Dubai’s “Summer Surprises” boosts Dubai economy

Mid-season results of summer promotion show increased footfall by 10%

Published: 17:34 August 25, 2014 Gulf News

Cars, clothes, homeware and perfumes were on the list of most of Dubai Summer Surprises (DSS) visitors this year, mid-season results showed.

Shoppers coming to Dubai this summer gave a significant boost to the Dubai economy during the first two weeks of DSS, with shopping malls and retailers across the emirate reporting major increases in visitor numbers and sales compared with last year, according to a statement from the organiser of DSS, the Dubai Festivals and Retail Establishment (DFRE).

The Dubai Shopping Malls Group reported an average 10 per cent increase in footfall across 27 malls participating in this year’s summer promotion. AW Rostamani Group, another DSS partner, said the special summer promotions and deals have seen a 39 per cent sales increase this summer.

“The first two weeks of Dubai Summer Surprises have seen excellent results, with retailers reporting increased sales and malls averaging double-digit growth in visitor numbers compared to last year,” Laila Mohammad Suhail, CEO of DFRE, said.

“Feedback from visitors and shoppers from overseas and across the region and other emirates has been very positive and our retail partners are finding that increased footfall is being matched by increasing sales — helping to once again boost the wider economy of Dubai,” she added.

Emirates airline reported that they have seen thousands of extra passengers attracted to Dubai by DSS, with visitors coming from both the GCC region and international destinations.
Hotel occupancy in Jumeirah Group hotels recorded an average occupancy rate of 70.2 per cent, an increase of 3.6 per cent on the same period last year.
“We are encouraged by this upward trend and feel confident as we prepare for the busy autumn season,” Gerald Lawless, President and Group CEO of Jumeirah Group, said.
DSS that began on August 2 will end on September 5.

The Bretton Woods summit explained

ON JULY 1ST 1944 the rich world’s finance experts convened in a hotel in the New Hampshire mountains to discuss the post-war monetary system. The Bretton Woods system that emerged from the conference saw the creation of two global institutions that still play important roles today, the International Monetary Fund (IMF) and the World Bank. It also instituted a fixed exchange-rate system that lasted until the early 1970s.

A key motivation for participants at the conference was a sense that the inter-war financial system had been chaotic, seeing the collapse of the gold standard, the Great Depression and the rise of protectionism. Henry Morgenthau, America’s Treasury secretary, declared that the conference should “do away with the economic evils—the competitive devaluation and destructive impediments to trade—which preceded the present war.” But the conference had to bridge a tricky transatlantic divide. Its intellectual leader was John Maynard Keynes, the British economist, but the financial power belonged to Harry Dexter White, acting as American President Roosevelt’s representative.


The strain of maintaining fixed exchange rates had proved too much for countries in the past, especially when their trade accounts fell into deficit. The role of the IMF was designed to deal with this problem, by acting as an international lender of last resort. But while White, as the representative of a creditor nation (and one with a trade surplus), wanted all the burden of adjustment to fall on the debtors, Keynes wanted constraints on the creditors as well. He wanted an international balance-of-payments clearing mechanism based, not on the dollar, but a new currency called bancor. White worried that America would end up being paid for its exports in “funny money”; Keynes lost the argument. Ironically enough, now that America is a net debtor, White’s administrative successors have called for creditors to bear part of the adjustment when trade balances get out of line.

The Bretton Woods exchange-rate system saw all currencies linked to the dollar, and the dollar linked to gold. To prevent speculation against currency pegs, capital flows were severely restricted. This system was accompanied by more than two decades of rapid economic growth, and a relative paucity of financial crises. But in the end it proved too inflexible to deal with the rising economic power of Germany and Japan, and America’s reluctance to adjust its domestic economic policy to maintain the gold peg. President Nixon abandoned the link to gold in 1971 and the fixed exchange-rate system disintegrated.

Both the IMF and World Bank survived. But each has fierce critics, not least for their perceived domination by the rich world. The IMF has been criticised for the conditions it attaches to loans, which have been seen as too focused on austerity and the rights of creditors and too little concerned with the welfare of the poor. The World Bank, which has mainly focused on loans to developing countries, has been criticised for failing to pay sufficient attention to the social and environmental consequences of the projects it funds. It is hard to believe that either institution will be around in another 70 years’ time unless they change to reflect the growing power of emerging markets, particularly China.

WEF global competitiveness rankings, 2013-2014

According to the World Economic Forum Qatar reaffirms once again its position as the most competitive economy in the region (13th globally) for the period 2013-2014. The country’s strong performance in terms of competitiveness rests on solid foundations made up of a high-quality institutional framework (4th), a stable macroeconomic environment (6th), and an efficient goods market (3rd). Low levels of corruption and undue influence on government decisions, high efficiency of government institutions, and strong security are the cornerstones of the country’s solid institutional framework, which provides a good basis for heightening efficiency.

Going forward, reducing the country’s vulnerability to commodity price fluctuations will require diversification into other sectors of the economy and reinforcing some areas of competitiveness. As a high-income economy, Qatar will have to continue to pay significant attention to developing into a knowledge- and innovation-driven economy. The country’s patenting activity remains low by international standards, at 60th, although some elements that could contribute to fostering innovation are in place. The government drives innovation by procuring high-technology products, universities collaborate with the private sector, and scientists and engineers are readily available. To become a truly innovative economy, Qatar will have to continue to promote a greater use of the latest technologies (31st), ensure universal primary education, and foster more openness to foreign competition—currently ranked at 30th, a ranking that reflects barriers to international trade and investment and red tape when starting a business.

The United Arab Emirates moves up in the WEF global competitiveness rankings to take second place in the MENA region at 19th globally. Higher oil prices have buoyed the budget surplus and allowed the country to reduce public debt and raise the savings rate. The country has also been aggressive at adopting technologies and in particular using ICTs, which contributes to enhancing the country’s productivity. Overall, the country’s competitiveness reflects the high quality of its infrastructure, where it ranks a solid 5th, as well as its highly efficient goods markets (4th). Strong macroeconomic stability (7th) and some positive aspects of the country’s institutions—such as strong public trust in politicians (3rd) and high government efficiency (9th)—round up the list of competitive advantages.

Going forward, putting the country on a more stable development path will require further investment to boost health and educational outcomes (49th on the health and primary education pillar). Raising the bar with respect to education will require not only measures to improve the quality of teaching and the relevance of curricula, but also measures to provide incentives for the population to attend schools at the primary and secondary levels.

Saudi Arabia remains rather stable with a small drop of two places to 20th position overall. The country has seen a number of improvements to its competitiveness in recent years that have resulted in more efficient markets and sophisticated businesses. High macroeconomic stability (4th) and strong, albeit falling, use of ICTs for productivity improvements contribute to maintaining Saudi Arabia’s strong position in the GCI. As much as the recent developments are commendable, the country faces important challenges going forward. Health and education do not meet the standards of other countries at similar income levels. Although some progress is visible in health and primary education, improvements are being made from a low level. As a result, the country continues to occupy low ranks in the health and primary education pillar (53rd). Room for improvement also remains on the higher education and training pillar (48th), where the assessment has weakened over the past year. Labor market efficiency also declines, to a low 70th position, in this edition. Reform in this area will be of great significance to Saudi Arabia given the growing number of young people who will enter the labor market over the next several years. More efficient use of talent—in particular, enabling the increasing share of educated women to work—and better education outcomes will increase in importance as global talent shortages loom on the horizon and the country attempts to diversify its economy, which will require a more skilled and educated workforce. Last but not least, although some progress has been recorded recently, the use of the latest technologies can be enhanced further (41st), especially as this is an area where Saudi Arabia continues to trail other Gulf economies.

WEF GCI Info Slides 1 v1

The Middle East and North Africa
The Middle East and North African region continues to be affected by political turbulence that has impacted individual countries’ competitiveness. Economies that are significantly affected by unrest and political transformation within their own borders or those of neighboring countries tend to drop or stagnate in terms of national competitiveness. At the same time, some small, energy-rich economies in the region perform well in the rankings. This underlines the fact that, contrary to the situation found in previous energy price booms, these countries have managed to contain the effects of rising energy prices on their economies and have used the window of opportunity to embark on structural reforms and invest in competitiveness-enhancing measures.

Mineral resource abundance: Blessing or curse?
The availability of abundant natural resources, especially minerals such as oil, gas, copper, and gold, has traditionally been regarded as an important input into economic growth and higher levels of prosperity in many economies. Many oil- and gas-rich countries in the Middle East have benefited from some of the highest gross domestic product per capita in the world, for example.

However, an abundance of mineral resources does not necessarily directly equate with higher rates of sustained productivity and overall competitiveness, and thus with rising prosperity in the long term. From the 17th century, when a resource-poor Netherlands managed to flourish in sharp contrast to gold- and silver-abundant Spain, to more recent cases—such as the rapid economic development of mineral-poor newly industrialized countries of Southeast Asia, which stand in contrast to some oil-rich nations such as Venezuela—history is full of examples where mineral endowments have not proved to be a blessing for long-term economic growth. Instead, such endowments have been a curse that has held countries back from making investments to support future, long-term economic development.

In the end, the relationship between mineral abundance and levels of prosperity depends on the use that nations make of the revenues accruing from mineral exports. Those countries that use such revenues for current spending rather than on productive investments will most likely not benefit from high growth rates in the long run. In those countries, national investments are driven toward mineral extraction activities that affect the level of productivity of other activities, such as manufacturing and services. This leads to an increase in the country’s exposure to fluctuations of mineral prices in international markets. In order to avoid these negative effects, known in the academic literature as the “Dutch disease,” countries should invest their mineral revenues carefully in productive activities such as infrastructure, education, and innovation. By doing so, they will enhance their overall productivity and support a progressive diversification of their economies, becoming more resilient and ensuring more sustainable patterns of economic growth.

One crucial factor that allows countries to effectively channel mineral revenues toward productive investments is the presence of strong, transparent, and efficient institutions. The absence of corruption, along with high levels of transparency and accountability and a strong commitment to a long-term economic agenda that is based on steady productivity gains and independent from the political cycle, are necessary, if not always sufficient, conditions to ensure that natural resources support long-term growth. Chile, Norway, and the United Arab Emirates are examples of countries that are managing their mineral revenues smartly. These countries are creating national funds that avoid overheating their economies and that invest in growth enhancing activities related to education and innovation, thus supporting more diversification and preparing the ground for longer-lasting and more sustainable economic growth.

UK Economy Tracker: Inflation

The UK inflation rate as measured by the Consumer Prices Index fell to 1.9% in January from 2% the month before, according to the Office for National Statistics.


BBC, 18 February 2014    See the graphs

The UK inflation rate as measured by the Consumer Prices Index (CPI) fell to 1.9% in January from 2% the month before, according to the Office for National Statistics (ONS).

It is the first time inflation has fallen below the Bank of England’s 2% target rate in more than four years.
The ONS said the lower inflation rate was in large part due to a fall in the cost of recreational and cultural activities, including falling DVD prices and lower entrance fees to attractions.

While the Consumer Prices Index fell, the rate of Retail Prices Index (RPI) inflation, which is calculated differently, increased slightly to 2.8% from 2.7%.

Understanding inflation:

  • Inflation is a rise in the price of goods and services we buy
  • The annual rate of inflation shows how much higher or lower prices are compared with the same month a year earlier. It indicates changes to our cost of living
  • So if the inflation rate is 3% in January, for example, prices are 3% higher than they were 12 months earlier. Or, to look at it another way, we need to spend 3% more to buy the same things
  • We compare this to the annual change recorded in the previous month to get an idea of whether price rises are getting bigger or smaller
  • If the annual rate has risen from 3% to 4% from one month to the next, prices are rising at a faster rate
  • If the rate has fallen – say from 3% to 2% – prices of the things we buy are still higher, but have not increased by as much
  • If the percentage rate is negative – for example, -1% – then prices are 1% cheaper than a year ago
  • The figures are compiled by the Office for National Statistics. The inflation rate is calculated every month by looking at the changes in prices of 700 goods and services in 150 different areas across the UK.
  • This is known as the basket of goods and is regularly updated to reflect changes in the things we buy. Hence the recent inclusion of tablet computers and Twilight books and the exclusion of casserole dishes and photo printing services.
  • There are two main measures: the Consumer Prices Index (CPI) and the Retail Prices Index (RPI). These are, in effect, two baskets comprising different goods and services, and different methods are used to calculate them. There are many differences, but the biggest is that RPI includes housing costs such as mortgage interest payments and council tax, whereas CPI does not.

There have been dramatic changes in the rate of inflation in recent years.

In 2008, as the global financial crisis was taking hold, prices were rising at an annual rate of about 5%.

But less than a year later, prices were rising by about 1% on the CPI measure, but were actually falling by about 1.5% on the RPI measure.

By late 2011, prices were rising again with CPI at 5.2%, matching the record high set in September 2008. RPI rose to 5.6%, the highest annual rate since June 1991.

Since then both measures have fallen back again, with CPI now below the Bank of England’s 2% target rate for the first time since November 2009.

So what was behind those big swings?
In the middle of 2008, record high oil prices were feeding through to higher prices of goods and increased energy bills and a fall in the value of sterling also forced up the cost of imported goods.

But by early 2009, the price of crude oil had slumped, losing two-thirds of its value in just six months, and the global recession had taken hold. In the UK, VAT was also cut from 17.5% to 15%, in an effort to stimulate spending. All of this contributed to the the inflation rate falling.

Then VAT went back up to 17.5% at the beginning of 2010, and was increased further to 20% the following year. Big rises in gas and electricity bills, along with transport costs and food prices, pushed prices up further.

Since then the rate of inflation has subsided as the impact of VAT rises and higher energy costs have fallen away.

What does falling inflation mean for households?
Economists broadly expect the UK to benefit from below-target inflation for some time. Jonathan Loynes, economist at consultancy Capital Economics, even suggests CPI inflation could fall to 1% before the end of 2014.

That is seen as good news for households, where prices have risen faster than average incomes since the financial crisis. That means that families have not been able to buy as much with the money that comes in.

Lower inflation means this may be about to turn around. The Institute for Fiscal Studies predicts that wage growth will start to outpace inflation this year

Is GDP the best measure of well being?

UK Prime Minister David Cameron has insisted his £2m plan to measure the nation’s happiness is not “woolly”.


BBC, 25 November 2010    Watch the video

Prime Minister David Cameron said economic growth remained the most “urgent priority” but he wanted a better measure of how the country was doing than GDP.

From April, the UK’s Office for National Statistics will ask people to rate their own well‐being with the first official happiness index due in 2012.

Labour also attempted to measure quality of life when it was in power but then prime minister Tony Blair abandoned the idea, after it proved too difficult to pin down.

But Mr Cameron, who first floated the idea of a “happiness index” in 2005, when he was running for the leadership of the Conservative Party, argues that gross domestic product (GDP) ‐ the standard measure of economic activity used around the world ‐ is no longer up to the job.

Launching the consultation on Thursday, he said: “We’ll continue to measure GDP as we’ve always done, but it is high time we admitted that, taken on its own, GDP is an incomplete way of measuring a country’s progress.”

Politicians have long been tempted by the idea of a “happiness index”. Quoting former US senator Robert Kennedy, who said GDP measured everything “except that which makes life worthwhile”, he said the information gathered would help Britain re‐evaluate its priorities in life.

He also hit back at claims that he should be focusing solely on economic growth as the country tries to emerge from recession. He said the government’s “most urgent priority is to get the economy moving, to create jobs, to spread opportunity for everyone”.

“Without a job that pays a decent wage it is hard for people to look after their families in the way that they want, whether that’s taking the children on holiday or making your home a more comfortable place.

“Without money in your pocket it is difficult to do so many of the things that we enjoy.”

But he said the government also had to focus on the long‐term and he said “the country would be better off if we thought about well‐being as well as economic growth”.

GDP was too “crude” a measure of progress as it failed to take into account wider social factors ‐ he cited the example of “irresponsible” marketing to children, an immigration “free for all” and a “cheap booze free for all”, which had all boosted economic growth at the expense of social problems.

‘Bottom line’
He admitted measuring happiness could be seen as “woolly” and “impractical”. But he said a new measure of national well‐being “could give us a general picture of whether life is improving” and eventually “lead to government policy that is more focused not just on the bottom line, but on all those things that make life worthwhile”.

He said he wanted Britain to be “in the vanguard” of efforts around the world to change the accepted measures of national progress “rather than following meekly behind”.

The Office for National Statistics will lead a debate called the National Wellbeing Project which will seek to establish the key areas that matter most to people’s wellbeing.

Potential indicators include how people view their own health, levels of education, inequalities in income and the environment.

National Statistician Jill Matheson said: “There is no shortage of numbers that could be used to construct measures of well‐being, but they will only be successful if they are widely accepted and understood.”We want to develop measures based on what people tell us matters most.”

She said questions would be added to the ONS household survey from next April ‐ but she wanted the public to help come up with sort of questions that should be asked. The first official measure of the nation’s well‐being would be published in summer 2012, she added.

The UK government is not the first to seek better measures of progress than GDP ‐ the World Bank, European Commission, United Nations, and Organisation for Economic Co‐operation and Development have all made the same commitment.

Trade union Unite attacked the plan as “another attempt by the coalition to pull the wool over peoples’ eyes”. General Secretary elect Len McCluskey said: “No doubt Cameron will use the index to claim that despite rising unemployment, home repossessions, longer NHS waiting lists and unaffordable education, the people of this country are happier under Tory rule. The reality is a gathering gloom.”

MENA: key economic issues in 2014


Economist Intelligence Unit | Middle East and North Africa: key economic issues in 2014

Since the onset of the Arab Spring in 2011 the Middle East and North Africa has in effect been a tale of the “haves” and “have nots”. The countries most affected by unrest, and in some cases war, have seen their economies stagnate. The more stable countries—which, not coincidentally, have also typically been oil-rich—have boomed on the back of fiscal stimulus and high oil prices. Yet 2014 should see the start of an unwinding of this trend, as the oil-rich “haves” take their foot off the fiscal pedal and the “have nots” begin to benefit from the upturn in the euro zone.

Nowhere has the opening of the fiscal spigots been more apparent than in the wealthy Gulf Co-operation Council (GCC). In the wake of the unrest in early 2011, all the GCC states dispensed with fiscal prudence and, buttressed by rising oil prices and production, their governments announced enormous public-sector salary and pension rises, huge new infrastructure and housing programmes, and increased subsidies. However, inevitably, such largesse has taken its toll on the public finances, and we expect all six of the GCC states to return either a narrower surplus, or, in the cases of Oman and Bahrain, wider deficits, in 2014.

GCC closes the fiscal spigots
In response, governments are being forced to act. Saudi Arabia, for example, recently announced a budget just 4% bigger than its predecessor (compared with a budgeted spending increase of 17% in 2013), and Oman’s 2014 budget projects spending just 5% up on its predecessor—a marked slowdown from the 29% spending increase announced in the 2013 budget. Similarly, for almost the first time since the collapse in oil prices in 1997‑98, several GCC governments are now publicly mulling tackling their overgenerous subsidy systems. In a blunt appraisal of the situation, the Omani oil and gas minister, Mohammed bin Hamad al‑Rumhi, told a conference in October that “subsidy is killing us” and, echoing his comments, the governor of the Central Bank of Bahrain, Rashid al‑Maraj, warned in December that the present situation is “not sustainable”. However, in reality, mindful of potentially fomenting unrest, any attempt to reform subsidies will be extremely cautious, with households almost certainly excluded, at least initially, from cuts, and industry prioritised.

Labour market policies will hinder businesses
The targeting of industries within the GCC is hardly going to help the business climate, however. Already, companies across the Gulf are being weighed down by increasingly aggressive labour market policies, which are focused on replacing foreign workers with locals. Saudi Arabia has been especially energetic in this regard, introducing a major reform to its expatriate sponsorship system, including inducements to encourage firms to hire nationals, and imposing fines on companies with more than 50% foreign workforces. Concurrently, a host of governments, including Oman, Saudi Arabia and Bahrain, have sought to encourage their wary citizens to embrace the private sector by raising the minimum wage for nationals. Overall, therefore, companies are increasingly being confronted with having to hire more, typically less well-educated and motivated locals, at a higher cost. Thus far, massive fiscal stimulus and high oil prices have shielded the GCC economies from the harmful effects of their labour policies. However, with oil prices stabilising (and forecast to decline in the coming years), the state will no longer be able to provide much of an economic prop, and thus there is a risk that the GCC’s stellar economic performance of recent years will become a thing of the past.

Economic growth
(% change, market exchange rate weights)
2011 2012 2013 2014
Middle East & North Africa 2.8 3.7 2.4 3.6
Oil exporters 2.7 4.0 2.3 3.8
Non-oil exporters 3.1 2.8 2.9 3.1
Gulf Co-operation Council 7.6 5.5 3.9 4.4
Algeria 2.4 2.5 3.2 3.6
Bahrain 2.1 3.4 3.9 3.2
Egypt 1.8 2.2 2.0 2.2
Iran 2.7 -5.6 -3.0 1.5
Iraq 8.6 8.4 5.2 8.2
Israel 4.6 3.3 3.2 3.4
Jordan 2.6 2.7 3.2 3.9
Kuwait 10.2 8.3 2.3 2.7
Lebanon 3.0 1.4 1.3 2.2
Libya -61.4 92.1 -2.3 -2.7
Morocco 5.0 2.7 4.0 4.1
Oman 0.3 8.3 4.2 4.1
Qatar 13.0 6.2 5.5 5.0
Saudi Arabia 8.6 5.1 2.9 4.0
Sudan -3.8 -4.2 3.0 2.9
Syria -3.4 -18.8 -19.0 1.8
Tunisia -2.0 3.6 2.8 3.0
United Arab Emirates 3.9 4.4 4.3 4.4
Yemen -10.5 0.1 3.8 5.1
Source: The Economist Intelligence Unit.

Governments eschew economic reform
Meanwhile, in the rest of the region the challenge is simpler: job creation, rather than worker replacement, is top of the agenda. However, in the absence of large oil reserves or swollen sovereign wealth funds, and confronted by long-fragile fiscal positions, boosting growth will prove an uphill task. This will be exacerbated in the near term by ongoing cuts in subsidies, which have typically been focused on larger users (namely, industry), rather than households. For example, a phased 50% cut in the price subsidy for gas and electricity in Tunisia is being initially focused on only large users, and the latest electricity price increase in Jordan for major users has prompted an outcry from industrialists.

More broadly, the business climate will be further impaired by the general governmental aversion to economic reform, as populations remain wary of the capitalist models pursued by the pre-2011 generation of leaders and technocrats (which, in reality, were always undermined by corruption and nepotism). The only exception to this trend will probably be Egypt, where the current interim administration (populated predominately by technocrats and academics) is working assiduously to create a more foreign investor friendly environment following the more statist policies of the previous Muslim Brotherhood administration.

However, it will be undermined in this by the unpromising political and security outlook, which will in turn depress domestic confidence and foreign investment—a handicap that will also affect Tunisia and Lebanon, as well as hydrocarbons-rich but hyper-unstable Libya and more resource-poor Yemen. Adding to the unhelpful climate, the ongoing war in Syria will also continue to spill over its borders, strengthening the economic headwinds in Lebanon, depressing the recovery in Jordan, and potentially setting back Iraq’s recent oil-led economic bounceback.

In contrast, thus far at least, Israel has managed to remain at least economically aloof from Syria’s problems, and indeed it is well placed to benefit from the strengthening economic picture in its two primary export markets, the US and the EU. The long overdue recovery in the euro zone will also offer a rare bright spot for some of the more troubled North African states, notably Morocco, Egypt, Tunisia and Algeria, reflecting its primary importance as an export market, and as a source of remittances and tourists.

A little help from their friends
Nevertheless, in many cases such positives will be more than outweighed by the continued fallout of the Arab Spring, prompting governments in the more unstable and less resource-rich states to continue to rely heavily on outside support. The IMF play a crucial role in this regard. Jordan, for example, has had a US$2bn lending facility in place since August 2012, and the IMF also formally agreed a US$1.74bn financing programme with Tunisia in June 2013. Despite popular misgivings about the conditions attached to this lending, the Fund is likely to remain relatively flexible in its assessments, primarily reflecting the overarching desire on the part of both itself and its financers to promote stability and assist in the democratic transition.

Nevertheless, talks between the IMF and Egypt over a US$4.8bn stand-by arrangement appear to have run into the ground. Prior to the ousting of the president, Mohammed Morsi, in early July, efforts to reach a deal had been persistently hindered by the then government’s failure to follow through on promised reforms. Since July, however, it appears that talks have in effect come to a standstill, with the new interim government eschewing the option, citing the need to wait until the installation of a permanent administration.

Egypt’s reticence about the IMF stems from a trend that has been increasingly prominent over the past few years: the disbursement of financial support from the region’s oil-rich states, in particular the GCC, to regional allies. In this regard, the GCC has been especially generous to the new leadership in Egypt, with Kuwait, the UAE and Saudi Arabia offering US$13.9bn in assistance However, it remains to be seen whether Qatar, which also gave a US$500m loan to Tunisia in April 2012, will curtail its hyperactive financial assistance programme, in line with the receding of support across the region for the Muslim Brotherhood (which Qatar has proactively backed).

Money buys influence
Even without active Qatari participation, however, Saudi Arabia and its allies in the GCC will continue to work assiduously to defend the current crop of autocratic rulers. For example, Saudi Arabia, the UAE, Kuwait and—possibly—Qatar will provide further backing to Jordan and Morocco, as part of their long-term pledge in 2011 to give US$5bn to support development projects. This reflects a desire on the part of the GCC to shore up political stability, as well as maintain influence, but humanitarian concerns will also increasingly come to the fore: amid the civil war in Syria, millions of refugees have poured into neighbouring Jordan and Lebanon, threatening the authorities’ ability to cope and prompting their governments to plead for foreign assistance. (In response, Saudi Arabia pledged US$3bn to Lebanon’s army in late December.) However, given the GCC’s states hostility to the Syrian government, Syria’s leadership will instead rely on Iran, which has set up a US$4bn credit line and, unlike other parts of the region, could see a major upturn in its fortunes if a diplomatic deal can be reached over its nuclear programme.

However, again, 2014 could mark a turning point. With the GCC’s fiscal situation deteriorating rapidly and austerity in vogue, the region’s non-oil producers will increasingly be left to fend for themselves (although this may not become truly apparent until next year). With governments under-resourced and the public sector typically inefficient, the responsibility for raising living standards and boosting job growth will once again have to be shouldered by the private sector—as was much the case prior to 2011.

Emirati women and the labour market

This is a recent article on the subject of Emirati women and the labour market

Parents play critical role in Emirati women’s career choices, UAE study shows

Dr Emilie Rutledge, associate professor of Economics at UAE University, at the lecture on Parental Influence on Female Vocational in the Arabian Gulf at Mohammed bin Rashid School of Government. Jeffrey E Biteng / The National.

The research team was led by Dr Emilie Rutledge, associate professor of economics at UAE University, who presented their findings to academics at the Mohammed bin Rashid School of Government (MBRSG) on Tuesday.

“Parental influence has a significant role on a given female’s likelihood of seeking to enter the labour market post-graduation,” she said. “Parental support reduces what women perceive as cultural barriers to employment.”

Sixty-eight per cent of the women said their parents influenced their decisions about careers, and 80 per cent said they preferred to work in the public sector.

Forty-six per cent said they felt it was the Government’s responsibility to find them work in the public sector.

Working in education, the civil service and police were deemed the most culturally “acceptable” careers for an Emirati woman, although areas such as advertising, marketing and pharmaceuticals were deemed more “attractive”.

“However, if parents are engaged in the vocational decision-making process, the female is more likely to consider exploring opportunities in the private sector,” Dr Rutledge said.

For Emiratisation to be successful, there must be more emphasis on these other fields rather than banking, human resources and finance, which the women did not consider interesting or attractive, Dr Rutledge said.

“Being in a gender-segregated environment was not as important to the girls as the salary or the job being interesting was, even if society or parents as a whole object to this,” she said.

Dr Rutledge cited holiday time and maternity leave as important, both of which were more attractive in the public than private sectors.

Ensuring the women return to the workplace through flexible working times and better maternity benefits was vital.

“A lot of females leave the workplace when they have a family because of the poor provisions, so they simply don’t go back and in turn, they lose their skills,” she said.

A father’s level of education was key in determining how his daughters would be guided. Fathers with degrees are more likely to support and encourage women to seek employment.

“Private-sector career paths are more attractive if the parent already works in the private sector,” Dr Rutledge said.

“This is of importance as there is merit to incentivising more Emirati males into higher education for the long-term participation of Emirati women in the labour market.”

Women graduate at a 3 to 1 ratio from UAE federal universities.

Dr Maryam Salem Al Marashad has been a long-standing academic at UAE University since she graduated with the first batch of students in 1977.

She left her post as dean of students two years ago but is still active in academia. She said a husband’s influence could not be underestimated.

“We see many girls at UAEU get married in their third year, so by the time they are going to the labour market, it is not only the family but their husband – she is stuck with an answer from her husband that she can or cannot work here or there.”

Geography will also sway a woman’s choices, she said.

“In Fujairah when I go to my bank, the whole first row is full of Emirati women who are supporting their families and are interested to work,” she said. “In Abu Dhabi or Dubai where there are many more opportunities, they can afford to be more picky.”

MBRSG’s head of gender and public policy, Ghalia Gargani, said more research was needed for the long-term participation of Emirati women in the job market.

Only 9 per cent of the labour force is Emirati, a fifth of them women.

“We need to think of ways to have policies for both men and women to balance their work and life and the responsibilities that come with their culture here,” she said. “It’s very relevant to research we’re doing here on the family unit.”

Dubai: alive to the financial competition

From the Financial Times (Feb 4, 2014) by Simeon Kerr

Dubai’s financial centre says it will slash telecommunications rates as it seeks to sustain growth amid increasing competition from neighbours such as Abu Dhabi, Qatar and Saudi Arabia. The DIFC is set this year to roll out a technology transit zone within its data centre, offering prices that can compete with London and other western cities to ease costs for trading desks and asset managers.

Telecommunications costs in the United Arab Emirates, dominated by two state owned companies, are a major cost disadvantage of doing business in the DIFC and the rest of the country. Located in liberal Dubai, the DIFC’s popular cluster, featuring familiar regulations and common law courts, has become the financial gateway to the region. But the indebted commercial capital of the region faces growing competition from its energy-rich neighbours.

The capital of the United Arab Emirates, oil-rich Abu Dhabi, is pushing ahead with Global Marketplace Abu Dhabi, a financial centre modelled on the DIFC. Gas-rich Qatar is seeking to boost asset management and insurance at its financial centre in Doha. And Saudi Arabia, the regional economic superpower, is to open King Abdullah Financial District – dozens of towers near Riyadh’s airport – later this year.
Growth in Dubai’s financial sector, which contributes around 12 per cent to Dubai’s overall GDP, reflects the broader revival of the emirate’s economy, whose bedrock remains trade and tourism.

In 2013, the DIFC had its strongest year since the financial crisis, with the number of registered firms rising 14 per cent to 1,039. The number of people working within the district grew 11 per cent to around 15,600. Regulated financial companies operating from the centre have risen by 11 per cent to 327 in 2013.

The DIFC rented out the largest amount of real estate since the global financial crisis last year, with occupancy at almost 100 per cent in the buildings it operates. But buildings operated by third parties will over the next year provide enough space to house another 15,000 staff.

Filling this extra space is the centre’s main challenge, especially as it faces increasing competition from neighbouring states keen to develop their own financial sectors. The centre has already frozen rents that had become less competitive compared to other parts of Dubai.

Dubai hopes to attract more Asian companies. Reforms this year allowing Chinese banks to open branches in the centre has allowed four major Chinese institutions operating in the DIFC to use their home balance sheet to lend in the region.

Dubai to repay Abu Dhabi debt


Economist Intelligence Unit | September 30th 2013 | Dubai to repay Abu Dhabi debt

Dubai, which needs to repay US$20bn to three Abu Dhabi entities next year, will meet its obligations and is not negotiating to refinance its debt, according to the chairman of the emirate’s Supreme Fiscal Committee, Sheikh Ahmed bin Saeed Al Maktoum. However, if necessary, Abu Dhabi would probably roll over the debt, to avoid any negative impact on market sentiment.

The emirate, which was on the brink of a default in 2009, borrowed US$20bn from its wealthier neighbour to shore up a troubled conglomerate, Dubai World, and others. The debt comprised US$10bn from the Central Bank of the UAE and US$5bn each from two state-owned banks, National Bank of Abu Dhabi and Al Hilal Bank. The US$10bn debt is due to mature in February and the bank debts in November 2014. In comments to reporters, Sheikh Ahmed also said that Dubai’s state-linked companies were doing well and were able to meet their debt repayments.

Debt rises on improved sentiment
Dubai’s debt, including that of government-related entities (GREs), has continued to rise since the global financial crisis. The IMF stated in June that the total debt of the emirate and its GREs rose by US$13bn between March 2012 and April 2013, to US$142bn. This is equivalent to 102% of the estimated 2012 GDP of Dubai and the UAE’s poorer northern emirates. Of the estimated US$93bn owed by GREs, US$60bn will fall due between now and 2017, the Fund added.

The increase in GRE debt in 2012 and early 2013 reflects successful debt restructuring, the strengthening of the UAE economy and its property sector and ample global liquidity. These factors meant that Dubai GREs regained access to international credit markets and sought to take advantage of favourable borrowing conditions.

Dubai’s performance in 2014 will be pivotal to maintaining solid investor sentiment. Senior government officials have said consistently that the emirate will meet its debt obligations next year, buoyed by the UAE’s wider economic recovery. The UAE is not well served with high-frequency economic indicators, but what indications there are regarding tourism, transport, the property sector, the stockmarket and company results point to considerable strength in the economy persisting in 2013. Ongoing support from high oil prices and the UAE’s appeal as a safe-haven investment location in the region have bolstered the economy.

Rises in airport traffic and hotel occupancy contributed to a strong performance by the tourism industry in Dubai and Abu Dhabi in the first six months of the year. Tourist arrivals in Dubai rose by 11.1% year on year to more than 5.5m in the first half of 2013, helping to drive overall hotel occupancy to 84.6%. The city state’s main airport handled 32.6m passengers during the period, marking an increase of 16.9% year on year. Furthermore, the property market in Dubai sparked back into life in 2012 and has continued to gain momentum in 2013. This has certainly benefited the finances of many GREs.

The main risks to this ongoing rebound include a shift down in oil prices and slowing global growth. We forecast that international oil prices will dip next year but will remain above US$100/barrel. On balance, we expect global GDP this year to expand by 2% at market exchange rates, down from global growth of 2.2% in 2012. However, we expect most of the currently suffering emerging markets to perform better in 2014, if only because the US, the EU and Japan are poised for faster growth. This should lead to a mild rebound in global GDP next year, to 2.7%.

More reforms needed
Dubai has been successful in restructuring GRE debt since the financial crisis, with most major agreements in place; a final deal regarding the debt of Dubai Holding is advanced but still pending. Progress with restructuring certainly boosted investor sentiment in 2012. Alongside this, the UAE is working on reforms to limit the risk of a renewed debt crisis.

The Central Bank has moved to curtail local banks’ exposure to GREs, proposing that lenders should offer no more than 100% of their capital base to local governments and to state-linked entities. This law was announced in April 2012, and banks were told to be in compliance by the end of September last year. However, several banks—including leading UAE banks such as National Bank of Abu Dhabi, Emirates NBD, Abu Dhabi Commercial Bank and Noor Islamic Bank—said that they were unable to comply. The Central Bank has not yet managed to finalise this rule, but it announced in mid-September that an agreement had been reached with commercial banks and would be confirmed before the end of 2013.

The IMF has also stressed the importance of greater transparency with regard to the finances of GREs. The Fund acknowledged that the government had taken some steps towards better oversight. For example, the Dubai government has put in place a team to oversee debt issuance, and any new borrowing by GREs needs to be approved by the Supreme Fiscal Committee. Abu Dhabi, meanwhile, has improved its monitoring of GRE debt. Nevertheless, the IMF has urged a more comprehensive approach to transparency and the governance of GREs, stressing the importance of better data availability on debt and further reforms to improve corporate governance of GREs.

Roll over?
The finances of Dubai and the emirate’s GREs have benefited from the economic rebound in 2012‑13. As a result, Dubai may now be in a position to repay its debts to neighbouring Abu Dhabi on schedule in 2014. However, any difficulties in meeting the due debt would play out behind closed doors, and Abu Dhabi would probably roll over the debt if necessary, to avoid any negative impact on market sentiment.