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CEU Business School – Full time MBA

Emerging regions: Middle East and North Africa
Final Project: Sustainabile Urban Development in United Arab Emirates

Emerging regions: Middle East and
North Africa

Sustainabile Urban
Development in United Arab
Emirates

By David Knezevic

Budapest 2009.

David Knezevic 7/1/2009 Page 1 of 16
CEU Business School – Full time MBA
Emerging regions: Middle East and North Africa
Final Project: Sustainabile Urban Development in United Arab Emirates

TABLE OF CONTENTS

7. Independent variable

7. Dependant variables

7. Hypothesis - Dubai as a leader

7. United Arab Emirates

4.1. Geography

4.2. History

4.3. Politics

4.4. Economy

4.5. Dubai

4.6. Abu Dhabi

7. Analysis of dependant variables

5.1. Economic Environment

5.2. Regulatory Environment

5.3. Construction standards

5.4. Property investment indicators

7. Conclusion

7. Literature

David Knezevic 7/1/2009 Page 2 of 16
CEU Business School – Full time MBA
Emerging regions: Middle East and North Africa
Final Project: Sustainabile Urban Development in United Arab Emirates

1. Independent variable
We live in a world where sustainability is more important than ever before. Current
approach reaches far beyond its verbal meaning and calls to action, as it has become a wide-
ranging term which can be applied to every aspect of life and can vary from a local to a
global scale and over various time periods.

Especially in urban development, sustainability is no longer just a charitable option.
That is the only reasonable step forward. Many real estate environment professionals in
United Arab Emirates, and particularly in Dubai realise that sustainablity needs to be part of
the grand plan of their society while urbanising at the rate far higher than in many MENA
countries.

Efforts to live more sustainably should be made and usually take many dimensions,
from reorganising living conditions, revaluating economic sectors, redesigning work
practices. All these should use science to develop new technologies which can upgrade living
on Earth to a higher level, the level which will harm environment far less and will ensure
sustainable development to our descendants.

According to Bruntland Commission this is development which meets the needs of the
present without compromising the ability of future generations to meet their own needs.
Essence of this concept is within two key concepts:
• the concept of needs,
• the idea of limitations imposed by the level of technology and social organization
on the environment's ability to meet present and future needs, and to recover from
contaminations.1

This project is questioning Sustainable urban development in United Arab Emirates.
Focal point of the analysis will be the Emirate of Dubai as it’s the most criticized or flattered
one out of seven Emirates. Some admire it as the global leader and characterize as the
Largest manmade development in the world (including Palm Jumeirah, Burj Al Arab, Burj
Dubai, The World Project, Emirates Mall etc.). Other criticize it saying that is only a big
show off and a real estate excess, that certainly meets no reasonable needs and operates in no
limitations environment, such a selfish colony somewhere in outer space.

2. Dependant variables

In order to successfully conduct such a research project one should look for the main
factors that have influence on independant variable. By using only legitimate literature author
will take an educated guess, based on objective indicators and unbiased information.

1
International Commission on Education for Sustainable Development Practice – Final Report – October 2008.

David Knezevic 7/1/2009 Page 3 of 16
CEU Business School – Full time MBA
Emerging regions: Middle East and North Africa
Final Project: Sustainabile Urban Development in United Arab Emirates

Substantionaly important factors for Sustainable urban development in United Arab
Emirates are following:
 Economic Environment
 Regulatory Environment
 Construction Standards
 Property Investment Indicators (PII)

Analysis of these variables will be the main body of this research project and will result
in positive or negative outcome related to our Hypothesis.

3. Hypothesis - Dubai as a leader
As an immediate outcome of a brief look over the main factors one have to take a
standpoint which will syntethicly merge independant and dependant variables, and formulate
a Hypothesis.
This Hypothesis will be testified and discussed with the help of academic literature, by
going through one variable after the other:
„Dubai is leader in sustainable urban development worldwide”

4. United Arab Emirates
Before start of analyzing Sustainable urban development in United Arab Emirates, I
feel motivated to explain briefly this marvelous country, which transformed from illiterate
society into one of the world most sophisticated in last three decades, from poor living
standard to a great one, and from tent to a world class skyscrapper.

4.1. Geography
The United Arab Emirates is a federation of seven states (emirates) situated in the
Soutwest Asia, on the southeast of the Arabian Peninsula on the shores of Arabian Gulf. UAE
is bordered from the north by the Arabian Gulf, and from the west by the Kingdom of Saudi
Arabia, and from the south by the Sultanate of Oman and the Kingdom of Saudi Arabia, and
from the east by the Gulf of Oman.
The capital and second largest city of the United Arab Emirates is Abu Dhabi. It is also
the country's center of political, industrial and cultural activities. The total area of the country
is 83600 Sq km, which includes an archipelago with an area about 5900 Sq km.
The total population in 1995 was 2.411.041 persons, and in oly 10 years increased up to
4.1 million. Very interesting is that over 80 per cent are expatriates.

4.2. History

David Knezevic 7/1/2009 Page 4 of 16
CEU Business School – Full time MBA
Emerging regions: Middle East and North Africa
Final Project: Sustainabile Urban Development in United Arab Emirates

Recent history of United Arab Emirates is connected to the personality of Sheikh Zayed
bin Sultan Al Nahyan, father of UAE nation. Other two very important factors were British
influence and discovery of oil reserves in 1960s.
Discovery of oil led to quick unification calls made by UAE sheikdoms. Sheikh Zayed
became ruler of Abu Dhabi in 1966 and the British started losing their oil investments and
contracts to U.S. oil companies.2

At the time of the imminent withdrawal of the British military and diplomatic
protection between 1968 and 1971, the sheikhs of the Emirates decided to form a Trucial
States Council to coordinate matters between them and took over the development office.
Shaykh Zayed had been a proactive advocate of cooperation between the Gulf states when
his emirate and a group of other small shaykhdoms had to decide on their political structure
and future statehood. In the beginnings of the Trucial States Council, Qatar and Bahrain were
expected to form part of a federal solution. When these two decided in 1971 to go alone, the
seven
Trucial States formed a federation, called the United Arab Emirates.3

4.3. Politics

Politics of the United Arab Emirates takes place in a framework of a federal
presidential elected monarchy, a federation of seven absolute monarchies. There should be
noted that death of Shaykh Zayed, who had been the UAE's only President in 33 years of the
country's existence as a modern state, was a substantial shocking moment for this young
nation's development.4 The UAE's political system, a unique combination and balance of the
traditional and the modern, as everything in this country is.

The presidency and premiership of the UAE is de facto hereditary to the Al Nahyan
clan of Abu Dhabi and the Al Maktoum clan of Dubai. The President of the United Arab
Emirates and the head of state is the ruler of Abu Dhabi (Khalifa bin Zayed Al Nahyan) and
the Prime Minister and Vice President of the United Arab Emirates, is the ruler of Dubai and
the head of government (Mohammed bin Rashid Al Maktoum). The political influences and
financial obligations of the Emirates are reflected by respective positions in the Federal
government. While each Emirate still retains autonomy over own territory, a percentage of its
revenue is allocated to the UAE’s central budget.5

4.4. Economy
The UAE is one of the most developed countries in the world. This assumption is based
on various economic indicators such as GDP per capita(PPP), energy consumption per capita,
and the Human Development Index. Their GDP per capita is currently 17th in the world as
measured by the IMF; while at $168 billion in 2006, with a small population of 4 million, the
GDP of the UAE ranks second in the Cooperation Council for the Arab States of the Gulf
2
http://countrystudies.us/persian-gulf-states/85.htm
3
The United Arab Emirates: Statehood and Nation-Building in a Traditional Society, Middle East Journal, Vol. 59, No. 3
4
The United Arab Emirates: Statehood and Nation-Building in a Traditional Society, Middle East Journal, Vol. 59, No. 3
5
http://www.uaeinteract.com/government/political_system.asp

David Knezevic 7/1/2009 Page 5 of 16
CEU Business School – Full time MBA
Emerging regions: Middle East and North Africa
Final Project: Sustainabile Urban Development in United Arab Emirates

(just behind Saudi Arabia), third in the MENA region after Saudi Arabia and Iran, and 38th
worldwide.6

There are various comments and estimates about the actual growth rate of the UAE’s
Gross Domestic Product. However, all available findings indicate that it currently has one of
the fastest growing economies in the world. UAE’s economy grows around 35% annually.
Although the UAE is becoming less dependent on exploatation of natural resources as a
source of revenue,especially comparing to other GCC countries, oil and gas exports still play
an important role in the economy (25% of GDP), especially in Abu Dhabi (as it contains
approximately 9% of worlds known reserves of oil and 1,3% of worlds known gas reserves)
A massive construction and real estate boom, an expanding manufacturing base, and a
thriving services sector are helping the UAE diversify its economy. UAE has one of the
lowest unemployment rates in the world, and attracts a great number of foreign workers.

4.5. Dubai
Globally recognized as a city of inspiration and imagination, sand and sea transformed
into Heaven on Earth, and a biggest manmade development in the world, Dubai is a symbol
of 21st century and an EST capital of the World. In 2007 when estimated worth of all
construction works in progress was $360bn, Dubai’s share was between 10 and 30%,
according to various sources.

Among the other interestings it’s very important to mention that Dubai has the smallest
share of its GDP (less than 6%) contributed by oil and gas exploitation, comparing to all
other oil rich areas in the world. Mainstream of Dubai’s income comes from Real Estate and
Property development. The other contributors are: Logistics, Tourism, Financial Services,
Manufactoring etc.

Capital of Imperatives or the EST capital got its nickname with such projects as:
 Burj Al Arab – Probably one of the first incredible buildings in Dubai, host to
the worlds Best Hotel.
 Burj Dubai –When completed (2010), will become the world's tallest building,
 Dubai World Central International Airport - When completed, will be the most
expensive and luxorious airport ever built
 Palm Islands - The largest artificial islands in the world, that increased UAE’s
coastline for over 800km.
 Dubai Mall - The world's largest shopping mall.
 The World - Largest and probably the only man-made archipelago.
 Dubailand – When completed will be the largest entertaining park (is expected
to be twice the size of Disney World)
 Dubai Sports City - Will provide homes for local sports teams and may be part
of future Olympic bids.

4.6. Abu Dhabi
For a long time in shadow of Dubai’s success, one of the world's largest producers of
oil, Abu Dhabi has actively attempted to diversify its economy in recent years through
6
World Economic Outlook 2007 – International Monetary Fund

David Knezevic 7/1/2009 Page 6 of 16
CEU Business School – Full time MBA
Emerging regions: Middle East and North Africa
Final Project: Sustainabile Urban Development in United Arab Emirates

investments in financial services and tourism. Abu Dhabi is the wealthiest emirate of the
UAE in terms of per capita income and GDP. The average net worth for Abu Dhabi's 420,000
citizens is $17 million. More than $1 trillion is invested worldwide in this city alone.
In order to make a huge step
forward and reach a success of the older brother, rulers of Abu Dhabi designed a five-
year strategic plan for municipality that communicates bold and far reaching vision, that will
be executed from 2008 till 2012.
The plan defines 8 pillars for best services:
1. Premium education, healthcare and infrastructure
2. Large empowered private sector
3. Creation of sustainable knowledge based economy
4. Optimal transparent regulatory environment
5. Continuation of strong and diverse international relationships
6. Emirate resource optimization
7. Maintenance of Abu Dhabi values, culture and heritage
8. Significant and ongoing contribution to the federation of UAE

5. Analysis of dependant variables

As stated before, substantionaly important factors for Sustainable urban development
in United Arab Emirates are following:
 Economic Environment
 Regulatory Environment
 Construction Standards
 Property Investment Indicators (PII)

5.1. Economic Environment
Economic environment is the first and the most significant driver of UAE’s success in
last 30 years. This said, I recognize a strong correlation between increase of GDP and urban
development, which further improved situation and attracted humongous amount of foreign
direct investments in this small Gulf state. Main questions that should be answered by
exploring this variable are:

• Will the state’s economy be stabile after exploiting all fossil fuel resources?

United Arab Emirates are already recognized among
the least dependant Gulf-states economy on oil and gas
(less than 25% overall). This number is even more
persuasive when we see Dubai’s GDP, where the part

David Knezevic 7/1/2009 Page 7 of 16
CEU Business School – Full time MBA
Emerging regions: Middle East and North Africa
Final Project: Sustainabile Urban Development in United Arab Emirates

of oil and gas doesn’t exceed 6%. As seen on Figure 3,
UAE’s real GDP growth rate is less dependant on
oil than ever before.
Very important feature of UAE’s economy are great trade
Agreements with USA and EU. Many international
Corporations have their headquarters for Middle East,
Central Asia and North Africa in Dubai.

Dubai in 2007 was announced as a biggest shopping destination in the world, where
existence of high-end shopping malls (Ibn Battuta, Emirates Mall, Dubai Mall etc.) and
favorable tax and customs policies attracts shoppers from various parts of the globe.
Unemployment rate is very low – 2,4%, and UAE employs about 80% of foreign labor.

During last 5 years Dubai International Financial
Exchange (DIFX), with a market capitalization
of $40 billion, grew into an international stock
exchange located in the DIFC and regulated by the
Dubai Financial Services Authority. Currently this

Stock exchange is operated by NASDAQ.
Its standards are comparable to those of leading
international exchanges in New York, London and
Hong Kong (Table 1). By increasing power and
presence of NASDAQ Dubai, UAE are
becoming more stabile, sustainable and desirable financial market where an increasing
number of international institutional investors invest in very diversified number of financial
products.

Inflation is forecasted to fall during 2009, but not as much as in low-income countries,
where food constitutes a dominant share of the consumption basket. The completion of new
housing units in UAE is likely to help alleviate the supply constraints that have fueled
inflation in the GCC, but inflation is expected to remain in double digits in 2009.7

• Will it be able to keep attracting foreign labor force and foreign direct investments in a
long run?

When we look at 2008 FDI in numbers and over 480 projects, creation of 87.000 new
jobs, and $36bn in capital expenditures, there is no doubt of emergence and increased
investment activity in UAE. "This report is a testament to the strategy of both the UAE and
Dubai under the directives of HH Sheikh khlaifa bin Zayed Al Nahyan, President of the UAE
and HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of
the UAE and Ruler of Dubai; a strategy of openness and diversification. The number of
projects initiated, the capital investment and jobs created in the UAE are proof of the
economic strength of the country. It is a remarkable achievement by Dubai to become the
leading city in the world for foreign direct investment and we are committed to continuing to
demonstrate the benefit of investing in Dubai and the UAE.“8
7
Regional Economic Outlook 2008 – International Monetary Fund
8
His Excellency Dr. Omar Bin Sulaiman, Governor of the Dubai International Financial Centre and Vice Chairman of the Central Bank of
the UAE

David Knezevic 7/1/2009 Page 8 of 16
CEU Business School – Full time MBA
Emerging regions: Middle East and North Africa
Final Project: Sustainabile Urban Development in United Arab Emirates

In 2008, Financial Times announced Dubai as a top FDI destination city in a world,
surpassing Shanghai and London.9 Dubai started to be recognized as a strong financial center
with sharp anti-money-laundering controls
Large government spending on job creation and infrastructure transformation increased
in 2009 despite the global economy collapse.

Summarizing all facts of UAE economy, I will notice that economic environment is
on desirable level of sustainability as FDI combined with non-oil contributors in GDP
drive economic activity.

5.2. Regulatory Environment
Regulatory environment of a local tax system is among the vital factors when deciding
whether to invest or locate business operations in a territory or just simply dont bother to
enter the market. This project will include a brief evaluation of the applicable taxes and
customs duties, the rates of such taxes and duties and whether exemption or reliefs will be
available. Besides taxation law, great importance in sustainable foreign FDI support proper
property and labor law.

• Will the government remain friendly tax environment once the mainstream cash flows
derived from oil and gas dry out?

The United Arab Emirates are an attractive destination in which one invest or set up
business operations favored by relative inexistance of personal and corporate taxes. Most of
the taxes, which form the significant part of an individual’s or company’s fiscal expenses in
other countries, either do not exist or are not levied in the United Arab Emirates.
Furthermore, only a few industries (oil, gas and petrochemical companies and branch offices
of foreign banks, etc.) are in subject to these taxes.
It is not expected that this approach will deviate in the medium to long term. Further,
those taxes of more general application are not demanding and the United Arab Emirates has
signed number of double taxation treaties with other countries (to restrict paying and
charging taxes to a person in connection with the same matter in the two different countries).
Countries that already signed are: France, Holland, Italy, Germany, India, China, Thailand,
Belgium, etc.10
Few weeks ago, Dubai’s government decided to permanently deduce business and
permitting fees up to 50%.11 This incentive was explained as their support to investors and
businesses during recession period.
There is no federal tax legislation in the United Arab Emirates. Every single Emirate
has its own tax law.

Overall the following taxes are not applicable in the whole country:
= Personal income tax
= Capital gain tax
= Value-added tax
9
https://www.menafn.com/qn_news_story_s.asp?StoryId=1093247379
10
Al Tamimi & Company: Taxation law in the UAE
11
http://www.government.ae/gov/en/biz/howdoi/start.jsp

David Knezevic 7/1/2009 Page 9 of 16
CEU Business School – Full time MBA
Emerging regions: Middle East and North Africa
Final Project: Sustainabile Urban Development in United Arab Emirates

= Withholding tax
= Corporate tax

Especially benefectoral for individuals and companies who have chosen to invest in
Dubai is the constantly developing legal and regulatory framework that is necessary to
provide the legal protection and clarity that property ownership and investment require in
order for the Dubai property industry to be successful. Much of this framework in the real
property area has only been in place since 2006 in Dubai, and the goverment is putting all
possible efforts to attract, satisfy and expand the umbrella of potential annd existing
investors.

This framework includes
= Straight-forward registration of title, foreign individuals and companies are granted a
right to own a freehold interest, a right of usufruct or a long-term lease of up to 99 years in
designated areas of the United Arab Emirates. Registration of title is very simple and takes up
to a week from a moment of property purchase.
= Modern strata laws, regarding jointly owned property, there is a framework which
covers two types of subdivision, namely: Subdivision within buildings (where common areas
will be created), and Subdivision within conventional methods of horizontal subdivision of
land (where common areas will be created).
= Hypotec laws, hypotec or mortgage contracts have to be registered with the Land
Department. In this contract both parties (mortgagor and mortgagee) must specify the size of
the loan, repayment period and the value of the property (according to a valuation of eminent
expert) to which the loan is connected. It provides that lenders obtain priority over unsecured
lenders in the case of default and provides for a “court-assisted” process, rather than a “self-
help” remedy
which permits the lender to sell the property without having to go through a court
process.
= Tenancy laws, have emerged as Dubai and Abu Dhabi became regional leaders in
office space development as a response to other protective laws and rights. Among many of
them is clause that there is no increase in rent or other amendment to a tenancy may be made
during the first 2 years of the tenancy.12

Summarizing these features of UAE’s regulatory environment, I emphasize that
regulatory environment is completely customer oriented and upgrades future Foreign
Direct Investments to a great level of sustainability.

5.3. Construction standards
In order to reach sustainability in its true form, actions should be focused on major
issues that undermine it. Most of the people have an opinion that the logistics and
transportation are the biggest global polluters and their carbon footprint is the highest one.
Others will argue that manufacturing industries are to blame. But not so many will recognize
construction industry and existing real estates as a major emitter of carbon footprint and one
of many industries that remains relatively unregulated.
12
http://www.tamimi.com/files/Legal%20Brochures/propertylaw.pdf

David Knezevic 7/1/2009 Page 10 of 16
CEU Business School – Full time MBA
Emerging regions: Middle East and North Africa
Final Project: Sustainabile Urban Development in United Arab Emirates

By 2020, more than 60% the world’s population will live in cities. This cities already
consume 50-70% of the world’s energy. All around the globe cities are now tied up in
competition with industry for power. Climate change is predicted to increase local
temperatures, so keeping cool in a warm climate will be one of world’s most demanding
challenges.

In a strong move, the United Arab Emirates are looking to provide acceptable solution
in craftinging environmentaly friendly regulations which provide accessible and fair method
of reduction regarding our environmental impact especially in urban areas.
Motioned by Shaikh Mohammed bin Rashid Al Maktoum’s 2007. Decree, all the UAE
require all new buildings to be Green Buildings.
Green Building is the construction practice which boost the efficiency with which
buildings and appended sites use resources (energy, water, materials (including waste), the
site, and the environment) while reducing building impacts on human health and the
environment.

In Dubai and Abu Dhabi, prime objective of Green Building is to develop buildings that
are healthy places to live and work, environmentally responsible and fully profitable. These
buildings accomplish efficiency through improved: design, construction, operating
management and ultimatelly disposal.

Sustainable buildings:
• cost less to operate,
• command a premium and improved rents,
• preserve natural resources for longer,
• improve health and productivity,
• can reduce pressure on city infrastructure.

David Knezevic 7/1/2009 Page 11 of 16
CEU Business School – Full time MBA
Emerging regions: Middle East and North Africa
Final Project: Sustainabile Urban Development in United Arab Emirates

In year 2008. Dubai government announced requirements for all new projects to have
LEED (Leadership in Energy and Environmental Design) expert in development team.

Just two years ago, Sheikh Mohammed assigned WSP expert Tim Armstrong to craft
detailed Green Building Regulations. These include:
• Site Sustainability (Site Protection, Dust Suppression, Soil Erosion, Building Shading
and Orientation, etc.)
• Water Efficiency and Conservation (Water Use Reduction, Outdoor Water Use and
Water Efficient Landscapes, Grey water Use, Reduction of Wastewater, etc.)
• Energy Efficiency and Conservation (Lighting, Energy Efficiency, HVAC systems –
Heating Ventilation Air Conditioning, Elevators/Escalators, Computerized Control
Systems, Insulation, Metering, etc.)
• Material Conservation and Resource efficiency (Demolition and Construction Waste,
No Asbestos Usage, Reduced Lead Usage, Recycled materials, Thermal Insulation
Materials. Certified Wood, Based Paints Collection, Regional materials,etc.)

How serious about this issues are the UAE shows the creation of Masdar City. That’s
the world’s first Carbon-Neutral, Zero-Waste city, fully powered by renewable energy located
nearby Abu Dhabi. The city is planned to cover 6 square kilometres and will be home to
45,000 to 50,000 people and 1,500 businesses, primarily commercial and manufacturing
facilities specialising in environmentally-friendly products, and more than 60,000 workers
are expected to commute to the city daily. No car access is allowed in Masdar City.

At the end, success of the UAE in environmentally sustainable leadership is confirmed
with many international awards. Currently, out of ten top green towers worldwide, two are in
Dubai. Four new green mega office towers are in construction in Dubai and one in Abu-
Dhabi. Furthermore, nine buildings are awarded Platinum LEED green building certificate
with alternative energy sources.

Taking into consideration previously mentioned there is no other than to greet
successes of UAE’s environmental policies. No other country projected this great level
of sustainability while regulating building standardization. Another indicator is fully
empowerance of Leadership in Energy and Environmental Design (LEED).

David Knezevic 7/1/2009 Page 12 of 16
CEU Business School – Full time MBA
Emerging regions: Middle East and North Africa
Final Project: Sustainabile Urban Development in United Arab Emirates

5.4. Property investment indicators
As a result of regional underdevelopment, overall the need for development aid is often
more pushy than the need for new business infrastructure. Also it’s too early for many to
view MENA as emerging area of real estate opportunity.
Nevertheless, one can notice steady increase of private and corporate interest in
appearance across the region. This is mostly stimulated through commodity markets but also
by the opening up of new economies and liberalization in areas of production and demand.

Business and real estate development will provide the greater wealth and independence
needed to stimulate social and political advancement.
But not everybody in the region is underperforming! Still there are beacons of
development and modernity in every sense, and especially in terms of their real estate
markets. Like nowhere southern hemisphere, the United Arab Emirates,Kuwait and Israel,
show the richness in supply and understanding investors requirements..

In year 2007 Construction and Real Estate (residential, office, retail, hotels etc.) were
main contributors to Dubai’s GDP (over 50%). This number present stress and significance
the UAE sheikhdoms gave to real estate developments. The office market within the Middle
East is directly linked to the stability of the region. Currently, the GCC states are creating
large scale real estate market development and in particular, locations such as Dubai and
Muscat are growing quickly. Dubai, as an office space market has taken advantage of its
location and time zone and is marketing itself as a financial hub located between the major
financial markets of London and Tokyo.
In June 2009., among Cushman & Wakefield top three investments projects worldwide,
there was an Office center in Dubai. What made this project so special was guaranteed 10 %
Return On Investment. Not so many markets and real estate developers are keen to guarantee
to investor so much, especially not this high yield, which will at the end, not be taxed. If we
compare it with worlds top real estate markets and their volatilities (London’s yield is 5-6%),
investing in Dubai is like buying diamonds.
Dubai already has the largest supply of AAA office space in MENA followed by the
highest rent levels - $550 sqm/year. Advanced calculation that explore the real benefit of
investment in the UAE office building is following.13
Not only in office market, the UAE posses the highest amount of premium quality
property on the MENA Real Estate market, and that includes:
• Hotels – Return on investment is very high, as many high-end hotel operators (Hilton,
Ritz Carlton, Four Seasons, Atlantis, Trump Hotels, etc.) are willing to manage new
projects. Simultaneously, Arabs are establishing their own great hotel brands (Burj Al
Arab, Medina Jumeirah, etc.), which sometimes boost more profits than international
hotel chains.
• Commercial real estate – As a world’s top shopping destination, retail space in modern
shopping centers (Ibn Battuta, Emirates Mall, Dubai Mall, etc.) is worth as gold. This
establishments are usually pre-let and operate under 98-100% capacity. For
comparative reasons, cost of building in Hungary is almost the same as there
(2500e/sqm), but vacancy rate is higher (15-20%) and retail space rent is far lower

13
Annual research of emerging markets – Africa and Middle East, Cushman & Wakefield, Global Real Estate Solutions

David Knezevic 7/1/2009 Page 13 of 16
CEU Business School – Full time MBA
Emerging regions: Middle East and North Africa
Final Project: Sustainabile Urban Development in United Arab Emirates

(600e sqm), so there should be understandable why educated investors are running onto
investing opportunity in the UAE.
• Residential real estate – Because of high demand for residential space, as of huge
amount of foreign labor force working in UAE, investing in this type of property is a
good choice. Most of the property is newly built and buying process is straight. Foreign
investors really appreciate this conditions.

In order to better describe profitability of the market, I made a development projections
for a real project, 320.000sqm office building in Dubai Marina Waterfront.

Overall, even with all other dependant variables on satisfactory and promising
level, there will be no fair reason for Dubai to keep the development pace if there is no
forth element. Investors go where the money is, and that is true for small individual and
especially for institutional incorporated investor. Having great return on investment
rate, low vacancy rate, high rents, high quality property, transparent ownership title
law and stabile political and tax regime are major indicators of the UAE’s high profile
and definite sustainability for a long term.

6. Conclusion
MENA region is very diverse area, as it includes some of the world’s most advanced
and some of the most closed and undeveloped economies. On the top of the first group that
stands for advanced reaches in HDI, high level of GDP and other economic indicators are
the United Arab Emirates.

Their Jewel when it comes to urbanization and FDI attractiveness is Dubai, one of
the seven Emirates located on the North part of this small Gulf state.

David Knezevic 7/1/2009 Page 14 of 16
CEU Business School – Full time MBA
Emerging regions: Middle East and North Africa
Final Project: Sustainabile Urban Development in United Arab Emirates

As this research confirmed, Dubai must be considered as one of the World Cities and
the place which represents leadership in energy and environmental design. Sustainability
of the building techniques, investment yields, regulatory and economic environment says
in favor of this leadership
.
Through this paper it was proved that:

• The UAE economic environment is on desirable level of sustainability as FDI
combined with non-oil contributors in GDP drive economic activity

• Their regulatory environment is completely customer oriented and upgrades
future Foreign Direct Investments to a great level of sustainability, this includes
all tax incentives, labor laws, property laws etc.

• There is no other than to greet successes of the UAE’s environmental policies. No
other country projected this great level of sustainability while regulating building
standardization. Another indicator is fully empowerance of Leadership in Energy
and Environmental Design (LEED).

• There are fair reasons for Dubai to keep the development pace, as investors
always go where the money is, and that is true for small individual and especially
for institutional incorporated investor. Having great return on investment rate,
low vacancy rate, high rents, high quality property, transparent ownership title
law and stabile political and tax regime are major indicators of the UAE’s high
profile and definite sustainability for a long term.

7. Literature

 International Commission on Education for Sustainable Development Practice – Final

Report – October 2008.

 The United Arab Emirates: Statehood and Nation-Building in a Traditional Society,

Middle East Journal, Vol. 59, No. 3

David Knezevic 7/1/2009 Page 15 of 16
CEU Business School – Full time MBA
Emerging regions: Middle East and North Africa
Final Project: Sustainabile Urban Development in United Arab Emirates

 World Economic Outlook 2007 – International Monetary Fund

 Al Tamimi & Company: Taxation law in the UAE

 Al Tamimi & Company: Property law in the UAE

 Annual research of emerging markets – Africa and Middle East, Cushman & Wakefield,

Global Real Estate Solutions

 http://www.uaeinteract.com/government/political_system.asp

 http://www.government.ae/gov/en/biz/howdoi/start.jsp

 https://www.menafn.com/qn_news_story_s.asp?StoryId=1093247379

David Knezevic 7/1/2009 Page 16 of 16