{"id":2024,"date":"2018-11-26T19:00:51","date_gmt":"2018-11-26T19:00:51","guid":{"rendered":"http:\/\/euromenaenergy.com\/?p=2024"},"modified":"2018-11-26T19:00:51","modified_gmt":"2018-11-26T19:00:51","slug":"the-slow-bleed-dubai-is-losing-its-shine-as-a-middle-east-haven","status":"publish","type":"post","link":"https:\/\/emimer.com\/?p=2024","title":{"rendered":"The slow bleed: Dubai is losing its shine as a Middle East haven"},"content":{"rendered":"
\n

Bloomberg\/Dubai<\/p>\n<\/div>\n

Ever since the first gleaming towers sprang out of the desert, Dubai has gotten used to rapid change. It\u2019s no stranger to boom-and-bust. What\u2019s happening now is different: a slow bleed.
\nThe city\u2019s iconic builders are moving ahead. Cranes are everywhere. But no one is sure who\u2019ll occupy all that new retail and office space. Already, Dubai\u2019s malls are noticeably less full of stores and restaurants than they once were. Expatriates, the lifeblood of the economy, have started to pack up and go home \u2013 or at least talk about it, as the cost of living and doing business surges. Corporate mainstays, from Emirates airline to developer Emaar Properties, just reported disappointing third-quarter profits. The stock market is having its worst year since 2008.
\nBusiness unease was already apparent in April, when Sheikh Mohamed bin Rashid al-Maktoum convened a meeting with more than 100 executives in his palace overlooking the Gulf. The bosses raised issues including hefty government fees \u2013 which are eroding the comparative advantage of tax-free Dubai \u2013 to strict visa rules that push foreigners out when they lose their jobs. The conclave was followed by a flurry of decisions, still working their way through the system.
\nBut a fix for what\u2019s ailing Dubai may be beyond the powers of its ruler. Sheikh Mohammed and his predecessors built a fishing village into a hub for finance, trade and tourism in the region \u2013 but now that region is changing, perhaps for good.
\nThe oil slump since 2014 hit big spenders from neighbouring Gulf states who used to flock to Dubai (tourists from China and India are filling the gap, but they\u2019re more price-conscious). Saudis, in particular, are feeling the pinch, as their own government imposes fiscal austerity and confiscates private wealth. The city\u2019s role as a trading post is being undermined by a global tariff war \u2013 and in particular by the US drive to shut down commerce with nearby Iran.
\nThere\u2019s a deeper problem. Dubai prospered as a kind of Switzerland in the Gulf, a place to do business walled off from the often violent rivalries of the Middle East, says Jim Krane, author of the 2009 book City of Gold: Dubai and the Dream of Capitalism.
\nNow the state is that the UAE has become an active player in those conflicts, fighting in civil wars from Libya to Yemen and joining the Saudi-led boycott of Qatar.
\n\u201cIt\u2019s a situation that Dubai finds itself in mostly through no fault of its own,\u2019\u2019 says Krane. \u201cYou can go to war with your neighbours, or you can trade with them. It\u2019s really hard to do both.\u2019\u2019
\nStories of Qatari citizens being ordered to leave the UAE shocked businesses that serviced the region from headquarters in Dubai. American executives were especially concerned about the prospect of being forced to pick sides, says Barbara Leaf, who was US ambassador in the UAE until March.
\n\u201cIt has cast a shadow,\u2019\u2019 she says. \u201cIt was a very unpleasant surprise when UAE-based companies found out they could no longer fly or ship goods directly to Doha.\u2019\u2019 The dispute rumbles on, even though the US is applying renewed pressure for a settlement.
\nThat\u2019s not the only blowback from siding with the Saudis. When Crown Prince Mohamed bin Salman rounded up dozens of leading Saudi royals and businessmen at the Ritz-Carlton hotel in a supposed crackdown on corruption, the UAE central bank asked the country\u2019s financial institutions to provide information on the accounts of some of those held.
\nInvestors are rightly worried, says Krane. Governments \u201cshouldn\u2019t be able to access accounts in other countries based on a simple request.\u2019\u2019
\nDubai also faces consequences of its own success. Lacking energy resources of its own, the city had little choice but to build a non-oil economy. The 2014 crash jolted other Gulf countries into following suit. They\u2019re all planning for a post-crude era, and trying to emulate their thriving neighbour by marketing their own capitals as regional hubs.
\nDubai remains pre-eminent in that role. But it\u2019s an increasingly high-cost base. In 2013, it ranked as the 90th most expensive place for expats to live, according to New York-based consultant Mercer. It\u2019s now vaulted to 26th on the list.
\nIt was the cost of living that persuaded Donovan Schram, a 38-year-old bond trader, to call time on his eight years in Dubai a few months ago. He\u2019d already moved his wife and children back to his native Cape Town in 2014, after being forced to take a salary cut in a new job, and now he\u2019s followed them.
\n\u201cDubai is very expensive when you have a family,\u201d and there\u2019s \u201ca culture of paying upfront for everything from rent to school,\u2019\u2019 says Schram. He says at least three friends have made a similar decision.
\nJobs became scarcer after companies from financial services to retail and energy enacted \u201cmassive layoffs\u2019\u2019 in 2015 and 2016 as profits slumped, says Nuno Gomes, head of Middle East business at Mercer. When the consultant surveyed 500 firms two years later, it found that half of them have no plans to boost hiring and don\u2019t expect growth to return to 2013 levels.
\nFahad al-Gergawi, head of investment agency Dubai FDI, says the city\u2019s seen lean times before \u2013 and bounced back. \u201cThis is a market cycle that we have to accept,\u201d he says. The government is doing what it did in past slumps, says al-Gergawi: Sitting down with business to figure out solutions. \u201cIt\u2019s about how you become creative.\u201d
\nWhen the upturn does arrive, Dubai\u2019s companies will emerge leaner and more competitive, according to Khatija Haque, head of regional research at local lender Emirates NBD. Meanwhile, many areas of the economy are holding up fairly well, she says.
\nThe big problem is in wholesale and retail trade. \u201cIt\u2019s a third of the economy, basically flatlining over the past two years, which is a big drag,\u2019\u2019 says Haque, who thinks government spending may have to fill the gap.
\nThe government of neighbouring Abu Dhabi has promised almost $14bn of stimulus over three years. Sheikh Mohamed in Dubai, after his meeting with the fretful bosses, is working on a raft of measures that should help: Freezing school charges, relaxing curbs on foreign ownership of business, and scrapping billions of dollars of government fees. The visa regime is also being loosened, to make it easier for expatriates \u2013 80% of the population \u2013 to come, stay longer, and spend more.
\nOne thing the government isn\u2019t doing is reining in the builders. That\u2019s a mistake, according to Craig Plumb, head of Middle East research at broker Jones Lang Lasalle.
\nPrices and rents are plunging across the board, as new capacity outpaces population growth and consumer spending.
\nAuthorities are reluctant to stabilise the market by restricting permits, because land sales are a source of revenue. Retail space will expand 50% in the next three years, according to real estate adviser CBRE Inc.
\nPlumb says it\u2019s not really needed \u2013 and he says some of Dubai\u2019s premium builders are to blame. \u201cWe\u2019re not talking about Mickey Mouse second-tier developers,\u2019\u2019 he says, citing state-run firms like Emaar and Nakheel PJSC. \u201cThey\u2019re all established companies, and they should know better.\u2019\u2019
\nGovernment, builders and business alike are all looking to one event on the horizon that may come to the rescue.
\nDubai will host the World Expo fair in 2020. Meant to showcase the city\u2019s future prospects, it\u2019s become almost an end in itself, a reason to keep the cranes at work. \u201cThe biggest saving grace,\u2019\u2019 Haque calls it.<\/p>\n","protected":false},"excerpt":{"rendered":"

Bloomberg\/Dubai Ever since the first gleaming towers sprang out of the desert, Dubai has gotten used to rapid change. It\u2019s no stranger to boom-and-bust. What\u2019s happening now is different: a slow bleed….<\/p>\n","protected":false},"author":1,"featured_media":2027,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2024","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/2024","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2024"}],"version-history":[{"count":0,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/2024\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/media\/2027"}],"wp:attachment":[{"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2024"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2024"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2024"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}