UAE Insurance report Q2 2010. 23

Table 3.10 below shows future projections for UAE banking sector assets and liabilities, which are forecasted to grow significantly over the next few years. Table 3.10: Projected levels for UAE banking sector assets and liabilities (US$ bn.) 2011 2012 2013 2014 Total Assets 482.31 535.36 599.60 671.56 Client Loans 317.24 345.79 380.37 418.41 Client deposits 329.63 362.59 395.23 426.84 Source: UAE Commercial Banking Report Q2 2010.

3.4.3. Investment Opportunities Dubai has many opportunities in the financial sector. For example, an investor can setup a company with the following functions in DIFC: Wealth Management, Banking and brokerage, Capital, Islamic Finance and ancillary services and re-insurance and captives (DIFC.ae).

Table 3.11 highlights some important opportunities in this sector. Some of these opportunities are in what is expected to be a rapidly growing sector, i.e. Islamic Finance. Opportunities in this are not only limited to designing and promoting Islamic financial instruments but also in areas such as education of professionals in this field. Some possible investment projects are given below. Another area of opportunity is greater financial integration across the Arab world. This could create opportunities for financial institutions in terms of creating payments systems, ICT technology and even regional investment institutions. Therefore, foreign investors, including those from other Arab and GCC countries can partner with Dubai financial institutions to profit from these opportunities as they emerge. These opportunities are partly dependent on greater integration between the members of the Grater Arab Free Trade Agreement (GAFTA). Another potential area is that investment from the GCC and wider MENA can be directed towards local capital markets and companies as compared to overseas. This will help recycle wealth in the region, leading to greater wealth generation. Therefore, the wealth of the GCC, the MENA region and even South Asia could be attracted by the investors in Dubai’s capital market, using Dubai as a financial hub. International investors are looking for diversification. Increased correlation between major global stock markets is increasing and this has reduced the natural benefits of portfolio diversification, the GCC region could offer both return and diversification potential. International investment funds should therefore consider Dubai as the location from which to tap the GCC’s potential given the quality of financial infrastructure, for example in the DIFC. This list of possible opportunities below is not exhaustive. With further analysis, investors can find many more opportunities in Dubai’s financial sector. 24

Table 3.11: Projected levels for UAE banking sector assets and liabilities Possible projects Project value Opportunities ICT technology upgraded banking NA Greater integration within the Arab world will create need systems and integrated payments systems for updated finance and payment systems. across Arab countries.

Partnerships between financial institutions NA Opportunities are very high and language and cultural from Arab countries, Asia and Africa and similarities between Dubai businesses and other businesses the UAE to provide greater financial in Arabic speaking countries partner with each other. services to un-served (unbanked Similar opportunities also exist in the financially un-served population). populations of Asia and Africa. According to Mckinsey/Financial Access Initiative, 67% of the adult population in Arab states is financially un served.

Corporate and infrastructure related bonds NA High amounts of infrastructure spending by GCC countries in areas such as transport systems, pipelines, telecommunication and electric grids means that some of these projects can be securitized by using the capital markets

Islamic Finance NA Opportunities also exist for designing and promoting Islamic Finance products, to serve a growing international market. Dubai is well placed to serve these needs as a global financial hub. Also Dubai based investors can partner with other financial hubs, such as Luxembourg which has strong fund brand internationally, using their expertise to offer Islamic funds. Sources: BMI, ERF9 , PWC10 DIFC, McKinsey and Financial Access Initiative, Saidi, Future of Capital markets 11 in the middle-east, DIFC presentation and Ernst and Young

3.5. Investment in Professional Services

The professional service sector is an important sector of the Dubai economy and has been defined as a key vertical building block according to the Dubai Strategic Plan for 2015. This section discusses investment opportunities in Dubai’s professional services sector.

3.5.1. Sector profile According to a survey done by Dubai Chamber in 2006, the share of marketing services is at 19%, followed by professional services at 18% and then renting and leasing at 18%. Within professional services, management consulting represents 31% of the share, followed by book- keeping, accounting and auditing at 19% and then legal services at 15%. Other professional services account for about 35% of the total (Abdelgalil and Hussain, 2007)

3.5.2. Investment Opportunities Given the specialized nature of this sector, there are opportunities for investment by professionals such as accountant, management consultants and legal professionals to setup office

9 Saidi, Nasser, ERF Working Paper Series, ‘Arab Economic Integration: An awakening to remove barriers to prosperity’. 10 http://www.pwc.com/en_LU/lu/podcast/docs/pwc-islamic-finance-podcast.pdf 11 Half the World is unbanked, 2008 25 in the UAE. Opportunities could also exist to service the needs of Dubai’s large free-zone business community. Given the expected growth in Dubai’s trade, logistics and tourism sectors, investors could expect a continued need to provide specialized professional services to these sectors.

3.6. Investment in Transport, logistics and storage sector

This section covers investment opportunities freight transport and logistics sector of Dubai and is based primarily on a BMI Freight transport report for Q2 2010.

3.6.1. Sector profile UAE’s position in logistics in transportation and logistics is based on two major factors. One is the strategic location of the country and the other is its ability to project the advantages of that strategic location by investing in high quality infrastructure. This is especially relevant in the case for Dubai which has been able to become a hub for many sectors, tourism, re-exports, finance among other sectors. The government continues to try to encourage diversification of the economy into non-oil sectors. As these sectors grow, there will be continued need to provide top quality transportation to facilitate growth in traffic.

Recently, Dubai has developed the Dubai Logistics Corridor. This development is expected to be a multi-modal logistics platform12. In another development, the Al Maktoum, international airport is opening in Dubai. In terms of capacity, the airport is expected to cater to 120 to 150 million passengers and 12 million tons of cargo annually13. Investors from overseas can expect investment opportunities in the Dubai World Central complex and in this new airport as it develops and passenger numbers grow.

In another development, the UAE is planning to build a railway network to connect all seven emirates. This Union Railway will also connect the UAE to Saudi Arabia via Ghwaifat city. It is also planned that it will connect the UAE to Oman in the east (gulf news, business, 22 June 2010). The pace of these developments shows the seriousness of the Dubai and UAE governments to develop the transportation infrastructure in the country. It also shows Dubai’s

12http://www.khaleejtimes.com/DisplayArticle08.asp?xfile=data/business/2010/January/business_January326.xml§ion=busi ness 13http://www.zawya.com/story.cfm/sidGN_21062010_220607/Al%20Maktoum%20airport%20will%20fuel%20future%20growt h 26 determination to continue to be a global logistics hub. Business Monitor international forecasts that in 2010-2014 it is forecasted that the strongest growth is by air, with an average annual growth rate of 7.5% in freight carried. It is also expected that during this period shipping will grow at 5.4%, pipeline transport at 4.8% and road haulage at 4.5% per year. Detailed forecast will be covered in the next sub-section.

Table 3.11 below shows the scores the logistics performance index (LPI) for UAE and compares this to Bahrain, Saudi Arabia and also Qatar. The other items which are considered here include customs, infrastructure, and international shipments and logistics competence. A high score in customs indicates that the UAE is better in terms of the efficiency of the clearance process, for infrastructure, it refers to the quality of the trade and transport related infrastructure. For international shipments a high score reflects greater ease of arranging international shipments and logistics competence refers to competence and quality of logistics services. Within the GCC the UAE has the highest LPI score showing superior quality of logistics infrastructure.

Table 3.11. World Bank LPI ranking United Arab Bahrain Saudi Arabia Qatar Emirates LPI 3.63 3.37 3.22 2.95 Customs 3.49 3.05 2.91 2.25 Infrastructure 3.81 3.36 3.27 2.75 International 3.48 3.05 2.80 2.92 shipments Logistics 3.53 3.36 3.33 2.57 competence Tracking and 3.58 3.63 3.32 3.09 tracing Timeliness 3.94 3.85 3.78 4.09 Source: LPI Index, World Bank.

Table 3.12 shows the major organizations in the UAE transport and logistics sector. Most of these organizations are based in Dubai while the Union Railways is expected to cover the seven emirates. These are world class organizations and the basing of these organizations in Dubai’s shows the Dubai government’s commitment to continue to have world-class infrastructure.

27

Table 3.12: Important organizations in UAE transport sector Organization name Major activities Opportunities

Union Railway It is expected that the union railway will The project targets 20m metric tones of extend 1,500 km across seven emirates. freight. Expressions of interest are being invited in this giant project. There is also possibility of investing in associated projects connected to this railway project14.

Emirates Airline Emirates airline has flights to and from With the development of Al Maktoum many destinations for passenger and airport, emirates Air Cargo can use the cargo multi-modal transport platform more efficiently. Investors can benefit from this by partnering with and also using this more efficient transport combination.

Jebel Ali Free Zone JAFZA is an international business hub JAFZA offers many incentives for setting (JAFZA) offering incentives, a strategic location up a business including ease of doing and outstanding logistics infrastructure to business and sites in between the two its clients. main logistics hub of Jebel Ali port and Al Maktoum airport.

Jebel Ali Port The world’s sixth largest container port There is scope for shipping and related and an international hub for shipping. companies to expand their business to this port and use it as a hub for regional and international traffic. This port is especially attractive as it is highly efficient in terms of the time it takes to receive goods that have been shipped.

Al Maktoum Airport This newly built airport has opened as an There is potential for air-cargo, freight, international hub for cargo operations. industrial and other companies to use this Traffic to this airport is expected to airport in combination with JAFZA and register strong growth. the Jebel Ali port for multi-modal transport. Source: JAFZA, BMI UAE Freight transport report Q2 2010, Zawya.com15

3.6.2. Future projections for UAE transport and logistics industry Table 3.13 below shows future projections for some important sub-sections of the UAE transport and logistics industry. Some of the highest annual growth is for air transport as the Dubai places greater importance on multi-modal transportation to decrease transport time and increase efficiency.

14 http://gulfnews.com/business/general/uae-railway-operational-in-7-8-years-1.644416 15http://www.zawya.com/Story.cfm/sidZAWYA20100628042418/Al%20Maktoum%20welcomes%20foreign%20cargo%20flights 28

Table 3.13: Projections for UAE transport and logistics sector 2011 2012 2013 2014 Road-mn tones-km 174 183 191 201 Annual growth (%) 5.2 5.2 4.0 5.2 Maritime, mn tones-km 127 134 142 149 Annual growth (%) 4.8 6.2 5.4 5.0 Air mn, tones-km 2.56 2.81 3.02 3.31 Annual growth (%) 7.5 10.0 7.4 9.6 Pipeline, mn-tonnes-km 36 38 40 42 Annual growth (%) 5.3 5.8 4.3 5.5 Total, mn-tonnes-km 340 359 375 395 Annual growth (%) 5.1 5.7 4.6 5.2 Source: BMI UAE Freight Transport Report Q2 2010.

3.6.3. Investment Potential and Opportunities Given new developments such as Al Maktoum airport and the Dubai Metro, there are opportunities in providing services and infrastructure around these large scale developments. There is also the possibility of Public Private Partnerships, where the government and private sector divide the risks so that the private sector bears the risk that it is best suited to bear, while the public sector bears risks that it is best suited. These projects include public-private partnerships regarding the Dubai metro. Prospective investors should contact the RTA and other relevant authorities form more details on these possibilities. Table 3.14 below lists some important projects in the Dubai Transport and logistics industry. This is not an exhaustive list and prospective investors should undertake their own studies regarding investment prospects in Dubai’s transport and logistics sector.

29

Table 3.14: Selected investment projects in transport and logistics Project name Project value Contracting part (USD mn) DCA - Dubai Airport Expansion 3,594 Department of Civil Aviation (DCA) Dubai Tramway system II Phase 1 1,100 Road and Transport Authority (RTA) Dubai RTA - Dubai Metro: Red Line 3,811 Dubai Roads & Transport Authority Dubai RTA - Parallel Road Scheme 1,699 Roads & Transport Authority Dubai RTA - Parallel Roads Scheme I 188 Road and Transport Authority (RTA) (Dubai) Dubai RTA - Dubai Metro: Green Line 3,811 Road and Transport Authority (RTA) Dubai RTA - Parallel Roads Scheme II B 163 Road and Transport Authority (RTA) Dubai RTA - Ras Al Khor Roadway (Phase 169 Roads & Transport Authority VI) Dubai RTA - Three Bridges Connecting the 162 Roads & Transport Authority Deira Island Frond to Palm Deira: Bridge II Dubai RTA - Extension to the Red & Green 20016 Dubai Roads & Transport Authority Line Dubai RTA - Dubai Metro: Purple Line 100017 Dubai Roads & Transport Authority Dubai RTA - Dubai Metro: Blue Line 100018 Dubai Roads & Transport Authority

Projects involving greening of supply chain NA Greening of supply chain aims to minimize social impact of products and/or services. According to research done by Dubai Chamber, this can be done by design of eco-products, sales of used materials and recycling and packaging (Rettab and Ben Brik, 2008). Source: meedprojects.com and (Rettab and Ben Brik, (2008)

3.7. Investment in Trade and Storage

Trade and Storage is described as another important sector in the Dubai Strategic Plan for 2015. This section is based primarily on a BMI UAE Retail Sector report for Q2 2010. The section on the UAE automotive market is based primarily on the BMI Auto Sector report Q2 2010.

16 The value for this item are budget values not contract values 17 The value for this item are budget values not contract values 18 The value for this item are budget values not contract values 30

3.7.1. Sector profile Overtime, the UAE retail sector has evolved from a souk setting (traditional bazaar) to a modern retail environment. Today in the Dubai, hypermarkets and supermarkets are common in large shopping malls which are also home to a variety of retail outlets catering to different segments of society. Although the global downturn has been challenging for many retailers, some retailers have reported a recovery in sales. Also the location of some retail outlets near the Dubai Metro can be expected to increase the number of visitors to adjacent malls.

Important shopping events in Dubai include the Dubai Shopping Festival (DSF). In important trends, retail stores selling consumer electronics have seen the emergence of the ‘big-box’ retail trend. This means that large electronic stores within malls are offering wider choices and also better prices for electronic items. In the automotive sector, the UAE has high rate of vehicles ownership at 548 per 1,000 people. Therefore, the growth potential in this sector lies in immigration and replacing existing cars with new ones. Japanese brands have a strong presence in this market and this could become stronger if the UAE signs a Free Trade Agreement (FTA) with Australia. There is also a significant auto-parts and accessories market with the size being around US $ 2.4 billion in Q1 2009, (BMI Auto Sector report Q2 2010). Table 3.15 below shows the breakdown of some important trade sector products.

Table 3.15: Breakdown of retail sales by important segment Estimated market share % Estimate value (USD bn.) Automotives 9.0 9.7 Consumer Electronics 2.4 2.6 OTC Pharmaceuticals 0.3 0.3 Source: BMI Retail Report Q2 2010.

Table 4.16 below shows historical values for sales for various components of the UAE Mass Grocery Retail (MGR) sub-sector. As discussed earlier, the UAE has moved from a souk style retail environment to having more supermarkets and large hypermarkets. As shown below the sales value in the MGR subsector is dominated by hypermarkets and supermarkets with convenience stores playing marginal role. Investment in this sub-sector must therefore consider any growth potential of hypermarkets and super markets over other kinds of grocery retail outlets.

31

Table 3.16: Sales value in UAE by value (US $bn.) 2002 2003 2004 2005 2006 2007 2008 Supermarkets 0.43 0.50 0.56 0.67 0.81 0.98 1.20 Hypermarkets 1.36 1.49 1.67 1.90 2.17 2.50 2.92 Convenience 0.07 0.08 0.09 0.11 0.12 0.14 0.17 Stores Total MGR 1.86 2.07 2.32 2.67 3.11 3.62 4.29 Sector Source: BMI, Ministry of Planning

3.7.2. Future projections Table 3.17 shows forecast for important sub-sectors and products in the UAE trade sector/. As shown the sales of most of the items is expected to increase as consumers in the UAE continue to increase the purchases of these items. According to BMI, part of the increase in computer spending may come from demand due to computers required for education and e-government.

Table 3.17: Sales Forecasts for UAE retail and trade sector 2011 2012 2013 2014 Supermarket (USD bn.) 1.53 1.70 1.86 2.02 Hypermarket (USD bn.) 3.60 3.93 4.28 4.58 Convenience stores (USD bn.) 0.25 0.29 0.34 0.34 Total MGR sector (USD bn.) 5.38 5.92 6.48 6.94 Computer electronics total demand 3,037 3,281 3,471 3,667 (USD mn.) Computers (USD mn.) 1,765 1,929 2,050 2,179 Video gaming (USD mn.) 917 978 1,026 1,072 Communications (USD mn.) 354 375 395 416 Total auto sales (US $ bn) 12.84 14.02 14.70 15.45 Total auto re-exports (CBUs) 86,498 93,941 99,895 107,041 Car ownership ( % of population) 56 56.31 56.61 56.93 Source: BMI UAE retail report Q2 2010.

3.7.3. Investment potential and opportunities Within Dubai, the project for Dubai land and city of Arabia offer investment prospects. The mall

of Arabia is set to be one the biggest malls in the world19. Retail and Tourism have synergies and

19BMI retail report Q2 2010 32 are dependent on each other. As tourism in Dubai grows the trade and retail sector is also likely to benefit. Generally, there is a lack of Mass Grocery Retail (MGR) outside the urban centers in the UAE creating good investment prospects there.

Table 3.18: Selected Investment projects Project name Project Value (USD mn.) Contracting parties Al Ghurair Investments/Bawadi - 2,750 Al Ghurair Investments Co*Bawadi Bawadi: Shopping Mall LLC

Dubai Sports City - Arena Mall 2000 Dubai Tourism Projects Development Company (DTPDC)*Private Developer Source: meeedprojects.com

3.8. Investment in construction

Construction has been identified as vertical building block in the Dubai strategic plan for 2015. This section discusses investment opportunities in Dubai’s construction sector and is based on a BMI UAE Real Estate report Q2 2010.

3.8.1. Sector profile: Construction has been a major source of investment flows into Dubai as was explained earlier in table 4.2. Due to the global downturn, the construction sector has undergone a correction. This sub-section is based on Business Monitor International Real Estate Sector Report for Q2 2010. According to this report, Damac announced that six projects are due to be completed in Dubai in the next 12 months. Two phases of building of the company’s emirates Gardens development at Jumeriah Village South and also the second of its projects at IMPZ and also two towers at business bay. While challenges in Dubai’s real estate and construction sector remain, the continued construction activity by major companies shows that companies are continuing to build in this sector to benefit from Dubai’s strategic location and its positions as hub for trade, tourism and finance among other activities.

33

Table 3.19: Important companies In Dubai’s construction sector Company name Major activities Opportunities

Al Habtoor Leighton Involved in building of airports, civil works, commercial The company reportedly has plans to and residential buildings, hospitals and hotels. Company is build hotels in Dubai and also plans to 45% owned by Australian contractor Leighton making it buy buildings overseas. one of the Gulfs largest multi-discipline contractors

Damac A leading developer of free-hold properties. Has The company continues to complete developed properties in Dubai Marin, Jumeirah Lake projects and in future could continue Tower and DIFC among other locations to be an important player in the construction

Deeyar Properties Deeyar Properties has property developments in business Deeyar’s operations are divided into bay of Dubai. Its developments can be found in Dubai four business units 1)Property Marina, Water Front and also Jumeirah Lakes Towers Development 2) Lease Management (JLT). 3) Asset Management 4) Fund Management

Dutco Balfour Beatty Dutco benefits from experience and support of an The Gulf region is one of the fastest international company Balfour Beatty. It is a multi- growing infrastructure markets in the disciplinary company based in Dubai and one of its world and Dutco Balfour Beatty important projects include the Burj Tower Shopping Mall stands to benefit from this. Also, the in Dubai company can benefit from the development of Dubai Land in which it is reported to be building the Tiger Woods complex. This could bring more projects in which Dutco specializes in. Emaar This Dubai based company has developed into one of the Emaar’s drive for diversification world’s biggest property developers. The company has means that investors could expect a been diversifying its portfolio. One large international different risk-return profile from this project is the development of the King Abdullah Economic company as compared to a purely City in which Emaar is building a sea-port, CBD, property based company. As the Industrial Zone, Educational Zone, Residential company reinvests in other sectors, communities and resort district this creates demand for associated infrastructure and opportunities for investors to invest in such infrastructure projects Source: BMI Real Estate report Q2 2010

34

3.8.2. Future forecasts Table 3.20 shows future forecasts for the UAE construction sector. These projections for the whole of UAE shows that overtime construction activity is expected to pick up pace and grow.

Table 3.20 Future projections for UAE construction industry 2011 2012 2013 2014 2015 2016 2017 2018 Value US $ bn. 24.57 27.16 29.58 32.05 34.73 37.62 40.74 44.13

Real growth % y-o-y 6.59 6.56 5.42 5.36 5.34 5.33 5.31 5.30

Capital Investment US $ bn. 65.1 71.7 78 84.3 91.2 98.6 106.7 115.3

Real Growth in capital investment 6 6 5 5 5 5 5 5 % y-o-y Source: BMI Real Estate Report Q2 2010

3.8.3. Investment Potential and Opportunities Table 3.21 below shows some selected investment projects for investment in Dubai’s construction sector.

Table 3.21: Selected investment projects Project name Project value US$ mn. Contracting parties Residential development, Dubai 422 Dubai Silicon Oasis Authority Silicon Oasis

Hotel for Emirates Airline 715 Multiplex

Falcon City of wonders 1,500 Pauling Middle East/Salem Al- Moosa Group

Festival City Dubai 4,770 Al Futtaim/Carrillion Source: BMI UAE Real Estate report Q2, 2010

3.9. Investment in infrastructure Infrastructure is an important sector of the Dubai economy. This sub-section is based on the UAE Infrastructure report for Q2 2010 and also Middle.

3.9.1. Sector profile Dubai is home to some of the world’s best infrastructure projects. Among them are world class projects such as the Jebel Ali Port, the Al Maktoum international airport, Dubai metro. Jebel Ali

35

Port is one of the best container ports in the middle-east, while the newly built Al Maktoum airport will propel Dubai into the next generation of becoming a multi-modal transportation hub for the next generation. The Dubai government continues to invest in high-quality infrastructure, including such projects as the Metro system. As Dubai’s economy continues to grow with growth in tourism, logistics re-exports and related sectors it is expected that this sector can be expected to witness continued growth

3.9.2. Future projections for UAE infrastructure sector Table 3.22 shows projections for capital investment both total and by the government in the UAE. The definitions in table 3.22 are based on Business Monitor International (BMI) methodology. Total capital investment is derived from GDP expenditure data and is a measure of total capital formation (excluding stock build) over the equivalent of the12 month reported period. Total capital formation, in turn is a measure of net additions to a country’s capital stock, and so it takes into account depreciation as well as new capital. Here since capital refers to structures, equipment and vehicles etc, it is a broader definition as compared to say using simply construction or infrastructure only. BMI uses it as a proxy for measuring a country’s commitment to development. Government capital expenditure is derived from budgetary data and it covers all non-current spending (UAE Infrastructure report Q2 2010, BMI).

Table 3.22: Forecast for UAE capital investment 2011 2012 2013 2014 2015 2016 2017 2018 Total capital 64.2 70.7 76.9 83.1 89.9 97.2 105.1 113.7 investment US$ bn.

Real Capital 6 6 5 5 5 5 5 5 Investment Growth % y-o-y

Total Capital 22.04 21.97 22.62 22.85 23.49 24.09 24.59 25.16 Investment as % of GDP

Government Capital 5.84 6.10 6.3 6.5 6.72 6.95 7.19 7.44 Investment US$ bn. Source: UAE Infrastructure report Q2 2010

3.9.3. Investment Potential and Opportunities Table 3.23 below shows some selected investment projects for investment in Dubai’s infrastructure sector. 36

Table 3.23: Selected investment projects Project name Project value (USD mn.) Contracting parties Union Railway NA It is expected that the union railway will extend 1,500 km across seven emirates. The project targets 20m metric tons of freight. Expressions of interest are being invited in this giant project. There is also possibility of investing in associated projects connected to this railway project.

Schon Properties / Town 50 Town Centre Management, Schon Properties Centre Management - Dubai investment Park: Dubai Lagoon: Infrastructure Works

DCA - Dubai Airport 1,334 Department of Civil Aviation (DCA) Expansion (Concourse 3)

Nakheel - Redevelopment of 1000 Nakheel Corporation Mina Rashid

Dubai RTA - Three Bridges 256 RTA Connecting the Deira Island Frond to Palm Deira: Bridge III Source: BMI, Meedprojects.com

3.10. Prospects for investment in utilities

Utilities are important for the development of every economy. Due to higher economic growth rates and influx of population from foreign countries, Dubai has experienced increased demand for electricity and water. Positive expectations for the long-term for both Dubai and UAE’s economy mean that investors could reasonably expect continued growth in utility demand over the longer-term.

3.10.1. Sector profile The Utility sector is an important sector for investment in Dubai and the UAE. Demand for Water and Power is deemed to have increased for two reasons. One is the growth of the population and the other is the growth of income in Dubai.

Figure 4.1 shows the relation of the growth of Dubai GDP and lagged electricity consumption growth. As the graph shows increased GDP growth generally seems to be related to next year’s electricity consumption growth rate. Various combinations of the relationship of growth in Dubai

37

GDP and electricity consumption were analyzed such as electricity consumption and GDP growth in the same year, electricity consumption and lagged GDP growth. The correlation was not found to be strong, until the relationship between electricity consumption lagged by one year and GDP growth rate was analyzed. In this case the correlation between the two variables was found to be strong, with the square of the Pearson Product moment correlation of about 0.68. Graphical analysis of the relation between Dubai GDP growth and electricity consumption growth lagged by one year is shown in figure 3.1 below.

Figure 3.1: Dubai GDP growth rate and lagged electricity consumption growth 35 30 25 20 15 10 5 0 2002 2003 2004 2005 2006 2007

Dubai electricty consumption growth lagged by one year Dubai GDP growth

Source: Dubai Chamber based on DEWA and Dubai Statistics Centre data

This is confirmed by research done in other countries. For example, it was noted in Aktas and Yilmaz (2008) that economic growth causes expansion in industrial and commercial activity. This in turn causes increased usage of energy which leads to increased electricity consumption. This could also be the reason why Dubai electricity consumption responds to economic growth but with a one year lag. Increased economic growth causes greater commercial and industrial activity. Also higher incomes could cause residents to buy more electrical appliances and also move into bigger residential units. This could also cause electricity consumption to increase in response to increased economic growth, but with a lag of one year (Shah, 2009).

Solar power is one of the fastest growing sources of renewable energy worldwide. A popular way to harness solar energy is to install solar panel installations on residential roofs. Give the unexploited solar potential, in Dubai there is scope for using photovoltaic cell and other technology to harness this important source of renewable energy The Dubai Electricity and

38

Water Authority DEWA is responsible for utility services in Dubai. This is the body prospective investors should contact regarding various investment, including Public Private Projects (PPP) in the utilities sector.

3.10.2. Future Forecasts Table 3.24 shows forecasts for UAEs Power sector and the supply and demand balance going into 2013. It shows UAE’s demand for power growing from 67.8 TWh in 2009 to 82.7 TWh in 2013. The power demand and supply balance is positive and growth in over demand will continue to require more investment to keep this balance positive Table 3.24: Forecasts for UAE Power Supply and Demand balance 2009f 2010f 2011f 2012f 2013f Electricity generation (TWh) 76.5 80 85 92 98.9

Electricity demand (TWh) 67.8 70.8 74.6 79.2 82.7

Source: Business Monitor International UAE Power Sector Report. F refers to forecasted data.

Table 3.25 shows forecasts for the UAE water sub-sector. As shown below, both overall water production in the UAE and per-capita water production are forecasted to increase up until 2014 as the UAE tries to keep pace with rising demand.

Table 3.25: UAE water industry forecast 2006 2007e 2008e 2009f 2010f 2011f 2012f 2013f20 2014 Total water 176,457 191,553 212,548 204,030 214,884 226,943 241,479 254,497 265,908 Produced (MG)

Average daily water 483 525 582 559 589 622 662 697 729 production (MGD)

Total water supply 175,011 189,847 210,693 202,236 213,013 224,986 239,419 252,344 263,674 (MG)

Average daily water 479 520 577 554 584 616 656 691 722 supply (MGD) Source: Business Monitor International UAE Water report for Q1, 2010.

3.10.3. Investment Opportunities Table 3.26 shows selected investment projects. As with other sections some are already underway and some may be in design or planning phases. Interested investors should also do

20 F means forecast. Number from 2009 onwards is forecasts. 39 their own research and contact relevant authorities, especially DEWA regarding more details for investment opportunities. Table 3.26: Selected investment projects Project type Project name Project value Contracting Parties (USD million) Power Plants IGCC plant, Dubai 6,000 Sino global International, Samena Power and Energy Ltd, Skyline Services

Jebel Ali Power Plant 10 Metito

Dubai Thermal solar na Na power plant

Warsan and Gardens 288 DEWA transmission stations

Solar and Wind 130 Portland Group Power, Dubai

400 KV Transformer, 59 Hyundai Engineering and Construction Dubai

Hassyan IWPP 8,600 Alstom and Ibedrola Ingenieria Y Construction

Jebel Ali Plant 10 Metito

DEWA - Dubai Coal 10021 Fired Power Plant

Renewable energy NA Prospects exist for investing in Dubai’s solar projects power and renewable energy sector. As controlling emissions becomes an increasingly important issue worldwide these technologies and projects could experience increased demand in Dubai. Water Al Ghafat Reservoir 108 DEWA

Desalination plant in 563 Impregilo Dubai

DEWA - Lussaily 12022 Dubai Electricity & Water Authority (DEWA) Reservoir Project Phases I & II Source: Dubai Chamber based on Business Monitor International (UAE Infrastructure report Q2-2010) and meedprojects.com

21 These are budgeted values not contract values 22 These are budgeted values not contract values 40

3.11. Prospects for investment in Manufacturing

This section is based on BMI Petrochemical Report for Q2 2010, BMI Chemical report 2009 and BMI Pharmaceutical and Health care report Q2 2010.

3.11.1. Sector profile Dubai has significant manufacturing capacity, including within the free-zones. For example for the petrochemical sector, Dubai reportedly contributes about 70% of the UAE’s foreign trade in petrochemical products. Of about 260 plastic manufacturing plants in the UAE, about 100 are located in Dubai (BMI Petrochemical Report for Q2 2010). About half of Dubai’s manufacturing capacity of plastics is concentrated to production of plastic pipes. In Jebel Ali Free Zone, the number of petro-chemical and plastics companies increased by 70% between the years 2000- 2005. Raw materials for Dubai’s petro-chemical sector are sourced from outside the UAE, from South America, Asia, the GCC and Europe, with 40% being from the UAE. In other developments, in oil refining, the Dubai’s ENOC has announced that it will upgrade the Jebel Ali oil refinery.23 Table 3.27: Selected chemical manufacturing companies in Dubai Company name Major activities Opportunities Methyl tetr-butyl ether Produces MTBE which is exported to Asian Investors can seek joint (MTBE) Plant Jebel Ali. countries ventures with parent Scimitar Oil (Canada) and companies in related areas. DUGAS.

Aromatics Plant-Jebel Ali Produces Benze, xyelene and toluene. Exports Investors can seek joint (Dubai Chemicals Company) these products ventures with parent companies in related areas,

Latex factory-Jebel Ali Imported feedstock is processed and then Investors can seek joint (Union Carbide Chemicals exported ventures with parent and Plastics) companies in related areas Source: UAE Research, BMI UAE Chemicals report 2009

For pharmaceuticals, the UAE pharmaceutical market is forecast to experience strong annual growth. Many international pharmaceutical companies, such as Pfizer, Novartis, GlaxoSmithKline (GSK), Eli Lilly and Abbot Laboratories among others are active in the UAE. These companies generally have contract manufacturing or local distribution arrangements. Gulf Pharmaceutical is the leader in the local manufacturing industry (Julphar). There are also other contract manufacturers such as Neo-pharma, Global pharma and Gulf Inject.

23 http://www.arabianbusiness.com/577921-enoc-to-begin-jebel-ali-refinery-upgrade-in-april 41

3.11.2. Future projections This section covers future projects for the UAE petrochemicals sector including production of products such as Ammonia, Urea and other products (table 3.28).

3.28: Projections for UAE petrochemicals sector (000 tpa unless stated otherwise) 2011 2012 2013 2014 Oil production, 000 3,200 3,300 3,425 Na bpd Gas production in 80 85 90 Na bcm

Refining capacity 1,000 1,500 1,500 Na

Ammonia capacity 695 695 695 695

Ehtylene glycol 500 500 500 500 capacity

Ethylene capacity 2000 2000 2000 3500

Propylene capacity 800 800 800 800

Urea capacity 1,250 1,250 1,250 1,250 Source: BMI Petrochemical report Q2 2010.

3.11.3. Investment Potential and Opportunities This section covers investment opportunities in Dubai’s manufacturing sector including petrochemicals. These are examples of a few opportunities and there is the chance to have many more in the Free-zones and industrial areas of Dubai.

42

Table 3.29: Selected investment projects Project name Project value (USD millions) Contracting party Jebel Ali refinery upgrade 850 ENOC

DMCC / SEOT / Tropicana Trading - 20024 Star Energy Oil tanking Jebel Ali Storage Facility (SEOT), Dubai Multi Commodities Centre (DMCC), Tropicana Trading

DPE - Carbon Dioxide Capture & 30025 Dubai Petroleum Storage Establishment (DPE)

Impel - Dubai LNG Storage Hub 2,600 Private Developer, LNG Impel, Dubai Multi Commodities Centre (DMCC) Source: Meedprojects and Arabianbusiness.com.

3.12. Public Private Partnerships in Dubai and the UAE

Public Private Partnerships are a unique way of combining public and private expertise and control. Their most powerful use is that the public sector gets to keep the risk that is best suited for it (such as unforeseen events etc) while the private sector manages the risks that it is meant to take on (such as risk of market fluctuations, changes in demand etc)26. PPPs offer a way to invest in Dubai’s growing infrastructure sector.

In Dubai, the Road and Transport Authority (RTA) recently announced that it could enter into public-private partnerships for implementing all RTA projects. According to the RTA, many organizations are interested in these public-private partnerships. In fact the RTA might move on future lines such as the purple and blue lines for the Dubai Metro after entering into such public- private partnerships27.

24 This is budgeted value, not contract value 25 This is budgeted value, not contract value 26 http://www.pppcouncil.ca/aboutPPP_definition.asp 27 http://www.uaeinteract.com/docs/RTA_open_to_partnership_for_all_its_future_major_projects__/37677.htm 43

Figure 3.2: Risk transfer and private sector involvement.

Source: Canadian Council for Public-Private Partnerships

Table 3.30 below highlights some reasons why PPPs may fail. Prospective investors wanting to invest in PPP type projects in Dubai can and should consider international experience regarding reasons for success and failure of these projects to avoid repeating the mistakes others have made and increase chances of success.

44

Table 3.30: Reasons why a PPP may fail Below are some reasons why the public sector may be unsuccessful in managing a PPP project based on international experience. This forms a list of things to avoid for investors in PPPSs o that their PPP projects may be successful.  Inadequate monitoring and management of political, commercial and legal risks  Focus on existing arrangements rather than emphasizing on potential improvements  The identification of responsibility and authority in relation to commercial decisions is unclear  Lack of understanding of context, complexities and dependencies of the contract  Failure to adopt an attitude towards partnership which helps the partnership succeed  Lack of experience in either public sector or provider teams  The contract managers are not assigned sufficient resources  The contracts are poorly drafted  Clashes in personality between project team personnel.

If a contract is managed inadequately, some of the following problems might occur which may render the project unworkable.

 There are possibilities for improved performance or improvement in value for money might be lost if the contract is not properly managed  The provider may assume control, which may lead to unbalanced decisions that do not reflect the interest of the public sector  Desired benefits may not be achieved  Progress on the project may be slow  Some disputes or misunderstandings may arise and these may be raised inadequately  People may fail to understand their responsibilities and roles.  Decisions are made at inappropriate times. New business processes are unsuccessfully integrated with old ones. Source: City of London, 2008.

45

Section 4: Investment Regime in UAE and Dubai

This section combines the information about sector specific opportunities with information about the current and incumbent investment laws, legal structure regarding company formation, procedures and incentives specific to foreign investors. This may be called the investment regime. At the time of writing this study, the UAE Federal government is planning to put in a new law for foreign investors, the Foreign Investment Law which is expected to be finalized soon. This new law may open up service sector areas to full ownership and also allow more foreign participation, possibly 100% foreign ownership (BMI, 2010)28. Also planned is an investment department to facilitate foreign direct investment at the UAE level.

In the meantime it is useful to see which laws currently apply to foreign investors in terms of company formation, legal regime, investor protection both in Dubai and the UAE. This will be done in the following sub-sections. For now, full foreign ownership is already allowed in the Free-Zones of Dubai and this will be discussed in more detail later in this section.

4.1. UAE Investment regime

The UAE has differential treatment for free-zones as compared to the customs region. Companies in the free-zones are allowed to be 100% owned by foreign investors. There is also no income tax applied to profits. There are no restrictions of profit repatriation (Dubai Chamber, 2007)29.

As discussed earlier, the UAE is in the process of drafting a new foreign investment law. Although details are still awaited the goals of this law seem to be to attract investments in areas which are not the core competencies of individuals, increase diversification in the economy and also to increase the transfer of technology (Al Farra, Investment Reform in UAE 2007)30. This law would also give more security and certainty to foreign investors regarding their investments in the UAE. It can be expected that foreign investors would also be given some incentives based on the economic significance of the project, value added, technology transfer etc.

28 BMI UAE Petrochemicals Report Q2 2010 29 Identification of Sectoral Opportunities in Dubai, 2007, Dubai Chamber 30 http://www.oecd.org/dataoecd/20/44/39296053.pdf

46

Box 1: Indicators for Investment Climate in UAE

Table 4.1 Global Competitiveness Index Dubai with its world class logistics infrastructure has helped the UAE Rank Score score highly in terms of competitiveness with regard to other UAE 23 4.9 countries.31 The UAE ranks highly as compared to the other GCC Singapore 3 5.5 countries in shown in table 3.1. In terms of overall competitiveness, Hong-Kong 11 5.22 while Singapore and Hong-Kong have higher rankings, the UAE’s Bahrain 38 4.54 relatively high ranking of 23 out of 133 countries shows the UAE’s Qatar strong position competitive position. According to the World Economic Saudi-Arabia 28 4.75 Forum, Dubai has pioneered with the creation of free-trade zones and Source: World Economic Forum today world-class service areas are being created in health-care, finance and IT. In terms of burden of government regulation, the UAE

Fig 1. Burden of government regulation fares better than other GCC countries (fig 1). Here the index numbers ranging from 1-7, with higher numbers UAE indicating that regulations are not burdensome. The Oman Saudi Arabia UAE has the same values as for Oman while other Qatar countries have more burdensome regulations. In terms Bahrain Kuwait of doing business overall, UAE generally does better than other countries (table 4.2). For example it takes 2 0 1 2 3 4 5 days to register a property in UAE, as compared to Source: Global Competitiveness Report 2009-2010, WEF 36.1 days in the OECD. In terms of rigidity of employment, also the UAE has a relatively flexible labor market as compared to the OECD and the MENA region.

Table 4.2: important indicators for doing business Indicator UAE OECD average MENA region

Registering property-number of days 2 36.1 25 Rigidity of employment index (0-100), 7 24.5 26.4 measures difficulty in hiring and firing workers-1

Depth of credit information index (0-6) 5 3.3 4.9 Source: Doingbusiness.org, World Bank group

Source32: IMF, Article IV consultation report

31 http://www.weforum.org/pdf/Global_Competitiveness_Reports/Reports/chapters/1_1.pdf 32 Some of the data has been updated and text changed from the initial commentary 47

4.2. Options in setting up a business in UAE:

This section is based on a UAE Ministry of Economy Publication titled, ‘Investors Guide to the UAE’. The UAE and Dubai are increasingly becoming favored investment destinations. One of the first issues to consider for a UAE investor is how to enter the UAE market. The options of forming a company include:

1) Setting up a UAE company 2) Setting up a branch office 3) Professionals who wish to act as sole proprietors 4) UAE Free Zone

4.2.1. Formation of a UAE company: The Federal Company Law No. 8 of 1984 (called the Commercial Companies Law) is the law that regulates the establishment of companies, both local and foreign. Companies, when formed should have at least one or more national partners who account for about 51% of the capital. There is a special case in the case of the hydrocarbon industry. This industry is owned by the respective emirates and any foreign ownership must be through joint-ventures in these projects

4.2.2.1. UAE Branch office: The Commercial Companies Law allows foreign companies to exercise what is called their main activity in the UAE by opening a branch office in the UAE. This office may then promote products or services which are provided by the owner (or parent) company. This kind of branch operation can be 100% owned by the foreign investor.

4.2.2.2. UAE Professional: Foreigners who practice certain professional activities are also be given allowance to set-up a sole proprietor ship in the UAE. This allows the individual to trade on his own account. This is pursuant to the issuance of a trade license which has been issues in the investor’s name. The foreign sole proprietor is required to appoint a local services agent

4.2.2.3. Investment in UAE Free-Zones: According to the UAE ministry of economy, about 80% of the United Arab Emirates non-oil exports come from its free-zones. There are many free-zones in the UAE and details regarding them are discussed in a later section. These free-zones are exempt from licensing, national

48 partner requirements, agency and other domestic regulations that apply to companies which have been formed in the customs region.

4.3. Forming a company

For many overseas investors, the favored strategy for market entry would entail establishing a business. According to a 2010 report by Doingbusiness.org of the World Bank group, it takes 8 procedures and 15 days to start a business in the UAE. The number of days it takes to open a business is generally lower than the average for the Middle East and North Africa (MENA) region. For the MENA region it takes about 20.7 days to start a business. In terms of cost to start a business it takes about 6.2% of income per capita for UAE, whereas for the MENA region it takes about 34.1%. So it is relatively less costly to start a business in the UAE.

The major steps involved in setting up a company in Dubai are described below. As with the earlier material, this information is also derived from the UAE Ministry of Economy Publication titled ‘Investors guide to UAE’

4.3.1. Licensing: Companies formed in the UAE may apply for three kinds of licenses which cater to different activities 1) Commercial license: This would cover trading activities 2) Industrial License: This can be used for establishing an industrial activity 3) Professional License: This kind of license covers professional services. It includes craftsmen and artisans

4.3.2. Options for Legal Structure: For the UAE, the Companies Law sets out in detail the regulations covering foreign business. According to the federal law, there are seven categories of organizing a business.

1. Limited Liability Company 2. Public Shareholding Company 3. Joint Venture Company 4. Private Shareholding Company 5. Share Partnership Company 6. Partnership Company

49

Because of their nature, foreign investors would mainly be interest in forming limited liability companies, a branch or representative office or a joint venture.

In the UAE, a limited liability company can be formed by a minimum of two and a maximum of 50 persons. In this kind of structure, the liability of every member is limited to the amount of capital they have contributed to the company (i.e. shares in capital).

A branch or representative office may engage only in activities for which they are licensed, may be fully owned as long as a UAE agent is appointed. A joint venture structure is a contractual agreement between a foreign party and local partner. In this case also local equity participation should be at a minimum of 51%. Both parties can agree between themselves on the distribution of any profits and losses. A joint venture structure is one option for a business that wants to invest in a project through a Public Private Partnership.

Table 4.3 shows the procedure for setting up a limited liability company in Dubai and also the number of days it takes to complete each step.

50

Table 4.3: Procedures for setting up a limited liability company (Dubai) Procedure Time to complete: Cost to complete: Submit the company registration 1 day AED 100 fee for the initial approval application and the proposed company name to the Department of Economic Development (DED)

Notarize the company’s Memorandum of 1 day 0.25% of the capital (for 3 copies of the Association in DED Memorandum of Association), AED 5 for each page of the additional copy

File company documents with the 6 days 5 % of the value of the lease agreement Department for Economic Development + AED 1,000-3,000 waste fees + AED (DED) and obtain trade license 600 for company registration + AED 500 fees for signboard approval

Register with the Dubai Chamber of 2 days AED 1,200 (application for membership Commerce and Industry certificate)

Make a name board 2 days AED 1,000

Apply for establishment card at the 1 day AED 2000 Ministry of Labor

Register native workers with the Ministry 1 day no charge of Labor

Register native workers with the General 1 day (simultaneous no charge Authority for Pension and Social Security with previous procedure) Source: Doing business.org, World Bank group

Appendix 1 contains some helpful websites and publications on legal and other aspects for doing business for the assistance of prospective foreign investors.

4.4. Dubai’s investment regime

Dubai is home to high quality world-class logistics and infrastructure. This has enabled the emirate of project itself into the rest of the region. Good opportunities lie both in the customs area and in the free-zone. However, some major advantages of Dubai with regard to incentive structure, the ability to intermediate between the world (i.e. as a hub for re-exports), and trading opportunities based on high RCAs lie in the free zones of Dubai (Azzam, Rettab and Morada, 2010). This next section will discuss the special case of Dubai Free-zones in more detail and highlight some of these opportunities.

51

4.4.1. The special case of Free-Zones There are many free-zones in the UAE and they have their own regime in place. A list of free- zones in Dubai follows. The most prominent free-zone is the Jebel Ali Free Zone (JAFZA). While each free-zone shares some qualities, it is best to regard them as separate clusters. For example the Dubai International Financial Centre (DIFC) focuses on the financial industry while the Dubai Multi-Commodities is focused on being a hub for commodity trade flows, such as Gems, Gold, base metals and other commodities. Details regarding some selected free-zones are discussed in the following sub-sections. Further information about free-zones can be obtained by visiting the website of individual free-zones, given in table 4.4.

According to research done by Dubai Chamber, Dubai’s main Revealed Comparative Advantage (RCA) is in re-exports (Azzam, Rettab and Morada, 2010). It would be of interest for Dubai exporters and re-exporters to note that Dubai’s free-zones are a major source of its re- exports and this is another reason to consider investing in Dubai’s free-zones.

Table 4.4 Current and Planned Free-Zones in Dubai 33 Name of Free zone Web address 1 Jebel Ali Free Zone www.jafza.ae/ 2 Dubai Gold and Diamond Park www.goldanddiamondpark.com 3 Dubai Maritime City www.dubaimaritimecity.ae 4 Dubai Aid city 5 Techno Park www.tp.ae 6 Dubai Airport Free Zone http://www.dafz.ae/ 7 Dubai Silicon Oasis www.dso.ae 8 Dubai Flower Centre 9 Dubai Logistics City http://www.dwc.ae/site/DWC_Elements_DWC_FreeZone_Du bai_Logistics_City.html

10 Dubai Internet City www.dubaiinternetcity.com 11 Dubai Media City www.dubaimediacity.com 12 Dubai Knowledge Village http://www.kv.ae/ 13 Dubai Outsource Zone www.doz.ae 14 Dubai Biotechnology and Research Park www.dubiotech.com 15 Dubai Studio City www.dubaistudiocity.com 16 International Media Production Zone 17 Dubai Healthcare City http://www.dhcc.ae/ 18 Dubai International Financial Centre www.difc.ae (DIFC) 19 Dubai multi-commodity Centre www.dmcc.ae 20 Dubai Textile City 21 Dubai Carpet Zone

33 Some of these free-zones are not in operation yet and are planned. Prospective investors are encouraged to contact individual free-zones regarding specific opportunities, incentives and current status. 52

22 Dubai Carpet Free Zone 23 Dubai Auto Parts City 24 Heavy Equipment and Trucks Zone 25 Dubai Building Materials Zone 26 Dubai cars and Automotive Zone 27 Dubai Design Centre http://www.dubaidesigncentre.ae/main.html 28 Dubai Auto-zone 29 Dubai Energy City 30 Dubai Academic City http://www.diacedu.ae/ Source: Ministry of economy, Investors guide to UAE.

4.4.2. An overview of investment regime in JAFZA Located in between Jebel Ali port and the Al Maktoum Airport, Jebel Ali Free Zone (JAFZA) is the only free-zone in the world to be situated between two important logistics enablers. A range of incentives are offered in Jebel Ali free zone including 100% foreign ownership, zero corporate and income taxes for 50 years and full repatriation of profits and capital and no foreign currency restrictions.

When considering the incentives offered by JAFZA, the opportunity to use the two major transport hubs of Jebel Ali port and Al Maktoum Airport, Jebel Ali port can be regarded as a re- processing and manufacturing cluster. Table 4.5 shows the facilities offered by JAFZA.

Table 4.5. Facilities offered in JAFZA Light Industrial Units (LIU) Light industrial unites can be used as storage warehouses (to be used in distribution and storage) and as factories for assembly and also light production. Facilities for LIUs include loading docks, parking space and office for each LIU

Showroom and Warehouse facilities Showroom and warehouse facilities are structured into eight blocks comprising 68 showrooms and warehouse. The showrooms can be used for displaying products for sale.

Office Space JAFZA offers unfurnished offices which can be of any size and are equipped with light fixtures. JAFZA office space is also designed with options for improvements.

Land Land can be provided in JAFZA in various sizes ranging from 2,500 square meters upwards. Utility services essential for development of land are provided to JAFZA land. Source: JAFZA.ae

53

4.4.3. An overview of the investment regime in the DIFC The Dubai International Financial Centre (DIFC) has been formed to further promote Dubai’s position as an international financial hub. Most of the information in this section is based on the PWC and DIFC publication, ‘Doing Business in the Dubai International Financial Centre’. Its purpose is to create a regional capital market which offers investors and issues of capital world- class regulations. With the increased importance of transparency in current times, the DIFC has ‘integrity, transparency and efficiency’ as its hallmarks34. One important distinction must be made that the DIFC is not an offshore tax haven. Rather, it is an onshore centre, like other markets such as London, Hong-Kong and New-York.

Table 4.6. Incentives offered by DIFC Allowance of 100 percent foreign ownership

Benefit of a wide network of double taxation treaties available to entities incorporated in the UAE

A transparent operating environment combined with high standards of regulations and rules

Benefit of a zero percent tax rate on income and profits

Benefit of a dollar denominated environment

There are no restrictions on foreign exchange or capital/profit repatriation

There is strict supervision and enforcement of money laundering laws

Investors in DIFC have access to ultra modern office accommodation, state-of-the-art technology, sophisticated infrastructure, data protection/security, operational support and business continuity facilities of uncompromisingly high standards. Source: DIFC.ae

4.4.3.1. Areas of focus within DIFC For foreign investors, these are main areas of focus within financial services

34 http://www.difc.ae/about-us/overview/ 54

Banking and brokerage services The DIFC offers a wholesale platform for investment banks and other financial intermediaries. These include those looking to establish underwriting, M&A advisory, venture capital, private equity, fund administration, private banking, brokerage and trade finance services.

Wealth Management: The pool of financial assets held by investors in the region has traditionally been invested overseas. The DIFC provides a range of investment opportunities, including mutual funds, open and closed ended investment companies, hedge funds and also Islamic compliant funds. The DIFC therefore is an onshore centre which can encourage the repatriating the regions wealth invested overseas and also to cater for increased demand due to demographic reasons. To encourage the wealth management industry, the DIFC has created regulation for mutual funds, a code of Practice for Hedge Funds. Family offices can work using the DIFC Trust law and also new Family Office Regulation.

Reinsurance and captive insurance35

Although historically the rate of penetration for insurance has been low in the region, premiums in the middle-east are expected to outpace industrial countries. Some important reasons for this include expected growth in the Takaful (or Islamic insurance) market, introduction of compulsory health insurance in Saudi-Arabia and the GCC.

What is Captive insurance: A captive insurance is a company formed for the insurance of the risks of the company itself or related entities. With increased awareness of insurance in the region, it is expected that interest in captive insurance will grow.

Islamic Finance and Ancillary Services

Islamic finance is a growing area which is becoming an increasingly, segment within the global financial market. It is expected that the Islamic finance market is growing in double digits and are expected to reach 1 trillion by 2010 (PWC)36.

35 http://www.mondaq.com/article.asp?articleid=102682 55

4.4.4. An overview of investment regime in DMCC The Dubai Multi Commodities Centre is a commodity market trading hub based in Dubai. It provides infrastructure for the commodity industry and as such can be regarded as a commodity trading cluster. One of the important objectives of the DMCC is to facilitate and integrate the whole value chain of key commodity market segments. It also aims to increase local activity in refining, manufacturing and trading of commodity products (dmcc.ae).

Table 4.7: Incentives offered by the DMCC Guaranteed 50 year tax holiday on personal and income taxes

100% business ownership

Facility for processing of documents, which include licensing, immigration and registration

Purpose built infrastructure, which may be available on leasehold or free-hold basis Source: DMCC.ae

4.5. Lessons from other countries

The UAE and Dubai can learn from the experience of other countries in improving the ease of doing business and attracting FDI, including comparable entrepots like Singapore and Hong- Kong. In one study, (Dongyun Park, Nanyang Technological University, Singapore) did research for Singapore’s experience with FDI and corporate taxation37. The author found that there are many factors influencing FDI inflows. For example, in case of China, it is low labor costs and a huge potential labor market. Some high tax countries, for example China attract high levels of FDI, while some low tax countries still fail to attract large FDI inflows. The author notes that in the case of Singapore, the freedom to pursue profits, the presence of avoidance double taxation agreements with many countries, investment guarantee agreements which are there to protect nationals of both countries against acts such as war, expropriation etc , encourage the flow of FDI. The author mentions that Singapore’s natural geographic advantage, by virtue of its strategic location, has been reinforced by a highly liberal trade regime. Time-Zone is another major advantage the Singapore giving its financial institutions the ability to transact with entities in Japan, Europe and US within its own working day. Other factors facilitating FDI inflows into Singapore include a stable political and economic climate, the presence of business parks and a pro-business environment.

36 http://www.pwc.com/en_LU/lu/podcast/docs/pwc-islamic-finance-podcast.pdf 37 http://www.econ.hit-u.ac.jp/~ap3/apppfdi6/paper/SINGAPORE.pdf

56

Investing Across Borders 2010, of the World Bank Group, analyzed FDI inflows into 87 world economies. This study mentions that countries with poor regulations and inefficient processes for foreign companies have smaller amounts of FDI inflows and smaller FDI stock. Countries tend to attract more FDI if they allow foreign ownership of companies in different sectors, have transparent and efficient procedures for company startup, commercial arbitration, ease of land acquisition and strong laws protecting investor interest. The study does caution that a causal relationship between FDI flows and these factors above are not implied. Other factors such as the size of the market, infrastructure quality and level of economic development are likely to better explain this relationship. The study also finds that reliable information, predictable and efficient actions by public institutions help create an environment conducive for foreign investment38.

Although many of the measures taken by these Singapore have either been taken by Dubai and UAE or being planned, it is the quality of implementation and dynamism of these initiatives which should be harnessed. Dubai and UAE can learn from success in comparable countries such as Singapore and beyond to take steps to improve transparency and security for investors, protecting investor interests and creating a single body to deal with matters relating to foreign investment. Continued investment in building world-class infrastructure and logistics, together with focused sector based initiatives, such as building world class financial infrastructure in the financial sector, will help Dubai take full-advantage of its geographic and time-zone advantages. These and other actions can help institutionalize initiatives aimed at making Dubai the most favored destination for investment.

38 http://iab.worldbank.org/~/media/FPDKM/IAB/Documents/IAB-report.ashx

57

Section 5: Conclusion

Dubai and the UAE have made great economic progress within a short span of time. A benign government approach towards business, high investment in infrastructure and forward looking policies have propelled Dubai into becoming a top destination for Foreign Direct Investment.

UAE ranks quite highly with the rest of the world and the MENA region in terms of the ease of doing business. Moreover, recently the UAE has made strides in the ease of doing business, especially with regards to starting a business, dealing with construction permits and trading across borders. This is a historical trend of improvement in business environment by the UAE and Dubai and investors can reasonably expect more improvement in the coming years.

The UAE and Dubai have strived to formulate a Foreign Investment Regime that is attractive to foreign investment. This includes initiatives to improve competitiveness, such as creating free- zones, tax incentives and world class infrastructure which aims to take Dubai into the next generation in terms of trade and logistics competitiveness. Setting up an office in the UAE is relatively simple and is even simpler in various free-zones, such as JAFZA.

The effort to boost trade and investment in Dubai by having several free-trade zones, of which Jebel Ali Free Zone is the most significant, has been a successful step. It has put Dubai on the map as a major logistics and trade hub and helped build its competitive advantage in key clusters. To further the development of the emirate, the Dubai Strategic Plan for 2015 sets ambitious targets. The sectors identified as key vertical building blocks are the ones in which Dubai has grown rapidly in the past. These include Travel and Tourism, Financial Services, Professional Services, Transport and Logistics, Trade and Storage and Construction. Most of the important opportunities to invest in Dubai lie in these sectors, but are not limited to them. For example there are also good opportunities in areas such as utilities, where there is possibility of Public Private Partnership (PPP), in manufacturing and there are opportunities in Petrochemicals and Plastics too. Non-traditional sectors such as renewable energy and greening of the supply chain and buildings could be growth areas in the future as well. There is also possibility of Public Private Partnership (PPP) in transportation projects undertaken by the RTA. These include projects such as the Dubai Metro. This includes not only the actual metro-stations but also ancillary projects related to the metro.

58

Investors with experience will realize that then most important resource is not really the abundance of factors of production but really good governance. The UAE and Dubai governments have shown that they can implement policies reflecting exemplary governance and investors can expect more of this in the future.

Recommendations for the future:

1) Increasing transparency for foreign investors. The UAE Foreign investment law which is expected to be announced soon will be a big step in this direction. 2) Learn from the experience of other countries such as Singapore in improving the ease of doing business. Dubai and UAE can learn from success in comparable entrepots and beyond in improving transparency and security for investors, making actions by public institutions predictable and creating a single body to deal with matter relating for Foreign Investment. Other steps include increasing the number of bilateral investment agreement with other countries which protect the rights of investors in both countries. These and other actions can help institutionalize initiatives aimed at making Dubai the most favored destination for investment. 3) Continue to diversify both the economy and the sectors which are promoted for growth to give the economy a broad base of production. This should be combined with diversification of production in different products and services and also diversification of export markets.

59

References

Doing Business rankings for UAE’, 2010, Doing business.org, World Bank Group, 2010.

2010 Logistics Performance Index, LPI, World Bank

Abdelgalil and Hussian, 2007, Dubai Business Services sector, Dubai Chamber

Al Hassani, 2007, ‘Public Private Partnership Policies and Their Applicability to Dubai’, Dubai Council of Economic Affairs, Dubai, UAE.

Al Tamimi and Company, 'Taxation Law in the UAE'.

AT Kearney, 2010, Investing in a rebound’, 2010 AT Kearney FDI Confidence index.

Australian Department of Foreign Affairs and Trade, United Arab Emirates, Fact Sheet .

Azzam, A., Rettab, B and Morada, M. (2010) ‘Revealed Comparative Advantage – Where it is least expected: Dubai’, Int. J. Trade and Global Markets, Vol. 3, No.2 pp. 199 – 216.

Business Monitor International, Consumer Electronics report, Q2 2010.

Business Monitor International, Infrastructure report, Q2 2010.

Business Monitor International, Real Estate report, Q2 2010.

Business Monitor International, UAE Autos Report, Q2 2010.

Business Monitor International, UAE Chemicals Report, 2009.

Business Monitor International, UAE Commercial Banking Report, Q2 2010.

Business Monitor International, UAE Freight Transport Report, Q2 2010.

Business Monitor International, UAE Information Technology Report, Q2 2010.

Business Monitor International, UAE Insurance Report, Q2 2010.

Business Monitor International, UAE Petrochemicals Report, Q2 2010.

Business Monitor International, UAE Power Report, Q2 2010.

Business Monitor International, UAE Retail Report, Q2 2010.

Business Monitor International, UAE Telecommunications Report, Q2 2010.

Business Monitor International, UAE Tourism Report, Q2 2010

Business Monitor International, Water report, Q1 2010.

Business Monitor International, Water report, 2009.

Canadian Council for Public-Private Partnerships

Dr. Aktas, Cengiz, Dr. Yilmaz, Veysel, 2008, ‘Causal relationship between electricity consumption and economic growth in Turkey’.

Dubai Chamber, Identification of Sectoral investment opportunities in Dubai, 2007

Dubai Statistics Centre, 2005-2006, Foreign Direct Investment Bulletin, Emirate of Dubai,

Dubai Strategic Plan , 2015.

Hesse, Heiko and Jobst, Andreas and Sole, Juan, IMF, Current Trends in Islamic Structured Finance and Capital Markets, viewed 26th June 2010.

Hugo, Sarah, 2008, ‘Trade and Investment Opportunities for UAE in Saudi Arabia’, Dubai Chamber. 60

Identification of Sectoral Investment Opportunities in Dubai, 2007, Department of Economic Research, Dubai Chamber.

Investing Across Borders, 2010, World Bank Group.

Major Construction Projects in the UAE, Dubai Chamber, Based on BMI UAE Real Estate Report Q2 2010.

Major Infrastructure Projects-Energy and Utilities in the UAE, Dubai Chamber, Based on BMI UAE Infrastructure Report Q2 2010. Opening address by Mr. Lim Hng Kiang, Minister for Trade and Industry and Deputy, Chairman of the Monetary Authority of Singapore 2010 , viewed 25th June 2010.Islami c Banking , 2010, Singapore, 14 June at the 1st Annual World Conference: Asia Summit 2.

Park Donghyun, ‘Foreign Direct Investment and Corporate Taxation: Overview of the Singaporean Experience’, Economics Division, School of Humanities & Social Sciences, Nanyang Technological University, Singapore.

Research Republic LLP, City of London, 2008, Developing India’s Infrastructure through Public Private Partnership, A Resource Guide, viewed 12th October,

Rettab, B and Ben Brik, A, 2008, ‘Green Supply Chain in Dubai. Dubai Chamber Centre for Responsible Business, Dubai, UAE’

Rettab, B. & Kwaak, T. (2005): The Structure of Economic Development in the UAE, Dubai Chamber

Saidi, Nasser, Economic Research Forum, Arab Economic Integration: An Awakening to Remove Barriers to Prosperity’ Working Paper 0322, ERF Working Paper Series.

Shah, SF and Abdelgalil, E, 2009, ‘UAE Water sector monitor’, Dubai Chamber.

Travel and Tourism Economic Impact, UAE, 2010, World Travel and Tourism Council (WTTC).

UNCTAD WIR and FDI indices.

United Arab Emirates,2007, Article IV consultation, Staff Report, IMF Country Report No. 07/347

United Nations, COMTRADE database.

World Economic Forum, Global Competitiveness Report, 2009-2010.

61

Website references

Abdel Hai, Mohammad, 18th March 2010, UAE MOE to finalise investment law next month, http://www.zawya.com/Story.cfm/sidZAWYA20100318043913, viewed 28th June 2010.

Ahmed, Bashir and Bowden, James, Afridi and Angell (Lex Mundi member) , Doing Business in the United Arab Emirates , , viewed 26th June 2010

Arabian business, 'Enoc to beging Jebel Ali refinery upgrade in April', 05 January 2010, , http://www.arabianbusiness.com/577921-enoc-to-begin-jebel-ali-refinery-upgrade-in-april, viewed 28th June 2010.

Basit, Abdul, UAE top logistics hub in Gulf, 16 January 2010, ,viewed 24th June 2010

Doing Business 2009, Qatar debuts at 37th on Ease of doing business, , viewed 20th June 2010.

Dubai government and Information Services portal, Dubai Strategic Plan 2015, http://www.dubai.ae/en.portal?topic,hm_dxbstgplan,1,&_nfpb=true&_pageLabel=general>

Emirates Business 24/7, 28th June 2010, Al Makhtoum welcomes foreign cargo flights, viewed 30th June 2010

Gerhard, Hope, Jan 18 2010, Dubai's 2010 budget to focus on infrastructure, , viewed 25th June 2010.

Gerrard, Micheal B,' Public-Private Partnerships' , Finance and Development Magazine, IMF viewed 25th June 2010 ,

Homan Kumar, Himendra, June 22, 2010 UAE Railways Operational in 7-8 Years, Gulf News, , viewed 28th June 2010.

Key Note Speech, 2010, HE GOVERNOR OF CENTRAL BANK OF THE UAE, MR. SULTAN BIN NASSER AL-SUWAIDI, , , viewed 25th June 2010.

Jebel Ali Free Zone Authority , viewed 18th June 2010

Lex Mundi, , Ferris A Hassen (Afridi and Angell), 2004, A Guide to doing busioness in the United Arab Emirates. , viewed 24th June 2010

Murphy, Kevin X., Analyzing and Implementing Clsuter Competetiveness, World Bank , J. E Austin Associates, , viewed 28th Jun e 2010.

Porter, Micheal E, 2005 What is Competitiveness', IESE Insight, , viewed 27th June 2010 Qatar Invetsment Authority,

Ref Al Farra, Investment Reform in the UAE, RTA top open partnerships for all its future major projects, 17th September 2009, , viewed 25th June 2010

Saleem, Nadia, June 22 2010,Al Makhtoum Aiprort will fuel future growth, Gulf News, viewed 18th June 2010.

Shtayyeh, Serene and Piot, Wim,October 2008, Introduction to Islamic Finance, its concpts, models, growth and opportunities, , < http://www.pwc.com/en_LU/lu/podcast/docs/pwc-islamic-finance-podcast.pdf>. viewed 26th June 2010

United Arab Emirates, Captive Insurance in Dubai, <‘http://www.mondaq.com/article.asp?articleid=102682’>, viewed 24th June 2010. World Bank Recognizes Saudi Arabia as 13th most competitive economy,

62

, viewed 24th June 2010.

63

Appendix 1: Useful publications and websites

1. Choosing a location for your business, Dubai Business Advisor, Vol. 1, no 1, 2009, Dubai Chamber.

2. Signing a Commercial Lease, Dubai Business Advisor, Vol. 1, No 2, 2009, Dubai Chamber.

3. Rating Economic Sectors in Dubai, Dubai Business Advisor, Vol. 1, No 3, 2009, Dubai Chamber.

4. Starting a business: A Practical Guide, Dubai Business Advisor, Vol. 1, No 4, 2009, Dubai Chamber.

5. Dubai Chamber: www.dubaichamber.ae.

6. UAE Ministry of Economy: www.economy.ae/English.

7. Foreign Investment Office, Department of Economic Development, Government of Dubai: www.dubaided.gov.ae/English/DEDAgen/ForInvstOff/default.aspx.

64

Appendix 2: UAE selected double taxation treaties

No Date of the Official Gazette Name of the Agreement Decree No Official Gazette No. 1 26/4/1975 27 Agreement on avoidance of double taxation & 25/1987 evasion of taxes between the Arab Council of Economic Unity 2 29/8/1989 203 Agreement on avoidance of double taxation on 76/1989 income resulting from air transport between the UAE and India 3 29/11/1989 207 Agreement on avoidance of double taxation on 83/1989 income between UAE and France 4 31/3/1990 211 Agreement on taxation depending on income 5/1990 resulting from air transport between UAE and Singapore 5 27/4/1992 238 Agreement on avoidance of double taxation on 24/1992 income and products resulting from international air transport between the UAE and Holland 6 27/4/1992 238 Agreement on avoidance of double taxation on 36/1992 income and products resulting from international air transport between the UAE and Switzerland 7 31/8/1993 254 Agreement on avoidance of double taxation on 39/1993 income and products resulting from international air transport between the UAE and India 8 31/8/1993 254 Agreement on avoidance of double taxation on 41/1993 income and products resulting from international air transport between the UAE and Sri-Lanka 9 24/1/1994 262 Agreement on avoidance of double taxation on 3/1994 income and products resulting from international air transport between the UAE and Pakistan 10 24/1/1994 262 Agreement on avoidance of double taxation on 7/1994 income and products resulting from international air transport between the UAE and Poland 11 19/6/1994 266 Agreement on avoidance of double taxation on 38/1994 income and products resulting from international air transport between the UAE and China 12 4/12/1995 178 Agreement on avoidance of double taxation on 60/1995

65

income and products resulting from international air transport between the UAE and Romania 13 4/12/1995 278 Agreement on avoidance of double taxation on 62/1995 income and products resulting from international air transport between the UAE and Italy 14 31/3/1996 291 Agreement on avoidance of double taxation on 21/1996 income and products resulting from international air transport between the UAE and Germany. 15 30/6/1996 294 Agreement on avoidance of double taxation on 34/1996 income and products resulting from international air transport between the UAE and Singapore. 16 30/6/1996 294 Agreement on avoidance of double taxation on 35/1996 income and products resulting from international air transport between the UAE and Malaysia. 17 30/6/1996 294 Agreement on avoidance of double taxation on 36/1996 income and products resulting from international air transport between the UAE and Indonesia. 18 27/2/1997 302 Agreement on avoidance of double taxation on 23/1997 income and products resulting from international air transport between the UAE and Finland. 19 27/2/1997 Agreement on avoidance of double taxation on 25/1997 income and products resulting from international air transport between the UAE and Tunisia 20 29/6/1997 Agreement on avoidance of double taxation on 83/1997 income and products resulting from international air transport between the UAE and Belgium 21 15/11/1998 Agreement on avoidance of double taxation on 106/1998 income and products resulting from international air transport between the UAE and Lebanon. 22 29/9/1999 Agreement on avoidance of double taxation on 90/1999 income and products resulting from international air transport between the UAE and Morocco. 23 30/11/1999 Agreement on avoidance of double taxation on 108/1999 income and products resulting from international air transport between the UAE and Turkmenistan. 24 28/6/2000 Agreement on avoidance of double taxation on 72/2000

66

income and products resulting from international air transport between the UAE and Syria. 25 29/11/2000 Agreement on avoidance of double taxation on 105/20000 income and products resulting from international air transport between the UAE and Thailand. Source: Al Tamimi and Company, Taxation Law in the UAE

67