Dubai Economic Report 2018 Full Report PDF

Dubai
Economic
Report 2018
VISION
Dubai to become a pivotal hub
in the global economy
CONTENTS
Acknowledgements X
Foreword XI
In Brief About the Dubai Economic Report 2018 1
Dubai and the Global Economy (in 2017-2018) 3

Global, Regional & Dubai Growth Trends | 6
Global & Regional Trade & Financial Developments | 9
Financial Conditions in Advanced Economies | 14
Financial Conditions in Emerging/Developing and GCC Economies | 15
Outlook for Global & Regional Growth | 20
Recent Developments in Dubai’s Economy 21

Main Macroeconomic Indicators of Dubai’s Economy | 24
Monetary Policy | 31
Public Finance | 35
Outlook for the Performance of Dubai’s Economy in 2018 | 41
Dubai’s Foreign Trade 43

Introduction | 46
Foreign Trade Performance | 47
Dubai’s Foreign Trade Structure & Patterns | 51
Dubai’s Main Trading Partners | 53
Intra-Trade between Dubai and GCC Countries | 55
Dubai’s Foreign Trade in 2018 | 56
Sustainable Tourism for Dubai’s Economic Development 57

Introduction | 60
Dubai’s Tourism and Economic Development | 61
Recent Developments in Dubai’s Tourism sector | 63
Economic Impact of Dubai’s Tourism sector | 66
Dubai’s Tourism Strategy | 70
Key Drivers for the Development of Dubai’s Tourism | 71
Sustainable Tourism in Dubai | 77
Sustainable Tourism: International Practice | 78
Conclusion & Policy Recommendations | 81
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Wholesale and Retail Trade 83
Overview | 86
Contribution of the Wholesale and Retail Trade to GDP | 87
Value added in Wholesale and Retail Trade | 88
Labour and Enterprises in the Wholesale and Retail Sector | 90
Fixed Capital Formation in the Wholesale and Retail Sector | 91
Tourism and the Retail Sector | 92
Global Retail in Dubai | 93
Wholesale and Retail and Expo 2020 | 93
Challenges to the Development of Wholesale and Retail | 94
Banking, Insurance and Capital Markets 95

Overview | 98
Developments in the UAE Banking Sector | 99
Developments in Dubai Banking | 102
Insurance | 108
Developments in Capital Markets | 113
Transport, Storage, Communications and Information Technology 117

Overview | 120
Contribution of the Transport and Communication sectors to Dubai’s GDP | 121
The Transport and Storage sector | 123
ICT sector | 135
Construction and Real Estate Activities 141

Introduction | 144
Construction | 145
Real Estate activities | 149
Industry 157
Introduction | 160
Mining and Quarrying | 161
Electricity and Gas | 162
Manufacturing Industries | 163
Foreign Direct Investment in Manufacturing | 167
Dubai Industrial Strategy 2030 | 169
Energy and Water 171

Introduction | 174
Electricity, gas, steam and air conditioning Supply (Electricity sector) | 175
Water supply, drainage and waste management and treatment (Water sector) | 176
Energy production and consumption | 177
Management of the Energy Sector in Dubai | 181
Challenges to Energy Management in Dubai | 183
Developments in Social Indicators 185

Population developments | 188
Primary and secondary education indicators | 191
Developments in health indicators | 199
dubaided.gov.ae Dubai Economic Report 2018 III

FIGURES & TABLES
Dubai and the Global Economy (in 2017-2018)

Figure 1.1: % YoY Real Growth in Global GDP and in Dubai 2012-2019 7
Figure 1.2: Real GDP Growth (%) World and Advanced Economies 7
Figure 1.3: Real GDP Growth (%) World and Emerging and Developing Economies 8
Figure 1.4: Real GDP Growth (%) GCC and Iraq 2016-2019F 8
Figure 1.5: Foreign Trade Ratio to GDP % in 2017 9
Figure 1.6: Global Cross-Border Capital Flows (%) of Global GDP 10
Figure 1.7: Top Five Source Countries FDI Capital % of Total 2017 12
Figure 1.8: Policy Interest Rates in Advanced Economies (%) per annum 2015 to 2018 14
Figure 1.9: Advanced Economies Stock Market Gains in 2017 and 2018 (%) change 16
Figure 1.10: Policy Interest Rates in Emerging Economies (%) per annum 2015 to 2018 16
Figure 1.11: Policy Interest Rates in GCC Economies (%) per annum 2016 to 2018 16
Figure 1.12: Emerging Economies Stock Market Gains in 2017 and 2018 (%) change 18
Figure 1.13: Equity Returns GCC and Emerging Markets % Per Annum 2012-2018 18
Figure 1.14: AED Exchange Rate Index against Trading of Partners (1/1/2016 =100) 18
Recent Developments in Dubai’s Economy

Figure 2.1: GDP in Constant Prices and annual Growth Rate (%) 2008-2017 24
Figure 2.2: Real GDP per capita in Dubai (US$‘000) 25
Figure 2.3: Real GDP growth rate and population growth rate in Dubai (%) 25
Figure 2.4: Structure of Dubai’s GDP (%) 28
Figure 2.5: Growth of Main Sectors in Dubai (%) 28
Figure 2.6: Dubai General Inflation Rate (%) 30
Figure 2.7: Inflation Rates in the Housing, Water and Electricity Group in Dubai (%) 30
Figure 2.8: Inflation Rates in Main Expenditure Groups in Dubai (%) 30
Figure 2.9: Interest Rates in the UAE and USA (%) 31
Figure 2.10: Domestic Liquidity Growth Rate in UAE (%) 32
Figure 2.11: AED/Euro Exchange Rate & Inflation in the UAE (%) per annum 34
Figure 2.12: Budget Structure of the Government of Dubai (AED billion) 36
Figure 2.13: Overall Fiscal Position of the Government of Dubai (as % of GDP) 36
Figure 2.14: Structure of Dubai’s Government Revenues (%) 38
Figure 2.15: Structure of Dubai’s Government Non-Tax Revenues (%) 38
Figure 2.16: Structure of Dubai’s Government Expenditures 40
Figure 2.17: Structure of Functional Expenditures of the Government of Dubai 40
Table 2.1: Sector Contribution to Overall GDP Growth Rate in 2017 28

Table 2.2: Dubai Growth Stimulus Package of Initiatives for 2018 42
Dubai’s Foreign Trade

Figure 3.1: Total Value of Dubai’s Foreign Trade (AED Billion) 47
Figure 3.2: Dubai’s Foreign Trade by Economic Zones 48
Figure 3.3: Direct Foreign Trade in Dubai (AED Billion) 48
Figure 3.4: US$ Trade Weighted Exchange Rate Index (2011-2018) 49
Figure 3.5: Dubai’s Foreign Trade in Free Zones and Customs Warehouses (AED billion) 49
Figure 3.6: Dubai’s Trade Balance (AED billion) 50
Figure 3.7: Dubai Trade Structure of Main Commodities (per cent of total, 2017) 52
Figure 3.8: Dubai’s Exports Structure of Main Commodities (per cent of total, 2017) 52
Figure 3.9: Dubai’s Imports Structure of Main Commodities (per cent of total, 2017) 52
Figure 3.10: Dubai’s Re-exports Structure of Main Commodities (per cent of total, 2017) 52
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Figure 3.11: Contribution of Dubai’s Main Trade Partners to Total Trade (AED Billion) 54
Figure 3.12: Contribution of Dubai’s Main Trade Partners: Total Exports (AED Billion) 54
Figure 3.13: Dubai’s Main Trade Partners: Total Imports (AED Billion) 54
Figure 3.14: Dubai’s Main Trade Partners in Re-Exportation (AED Billion) 54
Figure 3.15: Dubai’s Trade with GCC Countries (AED Billion) 55
Figure 3.16: Dubai’s Trade 2018 1H vs 2017 1H (AED billion) 56
Sustainable Tourism for Dubai’s Economic Development

Figure 4.1: International Overnight Visitors to Dubai 2007-2017 64
Figure 4.2: Hotel guests in Dubai according to Region (2017) 64
Figure 4.3: Shares of Top Countries source of Visitors (%) 65
Figure 4.4: The performance of the accommodation and food services activities sector in Dubai 68
Figure 4.5: Room Occupancy Rate (%) for Hotel Establishments 74
Figure 4.6: Average nights stayed in Dubai’s hotels (night per guest) 74
Figure 4.7: The number of rooms and hotel apartments in Dubai (thousands) 76
Figure 4.8: Hotel Classification in Dubai 2017 76
Figure 4.9: Average Daily Rates of Hotel Establishments in Dubai 76
Figure 4.10: Sustainability Development Index Scores 2017 80
Table 4.1: Rank of Dubai and International Cities, 2016-2017 68

Table 4.2: Dubai Hotels, 2016-2017 75
Wholesale and Retail Trade

Figure 5.1: Contribution of Wholesale and Retail Trade to GDP (%) 87
Figure 5.2: Value Added of the Wholesale and Retail Sector (in billion AED constant prices) 88
Figure 5.3: Trends in Value Added per Worker in the Wholesale and Retail Trade Sector
(AED thousand, constant prices) 89
Figure 5.4: Sector Share of the Total workforce in Dubai’s Economy, 2017 90
Figure 5.5: Trends in Workers; Share of Wholesale and Retail Trade Sector in the Total Workforce 90
Figure 5.6: Capital Formation in the wholesale and Retail Trade Sector (AED Billion) 91
Table 5.3: The top five cities by the highest percentage of global retail brands 93
Table 5.1: Importance of the Services Sector in GDP (%) 87

Table 5.2: Expected retail sales in Dubai (US$ Billion, at constant prices) 92
Banking, Insurance and Capital Markets

Figure 6.1: Total Bank Assets (AED million) 99
Figure 6.2: Growth of Banks’ Total Assets (% Change from the Previous Year) 100
Figure 6.3: UAE’s Biggest Banks 2017 (AED million) 100
Figure 6.4: Share of Bank Assets in UAE (2017) 101
Figure 6.5: Trends in Growth of Banks Total Customer Deposits (% Change from Previous Year) 104
Figure 6.6: Total Bank Loans (% Change from Previous Year) 104
Figure 6.7: Loan/Deposit Ratio (%) 104
Figure 6.8: Change in Net Income (% point Change from Previous Year) 105
Figure 6.9: Banks’ Net Interest Margin (%) 106
Figure 6.10: Banks’ Return on Equity (%) 106
Figure 6.11: Banks’ Tier 1 Capital Ratio (%) 106
Figure 6.12: Banks’ Capital Adequacy Ratio (%) 107
Figure 6.13: Banks’ Ratio of Non-Performing Loans (%) 107
Figure 6.14: Value added of Insurance Activities in Dubai 108
Figure 6.15: Share of Dubai in Gross Written Premiums (%) 110
Figure 6.16: Share of Dubai in the Number of Policies (%) 110
Figure 6.17: Share of Dubai in Gross Claims Paid (%) 110
Figure 6.18: Gross Written Premiums in UAE by Type and Aggregate (AED billion) 112
dubaided.gov.ae Dubai Economic Report 2018 V

Figure 6.19: Investment Portfolios in the Insurance Sector (AED billion) 112
Figure 6.20: Performance of Share Price Indices in the UAE Stock Markets 114
Figure 6.21: Share Price Indices in GCC Stock Markets 114
Figure 6.22: Performance of Sectoral Share Price Indices in Dubai Financial Market 114
Table 6.1: Total Gross Written Premiums and Number of Policies of the Dubai Insurance Sector 110
Table 6.2: DFM Sectoral Trading Value (AED billion) 114
Table 6.3: Nasdaq Dubai Market Indicators 116
Transport, Storage, Communications and Information Technology

Figure 7.1: Growth Rates of Transport , Storage and Communications 122
Figure 7.2: The Shares of Transport, Logistics, Information, and Telecommunications Sectors
in Dubai’s GDP 122
Figure 7.3: Link of UAE and the GCC ports with most of the world’s ports
(Maximum value in 2004 = 100) 123
Figure 7.4: GCC Logistics Performance Index for 2016 124
Figure 7.5: Growth rates of transport and storage workforce, 2007-2016 125
Figure 7.6: Total FDI stock in Transport and Storage sector (US$ Million) 125
Figure 7.7: Number of Metro passengers and public buses (2010-2017) 127
Figure 7.8: Number of taxis 2010-2017 128
Figure 7.9: Number of taxi rides 2010-2017 128
Figure 7.10: Number of ferry passengers (in million) 130
Figure 7.11: Number of water bus passengers 130
Figure 7.12: Number of registered flights worldwide 132
Figure 7.13: Number of flights passengers 132
Figure 7.14: Number of Dubai International Airport passengers 2010-2017 (in million) 133
Figure 7.15: Number of Al Maktoum International Airport passengers 2014-2017 133
Figure 7.16: Number of workers in the Telecommunications Sector 135
Figure 7.17: Total value of FDI in the telecommunications sector (US$ million) 135
Figure 7.18: International ranking of GCC countries according to the Network Readiness Index 136
Figure 7.19: International ranking of the GCC countries according to the ICT Development Index 136
Figure 7.20: Telephone lines in Dubai 138
Figure 7.21: Fixed telephone lines per 100 inhabitants 138
Figure 7.22: Mobile lines per 100 inhabitants 138
Figure 7.23: Broadband lines in Dubai 140
Figure 7.24: Percentage of Internet users 140
Figure 7.25: Size of converted data in kilobytes / sec per Internet users 140
Table 7.1: The Quality of Infrastructure in the UAE and the GCC 124
Construction and Real Estate Activities

Figure 8.1: Development of the Construction Sector (%) 146
Figure 8.2: Development of total workforce in the Construction sector (%) 146
Figure 8.3: Average worker productivity (thousand dirhams) 2014-2016 146
Figure 8.4: Construction Cost Index 147
Figure 8.5: Development of Real Estate activities (%) 150
Figure 8.6: Evolution of housing units 150
Figure 8.7: Buildings under construction 150
Figure 8.8: Distribution of New Freehold Units in Dubai 151
Figure 8.9: The movement of real estate transactions in 2017 (number of units) 152
Figure 8.10: Sales Value in 2017 (in billion dirhams) 152
Figure 8.11: Real estate prices per square meter 153
Figure 8.12: REIDEN Residential Sales Price Index in Dubai (base year 2003) 154
Figure 8.13: Rental prices AED (sq. metre) 154
Figure 8.14: Rental income returns in Dubai (%) 154
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Figure 8.15: Real estate investments in Dubai by nationality 2017 (billion dirhams) 156
Table 8.1: Global Real Estate Transparency Index for the Middle East and North Africa 156
Industry
Figure 9.1: Value Added of Mining and Quarrying (AED million) and Contribution to
Constant Price GDP (%) 161
Figure 9.2: Electricity and Gas Value Added (AED million) and Contribution to Constant Price GDP (%) 162
Figure 9.3: Manufacturing Value Added (AED billion) and Contribution to Constant Price GDP (%) 164
Figure 9.4: Contribution of Main Industries to the Value Added of Manufacturing in Dubai (2016) 164
Figure 9.5: Technology Composition of Manufacturing Value Added in Dubai and
Industrialized Countries (%) 164
Figure 9.6: Technology Composition of Manufactured Exports 165
Figure 9.7: Share of Manufacturing in Total Employment in Dubai 166
Figure 9.8: Contribution of Main Manufacturing Industries to Total Manufacturing Employment 166
Figure 9.9: Share of Manufacturing in Total FDI by Sector in Dubai, 2016 168
Figure 9.10: Trends in incoming FDI to Manufacturing (AED billion) 168
Energy and Water

Figure 10.1: The Contribution of the Electricity sector to GDP (%) 175
Figure 10.2: The Contribution of the Water sector to GDP (%) 176
Figure 10.3: Power Installed Capacity in Dubai (GW) 178
Figure 10.4: Electricity Consumption by sector in Dubai in 2017 178
Figure 10.5: Total Electricity consumption in Dubai (GW-hours) 178
Figure 10.6: Average per capita electricity consumption (1000 KW/ hour a year) 180
Figure 10.7: Peak demand for desalinated water in Dubai (Million Gallons/Day) 180
Figure 10.8: The demand for desalinated water in Dubai (Billion gallons) 180
Figure 10.9: Electricity tariff in UAE and selected countries ($ per thousand KWh) 184
Figure 10.10: Gasoline prices in UAE and selected countries (August 2018, US$ per litre) 184
Table 10.1: Economic Indicators of the Electricity sector in Dubai (Thousand Dirhams) 175
Table 10.2: Economic Indicators of the Water sector in Dubai (Thousand Dirhams) 176
Developments in Social Indicators

Figure 11.1: Dubai’s population (in millions) 188
Figure 11.2: Dubai’s population pyramid by age and gender in 2017 189
Figure 11.3: Population by educational status and gender 189
Figure 11.4: The evolution of Dubai’s population structure by educational status 189
Figure 11.5: Percentage of schools in Dubai by type 192
Figure 11.6: Enrolled Students by education type and nationality (%) 192
Figure 11.7: Emirati students by type of education in 2000 and 2017 192
Figure 11.8: Dubai’s schools by curricula 194
Figure 11.9: Enrolled students by School Curricula 194
Figure 11.10: Enrolled Students by Stage of Education 194
Figure 11.11: Dubai schools’ performance in 2017 195
Figure 11.12: Dubai’s student achievements between 2007 and 2015 196
Figure 11.13: Placement of students by area in Dubai in 2016/2017 198
Figure 11.14: Student Enrollment by field 198
Figure 11.15: Life expectancy in Dubai and OCED countries 200
Figure 11.16: Overseas treatment expenditure by type of expense in 2017 202
Box 1: Results of Dubai Students in International Tests 196

Box 2: Non-Communicable Diseases 200
dubaided.gov.ae Dubai Economic Report 2018 VII

Our open society, tolerant values,
excellent infrastructure and
flexible legislation offer the best
environment for international
investment and exceptional talent.
HIS HIGHNESS SHEIKH MOHAMMED BIN RASHID AL MAKTOUM
VICE PRESIDENT AND PRIME MINISTER OF THE UAE

AND RULER OF DUBAI
20 MAY 2018
Acknowledgements
This Report was prepared by the Economic Plan-
ning Division’s team in the Policies and Economic
Studies Sector. The work was carried out under
the general direction of Dr. Abdelrazaq Al Fares,
Division Director. Dr. Jamel Zarrouk was the prin-
cipal coordinator and led the editorial work and
final production of the report.
The primary contributors to the writing and

review of the Report are Dr. Ali Al Sadik, Dr. Ibra-
him Karsany, Dr. Kamal A. El Wassal, Dr. Ahmed S.
Rashad, Dr. Mohamed Lahouel, Aysha A. Al Kaabi,
Nasrin Sabra, German Gussakovskiy and Noor
Al Aidarous. Other contributors include, Laila A.
BuAbdulla and Abdulla AlHossani from Economic
Information Division.
Dr. Brian Sturgess was external contributor and

led the editorial work for the English version of
the report. Fatima Mahmoud provided research
assistance for the report.
The analysis has benefitted from comments and

suggestions by Dr. Abdulaziz Istaitieh from The
General Secretariat of the Executive Council of
Dubai, Sumaya Karam and Azza A. Hassan from
The Department of Tourism and Commercee
Marketing, as well as by Dr. Faisal M. El Amir from
Dubai Export, Hassan Mohalal and Juri Suehrer
from Dubai Investment FDI, Hassan Abdulkarim
from Dubai SME, Mariam Al Afridi, Mariam Kamal
and Hind Al Saffar from Government Commu-
nications. Administrative support was provid-
ed by Baheya Akila, and by Ahmed Mustafa and
Mohamed Elemam from the Finance Division.
The team was privileged by the continuous

encouragement from Excellency Sami Al Qamzi,
The Director General, and the support of Mr.
Khalid Al Kassim, the Sector’s Director, and Mr.
Farid Karmostaji, Deputy CEO.
X Dubai Economic Report 2018 Dubai_DED DubaiDED Dubai DED

Foreword
Dubai Economy is pleased to present the “Dubai Maktoum, Crown Prince of Dubai, and President
Economic Report 2018” which reviews the main of the Executive Council of Dubai, to all economic
developments in the Dubai economy during the players in the emirate to transform such goals into
year 2017 and most of the year 2018 on both the a clear work plan; the “Dubai Plan 2021” which
macro and sectoral levels. The report contains aims to mobilize all energies, resources and capa-
robust analyses of the main developments using bilities to ensure sustainable development.
economic indicators and official information. The
report compares the economic performance of Given the economic and political conditions in our
Dubai with countries with similar economies, and region and their impact on growth performance
it also examines the important topic of Sustain- in Dubai and the UAE, most indicators mentioned
able Tourism, one of the most important econom- in this report indicate that Dubai is capable of
ic sectors for the diversification of both Dubai and continuing its growth journey, supported by a
the UAE economies while achieving sustainable series of strategic initiatives which were launched
economic growth. by the Government of Dubai in the last two years
such as Dubai Smart City, Dubai Innovation Strat-
This report concludes that the Dubai Economy egy, Dubai Capital of Islamic Economy and others,
continued its ambitious development journey in addition to the mega projects in infrastructure
towards excellence and establishing Dubai as a in preparation for Dubai hosting the “Expo 2020”.
hub for finance and business in the region and
worldwide. The ability of Dubai’s economy to Finally, it must be noted that this report is the
attain such an achievement is due to its robust fruit of institutional cooperation between Dubai
foundations and the government’s ability to adopt Economy and its strategic partners within the
successful economic policies to stimulate various Government of Dubai, at the forefront of which
economic activities. This was also supported by are: Dubai Statistics Center, Dubai Customs,
Dubai’s openness to the world and its network of Department of Tourism and Commercial Market-
relationships and partnerships with many coun- ing, Dubai Department of Finance, Dubai Land
tries in the region and worldwide which led to and Property Department as well as some other
significant inflows of investment and record-high local departments. This cooperation reflects the
levels of tourism and foreign trade. vision of the excellent leadership guided by the
Government of Dubai in promoting institutional
Such remarkable achievements by Dubai in the integration among all government departments.
economic field could not have been possible
without the clear vision of His Highness Sheikh We hope that this annual report provides our
Mohammed bin Rashid Al Maktoum, Vice Presi- partners and decision makers, in both the private
dent and Prime Minister of the United Arab Emir- and public sectors, with important information to
ates and Ruler of Dubai, which aim to achieve high support the process in setting plans and strate-
levels of wellbeing for members of society and gies that will lead to achieve economic success
to promote the Emirate’s position on the global and sustainable growth as Dubai has chartered.
competitiveness map. This vision was practical-
ly translated into directives from His Highness Sami Dhaen Al Qamzi
Sheikh Hamdan bin Mohammed bin Rashid Al Director General
dubaided.gov.ae Dubai Economic Report 2018 XI

IN BRIEF
About the Dubai

Economic Report 2018
1 Dubai Economic Report 2018 Dubai_DED DubaiDED Dubai DED

T
he Dubai Economic report presents
the main economic developments
in the Emirate of Dubai during 2017
and 2018 at both macro and sectoral levels.
At the macro level, the report starts, in Chapter 1, with a review of global
and regional growth trends and their impact on Dubai’s growth path. Then
in Chapter 2, the report examines the performance of the main macro-
economic indicators of Dubai’s economy - real GDP growth, the structure
of the economy, inflation, money and liquidity, the AED exchange rate,
interest rates and the finances of Dubai’s Government, and the outlook
for Dubai’s economic growth in 2018. This is followed in Chapter 3, with
an analysis of the performance of the foreign trade sector which plays a
pivotal role in Dubai’s economy reflecting the high level of trade openness
it has reached.
At the sectoral level, the report addresses (Chapters 4 – 10) the perfor-
mance of Dubai’s primary economic sectors and activities. Firstly, the
report examines in a special chapter (the report’s theme) Sustainable
Tourism for the Economic Development of the Emirate of Dubai. Then
the report moves on to highlight major developments in the other main
economic sectors: Wholesale and Retail Trade; Banking, Insurance and
Capital Markets; Transport, Storage and ICT; Construction and Real Estate;
The Industrial Sector with its main components (manufacturing, mining,
quarrying, electricity and Gas) and the state of implementation of Dubai
Industrial Strategy 2030. Next, the report discusses the management of
energy and water production and consumption in the Emirate. The report
concludes with a chapter addressing recent developments in a number of
social indicators, namely, population, education and health.
The data and analysis appearing in the Dubai’s Economic Report are based
on the Dubai Statistics Center’s published data and information as well
as data from other relevant Dubai Government’s Departments. Finally,
the writing of the special chapter on Sustainable Tourism benefitted from
the discussions with concerned staff in the Department of Tourism and
Commercial Marketing.
dubaided.gov.ae Dubai Economic Report 2018 2

CHAPTER 1 |
Dubai and the

Global Economy
(in 2017-2018)

D
ubai’s economic base is diversified, yet closely intertwined
with the growth rates of its international trading part-
ners, and this complex relationship can positively boost
or lower the impact of financial trends worldwide. This
chapter presents historical data on Dubai’s annual GDP
and the correlating economic performance of other selected advanced
and emerging world economies. Background data is also presented on
Dubai’s trading relationships with regional GCC partners as well as major
players such as China, the US, Russia and India.
↗↗ Dubai’s annual GDP growth rate was 4.6 percent in 2014, but from
2016 onwards, Dubai’s growth has lagged behind that of the world
economy. In 2017, global real output rose by 3.7 per cent from 3.3
percent the year before that. In contrast, Dubai’s real GDP grew
by 2.8 per cent in 2017 and lagged global GDP by close to a full
percentage point. The main reasons for this discrepancy has arisen
from the impact of lower oil prices on the economic growth and
spending power of neighbouring oil-exporting economies, partic-
ularly Saudi Arabia.
↗↗ The IMF adjusted global and regional growth forecasts, in Octo-

ber 2018, citing less balanced expansion across region and uncer-
tainty over trade policy as the main reasons. Consequently, growth
in advanced economies which slightly rose by 2.3 per cent in 2017
is expected to remain above trend before and easing to 2.1 per cent
in 2019 reflecting growth moderations in the euro area and Japan.
↗↗ Real growth among the Emerging Market and Developing Economies

is predicted to continue to rise, from 4.4 per cent per annum in 2016
to 4.7per cent in 2019. Growth is depending on a country’s position
as an exporter or importer of energy.
↗↗ In contrast, the MENA (Middle East, North Africa) region experienced

a fall in real GDP growth from 5.0 per cent in 2016 to 1.8 per cent in
2017. This was a result of the delayed impact on demand due to the
slide in oil prices, which began in 2014, but the IMF predicts recovery.
Real GDP in the region is anticipated to have risen to 2.0 per cent in
2018 and forecast to rise to 2.5 per cent in 2019, in line with the rise
in global GDP.
↗↗ Dubai is the fourth most open economy in the world and the most
exposed economy in the Gulf to foreign trade and capital investment
flows. In 2017, the value of the ratio of foreign trade as a proportion
of Gross Domestic Product (GDP), was at 321 per cent.

CHAPTER 1 | Dubai and the Global Economy (in 2017-2018)
Bright Spots in
an Economic Slowdown
Despite Dubai’s lower than average global GDP growth rates since
2016, there are some bright spots.
1 Attractiveness and competitiveness

among 110 Financial Centres Worldwide
15 th
Dubai ranks 15th ahead of Abu Dhabi,
Doha, Bahrain and Riyadh.
Dubai
69th 59th
Riyadh
Bahrain
34th
Doha
26th
Abu Dhabi
2 Foreign Direct
Investment (FDI)
In 2017, Foreign
Direct Investment
(FDI) capital grew by
3 Oil Prices
7 percent to AED
27.3 billion (US$7.4
billion), ranking
Dubai as 10th among
Oil prices rebounded from less than global destination
US$27 per barrel in January 2016 to cities for capital
US$53 per barrel at year’s end, investment.
averaging at US$51 throughout 2017.
7%
US$51 (US$7.4 billion)
FDI
US$27
10th
2016 2017 Top global destination
for capital investment

Dubai and the Global Economy (in 2017-2018) | CHAPTER 1
Global, Regional & Dubai Growth Trends
1.1 In 2017, the world economy continued to high at 6.7 per cent, and is expected to rise to 7.3 per
strengthen. Real global output rose by 3.7 cent and 7.4 per cent in 2018 and 2019 respectively.
per cent from 3.3 per cent the year before Economic growth in Turkey has been very strong reach-
and the IMF predicts that it will continue to expand at ing 7.4 per cent in 2017 but it is predicted to fall sharply
this rate (3.7 per cent) in 2018 and 2019. In contrast, to 3.5 per cent in 2018 and 0.4 per cent in 2019. This
Dubai’s real GDP grew by 2.8 per cent in 2017, and 3.1 sharp slowdown is a result of the depreciation of the
per cent from the year before. Turkey Lira, the rise in interest rates, uncertainty and
the consequent impact on investment and consumer
Dubai’s diversified economic base and the composi- demand. In contrast, the MENA (Middle East, North
tion and growth rates of its main international trading Africa) region experienced a fall in real GDP growth
partners often multiplies or augments / diminishes the from 5.2 per cent in 2016 to 1.8 per cent in 2017. This
impact of trends in the world economy. For example, was a result of the delayed impact on demand due to
the Emirate grew faster than global output from 2012 the slide in oil prices, which began in 2014, but the IMF
to 2015 but from 2016 onwards Dubai’s growth has predicts recovery. Real GDP in the region is anticipated
lagged behind that of the rest of the world. The main to have risen to 2.0 per cent in 2018 and forecast to
reason for this discrepancy has arisen from the impact rise to 2.5 per cent in 2019, but the pattern of growth
of lower oil prices on the economic growth and spend- is mixed. Real output in Egypt is predicted to rise to 5.3
ing power of neighboring oil-exporting economies per cent in 2018 and to 5.9 per cent in 2019 compared
particularly Saudi Arabia. (Figure 1.1) to 4.2 per cent in 2017. In contrast, economic growth
in Iran is expected to fall to minus 1.5 per cent in 2018
1.2 Despite a global cyclical economic upswing on the back of the re-imposition of sanctions by the
that has continued for over two years as is United States, and to decrease further to minus 3.6
forecast by the IMF to produce world output per cent in 2019. (Figure 1.3)
growth of just under 4 per cent per year for two addi-
tional years, this will not be evenly spread among coun- 1.3 Dubai’s economic performance in 2017 has
tries. The rate of expansion in some economies been influenced by its exposure to econom-
appears to have peaked and growth has become less ic conditions in the region in which it resides
synchronized among economies. Having grown by 2.3 and to the prospects of some of its main trading part-
per cent in 2017 advanced economies are expected ners, particularly Saudi Arabia, Oman, Kuwait, and Iraq.
to remain above trend before easing to 2.1 per cent in Falling oil prices dampened demand in this region,
2019 reflecting growth moderations in the euro area particularly in the GCC, holding back the strength of
and Japan. Economic growth in the USA rose to 2.2 per Dubai’s growth in 2017. Economic growth in Saudi
cent in 2017 from 1.6 per cent the year and is expect- Arabia turned negative in 2017 falling by minus 0.9 per
ed by the IMF to continue to rise by 2.9 per cent and cent in constant prices from 1.7 per cent in 2016. A
2.5 per cent in 2018 and 2019 respectively. (Figure 1.2) similar pattern occurred in Oman, Kuwait and Iraq while
growth in the UAE was weak rising by only 0.8 per cent
Meanwhile, real growth among the Emerging Market and the growth rate in Qatar slowed to 1.6 per cent.
and Developing Economies is predicted to continue The continuing recovery in the price of oil, however, is
to rise, from 4.4 per cent per annum in 2016 to 4.7 per predicted to lift growth among the GCC nations in both
cent in 2019, although growth is increasingly uneven 2018 and 2019. Dubai’s regional exposure to these
across nations depending on a country’s position as trends will aid the emirate’s growth particularly if the
an exporter or importer of energy. Growth in China is Saudi economy continues to benefit from firm oil pric-
expected to slow from 6.9 per cent in 2017 to 6.6 per es and generates a predicted annual growth of 1.9 per
cent and 6.2 per cent in 2018 and 2019 respectively. cent in 2018 and 2019. (Figure1.4)
India’s growth rate slipped in 2017, but still remained

Figure 1.1: % YoY Real Growth in Global GDP and in Dubai 2012-2019
5.0
4.6 4.6
4.5
4.0
4.0 3.7 3.7 3.7
3.6
3.5 3.5
3.4 3.4
3.3
3.5
3.1
2.8
3.0
2.5
2.0
1.5
1.0
0.5
0 2012 2013 2014 2015 2016 2017 2018E 2019F
Source: IMF, World Economic Outlook, October 2018, World Real GDP Growth Dubai Real GDP Growth
Dubai Statistics Center
Figure 1.2: Real GDP Growth (%) World and Advanced Economies
4.0
3.7 3.7 3.7
3.5 3.3
2.9
3.0
2.5
2.4 2.4
2.5 2.3 2.3
2.1
2.0
1.9
2.0 1.8
1.7 1.7
1.6
1.5
1.1
1.0
0.9
1.0
0.5
0
World Advanced Economies USA Euroarea Japan
2016 2017 2018F 2019F

Source: IMF, World Economic Outlook, October 2018

Figure 1.3: Real GDP Growth (%) World and Emerging and Developing Economies
14
12.5
12
10
7.1 7.37.4 7.4

8 6.76.96.6 6.7
6.2
5.2
6 4.74.74.7
4.4 4.3
3.7 3.73.7 3.5
3.2 3.2
4 2.5
1.8 2.0
2
0.4
-1.5
-2
-4 -3.6
World Emerging & MENA China India Iran Turkey

Developing
Economies
2016 2017 2018F 2019F
Source: IMF, World Economic Outlook, October 2018
Figure 1.4: Real GDP Growth (%) GCC and Iraq 2016-2019F
13.1
6.5
4.1
2.2 2.3
1.5
Iraq Kuwait
-2.1
-3.3
3.7
3.0 2.9
1.7 2.2 2.4
0.8
Saudi Arabia UAE
-0.9
5.0 5.0
3.7
3.1 2.8 2.9
1.9
Oman Dubai*
-0.9
Source: IMF, World Economic Outlook, October 2018, Dubai Statistics Center
2016 ‘17 ‘18F ‘19F
*Dubai projected growth rates for 2018 and 2019 are approximated using IMF projections for the UAE.

Global & Regional Trade & Financial Developments
Global & Regional Trade

1.4 The rate of growth of world merchandise volume terms since the demand for oil and other natu-
trade volume accelerated in 2017 to 4.7 per ral resources is relatively stable in terms of quantity.
cent from 1.8 per cent the year before, Higher primary commodity prices, increasing export
according to the World Trade Organisation (WTO). The revenues in resource exporting countries, allowed
WTO estimates that merchandise trade volume will more imports to be purchased which rose by 0.9 per
rise by 4.4 per cent in 2018. However, growth is cent as a result.
expected to moderate to 4.0 per cent in 2019, below
the average rate of 4.8 per cent since 1990, but above 1.5 Economic activity in the emirate of Dubai is
the post-crisis average of 3.0 per cent. affected strongly by these trends in the glob-
al and regional economy because of its
The fastest regional trade volume growth in both openness to international trade in merchandise goods
exports and imports in 2017 occurred in Asia with an in services such as finance and tourism. It is also
annual rates of expansion of 6.7 per cent and 9.6 per impacted by capital investment flows. Dubai is the
cent respectively. In North America, volume trade in fourth most open economy in the world.
exports grew by 4.2 per cent and imports rose by 4.0
per cent, a bounce back in 2017 following a flat 2016. In 2017, the value of the ratio of foreign trade (the value
of imports plus total exports) as a proportion of Gross
South and Central America and the Caribbean’s import Domestic Product (GDP), was estimated by Dubai
growth turned positive again in 2017 with an increase Statistics at 321 per cent. This ratio might be below
of 4.0 per cent after three years of declining trade. the exposure of highly open trade exposure of Luxem-
European trade flows continued to expand moder- bourg at 424 per cent, Hong Kong at 375 per cent and
ately experiencing growth of 3.5 per cent for exports Singapore at 322 per cent, but it is well above the 173
and 2.5 per cent for imports. The WTO categorises per cent registered for the UAE as whole and the 62
Africa, the Middle East and the Commonwealth of per cent registered for Saudi Arabia. By this measure in
Independent States, as ‘other regions’. This group 2017, Dubai is the most exposed economy in the Gulf
experienced steady export growth of 2.3 per cent by to foreign trade. (Figure 1.5)
Figure 1.5: Foreign Trade Ratio to GDP % in 2017
424
375
322 321
173
156
87
62
41 38
20
Luxembourg Hong Singapore Dubai UAE Bahrain Germany KSA India China USA
Kong
(SAR)
Data Source: World Bank, Dubai Statistics Centre

Cross-Border Financial Flows

(Offshore financial centers & DIFC)
1.6 Dubai is also an open economy in terms of From increasing much faster than world GDP from
its participation in global capital markets, just under US$4 trillion in 2000 global capital flows
which attracts cross-border capital flows fell sharply as a result of the global financial crisis.
into the emirate. These include Foreign Direct Invest- According to a report by McKinsey the US$4.3 trillion
ment (FDI), encouraged by the Dubai FDI, part of the that flowed around the world in 2016 was only a third
Dubai Department of Economic Development, portfo- of the peak of US$12.4 trillion in 2007.1The biggest
lio investment flows (equity and debt) and other private contributor to the changing picture of capital flows has
capital flows, mainly bank lending. These flows have been the large fall in cross-border bank lending, with
been facilitated by the growth in Dubai’s role as an European banks responsible for much of the collapse.
offshore financial centre to provide services to resi- The improving global economic environment has led to
dents and non-residents. a recovery of aggregate capital flows in 2017 reaching
6.9 per cent of global GDP, up from a pre-crisis low of
4.7 per cent in 2015.2 (Figure 1.6)
Figure 1.6: Global Cross-Border Capital Flows (%) of Global GDP
4.0
2.9
3
2.5 2.4
1.9 2.0
1.8 1.8
2 1.6
1.1 1.1
1.0
1 0.7
0.5
0
-0.1
-1 -0.9
2014 2015 2016 2017
Portfolio Debt Portfolio Equity FDI Other (mainly Bank Loans)

Source: UNCTAD
1 https://www.mckinsey.com/industries/financial-services/our-insights/the-new-dynamics-of-financial-globalization
2 http://unctad.org/en/PublicationsLibrary/wir2018_en.pdf

Dubai International Financial Centre

1.7 Despite the global slowdown in cross-border of companies in DIFC remained broadly similar year-
capital flows since 2007, the Dubai Interna- on-year, with 36 per cent originating from the Middle
tional Financial Centre (DIFC),3 acting as an East, 33 per cent from Europe, 11 per cent from Asia,
offshore financial hub in the Middle East, Africa and 10 per cent from the United States, and 10 per cent
South Asia (MEASA) region, has steadily expanded its from other countries.
role and was ranked first in the area as a result of its
achievements in 2017. Set up in 2004, the DIFC lies in The growth experienced in 2017 puts the DIFC on track
a strategic location midway between the global finan- to achieving its goal set in 2014 of tripling its scale
cial hubs of London and New York in the west and by 2024. The DIFC is looking at the financial services
Singapore and Hong Kong in the east. The Global sector to increase its capital investment supporting
Financial Centres Index (GFCI)4 published in Septem- companies through fund raising and lending through-
ber 2018, an evaluation of the attractiveness and out the MEASA (Middle East South Asia) region. In
competitiveness of 110 financial centres worldwide November, 2017, the DIFC announced the launch of a
ranked Dubai in 15th position, up from 18h the year US$100 million FinTech start-ups fund to accelerate
before and ahead of other GCC locations: Abu Dhabi the development of financial technology by investing
26th, Doha 34th, Bahrain 59th and Riyadh, 69th. in start-ups from incubation through to growth stage.
Already, FinTech Hive at DIFC, the first-of-its-kind
In 2017, DIFC grew strongly and reached US$3.55 accelerator in the region, received over 100 applica-
billion in total assets, up by 15 per cent on 2016. The tions from more than 32 countries, before 11 finalists
registration of international companies rose by 12 per were selected to work alongside financial institutions
cent to 1,853 and increased further to 2,003 by the to create effective solutions that address the evolving
first half of 20185, but the geographic representation needs of the region’s financial services industry.
Dubai International Financial Centre (DIFC).
3 https://www.difc.ae/files/3715/2023/3790/Press_Release_-_DIFC_FY_2017_Annual_Review_-_English.pdf
4 https://www.longfinance.net/programmes/financial-centre-futures/global-financial-centres-index/
5 https://www.difc.ae/newsroom/news/dubai-international-financial-centre-reports-strong-start-2018/

Foreign Direct Investment

1.8 According to the Dubai FDI Monitor, in 2017 flows fell by 23 per cent in 2017, to US$1.43 trillion
AED 27.3 billion (US$7.4 billion)6 in Foreign from a revised US$1.87 trillion in 2016.8 The 2017 fall
Direct Investment (FDI) capital entered the in FDI globally is in line with a longer-term negative
emirate, a rise of 7 per cent over the previous year, an cycle that followed the global financial crisis. It is
increase greater than the growth in real GDP. FDI, net being driven by several factors; asset-light forms
inflows, as a percentage of GDP in the emirate stood of overseas operations (i.e., where companies have
at 6 per cent in 2017 compared with 2.7 in the UAE as relatively few capital assets to turnover), which
a whole, 0.2 per cent in Saudi Arabia, 4.0 per cent in are causing a structural shift in FDI patterns; and a
Oman and 1.8 per cent in the MENA region as a whole7. significant decline in rates of return on FDI over the
past five years.
The Dubai FDI Monitor recorded a total of 367 proj-
ects in 2017, an increase of almost 50 per cent up on The provenance of international FDI capital into
the previous year, of which 71.1 per cent were new Dubai by country is concentrated by country in terms
Greenfield projects. These data places the emirate of the total capital coming into the emirate and the
in 10th position in terms of global cities as destina- number of projects with seven countries dominating.
tions when ranked by FDI Markets Data based on the According to data compiled by Dubai FDI Monitor, in
value of total global capital flow into Greenfield FDI 2017, the top five countries accounted for 67 per
projects only, and 4th globally in terms of the number cent of all FDI capital into Dubai and 52.3 per cent of
of projects initiated. all projects. The United States reclaimed the leading
position with 35.6 per cent of FDI capital deployed in
Dubai’s relative success in attracting external capi- the emirate followed by Austria, 9.3 per cent; France,
tal contrasts sharply with global investment trends. 8.4 per cent; the United Kingdom, 7.3 per cent and
The World Investment Report for 2018 by UNCTAD Saudi Arabia, 6.4 per cent. (Figure 1.7)
estimates that global foreign direct investment (FDI)
Figure 1.7: Top Five Source Countries FDI Capital % of Total 2017
35.6 9.3 8.4 7.3 6.4
United States Austria France United Kingdom Saudi Arabia
Source: Dubai FDI Monitor
6 Tracked by Dubai FDI Monitor 2017.

7 https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS
8 http://unctad.org/en/PublicationsLibrary/wir2018_en.pdf

Global Commodity Prices, Oil and Inflation

1.9 As an open economy, Dubai is also affected over the next 4–5 years (in part due to increased US
by changes in commodity prices since its shale production).
currency exchange rate is fixed against the
dollar. Higher oil prices raise the demand of GCC-based The upturn in global growth has had an impact on
buyers of the emirate’s exports, but rising commodity non-oil commodity prices, particularly base metals,
prices also means that Dubai imports experience infla- which have also been rising since 2016. Copper
tionary pressures if the dollar weakens. rose from a low of US$1.93 per pound at January 11,
2016 to US$2.69 by July 10, 2017, increasing to over
Reflecting supply shortfalls, global oil prices increased US$3.00 a year later. Rising prices of commodities
steadily from a low of less than US$27 per barrel in other than fuel is slowly lifting headline inflation in both
January 2016, ending the year at US$53 per barrel, and the advanced and emerging market economies. Prices
averaging US$51 throughout 2017. This supported a of agricultural commodities have increased marginally,
rebound in the growth of Dubai’s GCC trading part- reflecting diminishing excess supply.
ners, which has continued into 2018, and is expect-
ed to support growth in the economies of energy Stronger world economic growth in 2017 and 2018 and
exporters in 2019. rising commodity prices means that inflation is picking
up in some economies. Economic growth and a tight
In June 2018, the Organization of Petroleum Exporting labour market have delivered rises in core inflation in
Countries (OPEC) and non-OPEC oil producers agreed the United States, which rose steadily throughout 2017
to raise oil production by about 1 million barrels per and 2018. In the European Union, the CPI rose through-
day from current levels, correcting the undershoot- out 2017 and 2018 mainly as a result of the increase
ing of a November 2016 group target. The impact of in oil prices, but core inflation remains subdued. The
these restrictions on prices is likely to be subdued fixed exchange rate between the dirham and the United
since declining production capacity in Venezuela and States dollar subjects Dubai’s economy to these global
US sanctions on Iran limit the ability of the group to commodity price movements and inflationary pres-
deliver a consistent increase in production. Futures sures, but also to international monetary influences,
markets, however, indicate prices could decline particularly interest rate conditions in the United States.

Financial Conditions in Advanced Economies &

in Emerging, Regional and GCC Economies
Financial Conditions in The Federal Reserve has so far led the central banks
Advanced Economies in the normalisation of interest rates among the
Interest Rates advanced economies. The Bank of England maintained
1.10 During 2017 and into 2018 policy interest its base rate at its post-Brexit referendum low of 0.25
rates in some of the advanced economies per cent throughout most of 2017, raising it by 25 basis
rose in measured steps without a negative points to 0.50 per cent on 2 November of that year and
impact on growth rates or on capital asset values, again to 0.75 per cent on 2 August, 2018. In contrast,
particularly equity prices in the United States. The monetary policy in Europe and Japan has been much
Federal Reserve continued the process of normalising more accommodating. The European Central Bank
interest rates in the United States in 2017 by raising (ECB) has maintained its refinancing policy rate steady
the benchmark interest rate three times during the at 0.0 per cent throughout 2017 and into 2018 and has
year. The policy Federal Funds rate was raised from indicated it will maintain policy rates at their current
0.75 per cent to 1.0 per cent on March 5, to 1.25 per levels at least through the summer of 2019. The ECB
cent on June 14 and to 1.5 per cent on December 13, has also announced that it will taper its monthly asset
2017. In 2018, there have been two further rises in the purchases from the current €30 billion to €15 billion in
policy rate to 1.75 per cent on March 21 and to 2.0 per October 2018, with an anticipated end to the program
cent on June 13. The rate of job creation and firming on December 31. The Bank of Japan has removed the
inflation in the US economy have led the US Federal time limit on achieving its 2 per cent inflation target
Reserve to signal two possible additional rate rises in and has maintained policy rates at minus 0.1 per cent
2018 and three in 2019. (Figure 1.8) during 2017 and 2018.
Figure
2 1.8: Policy Interest Rates in Advanced Economies (%) per annum 2015 to 2018
1.75
1.5
1.25
0.75
0.5
0.25
01.01.2015
01.02.2015
01.03.2015
01.04.2015
01.05.2015
01.06.2015
01.07.2015
01.08.2015
01.09.2015
01.10.2015
01.11.2015
01.12.2015
01.01.2016
01.02.2016
01.03.2016
01.04.2016
01.05.2016
01.06.2016
01.07.2016
01.08.2016
01.09.2016
01.10.2016
01.11.2016
01.12.2016
01.01.2017
01.02.2017
01.03.2017
01.04.2017
01.05.2017
01.06.2017
01.07.2017
01.08.2017
01.09.2017
01.10.2017
01.11.2017
01.12.2017
01.01.2018
01.02.2018
01.03.2018
01.04.2018
01.05.2018
01.06.2018
01.07.2018
USA Euro UK
Source: Bank of International Settlements

Equity Prices Financial Conditions in Emerging/

1.11 The interest rate hikes by the Federal Reserve Developing and GCC Economies
during 2017 did not dampen equity prices in Interest Rates
the United States and across the world in 1.12 Monetary conditions remained relatively
that year, but the MSCI World Equity Index peaked in stable in many key emerging markets
September 2018 and fell sharply on global trade fears throughout 2017. There were some individ-
and rising bond yields. Global stock markets ended ual country exceptions, such as Argentina, where the
2017 on record highs with strong gains in the advanced Central Bank raised rates several times in response to
economies. The MSCI World Index, which is dominated inflationary pressures during the year. In 2018, howev-
by the advanced economies with a weight of less than er, central banks in many key emerging market econ-
12 per cent for emerging markets rose by a fraction omies, including Argentina again, but also Indonesia,
under 20 per cent in 2017. In the United States the S&P Mexico, and Turkey, have raised policy rates, in
500 gained over 17 per cent during the year while the response to the interest rises that led to a stronger US
Nasdaq index increased in value by 25 per cent. In the currency producing lower rates of other currencies
United Kingdom, which also experienced an interest against the dollar and rising outward capital flows.
rate rise in 2017, the FTSE 100 hit an all-time closing Long-term bond yields in the emerging economies
high of 7687.77, a rise of close to 7 per cent. In Japan have also increased in 2018 and spreads have gener-
the Nikkei rose by 17 per cent and in Germany the DAX ally widened. ( Figure 1.10)
gained by over 11 per cent, (Figure 1.9)
1.13 During 2017 and into 2018 most of the GCC
Strong growth in the USA, a strengthening dollar countries central banks followed the US
and the expectation of profit gains from the tax cuts Federal Reserve’s lead in the setting of
implemented by the Federal government kept equi- interest rates. Monetary policy throughout the region
ty markets there buoyant throughout 2017 ignoring has to balance the aims of simultaneously maintain-
the interest rate rises already made and the additional ing links to the US dollar while ensuring that liquidity
rises anticipated as a result of the Federal Reserve’s conditions reflect the needs of individual economies.
policy shift. But US markets suffered a sharp correc- This affects the extent to which GCC central banks
tion in October 2018 on fears of higher interest rates. have shadowed the Federal Reserve. The UAE Central
In contrast, despite the continuation of easy mone- Bank raised its rates by 25 basis points on its certifi-
tary conditions in the Euro-area and in Japan, equi- cates of deposit in March 2017 in line with US rates
ty prices have weakened and the Nikkei and the DAX to 1.25 per cent, then to 1.5 per cent in June and to
are both down from the start of 2018. Equity markets 1.75 per cent in December. In 2018, the UAE contin-
in the United Kingdom have been affected by politi- ued to shadow the Federal Reserve and raised rates
cal uncertainty, investor fears over Brexit and mixed by 25 basis points twice in March and June up to 2.25
expectations over the future course of policy rates by per cent and to 2.5 per cent in September 2018. The
the Bank of England. Saudi Arabian Monetary Authority (SAMA) kept its
official repo rate fixed at 2.0 per cent throughout 2017
and then began raising rates ahead of the Federal
Reserve to 2.25 per cent in March and to 2.5 per cent
in June and to 2.75 per cent in September 2018. The
Central Bank of Oman, in contrast, raised only the
interest rate it offers on mandatory capital deposits
in March 2018 by 50 basis points to 1.5 per cent
reversing a cut of the same order in February 2015,
the most recent policy move it made. The Central
Bank of Kuwait increased its discount rate only twice
in the current round of Federal Reserve tightening on
March 15, 2017 by 25 basis points to 2.75 per cent
and on the 21 March 2018 to 3.0 per cent. (Figure 1.11)

Figure 1.9: Advanced Economies Stock Market Gains in 2017 and 2018 (%) change
25.0
19.8
17.4 17.0
13.1
11.4
6.5 6.6
1.6
-4.8 -4.8
-7.1
MSCI World Index NASDAQ S&P 500 FTSE 100 Nikkei 225 DAX
2017 2018 YTD

Source: Morgan Stanley Capital International, Market Indices
Figure 1.10: Policy Interest Rates in Emerging Economies (%) per annum 2015 to 2018
45
40
35
30
25
20
15
10
5
.2 5
.2 5
.2 5
.2 5
.2 5
.2 5
.2 5
.2 5
.2 5
.2 5
.2 5
.2 5
.2 6
.2 6
.2 6
.2 6
.2 6
.2 6
.2 6
.2 6
.2 6
.2 6
.2 6
.2 6
.2 7
.2 7
.2 7
.2 7
.2 7
.2 7
.2 7
.2 7
.2 7
.2 7
.2 7
.2 7
.2 8
.2 8
.2 8
.2 8
.0 .20 8
20 8
18
01.02 01
01 3 01
01.04 01
01 5 01
01.06 01
01 07 01
01 8 01
01 09 01
01 0 01
01 11 01
01 2 01
01.01 01
01 2 01
01 3 01
01 04 01
01 5 01
01 06 01
01 7 01
01.08 01
01 9 01
01.10 01
01 11 01
01 2 01
01 01 01
01 2 01
01 03 01
01 4 01
01.05 01
01 6 01
01 7 01
01 08 01
01 9 01
01 10 01
01 1 01
01.12 01
01 1 01
01.02 01
01 03 01
01 4 01
01 05 01
01 6 01
7. 1
.2
01.01
0
0
0
0
0
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
01
Argentina Brazil Turkey India

Source: Bank of International Settlements
Figure 1.11: Policy Interest Rates in GCC Economies (%) per annum 2016 to 2018
3 3 3
3 2.75 2.75 2.75 2.75 2.75
2.5
2.5 2.25 2.25 2.25 2.25 2.5
2 2 2 2 2 2 2 2 2.25
2 2
1.5 1.5 1.75 1.5 1.5 1.5
1.5 1.25
1 1 1 1
1 1 1 1 1 1 1 1 1
0.5
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018
SAMA Oman Kuwait UAE

Source: GCC Central Banks

Equity Prices
1.14 Most emerging market equity indices have 1.16 In contrast to the stability of some of the
declined modestly, reflecting, in some cases, world’s main currencies in 2017 and 2018,
concerns about imbalances (e.g., Argentina some of the emerging market currencies
and Turkey), and, more generally, rising downside risks have depreciated sharply against the dollar, particu-
to the global economic outlook. (Figure 1.12) larly those which account for a significant portion of
Dubai’s exports and re-exports, notably Turkey, India
The value of equity prices in the GCC region are and Iran. The AED dirham strengthened steadily
captured in the MSCI GCC Countries Index which is against the Turkish Lira throughout 2017 rising from
based on the weighted market capitalizations of large TL 0.99 to TL 1.03, an appreciation of 4 per cent over
and mid-size listed companies across the 6 GCC coun- the course of the year. In 2018, however, the Turkish
tries. The index includes 81 constituents companies, currency value has depreciated sharply. Turkey’s
covering about 85 per cent of the free float-adjusted widening current account deficit and large foreign
market capitalization in each country. (Figure 1.13) currency denominated debts has led to an accelera-
tion of capital outflows. By September 8, the Turkish
Exchange Rates Lira had fallen to a value of TL 1.74 to the AED dirham,
1.15 Dubai’s currency, the UAE dirham, is linked to a depreciation of 44 per cent since the start of 2017.
the US dollar at a rate of US$0.27. The
exchange value of the American currency Within the Gulf region, the Iranian Riyal has steadi-
against other international trading currencies and ly depreciated in value against the US dollar and
regional currencies affects the emirate’s terms of trade the AED dirham. Even after the lifting of sanctions
with its partners impacting on the relative cost of in 2016, political uncertainty and other negative
Dubai’s imports and exports. factors continued to make Iran unattractive to inflows
of foreign capital and the relative value of the AED
The US dollar weakened throughout 2017 falling dirham rose from 8,813.2 Iranian Riyal at the start of
against the Euro from €0.95 on 31st December 2016 2017 to 9,9763.9, an appreciation of 11 per cent in
to €0.83, a depreciation of 13 per cent reducing the the relative cost of Dubai’s exports to Iran. Capital
purchasing power of Dubai’s currency throughout the flight from the country continued into 2018 and by
year, but increasing the international competiveness September 8 the AED dirham was valued at 11,462.5
of its exports. The dollar has subsequently recovered Iranian Riyal, a rise in relative value of 30 per cent
in 2018 and stood at €0.86 by 8th September, a rise of since January 2017.
4 per cent. Throughout 2017 British pound regained
some of its value against the US dollar, starting the year The relative cost of Dubai’s exports for Indian
at £0.81 and ending it at £0.74, and appreciation that purchasers was reinforced (have become cheaper)
continued into 2018 with the dollar falling to £0.71 by for Indian buyers during 2017 as the AED dirham
March. But uncertainties surrounding the nature of the weakened slighty against the Indian Rupee with a
United Kingdom’s future relations with the European value of 18.56 rupees at the start of 2017 depreciat-
Union after Brexit in March 2019 subsequently weak- ing to 17.39 rupees by the end of the year, a fall in the
ened the British currency and it was trading at £0.77 value of Dubai’s currency of 6 per cent. During 2018,
by September 8, 2018. however, the Indian currency has depreciated against
the dollar and there have been capital outflows from
China and Japan are both major sources of Dubai’s the Indian bond market with the result that the value
imports accounting for a combined value of nearly against the dirham had reached 19.6 rupees by
26 per cent in 2017. The Japanese Yen traded in a September 8, reversing the gains of the year before
more stable range against the US dollar and the UAE raising the relative value of Dubai’s exports for one of
dirham, starting 2017 at ¥117.0 and ending the year its main trading partners. In contrast, the value of the
at ¥112.7, and has stayed within this range throughout AED dirham against the Iraqi dinar remained relatively
2018 reaching ¥111.0 by September 8. In contrast, the stable throughout 2017 and into 2018. One dirham
value of the dollar and the UAE dirham has been more bought 318.9 Iraqi Dinar at the start of 2017 and
volatile, depreciating from the Chinese Yuan 6.92 at the 324.4 Iraqi Dinar at the end of the year. The cost of
start of 2017 to reach Yuan 6.57 at the end of year, a fall Dubai’s exports to Iraq appreciated slightly (margin-
of 5 per cent. This weakness continued into 2018 with ally more expensive for Iraqi buyers) in 2018 with a
the dollar reaching a low of Yuan 6.27 in April before currency value of 325.1 Iraqi Dinar by September 8
steadily strengthening to Yuan 6.84 by September 8. 2018. (Figure 1.14)

Figure 1.12: Emerging Economies Stock Market Gains in 2017 and 2018 (%) change
64.4
49.6
32.8
28.1
18.9
7.1
-7.4 -7.9
-13.2
-20.0
MSCI Emerging Turkey BIST 100 India BSE Sensex Argentina MERVAL Indonesia IDX
Markets Index
2017 2018 YTD

Source: Morgan Stanley Capital International, Market Indices
Figure 1.13: Equity Returns GCC and Emerging Markets % Per Annum 2012-2018
37.28
40
30.86
30
18.22 16.81
20
11.19
10
8.16 1.16 9.46
4.64
0
-2.6 -2.19
-13.89
-7.18
-10
-14.92
-20 2012 2013 2014 2015 2016 2017 2018
MSCI GCC MSCI Emerging Markets

Source: Morgan Stanley Capital International
Figure 1.14: AED Exchange Rate Index against Trading of Partners (1/1/2016 =100)
230
210
190
170
150
130
110
90
01 2.2 6
01 3.2 6
01 4.2 6
01 5.2 6
01 6.2 6
01 7.2 6
01 8.2 6
01 9.2 6
01 0.2 6
01 1.2 6
01 2.2 6
01 1.2 6
01 2.2 7
01 3.2 7
01 4.2 7
01 5.2 7
01 6.2 7
01 7.2 7
01 8.2 7
01 9.2 7
01 0.2 7
01 1.2 7
01 2.2 7
01 1.2 7
01 2.2 8
01 3.2 8
01 4.2 8
01 5.2 8
01 6.2 8
01 7.2 8
01 8.2 8
9. 8
18
.0 01
.0 01
.0 01
.0 01
.0 01
.0 01
.0 01
.0 01
.1 01
.1 01
.1 01
.0 01
.0 01
.0 01
.0 01
.0 01
.0 01
.0 01
.0 01
.0 01
.1 01
.1 01
.1 01
.0 01
.0 01
.0 01
.0 01
.0 01
.0 01
.0 01
.0 01
.0 01
20
01 1.2
.0
01
India Rupee Iraq dinar Turkish Lira Iranian Riyal

Source: Gulf Economics


Outlook for Global & Regional Growth
1.17 Going forward, despite the forecasts for depreciation and a halt to capital inflows. The possible
continuing global real GDP growth and impact of sanctions and the relations between Iran and
growth in world trade, there are a number of the United States, along with the diplomatic dispute
downside risks. Growth is becoming more uneven between the other Gulf States and Qatar, could impact
among emerging market and developing nations and on oil prices and regional growth prospects.
between these countries and the advanced econo-
mies. Rising oil prices, higher bond yields in the United Growth among the advanced economies could be
States as a result of the Federal Reserve’s normaliza- negatively affected in 2019 by trade issues. The WTO
tion of policy rates and rising trade tensions between has already noted that lower export orders and car
the United States, China and the European Union are sales in the second half of 2018 could slow world trade
affecting sentiment and dampening equity prices. and GDP growth as the America First protectionist
Rising interest rates and a stronger dollar also means policy by U.S. President Donald Trump takes further
higher borrowing costs in many developing countries effect. The 25 per cent tariff on imported steel and
and challenges to the servicing of existing debt. The the 10 per cent rate on aluminium imposed in March
risks of a debt crisis is rising among poorer countries 2018 have already raised significant revenues for the
as these nations have extended their borrowing levels. United States, but have had negative economic effects
The IMF has calculated that the median level of public on other economies, which will reverberate.
debt to GDP among low income countries rose by 13
percentage points between 2013 and 2017 to reach The UAE, with a major global position in the alumini-
47 per cent. um-smelting sector and as a trading partner with
both the United States and China, is in a difficult posi-
Rising oil prices will impact the relative growth pros- tion and may face higher import costs on products
pects of energy exporters and importers among the using this metal. Policy uncertainty about the Federal
developing economies, which is good for Dubai since Reserve’s monetary policy in 2019, when aligned with
it will reinforce growth in the GCC region, but will nega- the escalating trade tensions and political turmoil in
tively impact some of the emirate’s trading partners the administration, could have a negative impact on
such as India. India could face pressure on its currency investment and economic growth. Finally, uncertainty
as a result of capital outflows pushing up interest rates about the future relations between the EU and the Unit-
and depressing growth in a replay of the trade imbal- ed Kingdom could unsettle global and regional trade
ances currently plaguing Turkey and Argentina. Turkey, until at least 2020.
in particular, still faces the danger of further currency

CHAPTER 2 |
Recent Developments
in Dubai’s Economy
Sheikh Zayed Road, Duabi.

T
his chapter reviews the performance of the main macro-
economic indicators of Dubai’s economy: the size of total
output, total GDP growth rates, trends in the development
of per capita GDP, the structure of the economy and the
sectoral contribution to growth, inflation, money and
liquidity, the AED exchange rate, interest rates, and government finances.
↗↗ Dubai’s relatively diversified economic base, unlike other GCC

nations, helps it to contain the effects of some adverse develop-
ments such as declining oil prices or other external shocks.
↗↗ The annual rate of price inflation in Dubai consistently dropped, down

to 2.1 per cent in 2017, falling from 2.9 per cent in 2016 and 3.7 in
2015. The inflation rate had reached a peak of 10.8 per cent in 2008
as a result of the global economic crisis.
↗↗ The expansionary economic policy in Dubai was very successful

in addressing the effects of 2008 global economic crisis by taking
necessary corrective countercyclical measures.
↗↗ Customs revenues are the main source of tax revenues, accounting

for 85 per cent of government revenue in 2017, and are anticipated
to increase to AED 7.0 billion in 2018 based on rising imports.
↗↗ A supply side stimulus package composed of 25 initiatives will impact

the public sector deficit and aims to liberate Small and Medium-Sized
Enterprises (SMEs) from restrictions that hold back their growth.

CHAPTER 2 | Recent Developments in Dubai’s Economy
Diversified Economy
Secret to Dubai’s GDP
The Dubai GDP is diversified and falls into twenty economic categories. The most growth
was seen in Tourism including food and accommodation and inflation actually subdued.
1 Dubai’s GDP Growth 2 Diversified Wholesale & Retail Trade:

Economic Categories 26.6%
Dubai’s GDP grew by 2.8 percent, Transport & Storage:

The Dubai GDP is diversified and 11.8%
in constant prices, to AED 389.4
billion (US$106.1 billion) in 2017 falls into twenty economic Financial & Insurance:
from AED 378.8 (US$103.2 billion) categories. 10.4%
in 2016. In 2017, percentage shares of Manufacturing:
GDP associated with some of 9.4%
Tourism was the sector with the
highest growth rate. GDP Growth these categories were: Real Estate:
Rate in tourism (associated with 7.1%
Accommodation and Food) was 8 Construction:
percent, making tourism a leading 6.3%
contributor to Dubai’s overall GDP 20 Economic Accommodation & Food
Growth Rate in 2017. Categories (largely tourism):
4.9%
Public Administration,
Defence, Social Security:
5.1%
Information &
Communication:
4.1%
Professional, Scientific &
Technical:
3.6%
Administrative & Support
Service:
3.0%
Electricity, Gas, Steam &
Air Condition Supply:
3
2.6%
Inflation (2017 vs. 2016)
The general annual rate of price inflation in

Dubai was 2.1 percent in 2017 versus 3.7 4 Public Finance
percent in 2015 and 2.9 percent in 2016.
Dubai government budget for 2018 anticipated public
Housing, Water and Electricity: expenditure rising by nearly 20 per cent to AED 56.6
0.9% vs. 4.5% billion with government revenues rising 12.5 per cent to
AED 50.4 billion. The rise in expenditure features
Food and Non-alcoholic Beverages: increased expenditure on infrastructure related to the
0.5% vs. 1.2% needs of the Expo 2020.
Education: Dubai government announced a supply side stimulus

4.9% vs. 6.4% package composed of 25 initiatives to stimulate growth
in the economy of Dubai.
Restaurants and Hotels:
2.7% vs. 1.7%

Recent Developments in Dubai’s Economy | CHAPTER 2
Main Macroeconomic Indicators of

Dubai’s Economy
Dubai’s Gross Domestic Product (GDP)

2.1 Dubai’s GDP in constant prices reached AED do with reduced demand from its neighboring coun-
389.4 billion (US$106.1 billion) in 2017, up by tries affected by oil prices as explained in Chapter 1.
2.8 per cent from AED 378.8 (US$103.2
billion) in 2016. This can be compared to a higher rate 2.2 The UAE grew by 0.8 per cent in 20171, but
of growth of 3.1 per cent achieved in 2016. The trajec- Dubai’s relatively diversified economic base,
tory of the emirate’s real GDP and annual percentage unlike other GCC nations, helps it to contain
growth rate over the last decade is shown in Figure 2.1. the effects of some adverse developments such as
declining oil prices or other external shocks. For exam-
Dubai’s economic performance is often compared to ple, the negative, although muted, impact of the global
cities similar in terms of size and in their dependence financial crisis, which produced negative economic
on internatonal trade. In Singapore, real GDP increased growth of minus 2.6 per cent in 2009 in Dubai, is illus-
by 3.6 per cent in 2017, up from 2.4 per cent the year trated in the chart. Figure (2.1) Stimulant policies
before, Hong Kong’s economy grew by 3.8 per cent in applied by the Federal Government and the Govern-
2017 compared with 2 per cent in 2016. Both of these ment of Dubai subsequent to the crisis also contribut-
economies grew faster as a result of revitalised growth ed in boosting the economy, and hence, the resumption
in global GDP, while Dubai’s slower growth had more to of growth in all sectors, including those sectors partic-
ularly impacted such as construction and real estate.
Figure 2.1: GDP in Constant Prices and annual Growth Rate (%) 2008-2017
450 4.6% 4.6% 5%

4.0%
4.0% 389.4
378.8
3.7% 3.6% 367.4
400 353.4 4%
337.9
322.9
350 300.8 311.8
303.0 295.0 3.1% 3%
2.8%
300
1.9% 2%
250
1%
200
0%
150
-1%
100
50 -2%
-2.6%
0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 -3%
GDP AED billions Growth Rate

Source: Dubai Statistics Center
1 IMF World Economic Outlook, October 2018.

GDP per capita in Dubai

2.3 GDP per capita in Dubai amounted to consistently below the emirate’s population growth
US$35,630 in 2017, declining by 6.8 per cent rate in recent years. In 2013, real GDP grew by 4.6 per
from US$38.22 thousand in 2016. This cent, but Dubai’s population increased by 5.1 per cent.
represents the continuation of a recent trend: GDP per In subsequent years the gap widened and by 2017,
capita has declined by 15.5 per cent since 2013. population grew by 10.3 per cent, the same rate as in
(Figure 2.2) the previous year, while real GDP declined to a rate of
2.8 per cent. (Figure 2.3)
The decline trend in Dubai’s GDP per capita has
occurred because the GDP growth rate has been
Figure 2.2: Real GDP per capita in Dubai (US$‘000)
41.56
41.10
40.77
38.22
35.63
2013 2014 2015 2016 2017
Source: Dubai Statistics Center data
Figure 2.3: Real GDP growth rate and population growth rate in Dubai (%)
12
10.3 10.3
10
8
5.1 5.1 5.1
4 4.6 4.6
4
3.1
2.8
2
0 2013 2014 2015 2016 2017
Population Growth Real GDP Growth


Sheikh Zayed Road, Duabi.

Performance of the Main Sectors in Dubai’s Economy

2.4 Dubai’s GDP structure is shown in the data estate sector slowed down from a rise of 9.8 per cent
produced by Dubai Statistics Center which in 2016 in constant prices to 7.3 per cent in 2017 and
breaks down total GDP into twenty econom- the growth in Manufacturing more than halved to 2.0
ic activities. In 2017 the main seven of these sectors in 2017. In contrast, the rate of real growth in Transport
accounted collectively for 76.5 per cent of GDP, down and storage sector rose strongly to 4.5 per cent and
slightly from their share in 2016 (See Figure 2.4). These Accomodation and food sector growth more than
main sectors by relative size were: Wholesale and tripled to 8 per cent due to a revival in tourism.
retail trade/motor vehicles and motor cycles repair
(Wholesale and retail trade hereafter), 26.6 per cent; 2.6 Among the other economic activities
Transport and storage, 11.8 per cent; Financial and comprising Dubai’s economy, the most
insurance activities, 10.4 per cent; Manufacturing, 9.4 notable changes were a fall in the rate of
per cent; Real estate activities, 7.1 per cent; Construc- growth in the Information and communication sector
tion, 6.3 per cent and Accommodation and Food from 7.0 per cent in 2016 to 2.1 per cent in 2017, while
(largely tourism), 4.9 per cent. Professional, scientific and technical activities grew
by 2.6 per cent in 2017 compared with 7.4 per cent
Other economic activities, accounting for 23.5 per the year before. The Mining and Quarrying sector,
cent of GDP in 2017, a share that is similar to the previ- which accounted for 1.7 per cent of GDP in constant
ous year, were dominated by five sectors. In terms of prices, saw a reverse in its fortunes, growing by 3.4
relative size as a proportion of GDP these were: Public per cent in 2017compared to minus 2.6 per cent the
administration, defence and social security, 5.1 per year before, the fourth successive year of negative
cent; Information and communication, 4.1 per cent; growth measured.
Professional, scientific and technical activities, 3.6 per
cent; Administrative and support service activities, 3.0 2.7 The contribution of economic sectors to
per cent and Electricity, gas, steam and air conditioning aggregate growth in Dubai in 2017 did not
supply, 2.6 per cent. necessarily reflect the share of each sector
in GDP in 2017. For example, the share of Accommo-
2.5 All the main economic sectors in Dubai grew dation and food services in Dubai’s economy in 2017
in real terms in 2017, apart from Financial and was 4.9 per cent of GDP, but its real growth rate that
Insurance services which remained con- year was 8.0 per cent so it contributed AED 1.4 billion
stant, contributing value-added AED 40.49 billion in or 13.2 per cent of the total growth in real GDP produc-
2017, effectively the same as the previous year. (See ing a weighted figure of 0.38 per cent. The contribu-
Figure 2.5) In contrast, to 2016, the Construction tions of other sectors to overall growth in 2017 are
sector grew by 3.5 per cent following a contraction of shown in. (Table 2.1)
minus 3.4 per cent. Notably, the growth in the Real
Dubai’s relatively diversified economic base,

unlike other GCC nations, helps it to contain the
effects of some adverse developments such as
declining oil prices or other external shocks.

Figure 2.4: Structure of Dubai’s GDP (%)
27.1 26.6
23.4 23.5
11.6 11.8 10.7 10.4

9.5 9.4
6.8 7.1 6.2 6.3
4.7 4.9
Wholesale Manufacturing Transport and Real Estate Finance and Construction Accomodation Others
and Retail Industries Storage Insurance and Food
Trade Activities Services
2016 2017
Figure 2.5: Growth of Main Sectors in Dubai (%)
9.8
8
7.3
4.5 4.5
3.1 3.5
2.8 2.8 2.4 2.5
2
0 0.6 0.9
GDP Manufacturing Transport and Real Estate Finance and Wholesale -3.4 Accomodation
Industries Storage Insurance and Retail Construction and Food
Activities Trade Services
2016 2017
Data source: Dubai Statistics Centre and Dubai Economy
Table 2.1: Sector Contribution to Overall GDP Growth Rate in 2017
Sector % Share of GDP Activity real % Contribution to Weighted Growth

Growth Rate 2017 GDP overall Growth Rate %
Wholesale and retail trade 26.6 0.9 8.3 0.23
Transport and storage 11.8 4.5 18.4 0.51
Financial and insurance 10.4 0.0 0.0 0.00
Manufacturing 9.4 2.0 6.8 0.19
Real estate 7.1 7.3 17.6 0.49
Construction 6.3 3.5 7.8 0.22
Accommodation and food 4.9 8.0 13.2 0.38
Total of main activities 76.5 2.6 72.1 2.02
Other 23.5 3.6 27.9 0.78
GDP 100.0 2.8 100.0 2.8
Source: Dubai Statistics Center data

Inflation
2.8 The general annual rate of price inflation in 2.9 The fall in the rate of price inflation in Dubai in
Dubai was 2.1 per cent in 2017. This rate has 2017 can be attributed to drops in annual rate
steadily fallen from an annual rate of 3.7 per of price increase across several sectors.
cent in 2015 and 2.9 per cent in 2016. It is noteworthy Housing, water and electricity annual cost increases fell
that the rate of price inflation reached its peak in 2008 from 4.5 per cent in 2016 to 0.9 per cent in 2017, below
at 10.8 per cent before the impact of the global finan- the general rate of inflation. (Figure 2.7) Inflationary
cial crisis was felt in Dubai. As a result, the inflation rate pressures weakened in other sectors of the economy.
dropped during a deflationary period caused by a fall In particular, food and non-alcoholic beverages, where
in real GDP of minus 2.6 per cent. The rate of inflation the rate fell to 0.5 per cent in 2017 from 1.2 per cent in
fell sharply in the following years reaching a rate of the previous year. In education, the inflation fell from 6.4
minus 1.7 per cent in 2012. The inflation rate rose to per cent to 4.9 per cent in 2017. There was almost defla-
1.3 per cent the following year as the economy recov- tion in the cost of health with prices barely stable. Only
ered with an increase in real GDP of 4.6 per cent. restaurants and hotels saw a rise in inflation with annu-
(Figure 2.6) al price increases moving up to 2.7 per cent in 2017 from
1.7 per cent the year before. (Figure 2.8)
Interior view of Dubai Mall.

Figure 2.6: Dubai General Inflation Rate (%)
3.65
4 3.4
2.91
3
2.1
2
1.3
0 2013 2014 2015 2016 2017
Figure 2.7: Inflation Rates in the Housing, Water and Electricity Group in Dubai (%)
General 1.3 3.4 3.7 2.91 2.1

Inflation
Rate
Housing,
1.2 5.6 6.1 4.54 0.88
Water and
Electricity
Rate
2013 2014 2015 2016 2017

Figure 2.8: Inflation Rates in Main Expenditure Groups in Dubai (%)
7 6.39
6
4.88
5
4 3.2
2.7
3
1.71 1.63
2 1.1 1.21
0.76
0.5 0.45
1
-0.08
Restaurants and hotels Education Health Food and beverages
2015 2016 2017


Monetary Policy
2.10 The UAE Central Bank is responsible for the Interest Rates
operation of monetary policy across the 2.11 The freedom of the central bank to influence
Federation and affects credit conditions and monetary conditions in the UAE and in
liquidity in Dubai. Monetary policy is concerned with Dubai is constrained by the requirement
determining the size and rate of growth of the money that the UAE sets an official interest rate close to the
supply by modifying the interest rate, buying or selling interest rate set by the US Federal Reserve Board (US
government bonds, and regulating the amount of Central Bank). This regime of currency peg to the US$
money banks are required to keep as reserves. The creates a link between the value of the American
UAE Central Bank plays an important role in supervis- currency and local inflation in Dubai/UAE (and other
ing the banking sector to achieve strong capitalization, GCC countries) which cannot be tackled by restrictive
liquidity and financial stability. The Central Bank moni- monetary policy using the interest rate to affect cred-
tors banks’ (Non-Performing Loan) NPL ratios, it growth and liquidity.
loan-to-deposit ratios, which must remain below 100
per cent, and Tier 1 core capital ratios which it sets at 2.12 The Central Bank’s REPO rate closely follows
8 per cent, above the stipulated minimum 6 per cent the US Federal Funds rate, but domestic
ratio in the Basel 3 agreements and capital adequacy credit conditions are also determined by the
ratios. In 2017, NPLs have remained fully provisioned, EIBOR (Emirates Inter-Bank Offered Rate) market rate.
but rose to 7.0 per cent by Q2 2018. The capital This rate can be set between banks in the country,
adequacy ratio of UAE banks was strong in 2017 and which can be influenced by the monetary authorities
remained robust at 18.1 per cent in Q2 2018. through capital requirements. There was a significant
difference between these two rates from the second
In the UAE, the existence of a currency peg with the half of 2008 before they harmonized in August 2011.
dollar constrains the Central Bank’s monetary poli- This difference is linked to the cautious lending prac-
cy since interest rates need to be aligned with policy tices of Dubai/UAE banks in addition to their need to
rates in the United States. In addition, the currency meet Basel (3) capital requirements, in light of the new
link means that the growth of domestic liquidity must regulations that the Central Bank imposed on banks.
also be consistent with the fixed US dollar-AE Dirham EIBOR fell below the UAE policy rate from 2012
exchange rate. This restricts the ability of the Central onwards, but rose in 2015 in anticipation of the tight-
Bank to expand or contract the money supply to stim- ening of policy rates by the Federal Reserve, followed
ulate growth or control inflation. by the UAE Repo Rate which rose in increments in 2017
and into 2018. (Figure 2.9)
Figure 2.9: Interest Rates in the UAE and USA (%)
2.5
1.5
0.5
0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: UAE Central Bank and UA Repo rate NADJ US discount rate UAE 1M Interbank - offered rate
the Federal Reserve Bank.

Domestic Liquidity
2.13 The UAE Central Bank’s balance sheet in Currency in Circulation by 8.7 per cent to reach
reflects changes in liquidity in the banking AED 67.7 billion and an increase in Monetary Depos-
system. In 2017 the Central Bank’s balance its by 3.1 per cent to reach 424.7 billion. The broader
sheet expanded by 11.5 per cent to AED 406.4 billion, definition of the money supply M23 had hit a peak rate
reversing a previous contraction in 2016 of 7.4 per of growth of 22 per cent in 2013 before dropping to
cent on the previous year. The main factors behind 8 in per cent in 2014. There was a sharp drop in the
this change were firmer oil prices and external growth of credit and liquidity in both the government
capital inflows. and the private sectors between 2015 and 2016. This
led to a contraction in liquidity growth to an annual
2.14 The rate of growth of financial liquidity (the rate of 3.3 per cent in 2016, and a slight rise to 4.1
supply of money) in the UAE had slowed per cent in 2017, to reach AED 1,276.2 billion, more
down significantly in 2014 largely resulted closely in line with economic growth. Meanwhile, M34,
from falling oil prices. The EIBOR rate, which had fall- the broadest definition of money, increased by 5.4
en well below the policy rate, began to rise again as per cent to AED 1,487.1 billion, owing to an increase
bank credit tightened. This caused a sharp drop in in government deposits of 13.4 to reach AED 210.9
the rate of growth of the money supply, falling in 2016 billion. The latter rise signalled a reversal of the previ-
with domestic liquidity, with growth only rising again ous downward trend, in support of bank liquidity.
marginally in 2017. M12 increased by 3.9 per cent to (Figure 2.10)
reach AED 492.4 billion in 2017, owing to an increase
Figure 2.10: Domestic Liquidity Growth Rate in UAE (%)
12.6 9.3 2.4 5.1 5.4

M3
22.4 8.1 5.5 3.3 4.1

M2
26.2 14.9 4.7 3.7 3.9

M1
2013 2014 2015 2016 2017
Source: UAE Central Bank
2 Currency in Circulation Outside Banks (Currency Issued - Cash at banks) + Monetary Deposits.
3 M1 + Quasi-Monetary Deposits (Resident Time and Savings Deposits in Dirham + Commercial Prepayments in Dirhams + Resident Deposits in
Foreign Currencies)
4 M2 + Government Deposits


AED Exchange Rate

2.15 The external value of the currency of the UAE 2008. Nevertheless, the second half of 2008 was char-
used by Dubai, the AE Dirham, is linked to the acterised by what is known as a “re-pairing” phase in
US Dollar. The fixed exchange rate set by the the global economic crisis when a key correction
UAE Central Bank is AED 3.6725 per US$1. In the occured in the US$/EUR rate, global oil prices dropped
context of free flows of capital, monetary policy in this and economic activity in emerging markets and in
system lacks autonomy, when compared to countries Dubai slowed down significantly bringing down infla-
which use floating rates. For example, when the US$ tion sharply over the period 2009 to 2010.
was dropping against the Euro during the three years
between 2006-2008, the AED also dropped against Since then, the AED started to rise against the Euro to
the Euro, as it tracked the US dollar. Throughout 2008 AED 4.72 through 2012 and local inflation remained
the UAE’s currency weakened so that one Euro bought supressed. The exchange rate weakened again in
AED 5.4. This lead to an increase in imported inflation 2014 and 2015, and inflationary pressures in the UAE
(through imports from European Union countries) in built up reaching a peak of 4.1 per year, before the
the UAE and also in other GCC countries whose curren- AED strengthened against the Euro again in 2016.
cies are also pegged to the US dollar. In 2017, the AED depreciated again with a drop in
inflation to 1.6 per cent, followed by a further rise
2.16 Inflationary pressures also increased during to 1.9 per cent, slightly below the rate of inflation in
this period, with an increase in oil prices, Dubai. (Figure 2.11)
which reached US$148 per barrel by mid-
Figure 2.11: AED/Euro Exchange Rate & Inflation in the UAE (%) per annum
14
12.3
11.1
12
10
5.40
5.12 5.11
6 5.03 4.87 4.88 4.87
4.72
4.41
4.0 3.87
4
2.3 4.1
1.6
1.9
1.6
0.9 0.9 1.1

2 0.7
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Inflation Rate AED/EUR

Source: Dubai Statistics Center and International Monetary Fund.

Public Finance
The Budget of Dubai Government 2.18 The expansionary fiscal policy adopted to
2.17 The Government of Dubai’s fiscal policy is stimulate Dubai’s economy in response to
exercised through the public sector budget, the aftermath of the global economic crisis
operating through changes in government produced a public sector deficit in 2009 of minus 4.3
expenditure and revenues. Policy has focussed on per cent as a per centage of GDP above the critical 3
strengthening the emirate’s financial accounts while per cent recommended by internationally accepted
being prepared to take necessary corrective counter- sound fiscal practice. The government tightened fiscal
cyclical measures in response to macroeconomic policy and reduced its budget deficit as a per centage
conditions. In fact, the Government of Dubai reacted of GDP from 1.9 per cent in 2010 down steadly to 0.6
to the effects of the global economic crisis of 2008 by per cent in 2012 and to 0.3 per cent in 2014. In 2015
raising expenditure from an annual average of AED and 2016, this approach of steadily restricting expen-
27.3 billion during the period between 2006 and 2008 diture growth achieved an operating balance with
to AED 41.4 billion during 2009, with an increase of spending rising by nearly 12 per cent from AED 41.2
around 52 per cent, while revenue dropped in 2009 by billion to AED 46.1 billion in line with rising revenues. In
13 per cent. This expansionary fiscal policy was 2017, expenditure increased by almost 3 per cent to
consistent with the actions of many advanced and AED 47.3 billion, but government revenues fell by 2.8
emerging countries to counter the adverse effects of per cent to AED 44.8 billion, producing a budget deficit
the global financial crisis through fiscal and monetary of AED 2.5 billion, or 0.6 per cent of GDP.
stimulatory programs. The expansionary economic
policy in Dubai achieved great success in addressing 2.19 The budget for 2018 anticipated public
the effects of that crisis. Following this fiscal stimulus, expenditure has risen by nearly 20 per cent
the success achieved by the financial authorities in to AED 56.6 billion and government revenues
the Emirate in reducing budget deficit in the following has increased 12.5 per cent to AED 50.4 billion. (Figure
years is considered a significant achievement. These 2.12) The public sector deficit is estimated to rise to
financial measures have contributed to macroeco- an unprecedented AED 6.2 billion, 1.5 per cent of GDP,
nomic stability and to the resumption of growth in below the recomended 3 per cent level, but still expan-
many sectors and activities, especially banks, finan- sionary necessitating increased government borrow-
cial market, trade, tourism and real estate in Dubai. ing. (Figure 2.13)

Figure 2.12: Budget Structure of the Government of Dubai (AED billion)
56.6
50.4
47.3
46.1 46.1
44.8
41.2 41.2
37.9
37.0
34.1
32.6
0.0 0.0
-1.5 -0.9
-2.5
-6.2
2013 2014 2015 2016 2017 2018
Surplus/Deficit Expenditure Revenue

Source: Dubai Department of Finance
Figure 2.13: Overall Fiscal Position of the Government of Dubai (as % of GDP)
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
0
0 0
-0.3
-0.5 -0.5
-0.6 -0.6
-1.0
-1.2
-1.5 -1.5
-1.9
-2.0
-2.5
-3.0
-3.5
-4.0
-4.3
-4.5
Source: Department of Finance of the Government of Dubai

Public Revenues
2.20 Government revenues in Dubai are derived customs duties, but also to a decrease in income taxes
from two main categories: 1 – Tax revenues on foreign banks. The value of imports into Dubai in
and 2 – Non-tax revenues. Tax revenue 2017 fell by AED 535.6 billion to AED 518.3 billion, a
sources include customs fees from import duties drop of 3.2 per cent. In consequence, revenue from
and taxes on banks in Dubai and from January 2018 customs duties fell by 12.5 per cent from AED 7.2 to
Value Added Tax (VAT) levied at a rate of 5 per cent AED 6.3 billion contributing to the fall in total govern-
on all but exempt items. Non-tax revenues are main- ment revenue and the public sector deficit of AED 2.5
ly miscellaneous fees and fines, oil revenues and billion. Customs revenues are anticipated to increase
investment returns. to AED 7.0 billion in 2018 based on rising imports.
2.21 The ratio of non-tax revenues to total reve- 2.23 Fees and fines revenues rose during the
nues has fluctuated in recent years between years 2017-2013 reaching 76.4 per cent by
a minimum of 76.8 per cent in 2013 and a 2013 and peaking at 94 per cent of non-tax
maximum of 83.5 per cent in 2017, while tax revenues revenues in 2015. This income group accounted for 92
varied between 23.2 per cent and 16.5 per cent during per cent of non-tax revenues in 2017 and is anticipat-
the same period. Tax revenues are anticipated to rise ed to fall to 79.8 per cent in 2018. On the other hand,
back to a share of 21.0 per cent of total government the ratio of oil revenues fell from 15.6 per cent in 2013
revenues in 2018 and will rise further when the federal to 5.7 per cent in 2015 as result of the fall in oil prices,
government transfers Dubai’s allocation of VAT reve- before recovering to 7.9 per cent in 2016 and falling
nues collected. (Figure 2.14) again in 2017 to 6 per cent of non-tax revenues. Final-
ly, income from investment has fluctuated in the period
2.22 Customs revenues are the main source of tax 2013-2017 between a minimum of 1.3 per cent in 2015
revenues accounting for 85 per cent of this and 2016 to a maximum of 8 per cent in 2013. Income
category of government revenue in 2017. from this source was 2.0 per cent of non-tax revenues
The fall in the proportion of tax revenues to the total in in 2017 and is anticipated to rise to 2.5 per cent in
2017 to 16.5 per cent was due to mainly to a fall in 2018. (Figure 2.15)
Customs revenues are the main source

of tax revenues, accounting for 85 per
cent of government revenue in 2017, and
are anticipated to increase to AED 7.0
billion in 2018 based on rising imports.

Figure 2.14: Structure of Dubai’s Government Revenues (%)
76.8 79.3 79.2 81.5 83.5 79.0

Non Tax
Revenue
23.2 20.7 20.8 18.5 16.5 21.0

Tax
Revenue
2013 2014 2015 2016 2017 2018
Figure 2.15: Structure of Dubai’s Government Non-Tax Revenues (%)
76.4 84.8 93.7 90.7 92.0 79.8

Fees and
penalties
15.6 9.0 5.7 7.9 6.0 7.6

Petroleum
8.0 6.2 1.3 1.3 2.0 2.5

Investment
2013 2014 2015 2016 2017 2018


Public Expenditures
2.24 The ratio of current public expenditures to deficit of 2018 which is anticipated to have tripled
total government expenditures in Dubai rose as a proportion of GDP in 2017 would result in a rise
from around 75.3 per cent in 2013 to 82.6 per in borrowing and debt service charges in 2018.
cent in 2016 passing a peak of 89 per cent in 2014. On (Figure 2.16)
the other hand, the ratio of investment expenditures
dropped from 24.7 per cent in 2013 to a low ratio of 11 2.25 The structure for spending by the Govern-
per cent in 2014. Such drop in investment expenditure ment of Dubai, broken down by function,
is attributed to the completion of most of the major indicates that the infrastructure, transport,
projects. However, investment expenditures rose in and social development sectors accounted for around
2017 to 19.4 per cent and are expected to have risen 71 per cent of total expenditure in 2017. The structure
to 28 per cent during 2018 to finance a package of also shows that the share for the social development
strategic initiatives and key development projects sector of total expenditure rose from around 21 per
which were recently launched by the Government of cent in 2010 to about 37 per cent by 2016 and 34 per
Dubai. These projects include various sectors, espe- cent in 2017. The share for the infrastructure and
cially real estate and tourism, in addition to the Islamic transport sector dropped from around 49 per cent in
economy initiative and infrastructure projects in 2010 to 36 per cent over the same period, rising slight-
preparation for hosting Expo 2020. The public sector ly to 37 per cent in 2017. (Figure 2.17)
New Dubai metro rail system under construction.

Figure 2.16: Structure of Dubai’s Government Expenditures
75.3 89.0 83.0 82.6 80.6 72.0

Current
24.7 11.0 17.0 19.4 19.4 28.0

Capital
2013 2014 2015 2016 2017 2018
Figure 2.17: Structure of Functional Expenditures of the Government of Dubai
34.6 34.9 34.9 36.7 33.7

Social
development
7.1 6.9 7.7 6.4 7.6

Government
services
39.2 37.1 35.7 36.0 37.4

Infrastructure
and transport
24.9 21.1 21.8 20.9 21.4

Security, equity
and safety
2013 2014 2015 2016 2017

Outlook for the Performance of

Dubai’s Economy in 2018
2.26 Growth in Dubai should be boosted by the that 30 per cent of collected VAT revenue would be
government’s fiscal stimulus initiatives of allocated to the federal government and the rest to
2018 on the back of increased infrastructure local governments. Although revenue distribution has
expenditure ahead of Expo 2020 and a rising public not taken place yet, and collection data are not avail-
sector deficit. Increased expenditures on infrastruc- able, annual VAT revenues are projected to reach 2 per
ture are related to Expo 2020, whose total investment cent of GDP, over the coming years.
value is estimated at AED 25 billion, and the expansion
of the Dubai Metro’s Route 2020 with a project value 2.28 Given the high proportion of public revenues
of AED 10.6 billion. However, the size of Dubai’s large accounted for by fees, this source of income
public-sector debt suggests that further fiscal expan- is regressive and costly to administer. It is
sion will be used with caution by planning current also less conducive to SME development and diversi-
expenditure growth and spending efficiently on fication as fixed fees are more burdensome for small-
capital projects. er enterprises. The authorities have initiated a compre-
hensive review of fees to rationalize them. In April
2.27 The return to a fiscal balance in Dubai will be 2018, the government also announced a supply side
helped by the impact of revenue from the stimulus package composed of 25 initiatives to be
implementation of VAT in 2018, although this implemented by a number of Dubai government
may take some time. The VAT base on rollout is narrow- Departments and Agencies. The package will have a
er than expected; since there are exemptions for most further impact on the public sector deficit, in some
real estate and financial services transactions, trade cases by increasing expenditure and reducing fees
in free zones, local passenger transport and charitable received from regulating private sector business activ-
organizations. In May 2018 the government also clar- ities, but the package is intended to liberate Small and
ified that wholesale VAT does not apply to gold and Medium-Sized Enterprises (SMEs) from the restric-
diamond sales to VAT-registered businesses intended tions that hold back their growth. The main reforms,
for resale. In addition, a zero rate applies to certain the relevant authorities, the aim of the measures and
transport, telecom, health and education services, as the likely impact on public finances, where obvious, are
well as exports, medical equipment, oil/gas, and invest- listed in Table 2.2.
ments in precious metals. The UAE authorities agreed

Table 2.2: Dubai Growth Stimulus Package of Initiatives for 2018
Fiscal Impact on
Implementing Agency Measure Objective Public Sector
Dubai Economy Exempt Companies from Attract SMEs to support Reduce Public Revenues
penalties for late renewal faster growth
of licenses
Dubai Chamber Revise downward the fees Attract SMEs to support Reduce Public Revenues
for doing business faster growth
Land Department Develop new financing Encourage property sales Unknown

mechanism for Real Estate and construction industry
market
Dubai Municipality Reduce fee collected as Attract SMEs to support Reduce Public Revenues
proportion of annual rent faster growth
from 5% to 2.5%
Dubai Municipality Reduce fee collected from Stimulate consumer Unknown

sales of hotel rooms from expenditure and tourism
10% to 7%
Aviation Authority Landing fees for private jets Attract international business Reduce Public Revenues
to be reduced to Dubai
Dubai South Make Dubai a global centre Attract international business Unknown
for registration of private jets to Dubai
and other planes
Department of Finance Raise procurement quota Attract SMEs to support Unknown

for SMEs from 10% to 20% faster growth
Nasdaq Dubai Accelerate the issue of Attract international business Unknown

bonds on secondary markets to Dubai
Dubai Port Authority and Encourage block chain Attract international business Unknown
Free Zones in logistics to Dubai
Dubai Free Zones Centre Regulate e-commerce in Attract international business Unknown
Dubai and the Free Zones to Dubai
Dubai International Attract FDI in Attract international business Unknown

Financial Centre financial markets to Dubai
Source: The General Secretariat of The Executive Council of Dubai (April 2018).

CHAPTER 3 |
Dubai’s Foreign Trade

F
oreign trade is an economic stronghold for Dubai and the
total value of the Emirate’s merchandise trade in 2017
accounted for over three times its GDP. Dubai is ideally
positioned for global commerce, with three ports, two
airports and 30 free trade zones. However other factors
contribute significantly to peaks and declines in Dubai’s foreign trade.
These include the fluctuating currency rate of the AED against the
Euro and other major currencies except the US dollar, variations in oil
prices, and global political and economic developments that impact
import, export, re-export engagements with countries that are main
trade partners.
↗↗ Three ports, two major airports, and 30 free zones, focusing on a

variety of economic activities; finance, health care, higher education,
media production, design, gold and diamonds, etc., play a pivotal role
in increasing commercial exchange between Dubai and the world.
↗↗ The total value of Dubai’s foreign non-oil commodity trade amounted

to AED 1.30 trillion in 2017, rising by 2.0 per cent on the previous
year. The recovery in merchandise trade value followed two years
of decline, which can be attributed both to a period of slowing global
demand while regional demand was also hit by a slump in the oil
prices. These factors turned round rebounded to raise the value of
Dubai’s trade in 2017.
↗↗ Three groups of commodities accounted for more than 66 per cent

of foreign trade in 2017: Machinery, tools, equipment, electronic,
and electrical appliances; Precious and semi-precious gemstones,
minerals and imitation jewellery, and Transport Equipment.
↗↗ Dubai’s foreign trade in 2018 will be impacted by the strengthened

US dollar to which the UAE Dirham is pegged: It will improve trade
conditions with major import partners such as China, Japan and
European countries. However Dubai’s exports will become more
expensive to India, especially given the pressure building up on the
value of the rupee. The situation could be exacerbated by India’s
raise of import tariffs on non-essential imports to reduce its current
account deficit, including gold, much of which is acquired from Dubai.

CHAPTER 3 | Dubai’s Foreign Trade
Free Zones on the Rise

The size and impact of free trade zones on the Dubai economy is on the rise.
1 Foreign Trade through 2 Dubai’s International Merchandise Trade

Free Zones
It has continued to increase in the first half of 2018,
Exports plus re-exports rose by 7.1 compared to the first half of 2017
per cent to AED 193.1 billion
Direct trade and free zones rose from AED 640 billion
Imports increased by 4.9 per cent to to AED 645 billion
AED 280.0 billion
3 Dubai’s Free Zones
There are now 30 free zones in Dubai for

various purposes and functions:
• finance
4 The Geographical Distribution
• health care of Dubai’s Foreign Trade
• higher education
• media production The top 4 countries (China, India, USA &
• design Saudi Arabia) account for 32.2 per cent of
• gold and diamonds, etc. Dubai’s total trade
Trade with neighbouring Saudi Arabia rose
strongly by almost 12 per cent to AED
58.4 billion, 4.5 per cent of total trade
Port of Jebel Ali
9
Top 4 Trade Countries:
th Largest container port
in the world
The three stations for containers, oil materials

and general shipments will expand to a fourth China India USA Saudi
station after 2018 Arabia

Dubai’s Foreign Trade | CHAPTER 3
Introduction
3.1 Foreign trade is of great importance to tional Airport, and the Free zones in both airports
Dubai’s economy. The total value of the emir- contribute to enhancing the role of Dubai’s foreign
ate’s merchandise trade in 2017 accounted trade in the economy.
for over three times its GDP. Trade has played a pivot-
al role in reviving the emirate’s economy in recent 3.2 Free zones play a pivotal role in increasing
years. Dubai’s commercial relationships with the world commercial exchange between Dubai and
helped overcome the consequences of a number of the world. In 1985, Dubai built the largest free
shocks, including the global economic crisis of 2008 zone in the Middle East and North Africa: “Jebel Ali Free
and 2009, and the regional impact of the sharp drop in Zone”. There are now 30 free zones were built for vari-
the price of oil from mid-2014 until it bottomed ous purposes and functions including finance, health
out in early 2016. care, higher education, media production, design, gold
and diamonds etc.
Three main ports currently serve Dubai’s foreign
merchandise trade activities: Port Rashid, Al Hamri- Dubai’s economy currently has a dual structure as
ya Port, and Jebel Ali Free Zone Port in addition foreign trade transactions are conducted in two differ-
to traditional piers along the Dubai Creek. Foreign ent economic zones: Dubai’s main zone and the group
trade has developed through free zones as a result of free zones. Free zones are governed by a set of rules,
of the massive infrastructure built in Jebel Ali Port. procedures, and regulations that are different from
This port became the ninth largest container port those governing business conduct in Dubai’s main
in the world, and it consists of three stations for zones, so regulations in free zones are highly flexible.
containers, oil materials and general shipments. Hence, the classification of foreign trade distinguishes
A fourth station for containers will be added on its between transactions conducted through Dubai main
completion after 2018. The increasing traffic in zones (“Direct Trade”), and those conducted through
Dubai International Airport, Al Maktoum Interna- free zones (“Indirect Trade”).
Three ports, two major airports, and 30 free zones,

focusing on a variety of economic activities;
finance, health care, higher education, media
production, design, gold and diamonds, etc.,
play a pivotal role in increasing commercial
exchange between Dubai and the world.

Foreign Trade Performance
Dubai’s Trade Values

3.3 The total value of Dubai’s foreign non-oil 3.4 The importance of direct trade (i.e. trade
commodity trade amounted to AED 1.30 tril- conducted through Dubai’s main zones)
lion in 2017, rising by 2.0 per cent on the decreased marginally in 2017. This catego-
previous year. The recovery in merchandise trade value ry’s share of the total value of Dubai’s foreign trade fell
followed two years of decline, with slight fall of 0.5 per to 63.7 per cent compared to 65.0 per cent in 2016.
cent in 2016 and of 3.7 per cent in 2015, after the value The share of foreign trade through free zones amount-
of foreign trade had registered a record value of AED ed to around 33.3 per cent in 2017 up from 32.2 per
1.33 trillion in the previous year. (Figure 3.1) The decline cent the previous year. Trade through customs ware-
and recovery can be attributed to several factors. The houses rose from 2.7 per cent to reach 3.0 per cent in
drop in value of Dubai’s trade from 2015 onwards 2017. (Figure 3.2)
occurred during a period of slowing global demand
while regional demand was also hit by a slump in oil 3.5 The total value of direct foreign trade fell frac-
prices. These factors rebounded to raise the value of tionally to AED 828.7 billion in 2017 from AED
Dubai’s trade in 2017. A decline in the value of imports 830.1 the previous year. The value of both
also occurred a result of the rise in the AED exchange imports and exports fell by 3.2 per cent and 4.5 per
rate (in which imports are valued) against the curren- cent respectively in 2017. In contrast, re-exports rose
cies of Dubai’s chief trading partners. During 2017, the strongly by 13.1 per cent to reach AED 186.8 billion,
relative value of the AED (which is linked to the US after falling steadily by 5.5 per cent from a value of AED
dollar) depreciated again, partially reversing the 174.7 billion in 2103. (Figure 3.3)
currency effect.
Figure 3.1: Total Value of Dubai’s Foreign Trade (AED Billion)
1340 1329 1331 16.0

13.4
14.0
1320
1,302 12.0
1300
1,283 10.0
7.6
1,276
1280 8.0
6.0
1260
2.0 4.0
1235
1240 0.2 2.0
-0.5
0.0
1220
-3.7 -2.0
1200
-4.0
1180 2012 2013 2014 2015 2016 2017 -6.0
AED Billions % change


Figure 3.2: Dubai’s Foreign Trade by Economic Zones
65.0% 63.7%
Direct Trade
32.2% 33.3%
Free Zones
2.7% 3.0%
Customs
Warehouses
2016 2017
Figure 3.3: Direct Foreign Trade in Dubai (AED Billion)
174,716
171,775 165,065 186,752
157,689 168,979
160,695
126,024 129,439
148,486 99,739 123,661
118,912
98,064 545,024 547,263 535,555

514,245 518,279
501,668
441,666
2011 2012 2013 2014 2015 2016 2017
Imports Exports Re-Exports


3.6 The recovery in re-exports in Dubai’s direct sharply from an index value of around 103 in July 2014
foreign trade in 2017, after a decline the to 125 at the end of 2016, before falling throughout
previous year, can be attributed to a number 2017 by 6 per cent to the end of the year. (Figure 3.4)
of factors. One factor is a recovery in foreign demand,
particularly in neighbouring countries, in the light of 3.7 With respect to foreign trade through free
the recovery in global energy prices and in their oil zones, the value of both imports and total
revenues. Another contributory factor may also be the exports (exports plus re-exports) recovered
fall in the relative valuation of goods in AED against the in 2017 after falling the previous year. Exports plus
currencies of Dubai’s main trading partners in 2017, re-exports rose by 7.1 per cent to AED 193.1 billion
after a steady rise in previous years. The relative value while the value of imports increased to AED 280.0, up
of the AED against other currencies is closely related by 4.9 per cent. The rise in both categories can be
to the value of the dollar because of the currency peg. attributed to a recovery in foreign demand due to the
A trade weighted index of the US dollar against a broad renewal of global economic growth in addition to the
range of currencies of twelve major trading partners, depreciation in the US$ exchange rate against the
including the Euro area, the UK, China, Japan, India and leading currencies in 2017 after its previous rise.
Brazil among others, but excluding Turkey. The trade (Figure 3.5)
weighted relative value of the dollar and the AED rose
Figure 3.4: US$ Trade Weighted Exchange Rate Index (2011-2018)*
130
120
110 USD exchange rate

starting to rise
100
90
2011.01.01
2011.03.01
2011.05.01
2011.07.01
2011.09.01
2011.11.01
2012.01.01
2012.03.01
2012.05.01
2012.07.01
2012.09.01
2012.11.01
2013.01.01
2013.03.01
2013.05.01
2013.07.01
2013.09.01
2013.11.01
2014.01.01
2014.03.01
2014.05.01
2014.07.01
2014.09.01
2014.11.01
2015.01.01
2015.03.01
2015.05.01
2015.07.01
2015.09.01
2015.11.01
2016.01.01
2016.03.01
2016.05.01
2016.07.01
2016.09.01
2016.11.01
2017.01.01
2017.03.01
2017.05.01
2017.07.01
2017.09.01
2017.11.01
2018.01.01
2018.03.01
2018.05.01
2018.07.01
Source: Federal Reserve Bank of St. Louis * Exchange rate index of USD against a weighted basket of twelve currencies
Figure 3.5: Dubai’s Foreign Trade in Free Zones and Customs Warehouses (AED billion)
215
217 199 193
179
191
297 282
265 267 280
236
2012 2013 2014 2015 2016 2017
Imports Exports & Re-Exports


Dubai’s Foreign Trade Balance

3.8 The total merchandise trade balance for and logistics activities as part of value chains and are
Dubai, which is the difference between then exported or re-exported abroad. Such imports
imports and total exports, has been charac- are registered as exports or re-exports, and therefore,
terized by a permanent deficit because Dubai is a hub they lead to an increase in the share of imports and
for global and regional trade. The imports of the Emir- re-exports in the trade components in such zones.
ates are largely greater than its total exports since the
majority of imports are transported to other emirates Third, Dubai has a narrow manufacturing and agricultur-
and neighbouring countries without them being regis- al base which leads to a significant increase in importa-
tered as re-exports. Dubai’s commodity trade balance tion of the most of such commodities that are required
statistics in 2017 indicated that the value of imports for final consumption. This increase in imports is aggra-
exceeded total exports producing a deficit of AED 295 vated due to the weak economic links between direct
billion or 23 per cent of total trade. It is noteworthy that trade in Dubai and the free zone and the low share of
the deficit between imports and exports has expanded high value- added content in Dubai’s exports.
as the importance of Dubai’s ports has increased as an
import hub with final destinations to the other emirates Fourth, the large number of high-income residents (citi-
and to neighbouring countries. (Figure 3.6) zens and expats) living in Dubai fuel the continuous
increase in the demand for foreign consumer goods.
3.9 The trade deficit resulting from direct trade
transactions in Dubai in 2017 at AED 207.9 Finally, it must be noted that. The value of foreign
billion is larger in value than that in free zones trade in financial and logistics services, in contrast to
and customs warehouses at AED 87.0 billion. This is merchandise trade, in which Dubai has a relative advan-
attributable to a number of factors. tage over similar economies (open and small), such as
Hong Kong and Singapore, is not included in Dubai’s
First, Dubai’s Custom’s data does not determine the final foreign trade statistics.
destinations of goods registered through Dubai ports.
This, in turn, leads to registering goods passing to other Therefore, recording the volume and value of trade
emirates and neighbouring countries as Dubai imports. in services (and increasing the focus on expanding
These goods are not even registered as re-exports. the services sectors) could help in reducing Dubai’s
reported significant trade deficit and might even turn
Second, compared to Dubai’s direct trade, a significant it into surplus.
part of imports to free zones are used in manufacturing
Figure 3.6: Dubai’s Trade Balance (AED billion)
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
-100
-149 -152
-200 -183
-195
-208
-226
-244 -241
-270 -276
-300
-40 -40 -45 -44 -48
-81 -82 -83 -88 -87
-400
Direct Trade Deficit Free Zones & Customs Warehouses Deficit

Dubai’s Foreign Trade Structure & Patterns
3.10 Dubai’s foreign trade flows, both exports and and Processed food, beverage and tobacco groups
imports, are highly concentrated in terms of accounted for 44, 18 and 10 per cent of exports
commodities and geography. respectively, with a total of 72 per cent of the total
value of exported commodities in 2017. (Figure 3.8)
With respect to the commodity structure of the value
of Dubai’s total trade, three groups of commodities 3.12 A high commodity concentration is also
accounted for more than 66 per cent of foreign trade found in Dubai’s imports where a limited
in 2017. These groups included: Machinery, tools, group of products account for the majority
equipment, electronic, and electrical appliances (at of its foreign trade purchases. Three commodities:
31 per cent); followed by Precious and semi-precious Machinery, tools, equipment and electronic and elec-
gemstones, minerals and imitation jewellery (at 25 trical appliances; Precious and semi-precious stones,
per cent): and then Transport Equipment (at 10 per minerals and imitation jewellery; and Transport Equip-
cent). The economic impact of a high commodity ment accounted for 32 per cent, 23 per cent and 10
concentration is heightened positively or negatively per cent of all imports respectively, totalling 65 per
when there are major changes in the global prices of cent of total value in 2017. (Figure 3.9)
these commodities. This concentration by commod-
ity affects the total value of foreign trade, and at 3.13 The concentration by commodity in the
the same time, it limits the emirate’s foreign trade structure of Dubai’s re-exports is similar to
sectors’ ability to adapt as needed to the chang- that of imports. The main reason is that a
es in the prices of such commodities. This in turn significant portion of the commodities, which are
may have adverse effects on the emirate’s terms of imported into the emirate, is then passed on as re-ex-
trade. (Figure 3.7) ports outside Dubai. It is notable that the top three
re-exported commodities, which dominate imports by
3.11 Regarding exports, three groups of commod- category, account for around 74 per cent of Dubai’s
ities dominate. The Precious and semi-pre- total-re-exports. The majority of commodities re-ex-
cious gemstones, minerals and imitation ported are passed on to other GCC countries and to
jewellery, Chemical products and related industries, Iran, Iraq, and India. (Figure 3.10)

Figure 3.7: Figure 3.8: Figure 3.9: Figure 3.10:

Dubai Trade Dubai’s Exports Dubai’s Imports Dubai’s
Structure Structure Structure Re-exports
of Main of Main of Main Structure of
Commodities Commodities Commodities Main Commodi-
(per cent of (per cent of (per cent of ties (per cent of
total, 2017) total, 2017) total, 2017) total, 2017)
Machinery, tools,
equipment, & 31% 6% 32% 38%
electronic &
electric appliances
Precious &
semi-precious 25% 44% 23% 23%
gemstones,
minerals &
imitation jewellery
Transport 10% 3% 10% 13%

equipment
Chemical 5% 18% 4% 2%
products &
related industries
Basic metals & 5% 4% 6% 4%

related products
Processed food, 4% 10% 3% 3%

beverage &
tobacco
4% 3% 4% 4%
Plant products
Textiles and 3% 1% 3% 3%
apparel
Rubber & rubber 2% 4% 2% 2%

products
2% 1% 3% 2%
Metal products
Other 8% 6% 9% 7%
commodities
Source: Dubai Customs

Dubai’s Main Trading Partners
3.14 The geographical distribution of Dubai’s Germany collectively accounted for 45.6 per cent of
foreign trade is also concentrated with a the total. China, the United States and India maintained
large per centage of trade conducted the first three positions respectively while Japan
between Dubai and a small number of trade partners. moved up into the fourth position, which Germany had
In 2017, four countries only (China, India, United States, held the previous year. Imports from China, valued at
and Saudi Arabia) accounted for 32.2 per cent of AED 167.2 billion, or 21 per cent of the total, were near-
Dubai’s total trade. China came in the first position as ly three times greater than those from the USA at AED
Dubai’s largest trade partner with 13.6 per cent of total 66.4 billion. Imports from Germany and Italy collective-
trade value rising by 6 per cent on the previous year to ly accounted for AED 55.4 billion or 7 per cent of the
reach AED 176.4 billion. Trade with India, Dubai’s total value in 2017. Japan accounted for a further AED
second largest trading partner, grew by a similar rate 38.3 billion of merchandise into Dubai, down by 6.2 per
to reach AED 99.4, 7.6 per cent of the total value. Trade cent on the year, but still responsible for 4.8 per cent of
with the USA, in third place, fell slightly by 1.5 per cent all imports. Since the emirate’s exchange rate is pegged
to AED 84.7 billion, 6.5 per cent of the total trade value. to the dollar this makes the exchange rates between
Trade with neighbouring Saudi Arabia rose strongly by the dollar and the Euro, the Chinese Yuan and the Yen
almost 12 per cent to AED 58.4 billion, 4.5 per cent of particularly important for Dubai. In 2017, the remaining
total trade. The most significant change was the ten import partners of Dubai maintained the same posi-
increased importane of Turkey as a trading partner, tions they had held in 2016. (Figure 3.13)
moving from 13th in importance in 2016, to 6th position
in 2017. The value of total trade between Dubai and 3.17 Dubai is a major international trading hub and
Turkey soared by 56.3 per cent in 2017 over the previ- is the centre of a number of regional value
ous year to reach AED 46.6 billion. (Figure 3.11) and global value chains given its favourable
geographical position. In 2017, it moved into 10th posi-
3.15 The destination of Dubai’s exports is also tion globally as a preferred maritime hub. Re-exports
highly concentrated. In 2017, five main trad- have come to represent a major part of Dubai’s inter-
ing partners (Turkey, India, Saudi Arabia, national trade activities. Close to a third of Dubai’s
Oman and Iraq) accounted for nearly 39 per cent of the commodity imports were re-exported both to neigh-
total value of commodities exported. The five main bouring countries and worldwide.
recipient countries varied from the previous year.
Turkey became the first destination for Dubai’s exports, The emirate’s re-exportation trade is also concentrat-
after it moved up from the fifth place. Saudi Arabia ed by geography. In 2017, the top five countries (Iran,
replaced Oman in the third position, while Oman moved Saudi Arabia, India, Iraq and Hong Kong) received AED
down into the fourth position and Iraq on the other hand 148.2 billion of re-exported commodities from Dubai, or
moved up into the fifth position from the sixth position 41.2 per cent of the total. The re-exportation trade grew
in 2016. The most significant change in 2017 was the strongly in 2017 with the total trade to the same five
rise in Dubai’s exports to Turkey, which more than countries rising by 12.7 per cent over the previous year.
doubled from their value the previous year to reach AED Iran is in the leading position in Dubai’s re-export trade
16.1 billion. While exports to India declined marginally at AED 42.4 billion and this growth is attributable to the
to AED 11.9 billion, 2017 witnessed a strong rise in the lifting of international sanctions. Saudi Arabia, India and
value of exports to Saudi Arabia and to Oman, rising by Iraq remained in the same rank positions in 2017 as in
46.5 per cent and by 18.3 per cent to AED 11.5 billion 2016, but Hong Kong rose from 7th to 5th position. Re-ex-
and AED 10.2 billion respectively. (Figure 3.12) ports to Belgium, a port of entry for the European market,
remained in 6th position, but dropped in value by 12.6 per
3.16 Inspecting the provenance of Dubai’s imports cent to AED 13.9 billion. The UK gained 10th position in
in 2017, the top five countries China, the Unit- 2017 from 13th the year before after a leap with growth
ed States of America, India, Japan and of 50 per cent to AED 10.5 billion. (Figure 3.14)

Figure 3.11: Contribution of Dubai’s Main Trade Partners to Total Trade (AED Billion)
2017
Ranking
1 2 3 4 5 6 7 8 9 10
Saudi
Country China India USA Arabia Iran Turkey Japan Germany Vietnam Iraq
2017 176.4 99.4 84.7 58.4 48.2 46.6 41.8 39.8 37.0 31.9
2016 166.4 (#1) 94.2 (#2) 85.9 (#3) 52.2 (#4) 45.4 (#6) 29.8 (#13) 43.5 (#8) 49.9 (#5) 37.4 (#9) 31.2 (#11)
Figure 3.12: Contribution of Dubai’s Main Trade Partners: Total Exports (AED Billion)
2017
Ranking
1 2 3 4 5 6 7 8 9 10
Saudi South
Country Turkey India Arabia Oman Iraq USA Kuwait Singapore Korea Switzerland
2017 16.1 11.9 11.5 10.2 5.8 5.2 4.6 4.5 4.5 3.5
2016 7.8 (#5) 12.0 (#2) 7.9 (#4) 8.6 (#3) 7.3 (#6) 5.2 (#8) 3.7 (#9) 5.7 (#7) 2.5 (#14) 19.2 (#1)
Figure 3.13: Dubai’s Main Trade Partners: Total Imports (AED Billion)
2017
Ranking
1 2 3 4 5 6 7 8 9 10
South
Country China USA India Japan Germany Vietnam Turkey Korea Italy UK
2017 167.2 66.4 57.0 38.4 35.8 35.1 27.0 22.1 19.6 19.2
2016 160.5 (#1) 69.0 (#2) 56.3 (#3) 40.9 (#5) 46.4 (#4) 35.5 (#6) 18.2 (#11) 22.2 (#7) 19.0 (#9) 19.7 (#8)
Figure 3.14: Dubai’s Main Trade Partners in Re-Exportation (AED Billion)
2017
Ranking
1 2 3 4 5 6 7 8 9 10
Saudi
Country Iran Arabia India Iraq Hong Kong Belgium USA Oman Kuwait UK
2017 42.4 34.3 30.5 23.7 17.3 14.0 13.1 12.5 12.2 10.5
2016 39.6 (#1) 33.5 (#2) 25.9 (#3) 17.4 (#4) 15.2 (#7) 16.0 (#6) 11.8 (#8) 10.2 (#10) 10.6 (#9) 7.0 (#13)
Source: Dubai Customs.

Intra-Trade between Dubai and GCC Countries
3.18 Trade between Dubai and the other GCC sensitive to energy prices and economic conditions in
countries (Saudi Arabia, Oman, Qatar, Kuwait Dubai’s trading partners. The demand for re-exports
and Bahrain) in 2017, valued at AED 127.4 to the GCC nations grew slowly, by less than 1 per cent
billion, accounted for nearly 10 per cent of the emir- in 2017, and has been volatile in recent years. Demand
ate’s total foreign merchandise trade. This represent- stagnated in 2014, before rising by 5.4 per cent in
ed an increase of 5.6 per cent after a similar fall in 2016. 2015, and falling by 15.3 per cent in 2016. In contrast,
Trade between Dubai and the rest of the GCC had exports and imports between Dubai and GCC coun-
grown rapidly up to 2016, rising by a third from 2012, tries started growing in 2012 after declining in 2011
until declining oil prices supressed regional and both had nearly doubled in value by 2016, although
demand. (Figure 3.15) exports fell by 7.6 per cent that year as a result of the
same demand conditions that had affected re-exports.
Re-exports are an important part of trade between In 2017, imports from the rest of the GCC grew by 3.1
Dubai and the other other Gulf States, accounting for per cent, but the value of merchandise exports into
53 per cent of total intra-GCC trade and 19 per cent the rest of the GCC from Dubai recovered strongly,
of all Dubai’s re-exports in 2017, but they are highly growing by 21 per cent to reach AED 30.6 billion.
Figure 3.15: Dubai’s Trade with GCC Countries (AED Billion)
140
79.5 67.9
67.4
75.4
120 75.3
100 63.5
80
28.9
60 28.0
19.8
21.3
18.3
40
15.9 30.6
27.3
25.3
20.2 20.8
20 15.3
2012 2013 2014 2015 2016 2017
Exports Imports Re-Exports


Dubai’s Foreign Trade in 2018
3.19 The total value of international merchandise ciated in 2017, the trade weighted value of the dollar
trade in Dubai has continued to increase in began rising again in 2018 with the index increasing
the first half of 2018, rising in direct trade from around 117 on January 24th to 127 by September
and free zones to AED 645 billion, compared to AED 12th. This will improve the terms of trade with major
640 billion in the same period the year before. Both import partners such as China, Japan and European
exports and imports fell in value by around 4 per cent, countries, but it will make Dubai’s exports to India
while re-exports rose by 14 per cent, but resulted in more expensive especially given the pressure building
a rise of less than 1 per cent in total trade. Despite the up on the value of the rupee. This could be exacerbat-
favourable growth trends in the global economy ed by proposals in India to raise tariffs on non-essen-
discussed in Chapter 1, a number of issues impacted tial imports, including gold and jewellery, in order to
the emirate’s important external trade sector in 2018. reduce its current account deficit. Turkey, another
(Figure 3.16) Dubai’s major trading partners, is facing a current
account deficit and capital outflows. Furthermore, the
3.20 According to IMF forecasts, firm oil prices dollar index against the basket of currencies has been
and recovering growth in the GCC region will appreciating in 2018, and this poses another head-
underpin Dubai’s regional trade in 2018, but wind for the emirate’s trade in 2018 and 2019. Finally,
Dubai is once again facing the headwind of an appre- apart from the general risks facing global trade as a
ciating currency as a result of the rising value of the result of rising tensions between the US, China and
dollar. Strong growth in the USA and the normalization the EU, Dubai could face regional problems as a result
of interest rates will reinforce this trend. Having depre- of the re-imposition of sanctions on Iran.
Figure 3.16: Dubai’s Trade 2018 1H vs 2017 1H (AED billion)
Total Trade
645.0
2018 1H
65.0 377.0 203.0
Total Trade
640.1
2017 1H
67.7 394.3 178.1
Exports Imports Re-Exports


CHAPTER 4 |
Sustainable
Tourism for
Dubai’s Economic
Development

T
his chapter highlights the tourism sector’s important
contribution to Dubai’s economic growth and how it is
fundamental to the successful diversification of the emir-
ate’s economy and that of the UAE as a whole. However,
tourism generates undeniable economic benefits, as well
as long-term costs and challenges. The focus of this chapter, and a major
theme of this year’s report, addresses these challenges in the context of
sustainable tourism.
↗↗ The growth of tourism has produced significant economic benefits in

Dubai and is also playing a major role in the economic diversification
of the federation.
↗↗ The continual rise in the number of international visitors to Dubai,

8.7% increase per year, has had a major positive economic impact
on the emirate’s development across sectors and a rise in the
labour force.
↗↗ Dubai attracts visitors who are high spenders on branded luxury

goods, contributing to 20.4% of total annual retail sales, of over
AED 100 billion.
↗↗ With four ports, Dubai is ideally situated for marine tourism

and is the activity hub for five luxury cruise lines and 20 global
cruise companies.
↗↗ DEWA is investing AED 4.26 billion in electricity and water infrastruc-

ture projects to ensure energy used during Expo 2020 will come from
renewable sources.
↗↗ To safeguard against a future oversupply of accommodation, the

Municipality of Dubai is overseeing the emirate’s overall urban
growth, including housing and hotels and hotel apartments.

CHAPTER 4 | Sustainable Tourism for Dubai’s Economic Development
Dubai’s Action Plan

for Sustainable Tourism
Tourism is an economic driver for Dubai and the UAE, amounting to 4.9% of the emirate’s GDP /
US$5.2 billion. Sustainable tourism can enable Dubai to successfully build this sector in a manner
that fosters an increase in visitors and a diversified economy while promoting regional culture
and being attentive to the impact of tourism on the environment.
1 Protecting the Environment 2 Promoting Regional Culture
Diversifying Dubai’s clean energy-mix Etihad Museum, opened in January 2017,

of solar and natural gas showcases the history of the UAE
The Carbon Dioxide Emission The Museum of the Future opened in February 2017
Reduction Programme, launched in with focus on technology
2012, is a roadmap for short, medium
and long-term emission reduction
actions up to 2030. Expo It will offer events, exhibitions,
2020
performances, meetings and many
other activities that positively reflect
30%
the culture of the UAE and Gulf region
Efficiency by 2030
Reducing energy
& water demand
4 Supporting the
Community
20 M
Visitors
3
270 K
DTCM infrastructure
for Stimulating
Tourism Investment New Jobs
Solicited investment from local and global

companies for hotel construction, resorts
and amusement parks

Resorts
Government infrastructure successfully
encourages private sector investment in Amusement Parks
hotels and other visitor accommodation
Theme Parks
In 2017, ten new hotels opened, increasing
the total number of hotels in Dubai to 485 in
7%
of total UAE investments
all categories, a rise of 2.1 per cent over the
previous year. of 2016 went for
tourism
Sustainable Tourism for Dubai’s Economic Development | CHAPTER 4
Introduction
Tourism is a key sector contributing to Dubai’s address first recent developments in Dubai’s tour-
economic growth and it is fundamental to the success- ist sector in 2017 and in the years before that, then
ful diversification of the emirate’s economy and that of Dubai’s tourism strategy and thirdly the main factors
the UAE as whole. This chapter highlights the impor- driving the demand and the supply sides of Dubai’s
tance of the sector, but given that tourism generates tourist industry.
long-term costs and challenges which net out of
the undeniable economic benefits, the focus of this The fifth section of this chapter summarizes the Dubai
chapter and a major theme of this year’s report, is on government’s efforts towards laying out the founda-
sustainable tourism. tions for sustainable tourism for the future. Then, the
sixth section draws on international policies and prac-
The first two sections of this chapter highlight the tices in order to extract the main lessons to be learnt
relationship of Dubai’s tourism with economic growth for a country to develop a successful and sustainable
and development and its economic impacts on other tourism industry. Finally, the chapter concludes with
sectors of the economy. The next three sections an overall assessment and policy recommendations.
The growth of tourism has

produced significant economic
benefits in Dubai and is also playing
a major role in the economic
diversification of the federation.

Dubai’s Tourism and Economic Development
4.1 Travel and Tourism is one of the more import- by tourism, contributed 4.9 per cent to GDP compared
ant drivers of sustainable economic devel- to 3.5 per cent in 2009, showing the sector has risen
opment creating jobs and contributing to faster than Dubai’s real GDP during the same period.
global economic activity in a large variety of direct and
indirect ways. Tourism encompasses international 4.3 In the Gulf region, tourism is also seen as a
visits for any main reason either leisure, business, means of diversifying the economy away
medical or other personal.1 According to the World from reliance on energy exports and an initia-
Travel and Tourism Council the sector directly contrib- tive was established in 2015 to encourage intra-coun-
uted 3.2 per cent of global GDP or US$2.57 trillion in try tourism within the region. There is also a relation-
2017.2 The total contribution taking account of indirect ship between economic growth and tourism in that
effects on other sectors and multiplier effects based richer countries have the infrastructure that attracts
on induced investment spending and the collective more visitors for business or leisure.
spending of governments and of employees was esti-
mated at 10.4 per cent of global GDP. This is expected In the GCC, a recent study found evidence that this
to grow by 3.8 per cent per annum from 2018 to reach has been the direction of causality for all countries
11.7 per cent of world value added by 2028. Interna- apart from Bahrain.3 This country level study, however,
tional overnight travel and expenditure by travelers has focused on the role of tourism and growth in the UAE
been rising at over twice the growth rate of global as a whole not just Dubai, where the government has
real GDP. successfully stimulated tourism as a means of encour-
aging growth. As a result tourism is less important in
4.2 Dubai Statistics Center (DSC) defines a tour- other emirates. Therefore, for the UAE as a whole, with
ist as anyone staying in a hotel or accommo- its high dependence on energy exports the most likely
dation for one night or more. Since 2014, causal relationship would be economic growth driving
official tourism statistics have included those who stay visitors, while in Dubai it is more likely that it is tour-
for one night or more at their relatives’ or hosts’ private ism influencing growth. This is a long-term support-
residences. The number of visitors to Dubai has been ive relationship. The growth of tourism has produced
rising since 2009 at an annual average rate of 8.7 significant economic benefits in Dubai, but it is also
percent, in excess of the growth in the economy. The playing a major role in the economic diversification of
tourism sector in the Dubai’s National Accounts is the federation. Dubai is helping transform the UAE into
defined to include Accommodation and Food Services a top international leisure and entertainment destina-
activities (restaurants and hotels). In 2017 the accom- tion developing into a global hub for tourism.
modation and food services activities, largely driven
1 The United Nations definition of a tourist is a traveler taking a trip to a main destination outside his/her usual environment for less than a year and
for any main purpose (business, leisure or other personal purpose) other than to be employed by a resident entity in the country or place visited.
International Recommendations for Tourism Statistics (IRTS 2008), para. 2.9.
2 https://www.wttc.org/-/media/files/reports/economic-impact-research/regions-2018/world2018.pdf
3 Abdulkarim K. Alowaish (2016). “Is Tourism Development a Sustainable Economic Growth Strategy in the Long Run?, Sustainability, 8.

People viewing marine life in the underwater tunnel at the Dubai aquarium.

Recent Developments in Dubai’s Tourism sector
4.4 Dubai is the most popular tourist destination Europe accounted for 7 per cent, which is a remarkable
in the Gulf and the fourth most popular desti- increase of 40 per cent over the total number of inter-
nation worldwide according to Master Card’s national visitors in 2017. (Figure 4.2)
Global Destination Cities Index.
4.6 The Emirate of Dubai aims to maintain its
Dubai’s popularity as a tourist destination is demon- market share of visitors from countries
strated by the continual rise in the number of annual where it is already a popular destination and
overnight visitors which have grown every year over attract tourists from new countries, particularly those
the last decade from 6.9 million in 2007 to 15.8 million with high growth potential such as China while encour-
in 2017. Further growth is planned as stemming from aging repeat visits by all tourists. In practical terms this
the government’s medium-term plan “Tourism Vision has entailed widening and deepening the global
2020”, launched in May 2013 by Sheikh Mohammed demand to visit Dubai as a tourist destination.
bin Rashid Al Maktoum, with the aim of attracting 20
million annual tourists to Dubai by that date. These These efforts are essential because at present the
trends are illustrated in Figure 4.1. provenance of international visitors to Dubai is concen-
trated which puts the sector at risk from economic and
The tourism sector in Dubai is expected to see a similar political shocks. In 2017 statistics from the Depart-
trend growth in 2018, with occupancy rates expect- ment of Tourism and Commerce Marketing (DTCM)
ed to rise as a result of strong demand growth, while show that three countries — India, the Kingdom of
increased competition from new hotels is expected to Saudi Arabia and the United Kingdom accounted for
result in a slight drop in prices. Reducing costs will be just under a third — 31 per cent of all international visi-
a top priority for many players in the tourism sector. tors. In the same year the top ten source countries for
Moreover, the demand for leisure and entertainment international visitors accounted for 58.7 per cent of all
tourism is also expected to rise as a number of mega tourists in 2017.
projects enter the market such as La mer, Dubai Safari
Park and Dubai Frame. 4.7 The number of visitors from India has
reached around 2.1 million and increased by
4.5 In terms of the geographical source of visi- 15 per cent in 2017, becoming the first coun-
tors by region, in 2017 Western Europe main- try to exceed 2 million visitors in a single year. The
tained its advanced position and contributed Saudi market maintained its second position in terms
a significant 21 per cent increase in international visi- of visitors, after registering 1.53 million visitors, down
tors, ahead of the GCC and South Asia regions, each by 7 per cent from 2016, but the Kingdom of Saudi
of which accounted for 19 per cent and 18 per cent, Arabia is still the main source from the GCC region. The
respectively. The Middle East and North Africa (MENA) UK came in third with 1.27 million visitors and 2 per
region remained stable at 11 per cent, North and cent growth over 2016, confirming the wide appeal of
South-East Asia accounted for 11 per cent of the total Dubai to the British visitors.
number of visitors, while Russia, the CIS and Eastern

Figure 4.1: International Overnight Visitors to Dubai 2007-2017
2006 6.4
7.81
2007 6.9
8.70
2008 7.5
1.33
2009 7.6
9.21
2010 8.3
8.43
2011 9
11.11
2012 10
10
2013 11
2014 13.2
7.58
2015 14.2
4.23
2016 14.8
6.69
2017 15.79
2020 20
SOURCE: Tourism statistics – Dubai Statistics Center

Note: Since 2014, official tourists’ statistics include those who stay
for one night or more at their relatives’ or hosts’ private residences Total Number of International Guests (million) Change %
and thus explains the jump in the total number of tourists in that year.
Figure 4.2: Hotel guests in Dubai according to Region (2017)
South Asia
18% North Asia and
South- East Asia
MENA
11% 11%
GCC
countries
19%
Russia, CIS, EE
(Eeastern Europe)
7%
Americas
6%
Western
Europe
21% Africa
5%
Australasia
2%
Source: Tourism statistics – Dubai Statistics Center

4.8 Dubai has been relatively successful in main- 4.9 Efforts to diversify the mix of tourists in Dubai
taining market share from its main source include promoting the emirate to new source
countries and as shown in Figure 4.3. There markets, particularly those with high growth
has been stability over the last three years in the potential. In early 2017 the DTCM began efforts to
attraction of tourists from the top 7 countries to visit further diversify the mix of tourists in Dubai by target-
Dubai. The statistics shows that both China and Russia ing South Korea and testing out new markets like Indo-
have benefited from the facilitation procedures for the nesia and Malaysia which have cultural affinities to the
issuance of visas on arrival to nationals of the two emirate. Iranians are also an important source of new
countries, which were announced by the end of 2016 tourist arrivals and arrivals have been growing steadi-
and the beginning of 2017. While Russian visitors ly over the last three years with further growth of 7 per
registered 530 thousand visitors up from 240 thou- cent in 2017 compared to the year before. The success
sand in 2016 scoring the highest increase of visitors of the DTCM’s policies was also evidenced by the
with 121 per cent more than the previous year, impact of the easing of visa regulations to
although this also represents a recovery from the level purchase-on-arrival since 2014, which has resulted in
of 420 thousand visiting three years ago. a significant rise in arrivals from EU countries over the
course of the following year, including Bulgaria, Roma-
The success of Dubai in attracting visitors from China nia and Hungary.
has meant that the country displaced Pakistan, which
still saw a respectable growth of 29 per cent in visitors 4.10 Dubai is also attempting to diversify its tour-
over the three year period, out of its position in the top ist profile in terms of income group by
six source nations. The number of visitors from China attracting a greater share of mid-market visi-
moved from rank 11 in importance in 2014 to rank 5 tors. This objective is necessary to achieving the 2020
in 2017, caused by a rise in the number of visitors of target of 20m tourist arrivals and its implementation is
118 per cent over the period. The new policy of visa evident in the rise in the number of visitors from India
on arrival helped increase the number of Chinese visi- and China. From the demand side, marketing efforts
tors by a further 41 per cent in 2017 to register 764 are being focused on China using social media as a
thousands visitors. Oman, one of the top six countries marketing tool by the DTCM. From the supply side, a
visiting Dubai with 5.5 per cent of all visitors in 2017 number of hotels aimed at the three- and four-star
has been volatile as the number of visitors fell by 16.9 market are under construction.
per cent on the previous year and are just above the
level three years ago.
Figure 4.3: Shares of Top Countries source of Visitors (%)
Ranking 2014 Ranking 2017
11 KSA 9.79 11 India 13.13
22 India 9.64 22 KSA 9.68
33 UK 8.14 33 UK 8.01
44 Oman 6.47 44 Oman 5.46
55 USA 4.43 55 China 4.84
66 Pakistan 3.51 66 USA 4.01
11 China
11 2.65 77 Pakistan 3.79

Economic Impact of Dubai’s Tourism sector
4.11 The continual rise in the number of interna- From the supply side tourism sector also plays an
tional visitors to Dubai has had a major posi- important role in generating additional indirect tour-
tive economic impact on the emirate’s devel- ism value-added to other industries that provide inputs
opment, directly through the size and pattern of the to the tourism-related activities such as air-land and
spending of visitors across sectors, and indirectly maritime transport, airports, recreation and enter-
through the investment in the infrastructure and in the tainment and healthcare, as well as real estate and
rise in labour force employed necessary to facilitate the retail trade.
access and spending.
Dubai Airport.

Tourists’ Expenditures
4.12 While Dubai was ranked fourth by Master- previous years it is expected to continue to grow at
Card’s Global Destination Cities Index, it was a high rate during the coming years ahead of Expo
ranked first in terms of total expenditure by 2020. (Figure 4.4)
tourists amounting to US$29.7 billion (AED 109.3
billion dirhams) in 2017 ahead of London with a growth 4.13 The impact of tourism on Dubai’s economy
rate for the emirate of 6.2 per cent over the previous is far greater than the 4.9 per cent of value
year. (Table 4.1) added accounted for by expenditures in the
Accommodation and restaurants sector. The Master-
The Dubai Statistics Center (DSC) defines the tour- card Global Destinations Survey estimated that tour-
ism sector narrowly to include Accommodation and ists spent AED 109.3 billion in 2017, far in excess of the
Food Services activities (restaurants and hotels). By AED 19 billion spent on hotels and food. Short-term
this definition the contribution of the tourism sector- visitors have a large impact on total consumer expen-
represented by accommodation, food and beverage diture in Dubai spending money which benefits other
service activities in the national accounts– to Dubai’s sectors while the increase in investment to expand the
GDP (in constant prices) reached AED 19 billion in supply of accommodation to house a rising number of
2017, which was equal to 4.9 per cent of GDP. While visitors has an impact on the construction sector and
tourism GDP grew faster by 8 per cent in 2017 from a multiplier effect on the economy.
The continual rise in the number

of international visitors to Dubai,
8.7% increase per year, has had a
major positive economic impact on
the emirate’s development across
sectors and a rise in the labour force.

Table 4.1: Rank of Dubai and International Cities, 2016-2017
City Rank Number of Visitors Change Tourists’ Spend
2016 2017 2016 and 2017 (bn$)
Bangkok 1 19.4 20.1 3.3 16.36
London 2 19.1 19.8 4.0 17.45
Paris 3 15.5 17.4 12.9 13.05
Dubai 4 14.9 15.8 6.2 29.70
Singapore 5 13.1 13.9 6.1 17.02
New York 6 12.7 13.1 3.4 16.10
Kuala Lumpur 7 11.3 12.6 11.5 7.2*
Source: MasterCard’s “Global Destination Cities Index”, 2018 * Data of Year 2016
Figure 4.4: The performance of the accommodation and food services activities sector in Dubai
8.0
2017 4.9
2.5
2016 4.7
8.3
2015 4.7
14.6
2014 4.5
4.0
2013 4.1
6.3
2012 4.1
14.7
2011 4.0
6.3
2010 3.6
4.6
2009 3.5
Share of Hotels and Restaurants in Dubai’s GDP (%) Hotels and Restaurants GDP Growth rate (%)

Tourism and Retail Trade

4.14 Tourism plays a significant and growing role al retail sales of AED 100 billion in 2012,4 which was
in the contribution of the retail trade to expected to have grown to 24.8 per cent by 2017. The
Dubai’s economy. In the last decade, Dubai Mastercard Global Destinations Survey, in contrast,
has attracted a rising number of visitors who are rela- estimated that 31.0 per cent of the total expenditure
tively high spenders, particularly on branded luxury of overnight visitors was accounted for by shopping
goods. A study carried out by the Dubai Department while 8.0 per cent was spent on local transport with a
of Economic Development estimated the contribution further 10.0 per cent on local services.
of foreign visitors at nearly 20.4 percent of total annu-
Dubai Mall, the world’s largest shopping mall, part of the 20 billion dollars Downtown Dubai Complex, and includes around 1,200 shops.
4 The Retail Sector in Dubai Performance and Future Prospects, Department of Economic Development, Government of Dubai, UAE, November
2013 (unpublished).

Dubai’s Tourism Strategy
4.15 Tourism is overseen by the Dubai Depart- the UAE federal authorities to reduce the transaction
ment of Tourism and Commerce Marketing costs of visiting Dubai by extending the number of
(DTCM), established in 1997. This govern- countries whose citizens can purchase a visa-on-arriv-
ment entity has replaced and built on the substantial al. This facility has been extended to EU citizens since
progress made by the Dubai Commerce and Tourism March 2014, to Chinese visitors in November 2016, to
Promotion Board (DCTPB), an emirate-level govern- Russian nationals in February 2017, as well as Indian
ment entity launched in 1989 with the aim of promoting passport holders with a valid US visa or green card
Dubai as a tourist destination by attracting top-level in March 2017.
events which encouraged airlines to route direct flights
to Dubai. The DTCM has played a pivotal role in plan- 4.17 The DTCM has also increased the interest of
ning and implementing development strategies for the local and global companies to invest in build-
sector, and overseeing all tourism activities. DTCM has ing hotels, to raise the supply of accommo-
worked to encourage demand to visit the emirate and dation and in resorts and amusement parks in the emir-
investment in the sector to stimulate the supply of the ate which raise the demand to visit Dubai. In 2016
necessary infrastructure to provide an attractive envi- capital investments in tourism by the government and
ronment to tourists all year round. DTCM has also private players, such as hotel development companies,
worked to encourage the participation of both public totaled AED 26.2bn, or about 7 per cent of total invest-
and private entities in developing a modern and both ments in the UAE’s economy over the course of the
luxurious and affordable facilities for visitors. year according to the World Travel and Tourism Council
(WTTC).5 This figure is expected to increase consider-
The DTCM strategy to attain this goal has been based ably by 2020, reflecting Dubai’s push to prepare for
on three key objectives: Expo 2020. The WTTC projects investments in travel
and tourism infrastructure will grow by 11 per cent per
↗↗ Maintaining market share in existing source annum up to 2027, at which point they will have reached
markets AED 74.5bn, or 11.2 per cent of total investments. As
the largest tourism industry in the UAE, Dubai would be
↗↗ Increasing market share in markets with high expected to account for most of this expenditure.
growth potential
4.18 Dubai has also embraced the digital econo-
↗↗ Increasing the length of stay of tourists and the my in order to increase the supply of accom-
number of repeat visits modation from private rentals. In mid-2016
the DTCM permitted homeowners to apply for a holi-
4.16 In order to meet these objectives the DTCM day home rental licence which requires the homeown-
has worked on both the demand and supply er to meet certain requirements in terms of amenities
side of the industry referred to above. The and is valid only for short period entire-home rentals.
Department has stimulated demand through the The move had the intended effect of moving hundreds
factors that attract visitors to Dubai — events, retail of individually listed apartments on websites like Airb-
facilities, exhibitions etc. and has consistently lobbied nb onto the formal market in the emirate.
5 https://www.wttc.org/

Key Drivers for the Development

of Dubai’s Tourism
4.19 Tourism, as an economic activity, has become Culture, Sport and Entertainment
an increasing source of revenue and employ- The DTCM has worked hard to attract major sporting
ment in Dubai. From the perspective of its and cultural events. In the last few years the emirate has
economic impact and the design of government poli- opened a number of cultural venues including Dubai
cy, the sector can be viewed from both the demand- Opera, which will stage classical opera inviting touring
side referring to the activities of visitors and their role troupes and popular music and theatrical performanc-
in the acquisition of goods and services, but also from es. Additionally the Etihad Museum opened in January
the supply side, as the set of productive activities that 2017 to showcase the history of the UAE; the Museum
cater mainly to visitors. of the Future, which opened in February 2017 with
focus on technology; and the Mohammed bin Rashid
Demand Attraction Drivers of Library which is expected to open in 2018.
Dubai’s Tourism
4.20 Dubai tourism development plans have relied The DTCM has also focused on raising Dubai’s repu-
on a diversity of events that focused strate- tation as a center for international sporting events.
gically on organizing and hosting exhibitions, Dubai Sports City was launched in 2004 as a mixed-
conferences and events, which are in line with Dubai use suburb that is home to 15,000 residents in addition
Government’s diversification policies. The event agen- to a wide range of retail, leisure and sporting facilities,
da promotes long term growth, stimulates business including the 25,000-seat Dubai International Stadium.
with the wider region, and increases communication The most important sporting events in 2017 were: the
and investment opportunities among organizers, “al-Marmoum” camel rider racing season; basketball
exhibitors and visitors, and establishes Dubai as a and volleyball championships; and football, golf, swim-
global business and leisure destination. ming, tennis, cycling, motor racing, sailing, and boxing
events. The Dubai’s International Boat show was held
Expo 2020 in 2017, an annual event where owners and interest-
The biggest event currently planned to attract visitors ed parties can view and purchase leisure yachts and
to Dubai is Expo 2020 scheduled to run from autumn boats of a variety of sizes.
2020 until spring 2021. The world exposition is expect-
ed to generate an enormous amount of press for the Family entertainment attractions include Dubai Parks
emirate, and to attract millions of visitors during its & Resorts, IMG World of Adventure, Safari Dubai and
six-month run (from October 2020 until April 2021), of the Dubai Mall.
which the majority will be from overseas. Expo 2020
will involve events, exhibitions, performances, meet- Meetings, Incentives, Conferences and
ings and many other activities and the host intends Exhibitions (MICE)
that these activities will reflect the culture of the UAE The MICE market involves a form of business tour-
and the Gulf. Expo 2020 is expected to generate more ism where large groups of visitors are assembled for a
than 270 thousand new jobs in the various sectors particular purpose usually focused on a theme or topic.
of the economy, as a result of holding the exhibition MICE events are usually planned some time in advance
and the associated activities. The hotels and restau- and are aimed at a professional, school, academic or
rants sector is expected to have a large share of the trade organization or other special interest group. This
value added from the exhibition. Hosting a success- market is growing rapidly in the GCC region, and partic-
ful expo generates economic benefits over time as ularly in Dubai.
experienced by cities such as Shanghai and Milan. The
number of tourists visiting Milan in 2016 rose by 2.1 per In 2015, the most recent year for which comprehensive
cent to 5.6 million the year after it hosted Expo 2015. data were available, Dubai generated US$351 billion

of income from the MICE market, a market share of 27 The “Global village” also opens its doors to visitors
per cent of the MICE market share in the GCC region from November until April each year. There is also the
valued at US$1.3 billion according to the PwC subsid- “Dubai World Cup” festival for the best horses, races,
iary and consulting firm Strategy&.6 The “Dubai World and trainers, in addition to the “Dubai Food Festival”,
Trade Centre (DWTC)”, has hosted major annual shows which included impressive cooking events and vari-
and accounts for the attraction of Dubai to the MICE ous activities for all food lovers, including shows by
market. In 2017 the most important of these were: the most famous chefs in the world, specialist confer-
GITEX electronics fair; the “Cityscape Global” exhi- ences, and outstanding offers from restaurants in
bition; the “Gulfood” exhibition, in its 22nd cycle, has parts of the city. On top of that, “Modhesh World”
been one of the largest leading platforms in the world entertainment for children, “Dubai’s Summer Surpris-
in food trade; the Arab Health exhibition and confer- es”, and “Ramadhan and Eid in Dubai” festivals are also
ence; the “INDEX 2017” exhibition, which is considered held each year.
the biggest and most diverse international event in
the interior design market; the new events included Medical tourism
the inaugural of “Gulf Host” sponsored by “Gulf Food”, Dubai has been active in attracting visitors for health-
which attracted great interest in addition to many other care. In 2016 the Dubai Health Authority (DHA), the
numerous events. government body entity in charge of regulating and
developing the emirate’s health sector, aimed to
Festivals attract a minimum of 500,000 international medical
The years 2017 & 2018 saw numerous festivals and tourists by 2020. Dubai’s hospitals have been experi-
events run in Dubai. Among the most significant festi- encing a rising number of overseas patients and the
val was “Dubai’s Shopping Festival” which is regarded DHA launched a new online portal aimed at attracting
as one of the most important and largest festivals, not international medical tourists called the Dubai Health
only in the region alone but in the world. The Festival Experience in April 2016. The website serves as a
has been held for twenty two years, starting every year comprehensive, one-stop shop for all health, travel,
from January until February. hospitality and visa services for interested visitors.
6 https://www.strategyand.pwc.com/me/home/press_media/management_consulting_press_releases/details/gcc-shows-high-potential

Start of the famous dubai shopping festival.

Shopping
The retail sector remains central to the emirate’s hotel apartment occupancy rate. In 2017, the rate
growth strategy to attract tourists. In 2017 the retail increased by 1.3 per cent in comparison with 2016 to
sector accounted for an important part of GDP and reach 78 per cent. The increase came despite the over-
it is estimated that in that year visitors accounted supply of hotel rooms in the local market, consequent-
for between 24 and 31 per cent of overnight visitors’ ly, putting more downward pressures on hotel prices
expenditure. There are annual retail-focused events during the year. (Figure 4.5)
like the Dubai Shopping Festival and on December 26,
2016, its first day, the DTCM launched an annual retail 4.22 The indicator for the average number of
calendar, showcasing the emirate’s many shopping-re- nights spent in Dubai’s hotels also reflects
lated events over the course of 2017. the emirate’s ability to attract visitors. The
average nights rose steadily from 3.21 nights in 2010
4.21 The impact of these demand-side factors to 3.84 nights by 2014. The average nights stayed have
have increased in the flow of tourists into slightly decreased since then and fell further from 3.6
Dubai and are reflected in the hotel room and nights in 2016 to 3.5 nights in 2017. (Figure 4.6)
Figure 4.5: Room Occupancy Rate (%) Figure 4.6: Average nights stayed in Dubai’s
for Hotel Establishments hotels (night per guest)
2017 78 3.50
2016 77 3.60
2015 78 3.60
2014 79 3.84
2013 81 3.78
2012 78 3.76
2011 74 3.61
2010 70 3.21
Room Occupancy Rate (%) Average nights per guest

Source: Tourism statistics – Dubai Statistics Centre

Supply Side Drivers of the 31 per cent in the four star category, and; 26 per cent
Development of the Tourism in the one to three star category. (Figure 4.8)
infrastructure
4.23 The government of Dubai has been success- 4.25 The data shows that over the last few years
ful in stimulating and encouraging tourism by there has been a decline in average room
providing the infrastructure and by encourag- prices across Dubai. In 2017, the average
ing private sector investment in hotels and other forms daily rates of hotel establishments declined by 3.8 per
of accommodation for visitors. In 2017, ten new hotels cent. The fall in price has been the effect of the rise in
were opened increasing the total number of hotels in the supply of rooms and new hotels that have entered
Dubai to 485 in all categories, a rise of 2.1 per cent in the market in the competition in the sector should
2017 on the previous year. (Table10.2) Nevertheless, 10 increase the attractiveness of Dubai as a tourist desti-
hotel apartment buildings were closed, resulting in a nation. (Figure 4.9)
decline of 4.9 per cent to a total of 196 in 2017. (Table4.2)
Cruise tourism in Dubai
The net impact of the supply changes in hotels and hotel 4.26 The importance of cruise tourism has
apartments in 2017 increased the stock of all rooms increased rapidly in recent years. Dubai has
available by 4.5 per cent to 107.4 thousand. The number become a center for the activities of five
of hotel rooms increased by 6.2 per cent from 77.9 thou- luxury cruise companies operating globally and a mari-
sand to 82.3 thousand. In contrast, the number of hotel time hub for cruises run by approximately 20 compa-
apartment rooms fell marginally by 1.1 per cent to 25 nies around the world. Cruises set off from Dubai to
thousand. The rise in rooms is in response to the ambi- visit other Gulf cities as well as the Far East, India and
tious plan announced by DTCM, which aims for a total the Mediterranean.
hotel capacity of 160,000 rooms to be ready for when
the Expo 2020 exhibition opens. (Figure 4.7) There are four ports, namely: Rashid, al-Hamriya, Jebel
Ali and al-Shandagha, which enable cruise tourists
4.24 The luxury hotel category predominates in to enter Dubai.
the Dubai hotel sector with a new supply of
seven 5-star and ten 4-star hotels opening In 2017, Dubai received more than 625,000 cruise tour-
by 2017. With Dubai’s growing presence as a fami- ists, via a total of 157 ship calls, including more than
ly-friendly city and the encouragement of family tour- 20 international cruise ships, reflecting an increase
ism, Dubai is making greater efforts to increase the of 15 percent of cruise tourist compared to 2016. The
number of the medium-sized hotel market for three- marine tourism sector is looking for stronger perfor-
and four-star hotels than to the large number of five- mance in 2018, and it is building towards its goal of
star hotels as the demand for budgeted hotels has receiving one million visitors through cruise ships
been growing continuously for the previous years. during the 2020/2021 season. Moreover, it is targeting
to make Dubai the preferred winter tourism destina-
The hotel rooms available in Dubai in 2017 were distrib- tion for the world’s leading travel companies special-
uted as follows: 43 per cent in the five star category; ized in this field.
Table 4.2: Dubai Hotels, 2016-2017
Classification 1 - 3 Star 4 Star 5 Star Total
2016 267 112 96 475

Number of Hotels
2017 260 122 103 485
2016 21.767 22.99 33.122 77.879

Number of Rooms
(Thousand)
2017 21.591 25.289 35.853 82.733
Source: The Department of Tourism and Commercial Marketing in Dubai and Dubai Statistics Centre

Figure 4.7: The number of rooms and hotel apartments in Dubai (thousands)
90
82.73
77.88
80
72.47
67.49
70
60.24
57.30
60 53.8
51.10
50
40
24.85 25.86 24.97 24.70

30
23.10 22.82
19.80 21.00
20
10
2010 2011 2012 2013 2014 2015 2016 2017
Source: The Department of Tourism and Commercial Marketing Hotel Rooms Hotel Apartments
in Dubai and Dubai Statistics Centre
Figure 4.8: Hotel Classification in Dubai 2017 Figure 4.9: Average Daily Rates of Hotel
Establishments in Dubai
Five Stars Four Stars

43% 31% 2017 492
2016 511
2015 569
2014 608
One-Three Stars
26%
Source: Dubai’s Department for Tourism and Commercial Marketing and Source: The Department of Tourism and Commercial Marketing in Dubai
Dubai Statistics Center and Dubai’s Statistics Centre

Sustainable Tourism in Dubai
4.27 Three key drivers will ensure sustainable establish a tourism industry that is economically and
tourism growth in Dubai and across the UAE. environmentally sustainable. Tourism has an econom-
First and the most important is far-sighted ic impact far beyond the revenues of hotels and restau-
government regulatory policies which have increased rants. Visitors spend money in the retail sector and at
the inflow of tourists and 47 nationalities are now eligi- events, but rising numbers of tourists also has impli-
ble for a visa on arrival for entry into the UAE, which has cations for transport and for water and electricity
helped increase the number of visitors from China, usage. Finally, an expanding sector will impact on both
India and Russia. Second, the government’s role in the number of workers employed in the sector, but on
providing public sector and stimulating private sector their skills. Already the hotel sector is increasing the
infrastructure investment has played a key role in build- number of Mandarin speakers employed to cater to
ing top class inbound air, sea and road and also internal the rising numbers of Chinese visitors.
transport links facilitating travel into and across the
UAE. Thirdly, destination planning and marketing to 4.29 Dubai has a strong commitment to sustain-
provide and promote an integrated entertainment and ability and the government supports the
retail destination is a key factor in attracting visitors. United Nations Sustainable Development
Dubai offers a wide selection of hotels, many retail Goals (SDGs), a global strategy for achieving econom-
malls and restaurant outlets, theme parks and leisure ic growth consistent with the planet’s capacities, soci-
attractions providing choice. The Dubai Department ety’s basic needs and priorities, and the capabilities
of Tourism and Commerce Marketing (DTCM) has also and stability of the economy. In Dubai a large part of
attracted numerous touristic events, festivals and tourist sector sustainability is dependent on the activ-
activities which have raised the demand of foreign ities and investments of the Dubai Electricity and
tourists to visit. In this vein it is expected that Dubai’s Water Authority (DEWA), the government owned utili-
hosting Expo 2020 will give a powerful stimulus to the ty, which owns, operates and maintains power stations
tourism sector. and desalination plants, aquifers, power and water
transmission lines and power and water distribution
4.28 There are however, challenges which need networks. The government of Dubai has focused on
addressing. For its investments in the sector reducing the demand for resources, while increasing
to be viable Dubai needs to maintain a high the supply of clean energy. Dubai’s Demand Side
growth of visitors to the emirate in the coming decade Management Strategy aims to reduce energy and
by filling expensive hotels and leisure venues. Dubai water demand by 30 per cent by 2030 while the Dubai
needs to raise the length of stay per visitor and the Carbon Abatement Strategy to reduce carbon emis-
number of source countries, but it needs to strive to sions by 16 percent by 2021.7
7 DEWA Sustainability Report 2017.

Sustainable Tourism: International Practice
4.30 Sustainable tourism is based on the recog- renewability of all of the assets used to generate
nition that the expansion of global tourism sustainably rising tourist income.
has both positive and negative effects such
as on the environment. It has been estimated that Countries where tourism contributes significantly to
tourism’s share of worldwide greenhouse gas emis- GDP need to focus on adopting sustainability policies.
sions has been about 5 per cent and is expected to According to the United Nations World Tourism Orga-
grow in the coming years.8 The carbon footprint nization (UNWTO), sustainable tourism consists of:
generated by tourism stems from a rising national
demand for transport, electricity and water resources, ↗↗ The optimal use of environmental resources in
but tourism can also lead to a depreciation of the qual- tourism development in ways which conserve
ity of the natural, cultural and other assets attracting natural heritage and bio-diversity;
visitors. Short-term gains realised by raising the
number of annual visitors lead to longer-term losses ↗↗ Respect for the socio-cultural heritage and tradi-
as congestion, poor air quality and accommodation tional values of host communities;
shortages depress a destination’s future tourist
potential. The trade-off for many countries relying on ↗↗ Contribution to the long-term economic viability
an expansion in numbers rather than an increase in of tourism operations and the local industries that
the premium attached to the relative scarcity of the support them, providing socio-economic benefits
tourist assets driving visitor demand depends on the to all stakeholders.
DEWA is investing AED 4.26 billion in

electricity and water infrastructure projects
to ensure energy used during Expo 2020
will come from renewable sources.
8 Stefan Gössling, Daniel Scott and C Michael Hall, “Challenges of tourism in a low-carbon economy”, WIREs Climate Change, July 2013.

Thailand’s Experience Thailand has also encouraged community level involve-

4.31 In Thailand, the importance of sustainable ment in the tourist industry and in 2015, TAT added an
tourism has been recognised for decades. additional slogan ‘Discover Thainess’, encouraging
Tourism represents a significant proportion Thais to follow cultural and other values that would
of Thailand’s economy and has been a driver of growth. attract tourists. The emphasis on local values and
The WTCC places its direct contribution alone to GDP authenticity can enhance the impact of tourism. One
at around 9.7 percent in 2017, well above the global study of Thailand’s tourism found that there can be an
average and over twice the comparable figure for additional causal relationship between tourist arrivals
Dubai. Thailand’s capital, Bangkok, was ranked first in and future exports. The author recommended tourist
terms of global destinations by Mastercard in 2016 policy should recognise that since ‘visitors’ preferenc-
with 21.5 million visitors, an increase of 9.6 percent es for national products formed during their stay would
over the previous year. The industry’s growth in Thai- eventually become future foreign demands, govern-
land has been driven by a combined effort of both the ments should consider foreign tourists as guests to
private and public sectors guided since 1979 by a their “in-house trade fair.”9
co-ordinating organisation, the Tourism Thailand
Authority (TAT) which is subject to central control by Costa Rica’s Experience
the Ministry of Tourism and Sport. 4.32 Encouraging community involvement
through incentives and education has also
Thailand has been a world leader in sustainable tour- made Costa Rica a leading destination for
ism. Thailand’s key tourist attractions depend on main- eco-tourists. The country has integrated educational,
taining a relatively unspoilt natural environment: clean economic and social sustainability aspects into the
white sandy beaches; a diverse and vibrant marine tourism industry by striving for conservation and
habitat and densely forested jungle areas teeming with community development, particularly in rural areas.
animal and plant species. TAT has intensely promoted For over two decades the government has invested in
these natural assets under its slogan “Amazing Thai- infrastructure for educational programs by establish-
land” and in order to ensure the long-term viability of ing the Certification for Sustainable Tourism (CST)
tourism, Thailand has embarked on many initiatives program. This consists of external auditor teams that
including promoting efficiency in energy and water assess hotel performance to ensure that a property
use to habitat conservation. In 2016, the government meets the criteria of environmental management. In
closed Koh Tachai Island indefinitely because rising 2005, Costa Rica extended the program requiring tour
tourist numbers had led to physical degradation. operators to only use hotels that obtained the CST.
Beach in Krabi, Thailand.
9 Surat Teerakapibal (2016), “From Sustainable Tourism to Economic Development,” Journal of Promotion Management, 22, (2). p205

Global Tourism Sustainability Index Germany have taken concerted and sustained action
(SDI) at the national level to develop policy, set targets
4.33 Sustainability can be assessed nationally, and monitor results. France’s national tourism policy
regionally, or locally, right down to the indi- scored 96.0 in this domain, well above Germany with
vidual resort and there is a vast diversity of 77.5 and the average value of 43.8. France specifically
standards that businesses can choose to adopt and stipulates goals to be met in areas such as carrying
follow in order to earn labels or awards to attract green capacity for territories and sustainable forms of tour-
tourists. There is an increasing number of initiatives in ist transport. Germany undertakes mandatory envi-
sustainable tourism across the world at all these levels, ronmental impact assessments which aim to reduce
but at the national level the EIU Sustainable Develop- energy, water and greenhouse gas emissions.
ment Index (SDI) ranks countries by those factors
deemed important as building blocks for sustainable
tourism development. These factors are ranked and Across the world many countries have either no poli-
weighted to compose the overall country index based cy or suffer from severe stakeholder coordination
on country scores for government policy and regula- problems which hamper sustainable tourism. In the
tion, for environmental, socio-cultural and economic EIU ranking in Figure 4.10, India, Brazil, China, Indo-
sustainability and finally for the size of the tourist nesia and Egypt ranked well below the world’s devel-
sector relative to GDP. oped countries in all categories. They scored poor-
ly in formulating policy, in adherence to recognised
The global SDI country ranking for 2018, shown in standards and in encouraging enterprises to reduce
Figure (4.10), was based on an analysis of only ten environmental footprints. These countries were less
countries, but it showed that European countries led able to co-ordinate efforts with Non-Governmental
the index with France, Germany and the UK in the top Organisations (NGOs) and the short-term pressures
three positions and leading in most domains. Of the of the private sector in order to protect the cultural,
10 countries included in the index, only France and natural and historical assets that attract visitors.
Figure 4.10: Sustainability Development Index Scores 2017
France Germany
73.9 71.7
UK
62.4
USA Japan
53.1 46
China
30.8
Indonesia
27.1
Brazil Egypt India

34.6 26.5 36.9
Source: EIU 2018

Conclusion & Policy Recommendations
4.34 Dubai’s government has targeted tourism as For example, the UAE will benefit from efforts to build
a significant development sector because of and develop a common inter-emirates tourism strat-
long-term sustainable growth potential, but egy for the AbuDhabi-Dubai-Sharjah-Ras Al-Khaima
it is also important a means of diversifying the UAE’s or RAK corridor. Already each emirate is increasingly
economy away from energy production. Sustainability specialising in its attractions. Abu Dhabi’s hosting of
for the UAE as a whole will require a balance of econom- the Louvre and the Guggenheim museums is part of its
ic activities including tourism across the nation while ambition becoming a major international cultural tourist
the industry and the resources it consumes moves hub in the Middle East and the subcontinent. Sharjah, in
towards renewable sources of electricity generation contrast, emphasizes friendly Islamic (halal/family) tour-
and the production of water. ism and is attractive to visitors from other Islamic states
outside of the GCC. The emirate opened the Museum of
4.35 There are a number of lessons that can be Islamic Civilisation in 2008. Sustainability is right at the
learned from international best practice to heart of the tourism strategy of the relatively undevel-
ensure that tourism is sustainable in Dubai. oped emirate of Ras Al-Khaima, only 45 minutes away
Foremost, tourism, to be a successful and sustainable from Dubai with its natural assets of mountains, sea and
contributor to economic growth, requires a powerful desert. The emirate is specialising in offering visitors
national coordinating and planning body with the poli- an authentic experience of Arabian culture. The UAE’s
cy of promoting the industry under state control or separate emirates can all benefit inmedium-longer term
direction. In Dubai, tourism’s development is directed, if a complementary rather than a competitive or unco-
planned and coordinated by the DTCM while the infra- ordinated tourism strategy is implemented.
structure to supply water and power sustainably is
managed by DEWA, an independent authority regulat- 4.37 Countries scored highly on the EIU index of
ed by the Dubai Supreme Council of Energy. Dubai has sustainability based on their ability to devel-
been able to promote and support sustainable tourism op and implement policy through targets and
through the existence of these state controlled central results according to best international practices of
bodies with long-term planning horizons. reliability, efficiency and safety and establish effective
and reliable service performance measures. DEWA
4.36 International experience shows frequently reports on its sustainability performance in accor-
that problems occur when there is a lack of dance with the Global Reporting Initiative (GRI) Stan-
coordination between stakeholders. Within dards. At the top level DEWA launched its Carbon Diox-
the GCC region and across the UAE countries have ide Emission Reduction Programme in 2012, which
similar climates and natural resources so attracting creates a roadmap for short, medium and long-term
international tourists will require specialisation to offer emission reduction actions up to 2030. DEWA has
localised activities and services. This requires coordi- recorded a reduction of 43.9 million tons of CO2 emis-
nation between national tourist policies based on sions in Dubai between 2007 and 2017.
country-specific comparative rather than competitive
advantages in order to plan for sustainable tourism in In terms of its supply of energy and water, DEWA has
a pre- and post-oil era. implemented targets to improve energy efficiency
on both supply and demand and is achieving globally
respectable results.

4.38 Sustainability involves balancing the growth creating a major risk factor of a post-Expo real estate
in the demand by tourists and the supply of recession especially in the emirate’s hotels segment.
the resources: hotels, electricity, water and
the natural and cultural assets which attract them. 4.40 In conclusion, sustainable tourism develop-
Dubai has taken important steps to ensure tourism is ment requires the existence of a strong
sustainable in the emirate in the long-term, but the national authority to plan and coordinate
sector faces a short-term challenge in preparing to long-term strategies. This body must promote tourism
meet the six months impact and later legacy from host- demand in coordination with the private sector, to
ing of Expo 2020. DEWA is investing AED 4.26 billion ensure the supply of a sustainable tourist infrastruc-
in electricity and water infrastructure projects to ture in terms of accommodation, trained employees
support Expo 2020 and as the official Sustainable and other resources such as power, water and trans-
Energy Partner for EXPO, it is ensuring that all of the port. Furthermore, it must identify stresses threatening
energy used during Expo 2020 will come from the integrity of the natural and cultural assets which
renewable sources. attract tourists and the power to preserve them.
Targets to promote sustainability must be set and
4.39 Some concerns have been raised about a regularly monitored in terms of performance for all
future oversupply of accommodation after entities involved in the industry.
Dubai has reached its 2020 target of 20
million visitors. The government of Dubai has recently 4.41 Finally, sustainable tourist policies need to
established “the Higher Committee for Dubai Urban involve and engage the support of local
Planning” an Urban Planning Body headed by the communities and businesses. Community
Municipality of Dubai to oversee and regulate the emir- and private sector involvement can be made through
ate’s overall urban growth including housing and hotels systems of incentives, certification and education
and hotel apartments. This is in response to signals programs which will align the economic interests of
that that there could be a glut of hotels (3-4-5 star) and locals and residents of both genders with the long-
housing units on the market as a result of Expo 2020 term development of a sustainable tourist sector.
To safeguard against a future oversupply

of accommodation, the Municipality
of Dubai is overseeing the emirate’s
overall urban growth including housing
and hotels and hotel apartments.

CHAPTER 5 |
Wholesale and
Retail Trade
Shoppers at Dubai Mall, the world’s largest shopping mall.

W
holesale and retail trade is the most important activity in
the services sector in Dubai and in 2017 it represented
26.6 per cent of GDP (in constant prices. The wholesale
and retail sector has evolved over the years, due to factors
such as the creation of a modern and robust infrastructure,
effective distribution channels to neighbouring emirates, rapid urbaniza-
tion and the shift of shopping centres to suburbs instead of town centres.
This chapter identifies strengths and challenges to Dubai’s retail trade,
along with its important correlation to the tourism sector.
↗↗ Dubai is in top position on the global map for tourism and retail,
with 62 per cent of the world’s retail brands available for purchase.
It ranks above Shanghai, London, Abu Dhabi and Paris as a go-to
destination for shoppers seeking world-class luxury brands.
↗↗ Expo 2020 is the most global event in the history of the emirate and
is expected to attract around 25 million visitors, 70 per cent of whom
will come from abroad. Retail, tourism and real estate are expected
to reap the most financial benefits.
↗↗ E-commerce is disrupting traditional shopping and is a threat

to the retail business in the emirate. The projected increase of
middle-income tourists will also impact spending and shopping
patterns in Dubai.

CHAPTER 5 | Wholesale and Retail Trade
The Impact of Tourism

on Retail Sales
E-commerce is becoming increasingly popular with UAE consumers and disrupting
traditional shopping. Tourism, bringing an influx of shoppers from around the globe,
offers a strong counterbalance to maintain robust retail sales activity.
1 Go-to Destination for Shoppers 2 Dubai Visitors
Dubai is a go-to destination for shoppers Dubai visitors spent US$ 5.5 billion in
seeking world-class luxury brands. 2012 (20.4 per cent of total retail sales)
62 per cent of the world’s retail brands This was projected to increase to
available for purchase US$ 8.9 billion in 2017 (almost 25 per
cent of total retail sales)
Ranking above:
•
•
•
Shanghai
London
Abu Dhabi
62%
of world’s retail
US$8.9
BILLION
• Paris
brand available US$5.5
BILLION
in Dubai
2012 2017
(estimated)
3 Expo 2020
25 million visitors expected, more than

300,000 per day
70 per cent will come from abroad 4 Opportunity
Dubai is seeking to attract larger number

middle-income tourists, from countries such as
300K • China
visitors per day • India
• Indonesia
• Malaysia

Wholesale and Retail Trade | CHAPTER 5
Overview
Dubai has been a trade-based city throughout its modern and robust infrastructure, effective distribu-
history. The Wholesale and Retail sector, defined by tion channels to neighbouring emirates, rapid urban-
Dubai Statistics Center in national accounts, includes ization and the shift of shopping centres to suburbs
wholesale and retail trade and the repair of motor instead of town centres.
vehicles and motorcycles. This sector is the largest
contributor to the emirate’s GDP and one of the most This sector is strongly connected with the tourism,
important economic sectors supporting growth and logistics and transport sectors. Tourism contributes
attracting domestic and foreign investment. The strongly to the growth of the retail sector. Expenditure
growth of the wholesale and retail sector has enabled by foreign visitors are estimated to account for about
Dubai to become one of the world’s leading destina- a quarter of total annual retail sales, and spending by
tions for tourism and shopping. foreign tourists on luxury brands is relatively high. One
2018 market research report ranks Dubai as the top
The wholesale and retail sector in Dubai has evolved shopping destination, with about 62 per cent of the
over the years due to factors such as the creation of a world’s retail brands available for purchase.
Dubai is in top position on the global

map for tourism and retail, with 62
per cent of the world’s retail brands
available for purchase. It ranks above
Shanghai, London, Abu Dhabi and Paris
as a go-to destination for shoppers
seeking world-class luxury brands.

Contribution of the Wholesale

and Retail Trade to GDP
5.1 The wholesale and retail trade’s significant sector in Dubai. The services sector also includes
growth is reflected in the increase in its share Transport and Storage, Housing, Accommodation and
of GDP over time. In 2017, this sector repre- Food, Financial and Insurance and other activities. The
sented 26.6 per cent of GDP (in constant prices), the services sector as a whole is the largest contributor to
largest sector share of GDP, although it fell by 1.8 per the GDP of Dubai, with 79.7 per cent in 2017 compared
cent from of 27.1 per cent in 2016. (Figure 5.1) to 78.9 per cent in 2014. This contribution has not been
less than 78 per cent of GDP since 2010. Wholesale
5.2 Wholesale and retail trade constitutes the and retail trade activities accounts for about one-third
most important activity in the services of the total services sector, as shown in. (Table 5.1)
Figure 5.1: Contribution of Wholesale and Retail Trade to GDP (%)
28.5
28.1 28.1
28.0
27.8
28.0
27.5
27.4 27.4
27.5 27.1
27.0
27.0 26.6
26.3
26.5
26.0
25.5
25.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Table 5.1: Importance of the Services Sector in GDP (%)
2010 2011 2012 2013 2014 2015 2016 2017
Main Sector 1.5 1.9 2.4 2.2 2.1 1.9 1.8 1.9
Secondary Sector 20.5 19.7 19.4 19.5 19.0 18.5 18.4 18.4
Tertiary sector 78.1 78.4 78.2 78.3 78.9 79.5 79.7 79.7
Wholesale and Retail Trade 27.0 28.0 27.4 28.1 27.5 27.8 27.1 26.6
Total 100 100 100 100 100 100 100 100

Value added in Wholesale and Retail Trade
5.3 Data shows that the value added (in crisis and its value added declined by 6 per cent in
constant prices) of the wholesale and retail 2009. But the sector has recovered once again and
sector in the economy of Dubai rose to AED plays an important role as a key driver of economy in
103,649 billion in 2017 from AED 102,759 billion in Dubai. It must be noted that the relationship between
2016. This was an increase of about 1 per cent, simi- the wholesale and retail trade and many other activ-
lar to the percentage growth the year before, but less ities in the economy, such as tourism, logistics and
than the increase in the value added of the sector in transport, has contributed to an increasing demand
2016, which amounted to 5 per cent. The wholesale for products and services from these sectors.
and retail sector was affected by the global financial (Figure 5.2)
Figure 5.2: Value Added of the Wholesale and Retail Sector (in billion AED constant prices)
120 14 15
102.2 102.8 103.7
97.3
100 95.0
10
88.4
87.4
82.0 83.0
81.4 7 7
77.6
80
72.0
5
5 5
2
60
1 1 1
1
0
40
-5
20 -6
0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 -10
Value Added Growth rate %


5.4 The value added per worker in the wholesale prepared for economic recovery. Output per worker
and retail trade sector in constant prices rose steadily in the following years, although it declined
declined in the years following the global slightly in 2015, before rising by about 6 per cent in
financial crisis, falling from AED 187,000 in 2008 to 2016 to reach AED 179,000. In general, worker produc-
AED 149,000 in 2010. This decline can be attributed tivity in this sector is relatively low compared to other
to several factors, most notably that businesses sectors, because as a service industry retail trade is
(despite the decline in their business activities during dominated by small businesses characterized by
the crisis), retained most of their labour force, but with intensive use of labour and low use of modern tech-
lower wages and privileges, so that they were well nologies. (Figure 5.3)
250
Figure 5.3: Trends in Value Added per Worker in the Wholesale and Retail Trade Sector
(AED thousand, constant prices)
198.2
200 189.2
187.2
179.2
169.2 168.5
162.0
159.1
149.0
149.7
150
100
50
0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Labour and Enterprises in the Wholesale and

Retail Sector
5.5 Available data indicates that the number of small and medium-sized enterprises and the emer-
workers in the wholesale and retail sector gence of shopping centres in the suburbs of Dubai.
reached about 570,000 workers in 2016, The rise in the percentage of workers in the wholesale
compared to approximately 577,000 workers in 2015. and retail sector in 2017 can be explained by the
The sector’s share in the allocation of labour by econom- decline in the growth of workers in other economic
ic activity was 14.1 per cent in 2014, ranking second activities, such as accommodation and food services,
after the construction sector which accounted for 23.8 whose share of total workers in Dubai fell from 6.7 per
per cent in that year. It rose to 17.9 per cent in 2017, while cent in 2016 to 5 per cent in 2017. (Figure 5.5)
the share of the construction sector in the labour force
jumped to 27.6 per cent, in the same year. (Figure 5.4) 5.7 Small and micro-enterprises (1-49 workers)
play a big role in the wholesale and retail
5.6 The increase in the number of workers in this sector. They number about 65,000 compa-
sector is attributed to the growth of popula- nies, representing 98% of the total number of enter-
tion resulting from both the increase in expa- prises operating in this sector in Dubai and employ
triate labour and the high rate of population growth in about 350,000 workers, 66 per cent of total number of
Dubai. This has led to a rapid increase in the number of workers in the sector.1
Figure 5.4: Sector Share of the Total workforce Figure 5.5: Trends in Workers; Share of Wholesale
in Dubai’s Economy, 2017 and Retail Trade Sector in the Total Workforce
23.4%
27.6%
Construction 17.9%
20.0 25.0
15.2% 15.2% 20.0

14.1% 14.5% 14.1% 14.5%
15.0
15.0
17.9% 10.0
Wholesale and
10.0
Retail Trade
2.8% 5.0
0.0% 2.8%
8.0%
Manufacturing 0.0
5.0
-2.8%
7.9% -5.0
Administrative and -7.2%
Support Service Activities
0.0 2011 2012 2013 2014 2015 2016 2017 -10.0
7.1%
Transportation and Storage
5.0% Share of the trade sector Change %
Accommodation and in total employment (%)
Food Services Activities
Source: Dubai Statistics Center Source: Dubai Statistics Center
1 Source: Dubai Statistics Center

Fixed Capital Formation in the Wholesale and

Retail Sector
5.8 Fixed capital formation, i.e. investment mated at AED 20.5 billion in 2007, i.e. a drop of 63.4 per
expenditure, is one of the most important cent. However, the sector recovered quickly in 2010,
levers affecting growth in the economy.2 As with the value of capital formation rising to AED 8.9
shown in Figure 5.6, capital formation in the wholesale billion, an increase of 31 per cent compared to 2009.
and retail sector fell in the years following the global It continued its upward movement until 2013, with an
financial crisis, falling to AED 11.3 billion in 2008 and increase of 34 per cent before falling by 1 per cent
AED 7.5 billion in 2009, compared to high levels esti- in 2015.
Figure 5.6: Capital Formation in the wholesale and Retail Trade Sector (AED Billion)
25 40
34%
31%
30
20.5
20 20%
20
17.2 17.2 17.2
10% 10
15
12.9 0% -1% 0.0
11.7
11.3
-10
9.8
10
7.5 -20
-30
5
-34%
-40
-45%
0 2007 2008 2009 2010 2011 2012 2013 2014 2015 -50
Capital Formation Growth Rate %

2 Capital formation represents investment expenditure by businesses to build factories and buy capital goods such as machinery and equipment
used for the production and marketing of other goods or providing other services that support all sectors, including the wholesale and retail, as
well as investment in buildings, properties and various equipment used in production, shipping and marketing. Hence, fixed capital formation is
one of the most important indicators of the extent of success of any economic sector in attracting capital for investment.

Tourism and the Retail Sector
5.9 Dubai’s wholesale and retail trade has grown According to the Dubai Statistics Center, the value
steadily, especially in late 1990s and early added of the tourism sector, measured by the accom-
2000s, as real estate developers started modation and food services sector as defined in the
entering the market by building shopping malls. The national accounts of Dubai,3 rose from about AED 9
success and development of retailing through shopping billion (in constant prices) in 2006 to AED about 19.5
centres made Dubai a regional, even a global, shopping billion in 2016, an increase of nearly 110 per cent.
destination, especially after Emaar Properties entered The value added of the retail sector rose from about
this sector in the second half of the 1990s, followed by AED 72 billion (in constant prices) to about AED
major real estate companies such as Dubai Holding, 107 billion, an increase of about 47 per cent during
Nakheel, Meraas and others. The economic boom of the same period. This growth and development
the tourism sector has been reflected in some sectors, happened over a decade.
but its major impact has been on the retail trade sector.
5.11 The significant correlation between the tour-
5.10 Since the emergence of shopping centres and ism and retail sectors also becomes evident
the dynamic growth of the trade sector, its when one looks at spending by Dubai visi-
performance indicators have been consistent tors, which reached about US$ 5.5 billion in 2012,
with the tourism sector’s development indicators in representing 20.4 per cent of total retail sales in that
terms of size, annual growth and the number of visitors year (US$ 27 billion) according to a study by the Dubai
to the emirate. The number of tourists visiting Dubai rose Department of Economic Development in 2013. The
continuously during the period (1996-2017), with the same study indicates that spending by Dubai visitors
emirate receiving a total of 15.8 million visitors in 2017, will rise to about US$ 8.9 billion in 2017, almost 25 per
an increase of about 6.2 per cent from 2016. The average cent of total retail sales in the emirate. These figures,
annual number of visitors to Dubai during the period as shown in the table below, highlight the big contribu-
1996-2000 was about 2.6 million visitors. It rose to 5 tion of the tourism sector to the growth and develop-
million visitors during the period 2001-2005, and then ment of retail, which plays a key role in the develop-
to 7.4 million visitors between 2006 and 2010, reaching ment of Dubai’s economy and its progress towards
13.8 million visitors during the period 2011-2017. sustainable economic development. (Table 5.2)
Table 5.2: Expected retail sales in Dubai (US$ Billion, at constant prices)
Year 2012 2013 2014 2015 2016 2017
Resident's sales 21.5 22.5 23.5 24.5 25.6 26.8
Visitor's sales 5.5 6.1 6.7 7.3 8.1 8.9
Total sales 27 28.5 30.1 31.9 33.7 35.7
Visitor's share 20.4 21.2 22.1 23 23.9 24.8
Source: “The Retail Sector in Dubai Performance and Future Prospects”, Dubai DED, UAE, November 2013.
3 Source: Dubai Statistics Center

Global Retail in Dubai
5.12 Dubai has a wide variety of shopping and available for purchase. Shanghai ranks second with
access to world-class luxury retail brands, 55.3 per cent, followed by London (51.7 per cent), Abu
making it a competitor for major shopping Dhabi (51 per cent) and then Paris (48 per cent). Mark-
destinations. According to a recent CBRE4 market edly, Dubai and Abu Dhabi ranked among the top five
research report titled “How Global is the Business of cities, highlighting the UAE’s success in enhancing
Retail?” (2018), Dubai is the top destination for shop- its position on the global map of tourism and
ping, with 62 per cent of the world’s retail brands retail. (Table5.3)
Table 5.3: The top five cities by the highest percentage of global retail brands
Percentage of retailers in 2017 City Rank
62 Dubai 1
55.3 Shanghai 2
51.7 London 3
51 Abu Dhabi 4
48 Paris 5
Source: CB Richard Ellis (CBRE), 2018
Wholesale and Retail and Expo 2020
5.13 Expo 2020 will be organized under the theme making it the most global event in the history of exhi-
“Connecting Minds, Creating the Future”, bitions in the emirate. This huge trade and economic
which reflects Dubai’s history of new initia- event will have a positive impact on all sectors and
tives, pioneering ideas, innovation and future vision. activities, but retail, tourism and real estate are expect-
Dubai Expo is expected to attract about 25 million visi- ed to reap the most benefits.
tors, 70 per cent of whom will come from abroad,
4 CB Richard Elli (CBRE), 2018

Challenges to the Development of

Wholesale and Retail
5.14 The retail business faces current and future of visitors from middle-income countries such as
challenges, due in part to increased compe- China, India, Indonesia and Malaysia, which may affect
tition of e-commerce from within and outside spending and shopping patterns in Dubai. All these
the emirate. E-commerce is growing at a rapid pace, developments mean there is a need for studies to
threatening traditional shopping. In addition, a closer explore ways to support the performance and growth
look at the tourism sector (Chapter Four of this report) of the wholesale and retail sector as the largest
shows that Dubai is seeking to diversify to attract contributor to the GDP of Dubai.
foreign tourists, particularly to attract a larger number
E-commerce is disrupting
traditional shopping and is a
challenge to the retail business
in the Emirate. The projected
increase of middle-income
tourists will also impact spending
and shopping patterns in Dubai.

CHAPTER 6 |
Banking, Insurance
and Capital Markets
The Gate building at the Dubai International Financial Centre, Dubai.

B
anking, capital markets and insurance activities accounted
for the third largest sectoral contribution to Dubai’s GDP
in 2017 generating value added of AED 40.5 billion or 10.1
per cent of the total. In terms of employment, the sector
ranked in 11th place among 20 sectors in the economy
and labour productivity was among the highest with AED 868,785 per
worker, in 3rd place.
↗↗ Global Financial Centres Index (GFCI) ranked Dubai in 15th position

out of 110 financial centres worldwide, up from 18th the year before.
↗↗ Dubai’s banks returned to a growth path in 2017 due to increase in

loans and deposits while maintaining high levels of capitalization
represented by capital adequacy ratios and Tier 1 capital ratios.
↗↗ The return on equity of Dubai’s banks increased by 19 per cent to

reach 12.0 per cent in 2017, up from 10.1 per cent the year before.
↗↗ The UAE insurance market has maintained the first rank in the MENA
region for ten consecutive years, with a growth rate of 12 per cent in
gross written premiums recorded for 2017.
↗↗ Dubai insurance sector is dominated by non-life insurance activities.

Health and Motor insurances were major contributors to the total
gross written premiums accounting for 40.2 per cent and 15.4 per
cent respectively, while other non-life insurance contributed 22.8
per cent of all gross premiums. Life insurance accounted for 21. 6
per cent of gross written premiums.
↗↗ Dubai reached a new record in Islamic Finance with the total nomi-
nal value of all Sukuk listed with its markets to US$59.22 billion,
marking Dubai as the highest amount of any Sukuk listing venue
in the world.

CHAPTER 6 | Banking, Insurance and Capital Markets
DIFC Creating New Horizons

for a Bright Financial Future
Dubai’s banking, insurance, and stock market all showed positive signs in 2017 with
DIFC paving the path to future financial success.
1 Global Financial Leader 2 Dubai International Financial Center (DIFC)
The Global Financial Centres Index (GFCI)* DIFC is one of the world’s leading financial centres
ranked Dubai 15th in the world as a global plans to triple in size by 2024. It currently has:
financial leader (up from18th place in
2017), ahead of all other GCC locations. • 1,800 actively registered firms
• 22,000 professionals as employees
*The GFCI published in September 2018 is an evaluation of
the attractiveness and competitiveness of 110 financial • an enabling platform across MEASA region, for:
centres worldwide ranked Dubai in 15th position, ahead of ▷ investment banking
Abu Dhabi 26th, Doha 34th, Bahrain 59th and Riyadh, 69th ▷ M&A
▷ commercial banking
▷ innovative project finance
15th
▷ including securitization
▷ asset-backed financing
top global
financial leader
US$3.55 billion
total assets in 2017
(15% from 2016)
3 FinTech
In November 2017, the DIFC announced the

launch of a US $100 million FinTech start-up
fund to accelerate the development of
The registration of international companies rose by
financial technology by investing in start-ups
12 per cent to 1,853, with:
from incubation through to growth stage:
• 36 per cent from the Middle East
• over 100 applications
• 33 per cent from Europe
• from more than 32 countries
• 11 per cent from Asia
• 11 finalists were selected to work
alongside financial institutions to create • 10 per cent from the United States
effective solutions that address the • 10 per cent from other countries
evolving needs of the region’s financial
services industry.

Banking, Insurance and Capital Markets | CHAPTER 6
Overview
Banking, capital markets and insurance activities As the second largest and most diversified financial
accounted for the third largest sectoral contribution to centre in the region, Dubai is steadily entering into the
Dubai’s GDP in 2017 generating value added of AED 40.5 global financial arena taking its place among the global
billion or 10.4 per cent of the total. In terms of employ- leading financial centres such as New York, London,
ment, the sector ranked in 11th place among 20 sectors Singapore and Hong Kong. Dubai International Finan-
in the economy and labour productivity was among the cial Center (DIFC) plays a major role in Dubai’s growth
highest with AED 868,785 per worker, in 3rd place. in global and regional finance. As one of the world’s
leading financial centres, connecting regional markets
Banks and insurance companies are major contribu- to the global economy, the importance of DIFC is high-
tors to the growth of financial activities in Dubai. Dubai lighted in the Dubai Plan 2020.
is home to the second largest conventional bank in
the Middle East, Emirates NBD, and also to the third DIFC acts as an enabling platform for investment bank-
largest Islamic bank in the world, Dubai Islamic Bank. ing, M&A, commercial banking and innovative project
Insurance activity in Dubai is also a major contributor finance, including securitization and asset-backed
to the overall insurance sector in the UAE. The emirate financing, across the Middle East, Africa and South
accounted for 61 per cent of the total gross premi- Asia (MEASA) region.
ums earned, 46 per cent of total number of policies
contracted, and 58 per cent of the overall gross claims
paid in UAE in 2017.
In 2017, the average share price index of Dubai

Financial Market reached 3,512 points, a 4.44
per cent increase in performance, after a fall of
9.3 per cent in 2016. The average capitalization
of DFM had a 15.3 per cent growth in 2017,
compared to a 5.4 per cent decline in 2016.

Developments in the UAE Banking Sector1
6.1 The UAE has 49 banks, of which 27 are Gulf banking assets in other emirates within the UAE which
and foreign banks and 22 are domestic. The grew by just over 9 per cent. (Figure 6.1 - 6.2)
total assets of all UAE banks reached AED
2.61 trillion at the end of 2017, equivalent to 174 The major corporate event that took effect in 2017 in
percent of the country’s GDP. Bank assets grew by the banking sector was the merger of National Bank of
4.5 per cent in 2017 from AED 2.5 trillion at the end Abu Dhabi (NBAD) and First Gulf Bank (FGB) into First
of 2016. The growth in bank assets in the UAE as a Abu Dhabi Bank (FAB). The merger means that there
whole has moderated in the last two years after a are now two mega players in the UAE banking sector,
rapid increase of 20.9 per cent in 2015, attributable FAB and Emirates National Bank of Dubai (Emirates
mainly to a surge in the value of bank assets in Abu NBD), which jointly account for 44 per cent of total
Dhabi in that year. In contrast, in 2017 the rate of bank assets in the UAE, 26 per cent and 18 per cent
growth of banking assets in Dubai was 5.4 per cent, respectively. The next two largest banks are the Abu
faster than growth in banking assets in Abu Dhabi Dhabi Commercial Bank (ADCB) and the Dubai Islamic
which grew at 2.8 per cent, but less than the rise in Bank (DIB) with shares of total sector assets of 10 per
cent and almost 8 per cent respectively. (Figure 6.3)
Figure 6.1: Total Bank Assets (AED million)
1,228,568 1,136,017 246,575

2017 2,611,159
1,194,826 1,078,182 226,063

2016 2,499,071
1,153,262 1,006,388 210,809

2015 2,370,459
841,111 925,064 194,23

2014 1,960,411
750,275 860,151 166,544

2013 1,776,970
686,739 789,604 142,834

2012 1,619,176
624,448 698,687 126,430

2011 1,449,564
0 750,000 1,500,000 2,250,000 3,000,000
Abu Dhabi Dubai The Rest of UAE

Source: DED Analysis | BankFocus (Bureau van Dijk)
1 Methodology: For the analysis of Dubai & Abu Dhabi banks’ performance in this chapter, financial data on 23 banks covered in BankFocus
(Bureau van Dijk) are used. These 23 banks represent 96% of the entire banking sector in the UAE measured by total assets. The indicators and
figures used to measure the size of the whole of financial activity for the UAE as an aggregate are from the UAE Central Bank website.

Figure 6.2: Growth of Banks’ Total Assets (% Change from the Previous Year)
9.98 9.25 12.11 37.11 3.60 2.82

Abu
Dhabi
13.01 8.93 7.55 8.79 7.13 5.36

Dubai
12.98 16.60 16.63 8.53 7.24 9.07

Rest of
the UAE
11.70 9.75 10.32 20.92 5.43 4.49

Total UAE
2012 2013 2014 2015 2016 2017
Figure 6.3: UAE’s Biggest Banks 2017 (AED million)
Total Customer Deposits

500,000
FAB
400,000
300,000
BNAD
ADCB
200,000
DIB
100,000
Total Assets 175,000 350,000 525,000 700,000 875,000
Source: DED Analysis | BankFocus (Bureau van Dijk) Note: The size of the bubble indicates the size of the bank measured by total assets.

Additionally, FAB took the first position as the biggest macro-financial shocks, has provided a basis for the
bank in the Middle East from Emirates NBD, after evidential inference of “sufficient capacity to withstand
the merger. The consolidation further increased the a severe yet plausible deterioration in macroeconomic
concentration of assets in the hands of fewer banks in and financial market conditions” (UAE Central Bank).
the UAE. In 2017 the 10 largest banks accounted for Additionally, with the exception of some small and medi-
86 per cent of total bank assets up from 77 per cent um-sized banks, most of the 20 national banks covered
the year before. The merger has also caused a major by the test will be able to maintain capital adequacy
change in the share of banks’ assets in the UAE, with ratios well above the required 12 per cent in the event
Abu Dhabi now accounting for 47 per cent, Dubai 44 of adverse developments in the financial system.
per cent and the rest of the UAE 9 per cent of all bank-
ing assets in the country. (Figure 6.4) 6.4 Due to merger of the National Bank of Abu
Dhabi (NBAD) and First Gulf Bank (FGB) to
6.2 The UAE banking sector achieved strong First Abu Dhabi Bank (FAB), the total number
capitalization, improved profitability, stable of locally-incorporated banks declined to 22 in 2017.
funding and liquidity in 2017, enhancing UAE banks have taken some precautionary measures
financial stability. Improvements in stable funding indi- with respect to operating efficiency, which has been
cators and increased liquid assets were two of the reflected in a significant reduction in the number of
major developments in the banking sector during the branches. The trend of a decline in the number of
year providing important support to the non-energy branches started after they had reached a peak of 874
growth of the UAE. However, the growth in net loans in 2015 as a result of a period of a higher oil price and
and advances to customers has been slower as booming oil and non-oil sectors of the economy. Since
compared to the year earlier despite the fact that real 2015, the number of branches has declined signifi-
estate lending exposure has been increased. Despite cantly reaching 771 by the end of 2017. An aspiration
a slight increase in the (Non-Performing Loan) NPL towards higher operating efficiency, a continuation in
ratio, representing a moderate deterioration of asset consolidation, and investments in new technology
quality, the general and specific loan loss provisions have been the prime reasons for this decline. Cost-ef-
were stable compared to the previous year. ficiencies in both national and foreign banks in UAE has
also resulted in a decline in the number of bank
6.3 The regulatory stress test in 2017 by the UAE employees from 29,532 and 7,439 in 2016 down to
Central Bank, which assesses the resilience 29,056 and 7,311, respectively, in 2017.
of the banking sector in UAE to adverse
Figure 6.4: Share of Bank Assets in UAE (2017)
Dubai
44%
The Rest of UAE

9%
Abu Dhabi
47%

Developments in Dubai Banking
6.5 Dubai is the headquarters of six major banks represented by capital adequacy ratios and Tier 1 capi-
among the 22 UAE national banks: Commer- tal ratios. Despite a moderate decline in Tier 1 and Total
cial Bank of Dubai; Dubai Islamic Bank (DIB); Capital Adequacy ratio for Dubai banks to 15.98 per
Emirates NBD; Emirates Islamic (the Islamic unit of cent and 17.28 per cent in 2017 from 16.97 per cent
Emirates NBD); Mashreq Bank and Noor Bank. The larg- and 17.94 per cent in 2016 respectively, they are well
est Dubai-based bank and the second-largest bank in above Basel 3 requirements and those of the Central
the UAE by assets, is Emirates NBD, in which the Bank of the UAE. Additionally, the ratio of reserves for
government of Dubai is the major shareholder. Dubai impaired loans to gross loans for Dubai banks stabi-
also is a home to 3 large Islamic banks: Dubai Islamic lized in 2017 at 6.32 per cent as compared to 6.29 per
Bank (DIB); Emirates Islamic Bank (EIB); and Noor Bank. cent in 2016 and 5.57 per cent in 2015, while profitabil-
Dubai-based Islamic banks are led by DIB, the largest ity increased substantially with a 15.14 per cent growth
Islamic bank in the UAE and the third largest Islamic in net annual income growth in 2017 as compared to
bank in the world by asset size, followed by EIB. Dubai a decline (-2.65 per cent) in 2016. Dubai banks have
Islamic banks had combined assets of AED 311.29 also strongly outperformed Abu Dhabi banks in terms
billion, at the end of 2017, equivalent to 31.9 per cent of profitability, liquidity, loans and deposit growth while
of the total assets of the Dubai-based national banks. Abu Dhabi banks have shown an improved financial
At the UAE level, Islamic banks represent 21.6 per cent strength reflected in Tier 1 and total capital adequacy
of the total assets of all UAE national banks. ratios. Generally, the 2017 performance of the Dubai
banking sector was characterized by improved profit-
6.6 Dubai’s banks returned to a growth path in ability, growing customer deposits, increasing loans
2017 due to increase in loans and deposits and advances to customers, and stable liquidity.
while maintaining high levels of capitalization
National Bank of Dubai NBD (left) and Dubai Chamber of Commerce (right).

6.7 Customer deposits in Dubai banks grew by worked to reduce debt (deleveraging) to improve the
6.4 per cent in 2017 compared to 4.8 per financial and banking framework, and as a result, cred-
cent in 2016, reaching AED 775 billion. This it to the Government in 2017 grew less than the three-
growth exceeded that of customer deposits in Abu year average (1.7 per cent vs. 4.6 per cent). Overall,
Dhabi banks which increased by 4.0 per cent in 2017 domestic bank credit increased by 1.4 per cent in
compared to 3.2 per cent in 2016, reaching AED 784 2017 with GREs and Non-Bank Financial Institutions
billion. Overall, banking deposits in the rest of the UAE (NBFI) deleveraging their credit positions during 2017.
banks increased by 9.9 per cent by the end of 2017 (Figure 6.6)
reaching a total of AED 171 billion compared to a rise
of 7.5 per cent in the previous year. (Figure 6.5) Accord- 6.9 The loan-to-deposit ratio in Dubai in 2017
ing to the UAE Central Bank, the rise in total deposits was 88.4 per cent, marking an improvement
is due to the increase in resident deposits, which have with a decline of 1.8 percentage points over
been increasing over the past three years. Non-resi- the previous year. (In 2016, the ratio was at 90.2 per
dent deposits, however, recorded a decline of 3.7 per cent), but remained below the 100 per cent ceiling set
cent in 2017 after a substantial rise of 16 per cent in by the UAE Central Bank. This indicates that banks in
2016. Deposits by the Government Sector and Dubai have enough liquidity to cover any unforeseen
Government Related Enterprises (GREs) also saw fund requirements. The decrease is due to the lower
significant rises by 13.5 per cent and 14 per cent pace of lending and the increase in deposits. In Abu
respectively, in 2017. Dhabi the ratio of loans-to-deposits decreased in the
emirate’s banks to 87.4 per cent in 2017 compared to
6.8 In 2017, the total loans made by Dubai banks 91.2 per cent at the end of 2016. The ratio for banks in
grew by 4.3 per cent to reach AED 685.2 the rest of the UAE declined slightly by 0.7 percentage
billion, a slow-down from a growth in lending points to 93.0 per cent in 2017. As a result, the
of 5.7 per cent in 2016 and 10.9 per cent in 2015. In loan-to-deposit ratio for the overall banking sector in
contrast, loans made by Abu Dhabi banks reached UAE declined to 88.4 per cent in 2017 from 91.0 per
AED 685.3 billion in 2017, after falling by -0.4 per cent cent in 2016, a fall of 2.6 per centage points. This is
from 2016 and effectively stagnating in 2015. The mainly attributed to strong deposit growth and tighter
slowdown in lending growth occurred as banks contin- lending policy, with the Government being the major
ued to tighten credit extended while developing a contributor to both factors by lowering its borrowing
more selective lending policy. Local governments and increasing its deposits. (Figure 6.7)
Local governments worked to reduce

debt (deleveraging) to improve the
financial and banking framework, and
as a result, credit to the Government
in 2017 grew less than the three-year
average (1.7 per cent vs. 4.6 per cent).

Figure 6.5: Trends in Growth of Banks Total Customer Deposits (% Change from Previous Year)
30.3
30%
25%
20% 17.0 17.6

16.6
15% 11.5 11.6 12.0 11.9 11.2 9.9

9.5 8.7
10% 7.2 7.5
6.4 5.6
4.3 4.8
3.2 4.0
5%
2013 2014 2015 2016 2017
Source: DED Analysis | Dubai Banks Abu Dhabi Banks The Rest of UAE Total UAE
BankFocus (Bureau van Dijk) Data
Figure 6.6: Total Bank Loans (% Change from Previous Year)
34.9
34%
29%
24% 20.7
19% 16.3
14.0
14% 12.0 10.4 10.5 10.2 10.8
8.2 8.6 8.2 9.0
7.0
9% 5.7
4.3
3.2 2.6
4% 0 -0.3
-1% 2013 2014 2015 2016 2017
Figure 6.7: Loan/Deposit Ratio (%)
93.0 93.5 90.3 94.2 93.2 92.0 93.7 91.0

100% 91.0 93.3 89.6 89.4 90.2 91.2 88.4 87.4
93.0
88.4
86.8 87.6
80%
60%
40%
20%
0% 2013 2014 2015 2016 2017

6.10 The continuation of a conservative lending Abu Dhabi fell from 10.2 to 9.9 per cent. The improve-
policy by Dubai did not lead to a decline in ment in profitability in Dubai’s banks is mainly due
profitability in 2017. In fact, net income of to an improvement in stable funding indicators and
Dubai Banks has increased by 15.1 per cent in 2017 as increases in liquidity. (Figure 6.10)
compared to 2.7 per cent decline in 2016, a year in
which the profits of all banks in the UAE declined. The 6.11 Banks in Dubai still remain strongly capital-
total net income of Dubai banking sector reached AED ized despite a fall in the Tier 1 capital ratio
19.46 billion in 2017 just below the AED 19.69 billion from 16.97 per cent in 2016 to 15.98 per
earned by banks in Abu Dhabi where banks’ profitabil- cent by the end of 2017 representing a 5.8 percent-
ity rose by only 0.4 per cent. (Figure 6.8) age points annual decline. The Tier 1 ratio is the prime
measure of the financial strength of banks because
The improvement in profitability is also evident from it is composed of core capital (equity capital plus
the increase in the net interest margin 2 for Dubai banks disclosed reserves) as a percentage of risk-weighted
in 2017 which rose to 3.18 per cent, while banks in Abu assets. This segment of capital is regarded as of the
Dhabi and the rest of the UAE registered falls in the highest quality in bank capitalization and the ratio
margin. (Figure 6.9) remains significantly above the stipulated minimum
6 per cent ratio in the Basel 3 agreements as well as
The improvement in the profitability of Dubai’s banks the stricter minimum ratio of the first tier of capital,
was also observed in an increasing return on average set by the UAE Central Bank at 8 per cent. In contrast,
assets3 and upon equity capital. The return on average Abu Dhabi Banks, saw an increase in the Tier 1 ratio
assets of Dubai’s banks rose to 1.56 per cent in 2017 from 16.88 per cent in 2016 to 17.31 per cent in 2017
from 1.33 per cent the year before. In contrast, in Abu marking a 2.5 per cent rise for 2017 as compared to
Dhabi the return on average assets of its banks fell a 3.1 per cent decline in 2016. Given the high impor-
from 1.59 per cent to 1.51 per cent. The profitability tance of core capital for banks capitalization in gener-
of banks in the rest of the UAE was lower with a return al, this is an excellent though expensive improvement
on average assets in 2017 at 0.89 percent, down from for Abu Dhabi banks. The Tier 1 ratios for banks in the
1.03 per cent the year before. The return on equity rest of the UAE have been generally higher standing
of Dubai’s banks increased by 19 per cent to reach at 18.01 per cent in 2017. The average ratio for all UAE
12.0 per cent in 2017, up from 10.1 per cent the year banks was 17.12 per cent in 2017 compared to 17.76
before. In contrast, the return on equity of banks in per cent at the end of 2016. (Figure 6.11)
Figure 6.8: Change in Net Income (% point Change from Previous Year)
46.3
50% 41.2
40% 31.0
24.6
30% 22.6
20.0
14.3 16.5 15.1
20% 8.8 6.2 7.1 5.5
3.3
10% 0.4
0%
-2.6 -4.2
-4.7
-10%
-20% -20.0
-30% -30.6
-40% 2013 2014 2015 2016 2017
2 Net interest margin is a measure of the difference between the interest income generated by banks and the amount of interest paid out to their
depositors relative to the amount of their interest-earning assets.
3 Return on average assets is the ratio of net income to average total assets.

Figure 6.9: Banks’ Net Interest Margin (%)
4.54 4.49
5
4.13
3.76
3.59 3.60 3.56
4 3.42 3.35 3.36
3.13 3.19 3.26 3.18 3.20
2.93 3.05 3.08 3.06 2.97
3
0 2013 2014 2015 2016 2017
Figure 6.10: Banks’ Return on Equity (%)

3
.1
17
18
9
16
.7
.7
13
13
12 5
1
12 0
12 3
2
.3
0
.2
.2
3
12 9
.0
.2
14
.0
.0
12
.6
12
12
11
10 7
9
.2
12 .0
.1
91
10
10
9.
90
15
10
8.
8.
8
01
47
6.
08
5.
5.
6
4
2
0 2013 2014 2015 2016 2017
Figure 6.11: Banks’ Tier 1 Capital Ratio (%)
25
2
.8
21
9
0
17 4
.9
.8
.9
.7
17 1
3
18
18
1
18
0
.7
2
.0
18
.6
1
8
20
16 7
2
.5
.4
.4
.3
17
.8
18
.9
.1
9
0
8
17
8
17
17
17
.2
.8
5
16
.2
.9
.5
16
15
16
15
15
15
10
0 2013 2014 2015 2016 2017

6.12 Dubai’s capital adequacy ratio 4, which small and medium-sized banks, most of the 20 nation-
measures banks available capital as a al banks covered by the test will be able to maintain
percentage of risk-weighted assets, declined capital adequacy ratios at levels above 12 per cent in
from 17.94 per cent at the end of 2016 to 17.28 per case of adverse developments. (Figure 6.12)
cent in 2017, marking a 3.7 per cent decline over the
year However, despite the slight deterioration, Dubai 6.13 The ratio of non-performing loans (NPL) to
Banks are in a strong position to absorb a reasonable total loans, loan loss reserves as a propor-
amount of potential losses as the ratio is well above tion of total loans, for Dubai’s banks rose
Basel 3 requirements and those of the Central Bank of slightly from 6.29 per cent in 2016 to 6.32 per cent in
the UAE. On the other hand, Abu Dhabi banks experi- 2017 after reaching a low point of 5.57 per cent at the
enced an increase in the capital adequacy ratio from end of 2015. In contrast, the non-performing loans
18.43 per cent in 2016 to 18.74 per cent in 2017. The ratio in Abu Dhabi banks has been relatively stable
capital adequacy ratio of the UAE for the last three over the past 3 years, at just below 5 per cent with
years peaked at 18.98 per cent in 2016, before declin- some deviations. The UAE banking sector as a whole
ing to 18.34 per cent in 2017. The capital ratios record- recorded a fall in the NPL ratio to 5.64 ratio in 2017
ed in 2017 place UAE banks in a strong position regard- from 5.73 per cent in 2016, but this ratio started rising
ing their ability to withstand unexpected shocks to the into 2018 on the back of issues with some corporate
banking sector. According to a stress test recently entities and Government related Enterprises (GRE).
performed by the UAE Central Bank, except for some (Figure 6.13)
Figure 6.12: Banks’ Capital Adequacy Ratio (%)

4
.9
25
22
1
4
18 2
.2
.0
.0
6
18 7
.9
19 5
2
4
20
20
.3
3
6
.9
.0
20
4
.9
.9
.7
.4
.5
.5
19
.3
8
18
19
.9
18
18
18
4
18
18
.2
.2
4
20
17
.6
.6
17
17
16
16
15
10
0 2013 2014 2015 2016 2017
Figure 6.13: Banks’ Ratio of Non-Performing Loans (%)
7.50 7.23
7.00
6.32 6.29 6.32
6.50
5.57
5.73 5.73 5.64
6.00 5.48 5.32
5.50 5.09 5.65
5.49
5.32 5.37
5.00
4.82 4.96 4.82
4.81
4.50 4.62
4.00 2013 2014 2015 2016 2017
4 Adequate capital is composed of Tier 1 capital and Tier 2 capital, the capital available to absorb losses in the case of winding-up.

Insurance
Developments in Dubai’s
Insurance Sector
6.14 Insurance activities in Dubai account for the insurance value added has been a very volatile sector
second largest part of the overall financial over the last decade. (Figure 6.14)
sector and generated value added of AED 3
billion in 2017, the same value as the year before. In Additionally, insurance activities in Dubai are respon-
2017, insurance activities constituted 7.5 per cent of sible for the employment of 12 per cent of the total
the total financial sector’s value added, but only a rela- numbers employed in the financial sector in 2017
tively small part of Dubai’s GDP with less than a 1 per up from 10 per cent in 2016. The compensation of
cent contribution to the aggregate. Value added in the employees in the insurance activities of Dubai has also
insurance sector has followed the trend line of the seen a year-over-year growth.
overall financial sector value added; however, the
Figure 6.14: Value added of Insurance Activities in Dubai
3500 27.0% 30%
3,043 3,042
25%
3000
2,621 17.7% 20%

2,520 2,513
2,443 2,402 2,395
2500
15%
2,167
2,135
10.5% 10%
2000
3.2%
5%
1500
0%
0.0%
-5%
1000 -4.7%
-6.8%
-10%
-11.1%
500
-13.8% -15%
0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 -20%
Source: DED Analysis & Estimation | UAE Insurance Insurance Sector Value Added AED Millions Rate of Growth YoY %
Authority & Dubai Statistic Center Data

6.15 Despite the small contribution to Dubai’s total number of policies and 88 per cent of the total
total GDP, the emirate is a major city for the gross claims paid in 2017. (Figures 6.15-6.17)
entire insurance sector of UAE. The gross
written premiums in Dubai’s insurance activities 6.16 The insurance sector in Dubai is dominated
amounted to AED 27.4 billion in 2017, constituting 61.2 by non-life insurance activities measured in
of the total gross written premiums in UAE in that year. terms of gross premiums and the number of
policies. Health and Motor insurances were major
According to the OECD, gross direct insurance premi- contributors to the total gross written premiums in
ums per capita represent the average insurance Dubai in 2017, accounting for 40.2 per cent and 15.4
spending per capita in a country. Gross written premi- per cent respectively, while other non-life insurance
ums per capita were estimated at US$2,504 for Dubai, contributed 22.8 per cent of all gross premiums. Life
close to many developed countries in 2016 such as insurance accounted for 21. 6 per cent of gross written
Japan with US$ 3,001, the average of OECD coun- premiums. The total value of written premiums rose by
tries, US$3,316 and the UK, US$3,725. 5 In 2017, Dubai 16.8 per cent in 2016 and the number of policies
standing at 3.35 million also accounted for 46 per cent reached 3,347,129, out of which motor insurances
of the total number of policies and at AED 16.2 million, accounted for almost half in 2016. The number of
58 per cent of the overall gross claims paid in UAE. health insurance policies rose by over 60 per cent
Jointly, Dubai and Abu Dhabi, dominate all insurance while the value of health gross premiums increased by
activities in UAE, accounting for almost 90 per cent of 18 per cent. (Table 6.1)
the overall gross written premiums, 84 per cent of the
5 https://data.oecd.org/insurance/gross-direct-insurance-premiums.htm

Figure 6.15: Share of Dubai in Gross Written Premiums (%)
Dubai Abu Dhabi The rest of UAE

27,396,173,000 12,322,928,000 5,105,127,000
62% 27% 11%
Source: DED Analysis & Estimation | UAE Insurance Authority & Dubai Statistic Center Data
Figure 6.16: Share of Dubai in the Number of Policies (%)

3,347,129 2,778,094 1,187,108
46% 38% 16%
Figure 6.17: Share of Dubai in Gross Claims Paid (%)

16,204,232 8,350,562 3,411,224
58% 30% 12%
Table 6.1: Total Gross Written Premiums and Number of Policies of the Dubai Insurance Sector
Health Insurance Life Insurance Motor Insurance Total for Dubai
Gross Written Number of Gross Written Number of Gross Written Number of Gross Written Number of
Premiums Policies Premiums Policies Premiums Policies Premiums Policies
2017 11,012,915,000 1,045,654 5,905,067,000 257,169 4,224,398,000 1,615,163 27,396,173,000 3,347,129
2016 9,329,598,000 401,378 5,616,330,000 271,507 3,536,770,000 1,792,230 23,485,684,000 3,300,524
Source: DED Analysis & Estimation | UAE Insurance Authority

Developments in the UAE Regulatory Developments

Insurance Sector 6.20 The legislative landscape in the UAE
6.17 The UAE is a home to 62 insurance compa- concerning insurance sector is very import-
nies as well as many insurance agents, insur- ant given the sector’s key role in the econo-
ance broker companies, insurance consul- my in addressing the risk exposures, as well as protect-
tants, actuaries, loss/damage adjusters, and third- ing individuals and companies against various risks. In
party administrators. The total assets of these 62 this regard, the UAE Insurance Authority has been
companies reached AED 103.9 billion, marking a 16 instrumental in developing the sector’s regulatory
per cent increase from the year before, which is main- framework and setting the legislative foundation not
ly due to increases in investment within the sector. only to insure the stability in the sector but also to
National companies accounted for 60 per cent of the enhance the growth of the overall insurance sector.
total assets in 2017 and foreign companies account-
ed for the rest. Among the major regulatory developments in the
insurance sector of UAE and market factors affecting
6.18 The total gross written premiums of the UAE it were the following:
insurance sector was AED 44.8 billion in
2017, up from AED 40 billion in 2016. The ↗↗ Full Implementation of the financial regulations on
UAE insurance market has maintained the first rank in insurance companies
the MENA region for ten consecutive years, in terms
of gross written premiums. The sizable growth rate of ↗↗ New Investment rules to protect the rights of poli-
12 per cent in gross written premiums recorded for cyholders and companies against risks
2017 has strengthened this position. The largest
contribution to the total gross written premiums came ↗↗ Regulations on the solvency margin and minimum
from property and liability insurance accounting for guarantee fund
73.8 per cent while Insurance of Persons & Fund Accu-
mulation accounted for the rest of gross premiums in ↗↗ Strengthening financial reporting requirements
2017. Foreign insurance companies contributed 37.2
per cent of total gross written premiums in 2017. There ↗↗ Advancing motor tariffs
are 12 Islamic insurance (Takaful) companies which
accounted for 9.5 per cent of all gross written premi- ↗↗ Amendment of the minimum capital regulations of
ums in UAE, during 2017. (Figure 6.18) insurance companies
6.19 Total investments of the UAE insurance ↗↗ Common reporting standard regulations
sector in the economy have grown exten-
sively, reaching AED 60.7 billion in 2017, with ↗↗ Compulsory health insurance in Dubai
an increase of 15.6 per cent from the year before. The
investments portfolios of the insurance companies ↗↗ VAT implementation
are concentrated primarily in equity & debt securities,
cash & deposits, and real estate representing 22.5 per
cent, 16 per cent and 5.1 per cent respectively of the
overall investment holdings of the sectors in
2017. (Figure 6.19)

Figure 6.18: Gross Written Premiums in UAE by Type and Aggregate (AED billion)
50
45
45
40
40 37
34 33
35
30 30
30 28
25
23
25
20
15 12
10 10
9
10 7
2013 2014 2015 2016 2017
Insurance of Persons & Fund Accumulation Property and Liability Insurance Total Gross Written Premium
Figure 6.19: Investment Portfolios in the Insurance Sector (AED billion)
70
60.65
60
52.5
50
40
30
22.52
20 16.04 15.37
14.18
11.32
10.07
7.13
10 4.97 5.12 5.14
0.47 0.5 0.16 0.16
Total Other Investment Loans, Loans Cash & Equity & Real Estat
invested Invested in Associates Deposits Secured by Life Deposits Debt Securities Investment
Assets Assets and Other Insurance
Instruments Policies
that are Rated A
2016 2017

Developments in Capital Markets
6.21 Capital markets in the UAE experienced an 6.24 In contrast, financial markets indices in the
increase in the share price index as a result rest of the GCC countries had performed
of a large jump in market capitalization in variously in 2017 with stock market indices
2017, which was primarily due to new initial public in Saudi Arabia, Kuwait and Bahrain recording a
offerings. The overall and sectoral performance of the growth in share price index by 12.75 per cent, 11.48
Dubai Financial Market (DFM) has been the major per cent and 14.94 per cent, respectively, driven
contributor to the performance and size increase of primarily by recovery in oil prices as well as the
UAE capital markets. economic measures taken by GCC governments to
foster growth. Meanwhile, the Qatar stock market
6.22 Out of a total of the 130 listed companies on index continued its decline recording a drop in share
the UAE capital markets, the DFM accounted prices indices by 15.95 per cent. This is by far the
for 64 companies and the Abu Dhabi Secu- biggest decline in the Qatar financial market since the
rities Exchange (ADX) accounted for 66. UAE capital global financial crisis in 2008. The Oman stock market
markets topped the GCC markets in 2017 in terms of has been one of the worst performing financial
raising capital through IPOs. Five new companies markets in GCC as it has been declining for 3 consec-
registered with the UAE Securities and Commodities utive years since 2015. The Oman financial market
Authority (SCA) each as a Public Joint Stock Company index fell by 12.4 per cent in 2015, 8.21 per cent in
(PJSC) during 2017, with a total capital exceeding AED 2016, and 15.29 per cent in 2017. This decline is
74 billion. The SCA approved the offerings of shares expected to continue further. Geopolitical tensions
of Emaar Development Company in (DFM), and Abu in the region, trending liquidation of stock holding by
Dhabi National Distribution Company in (ADX), with 800 foreign and local investors in favor of new investment
million shares valued at AED 4.8 billion for Emaar and opportunities such as cryptocurrencies, gold and US
1.25 million shares valued at AED 3.125 billion for dollar had been the prime reasons for the overall
ADDC. These 2 offerings have increased the market deteriorating performance of many GCC local
capitalization of the UAE capital markets by AED markets. (Figure 6.21)
55.35 billion.
6.25 At the sector level, four sectors out of nine
6.23 The average share price index of Dubai in the DFM and three sectors out of nine in
Financial Market during 2017 reached 3,512 ADX witnessed an increase in their indices
points showing a 4.44 percent increase in by the end of 2017 compared to the end of the year
performance after a fall of 9.3 per cent in 2016. On the 2016. The rise in DFM was mainly led by services,
other hand, the average share price index of Abu Dhabi which increased by 26 per cent while consumer goods
Securities Exchange was at 4,461 points during 2017, and telecommunication have been the biggest down-
up by 1.52 per cent from the 4,394 points recorded ward draggers of the index in 2017 from the year
during 2016. The average capitalization of DFM has before. The major contributors to upward index move-
also shown a similar trend of 15.3 per cent growth in ments in ADX have been the energy and the insurance
2017, in contrast with 5.4 per cent decline in the previ- sectors; whereas, real estate, consumer goods and
ous year. ADX has been more stable in terms of market services have been the major downward factors, drag-
capitalization showing only a slight growth rising by 3.7 ging down the index in 2017 from the year before.
per cent. (Figure 6.20) (Figure 6.22, Table 6.2)

Figure 6.20: Performance of Share Price Indices in the UAE Stock Markets
ADX General
5000 Price Index
4000 Dubai Financial

Market
Price Index
3000
FTSE NASDAQ
2000 Dubai UAE 20
Price Index
Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Thomson Reuters data
Figure 6.21: Share Price Indices in GCC Stock Markets
16000 Qatar SE
14000 Tadawul
Stock Market Price Index
12000 Kuwait SE
10000 AXD
8000 Muscat SE
6000 FTSE NASDAQ

Dubai
4000 DFM
2000 Bahrain SE
Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Figure 6.22: Performance of Sectoral Share Price Indices in Dubai Financial Market
8000 Real Estate

Investments and
7000 Financial
6000 Banks
5000 Insurance
Telecomunication
4000
Transportation
3000 Services
2000 Consummer
Goods
1000 Industrial
01/16 03/16 05/16 07/16 09/16 11/16 01/17 03/17 05/17 07/17 09/17 11/16
Table 6.2: DFM Sectoral Trading Value (AED billion)
Sectoral Trading Value in Dubai Financial Market (AED Billion) 2013 2014 2015 2016 2017
Banks 31.61 60.88 39.9 35.3 33.1
Investment and Financial 27.3 50.15 15.4 13.3 11.7
Insurance 4.76 4.72 1.8 2.6 4.43
Manufacturing 0.001 12.66 0.057 9.2 0.0429
Estates and Construction 70.88 243.27 78.6 57.2 45
Telecommunication 4.22 3.43 1.3 3.9 4.49
Transport 12.36 13.63 5.5 6.4 4.9
Consumer Goods 0.049 1.04 5.8 8.7 4.5
Services 8.63 4.35 3 5.8 6
Source: DED Analysis | Dubai Statistic Center Data


Nasdaq Dubai
6.26 The value of shares trading on the Nasdaq were listed on Nasdaq Dubai and US$2.75 billion were
Dubai market amounted to AED 4.88 billion listed on the Dubai Financial Market (DFM). Around 35
by the end of 2017, up 7.08 per cent from the per cent of Nasdaq Dubai’s Sukuk listings were from
value of trading in 2016, which amounted to about AED sovereign issuers. During 2018 to date, the listings by
4.57 billion. The volume of shares traded in 2017 rose SIB and DAMAC Properties brought the total nominal
significantly to 273 million shares from 138 million value of all Sukuk in Dubai to US$59.22 billion, marking
shares in 2016, marking a 49 per cent increase. The a remarkable achievement for Dubai as the highest
number of deals rose from 23,000 to 29,000. (Table 6.3) amount of any Sukuk listing venue in the world, and
strengthening the emirate’s role as the leading global
6.27 Nasdaq Dubai has also helped the emirate centre for Sukuk listings by value.
reach a new record in Islamic Finance with
the total nominal value of all Sukuk listed in 6.28 FTSE Nasdaq Dubai index, which tracks the
Dubai reaching in excess of US$50 billion for the first performance of 20 companies listed on the
time in 2017, a new world record. The Indonesian Dubai Financial Market, the Abu Dhabi Stock
government was the largest issuer on the exchange in Market and the Nasdaq Dubai, gave a clear indicator
2017 with a total value of US$11.5 billion from 8 list- of the strong performance of the Dubai financial
ings. Other leading issuers include the Jeddah-based sector in 2017. The index rose by 3.31 per cent in
Islamic Development Bank with total value of US$8.5 2017, after declining by 13.22 per cent in 2016 and
billion and the government of Hong Kong with a total 14.17 per cent in 2015. This was an additional signal
value of US$3 billion. Out of the total value of US$52.06 of the positive sentiments of investors about the
billion Sukuk listings in Dubai in 2017, US$49.3 billion growth of Dubai’s economy.
Table 6.3: Nasdaq Dubai Market Indicators
Nasdaq Dubai Market Indicators 2013 2014 2015 2016 2017
Value of Shares Traded (AED Billions) 2.33 5.31 5 4.57 4.88
Volume of Shares (Million Shares) 199 280 219 138 273
No. of Deals (Thousands) 11.9 25 31 23 29
Source: DED Analysis | Dubai Statistics Center Data

CHAPTER 7 |
Transport, Storage,
Communications
and Information
Technology
Sheikh Zayed road in Dubai downtown.

T
his chapter highlights the importance of these sectors
as drivers of economic growth, foreign investment, a
well-managed infrastructure to effectively support trans-
port of goods in and around the country, and a world class
road system and modern public transportation system by
metro, bus, taxi, waterbuses and ferries, and mass transit. The UAE ranks
first globally in terms of government procurement of high technology
products and innovation capacity. The ICT sector is attractive to foreign
direct investment (FDI) which has doubled over the last decade (2007-
2016), reaching USD$6,017 million in 2016.
↗↗ Dubai and the UAE rank first globally for the quality of transport
infrastructure, outperforming most countries of the world, including
many in the developed world.
↗↗ The transport and storage sector is the second largest contributor

to Dubai’s GDP, contributing 11.8 per cent in 2017.
↗↗ The emirate’s road network is recognized as the best globally in

terms of safety and efficiency.
↗↗ Dubai is home to two of the world’s best airports in terms of effi-

ciency and quality of service.
↗↗ The Al Maktoum International Airport project is part of Dubai World

Central, one of Dubai’s largest air transport projects, and includes
the construction of the world’s first fully integrated airport city.
↗↗ According to the Global Competitiveness Report (2017–2018) issued

by the World Economic Forum, the UAE ranks first globally in terms
of government procurement of high technology products.

CHAPTER 7 | Transport, Storage, Communications and Information Technology
Economic Growth Promoted by

World Class Infrastructure
Dubai’s investment in transportation, storage, and ICT has created a fertile and
profitable environment for foreign investment, international trade, and tourism.
1 World Class Transport and Storage Sector
The UAE has a world class transport and storage

sector that is poised to only improve over time.
1st for road quality

in the world
According to the
World Economic Forum,
4th for the highest quality
of port infrastructure
the UAE ranks: in the world (1st in GCC)
3rd for the highest quality

of air transport infrastructure
in the world (1st in GCC)
2 Foreign Direct
Investment (FDI)
Total FDI in the

transport and storage
sector has almost
doubled from
2007-2018 to US
3 Government Procurement
$5,214 million
Total FDI in ICT
The UAE is #1 in government sector has doubled
procurement of high technology from 2007-2016 to
products. US $6,017 million
1
FDI for Transport
st & Storage:
FDI for ICT:
GLOBALLY
in government US$6,017
procurement of US$5,214 MILLION
high technology MILLION
products globally US$2,863 US$2,555
MILLION MILLION
2007 2016 2007 2016

Transport, Storage, Communications and Information Technology | CHAPTER 7
Overview
The Transport and Storage sector in Dubai has a Given the pivotal importance of the transport sector,
special importance beyond its position as one of the the Government of Dubai is continuously developing
main economic sectors in the emirate in terms of its plans and strategies to improve it, not only by making
contribution to GDP. This stems from its interrelation- financial allocations to support investment in its expan-
ships with other economic sectors, especially trade sion, but also by enhancing and improving the quality
and tourism. The quality of the emirate’s transport of various transport services. Dubai and the UAE rank
infrastructure is a determinant of Dubai’s international first globally in terms of the quality of transport infra-
competitiveness and of foreign investment inflows. The structure, outperforming most countries of the world,
transport and logistics infrastructure is closely linked including many of those in the developed world.
to both domestic trade and foreign trade. The ability
of the country to offer its products and services with The Government of Dubai has also established appro-
the required speed, efficiency and reliability is one of priate institutional, organizational and administrative
the fundamental determinants of its competitiveness frameworks given the importance of transport and
in international trade. Throughout human history, the communications in the economy. The responsibilities
most developed and economically prosperous coun- for managing and supervising the sector are distribut-
tries are the ones which are easily accessible and well ed between the Roads and Transport Authority (RTA)
connected to their trading partners. In addition finan- and the Dubai Civil Aviation Authority. While the former
cial activity in modern economies, particularly in the is responsible for the regulation and management of
service industries, increasingly depends on the effi- land, sea and rail (Dubai Metro) means of transport, the
ciency of the information and communications (ICT latter is responsible for managing and regulating air
sector and its ability to deliver voice and digital data. transport and shipping. The supervision of ICT service
This is bolstered by rising consumer demand for infor- providers (Etisalat and du) is the responsibility of the
mation and entertainment services as living standards Telecommunications Regulatory Authority.
rise. Although smaller than the transport sector Dubai is
widely regarded as having one of the most competitive
telecommunications industries in the MENA region.
Dubai and the UAE rank first globally for

the quality of transport infrastructure,
outperforming most countries of the world,
including many in the developed world.

Contribution of the Transport and

Communication sectors to Dubai’s GDP
7.1 The transport and communications sectors This growth was reflected in changes in contribution
grew at differing rates in 2017. While the of the two sectors to the total GDP of the emirate. The
output of the transport and storage sector share of the transport and storage sector increased
grew by 4.5 per cent in constant prices on the previous slightly from about 11.6 per cent of GDP in 2016 to
year, the ICT sector grew by about 2 per cent in the 11.8 per cent in 2017, making it the second largest
same year. (Figure 7.1) contributor to Dubai’s GDP. The contribution of the ICT
sector was stable at about 4 per cent in both 2016 and
2017. (Figure 7.2)

Figure 7.1: Growth Rates of Transport , Storage and Communications
14.6
15
13.0
11.4
9.3
10
5.1 5.2
4.6 4.7 4.5
5 4.0 4.1
3.7 3.6 3.6
2.8 2.9 2.8
2.5
1.9 2.1
0.7 0.6
0.1
-1.8
-5 2010 2011 2012 2013 2014 2015 2016 2017
GDP Growth Rate % Transportation & Storage Communication

Figure 7.2: The Shares of Transport, Logistics, Information, and Telecommunications Sectors in Dubai’s GDP
15
11.7 11.6 11.8

11.3 11.2 11.4
11.1
10.6
10
Dubai Banks Abu Dhabi Banks The Rest of UAE Total UAE
5 4.0 4.0 4.1 4.1

3.6 3.7 3.8
3.5
0 2010 2011 2012 2013 2014 2015 2016 2017
Transportation & Storage Communication


The Transport and Storage sector
7.2 In light of the attention paid to infrastructure as shown by the liner shipping connectivity index,
quality by the UAE in general and Dubai in where the UAE ranked first among GCC countries
particular, it is no surprise that the United in the last three years. (Figure 7.3)
Arab Emirates topped some major infrastructure
quality indicators, as shown in the World Economic In the quality of air transport infrastructure indica-
Forum’s Global Competitiveness Report 20181. tor, the United Arab Emirates ranked in third place
globally and first among GCC countries, reflecting
The United Arab Emirates ranked first in the world in the high quality of transport and storage infrastruc-
the road quality index. The next highest ranked Arab ture in the country. (Table 7.1)
country in this category was Oman (14), followed by
Qatar, Bahrain, Saudi Arabia and Kuwait (17, 25, 34 The latest available data on the overall performance
and 63 respectively). In the port infrastructure qual- of the World Bank’s logistics performance index are
ity index, the United Arab Emirates ranked fourth consistent with previous data; not only does the UAE
globally and first among the GCC countries. The outperform the GCC, but its score is higher than the
UAE has a strong link with most of the world’s ports, average of EU countries. (Figure 7.4)
Figure 7.3: Link of UAE and the GCC ports with most of the world’s ports (Maximum value in 2004 = 100)
70.4 70.6
66.5
64.8
61.3 61.8
49.9
48.4 47.4
27.0 26.7 26.5
8.2 8.9 8.9

5.2 5.2
3.9
KSA UAE Bahrain Kuwait Qatar Oman
Source: World Bank: World Development Indicators, 2018 (https://datacatalog.worldbank. 2014 2015 2016
org/dataset/world-development-indicators).
1 http://www3.weforum.org/docs/GCR2017-2018/05FullReport/TheGlobalCompetitivenessReport2017%E2%80%932018.pdf

Table 7.1: The Quality of Infrastructure in the UAE and the GCC
Countries Quality of roads Quality of port infrastructure Quality of air transport

infrastructure
Rank Value Rank Value Rank Value
UAE 1 6.4 4 6.2 3 6.6
Oman 14 5.5 48 4.6 56 4.7
Qatar 17 5.5 12 5.6 6 6.3
Bahrain 25 5.1 30 5.1 49 4.9
KSA 34 4.8 42 4.7 46 4.9
Kuwait 63 4.1 78 3.8 117 3.2
Source: World Economic Forum: Global Competitiveness Report 2018.
Figure 7.4: GCC Logistics Performance Index for 2016

3.94
3.61 3.60
3.31
3.23
3.16 3.15
2.71
European Arab World KSA UAE Bahrain Kuwait Qatar Oman

Union
Source: World Bank: World Development Indicators, 2018

The transport and storage sector in the emirate has The transport and storage sector is one of the sectors
seen significant growth in recent years according to a that is particularly attractive to foreign investment
number of sectoral indicators. The number of workers because of its importance in the economy and the
employed in the sector increased from about 232,000 growth and expansion opportunities it offers. Total
in 2011 to about 241,000 in 2013, then 262,000 in foreign direct investment in the transport and stor-
2015and to 273,000 in 2016. age sector has almost doubled during the last decade
(2007-2016), rising from US$ 2,863 million in 2007 to
The average annual growth rate in the number of US$ 3,575 million in 2009, to US$ 4,251 million in 2014,
workers was 4.7 per cent during the period (2007- and finally to US$ 5,214 million in 2016. (Figure 7.6)
2016). The year 2016 witnessed a growth of 4.3 per
cent. (Figure 7.5)
Figure 7.5: Growth rates of transport and storage workforce, 2007-2016
9
7.9
8
7
6.4 6.4
7
6 4.9
5 4.3
3.7
4 3.1
3 2.1
2 0.8
0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Figure 7.6: Total FDI stock in Transport and Storage sector (US$ Million)
6,000
5,214
5,000 4,444
4,294 4,177 4,251
3,942
4,000 3,575
3,282 3,364
2,863
3,000
2,000
1,000
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Land transport
7.3 Land transport involves the transport of indi- attention to it, making it the best globally in terms of
viduals and goods. Individuals in Dubai move safety and efficiency. This has led to an increase in the
around using private cars and public transport, number of cars and buses that use Dubai’s network,
including public buses, metro and taxis, while goods are making the emirate one of the most densely populat-
moved by trucks. The road network is one of the most ed cities in the world in terms of its car-to-population
important public assets that, when developed and ratio. This ratio is also high because of other economic
improved, offers many economic and social benefits, factors such as the high level of per capita income and
including quick and safe transport. This reduces the the level of economic prosperity in the emirate. In order
operating costs of running buses, cars and trucks, to counter the environmental impact of carbon dioxide
making transporting goods and individuals more effi- emissions arising from a high number of cars per capi-
cient raising profits and the welfare of society’s members. ta, the Government of Dubai has undertaken several
initiatives in cooperation with local and federal author-
Recognizing the pivotal role played by the road network ities to help make the emirate a “green economy.”
in the transport sector, the emirate has paid great

Mass transit system

7.4 As part of the Government of Dubai’s than the number of passengers using public buses.
efforts to enhance the welfare of its resi- Metro travel increases more than five times during
dents and encourage the use of public 2010-2017, from about 39,000 passengers in 2010
transport to preserve the environment, an integrated to close to 201,000 passengers annually in 2017.
mass transport network has been developed, cover- Public bus use increased from about 110,000
ing most areas within the emirate and offering its passengers annually to about 155,000 passengers
services to all segments of society efficiently, safely annually during the same period. (Figure 7.7)
and cost effectively. Not only did the Government of
Dubai provide public buses, but it intensified its RTA has signed a contract to build Route 2020,
efforts to reduce environmental pollution and provide which will extend the Red Line of Dubai Metro from
alternative high quality means of transport. It has also Nakheel Harbor and Tower Station to the Expo 2020
built two metro lines, the Red Line and the Green Line, site, adding 15 km, of track including 11.8 km above
with 87 trains in operation covering a distance of 75 ground level and 3.2 km underground. The project
km. The tremendous change that Dubai Metro has comprises seven stations, including an interchange
brought about in terms of a mass transit network can station with the Red Line, a station at the Expo
be seen in the growing numbers of metro passengers site, three elevated stations and two underground
in recent years. The increase in the number of stations, along with the addition of 50 more trains.
passengers using the metro was significantly higher
Figure 7.7: Number of Metro passengers and public buses (2010-2017)
38,888 69,007 109,492 137,760 164,307 178,647 191,326 200,753

Metro
Passengers
110,393 107,408 107,806 115,676 128,539 128,931 151,069 155,320

Public Buses
Passengers
2010 2011 2012 2013 2014 2015 2016 2017

Taxis
7.5 As part of the diversification programme of 7,942 in 2011 to 8,702 in 2013, to 9,611 in 2015 and
the transport services for residents and to 11,327 in 2017. (Figure 7.8)
visitors, Dubai offers an excellent transport
service through a huge fleet of taxis managed and The increase in the number of taxis caters for increas-
supervised by RTA. These vehicles are operated by ing demand, as demonstrated by the rise in the number
six companies that are licensed to operate taxis: of trips from about 82 million trips in 2010 to about
Dubai Taxi, Arabia Taxi, National Taxi, Cars Taxi, Metro 96 million trips in 2012, to about 108 million trips in
Taxi and City Taxi. The number of taxis in Dubai has 2015 with a slight decline to around 102 million in
increased significantly in recent years, rising from 2017. (Figure 7.9)
Figure 7.8: Number of taxis 2010-2017 Figure 7.9: Number of taxi rides 2010-2017
2017 11,327 101,680,328
2016 10,216 101,680,328
2015 9,611 107,822,479
2014 8,762 106,700,287
2013 8,702 81,619,678
2012 8,042 95,525,514
2011 7,942 91,448,170
2010 7,944 81,800,803
Number of Taxis Number of Taxi rides

Source: Roads and Transport Authority (RTA)

Maritime mass transport

7.6 Dubai offers several maritime mass transport 7.7 As part of the continuous development of
systems, including ferries, water buses, the emirate’s transportation system, RTA has
water taxis and Ferry Dubai. These are used adopted the unique design of the Enterprise
by citizens, residents and tourists. The number of Command & Control Centre to meet the requirements
ferries has increased from 154 in 2013 to 158 in 2015, of hosting Dubai Expo 2020, at an estimated cost of
and to 169 in 2017. In line with this, the number of ferry AED 335 million.The Centre is the first of its kind in the
passengers increased from about 12.5 million in 2013 Middle East in terms of ability to control and integrate
to about 13.6 million in 2015, before falling slightly to all of the different means of transport and connect the
12.9 million passengers in 2017. (Figure 7.10) various control centers to the operational institutions
in the RTA and traffic control systems. The Centre
The number of passengers on water buses increased contributes to the enhancement and coordination of
significantly over the same period, rising from 85,000 communication with various control centres through
in 2013 to more than 572,000 in 2015, an increase the use of smart simulation and forecasting for smart
of seven times more, before dropping to 432,000 in mobility services, an improved coordination in crisis
2017, Figure 7.11. Ferry Dubai is one of the outstand- management, for event planning and management,
ing services launched by the Dubai RTA, offering an and the organization of mobility during major events
hour-long round trip in Dubai that passes by the Atlan- and exhibitions in Dubai.
tis, Burj Al Arab and Palm Jumeirah.
The RTA has adopted two projects for cycling and
RTA is preparing to build additional 12 maritime running tracks. The first project involves the execution
stations in the Business Bay Canal and the Dubai Water of 32 kilometers of cycling and running tracks and the
Canal: five stations on the Dubai Water Canal as part construction of three bridges for bicycles and pedes-
of the canal construction project and seven stations trians. The project cost is AED 52 million. The second
on the Business Bay Canal to be opened by 2018. This project involves the implementation of 25 kilometers
will bring the number of stations on Business Bay Canal of cycling and running tracks and the construction of
and Dubai Water Canal to 18. The number of users of a bridge for use by bicycles and pedestrians, at a cost
the maritime transport sector in Dubai is estimated at of AED 27 million.
13 million passengers annually.
Water Taxi at the Dubai Festival City.

Figure 7.10: Number of ferry passengers (in million)
14.0
13.6
13.5
13.1
13.0 12.9
12.6
12.5
12.5
12.5
12.0 2012 2013 2014 2015 2016 2017

Figure 7.11: Number of water bus passengers
700,000
572,202
600,000
533,413 527,025
500,000
431,891
400,000
347,530
300,000
200,000
100,000
84,720
0 2012 2013 2014 2015 2016 2017


Air transport
7.8 The air transport sector is one of the most It is unsurprising that the UAE topped the GCC coun-
important success stories in the Emirate of tries in terms of the number of flights of registered
Dubai. The sector’s progress began in the airlines worldwide, reaching about 459,000 flights in
mid-1980s and continues to this day constituting one 2017, down slightly from 464,000 the year before.
of the cornerstones of the emirate’s economy. It is The UAE was followed by Saudi Arabia with 271,000
supervised by the Dubai Civil Aviation Authority. flights and by Qatar in third place with 194,000 flights.
In rank order Oman, Bahrain and Kuwait generated
The exceptional growth of the air transport sector 167,000 flights between them. The order of the top
over the past two decades has been due to several three countries remained the same over the last three
factors, including most prominently the air transport years. (Figure 7.12)
infrastructure, represented by Dubai Airports and
Emirates Airlines, which have been the driving force In parallel, the number of air passengers in the UAE
of this sector. has increased from about 84 million in 2015 to about
92 million in 2016 and to about 95 million in 2017. As
7.9 Dubai is home to two of the world’s best in the case of the number of registered flights, the
airports in terms of efficiency and quality of UAE ranks first in terms of number of passengers in
service:Dubai International Airport and Al the GCC region, followed by Saudi Arabia and then
Maktoum International Airport. Their operations are Qatar. (Figure 7.13)
managed by the Dubai Airports Company, which was
established in 2007.
The Al Maktoum International

Airport project is part of Dubai World
Central, one of Dubai’s largest air
transport projects, and includes
the construction of the world’s
first fully integrated airport city.

Figure 7.12: Number of registered flights Figure 7.13: Number of flights

worldwide passengers*
2017 458,672 95,306,296
UAE 2016 463,947 91,763,598
2015 437,638 84,343,562
2017 270,924 37,503,000
Saudi 2016 256,635 35,092,840

Arabia
2015 236,468 33,431,736
2017 194,389 29,949,181
Qatar 2016 200,927 31,209,097
2015 170,582 25,263,224
2017 70,436 9,065,019
Oman 2016 61,956 7,709,851
2015 56,544 6,365,784
2017 54,474 5,190,484
Bahrain 2016 55,592 5,220,218
2015 57,444 5,313,756
2017 41,736 5,586,034
Kuwait 2016 33,387 4,069,935
2015 30,073 3,752,995
Source:
World Bank: World Development Indicators 2018
*Note: fig (7.13) includes the number of air passen-
gers includes both those traveling on domestic and
international flights, which are served by the UAE Registered flights worldwide Passenger flights
registered airlines.

Data shows that Dubai receives the largest share of The number of passengers at Al Maktoum International
passengers in the UAE. Dubai International Airport Airport has increased from about 433,000 passengers
received more than 88 million passengers in 2017, in 2015 to about 851,000 passengers in 2016, and then
compared to 84 million passengers in 2016 and 78 to about 905,000 passengers in 2017. (Figure 7.15)
million passengers in 2015. (Figure 7.14)
7.11 Developments in Dubai’s air transport sector
7.10 The Al Maktoum International Airport project are linked closely with the leading position of
is part of Dubai World Central, which is one of the Emirates Group, which is one of the fast-
Dubai’s largest air transport projects, at a est growing airlines in the world and operates a
cost of AED 120 billion. It includes the construction of network to more than 150 destinations. Emirates
the world’s first fully integrated airport city. The project Group includes a number of companies with different
includes six specialized areas: Al Maktoum Internation- activities related to air transport services, including
al Airport, which will be the world’s largest airport; Dubai most notably Emirates Airlines, Dnata, Emirates Holi-
Logistics City: a residential city, a commercial city, a days, Marhaba, Emirates Air Cargo, Emirates Private
golf city and an aviation city. The total cost of the proj- Aviation, Emirates Academy for Pilot Training and
ect is AED 120 billion which is being executed in phases. Emirates Catering.
The cargo terminal was opened in June 2010 and the
passenger terminal was opened in October 2013.
Figure 7.14: Number of Dubai International Airport passengers 2010-2017 (in million)
100.0 88.2
83.7
78.0
80.0 70.5
66.5
57.7
60.0 50.9
47.2
40.0
20.0
0 2010 2011 2012 2013 2014 2015 2016 2017

Figure 7.15: Number of Al Maktoum International Airport passengers 2014-2017
904,940
1,000,000
844,576 850,633
800,00
600,000
432,876
400,000
200,000
0 2014 2015 2016 2017


Dubai International Airport.

ICT sector
7.12 The ICT sector has witnessed continuous The ICT sector is attractive to foreign direct invest-
growth in recent years, with the number of ment (FDI) which has doubled over the last decade
people working in the sector increasing from (2007-2016), rising from US$2,555 million in 2007
about 25,000 in 2011 to about 29,000 in 2013, to to US$3,098 million in 2009, to US$5,496 million in
32,000 in 2015 and to more than 33,000 by 2016. 2014, and finally reaching USD$6,017 million by
(Figure 7.16) 2016. (Figure 7.17)
Figure 7.16: Number of workers in the Telecommunications Sector

33,232
32,341
30,155
28,617
27,254 27,572
24,868 24,477 24,283 24,615
22,481
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Figure 7.17: Total value of FDI in the telecommunications sector (US$ million)
6,017
5,496 5,573
5,317
5,066
4,805
3,447
3,098
2,555 2,648
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

7.13 According to the Global Competitiveness measures the ability of a particular economy to use ICT
Report (2017-2018) issued by the World to increase competition and enhance development.
Economic Forum, the UAE ranks first global- The UAE was ranked 26th among all 139 countries on
ly in terms of government procurement of high tech- this index. (Figure 7.18)
nology products”, 13th globally and the first among
Arab countries in terms of the availability of the latest According to the ICT Development Index, which
technology, and 15th globally and the first in the Arab measures the level of ICT development, the UAE
world in terms of innovation capacity. ranked 40th globally and third in the GCC region in
2017. (Figure 7.19)
The United Arab Emirates ranked first among Arab
countries on the network readiness Index, which
Figure 7.18: International ranking of GCC countries according to the Network Readiness Index
Ranking
10
20
26 27 28
30 33
40
52
50
61
60
70
80
UAE Qatar Bahrain KSA Oman Kuwait
Source: Global Competitiveness Report - World Economic Forum, Network Readiness Index
Figure 7.19: International ranking of the GCC countries according to the ICT Development Index
Ranking
10
20
30 31
40 39
40
50
54
60 62
70 71
80
UAE Qatar Bahrain KSA Oman Kuwait
Source: ITU - ICT Development Index

7.14 According to the Dubai Statistics Center, the 100 inhabitants in 2017, the United Arab Emirates
number of fixed lines in Dubai has grown ranked 41st globally and first among the GCC coun-
strongly over the last four years, rising from tries. (Figure 7.21)
about 1.304 million in 2014 to about 1.349 million in
2015 and then to 1.414 in 2017. The available data also Regarding the penetration of mobile phone usage the
indicates that the number of active mobile lines was World Bank’s Mobile Phone Index for every 100 inhab-
about 5.8 million in 2017. (Figure 7.20) itants in 2017 showed that the United Arab Emirates
was third in the world and second among the GCC
In terms of the density of lines according to the region, Figures (7.22)
World Bank’s Fixed Line Index for lines for every
Technology exhibition in Dubai.

Figure 7.20: Telephone lines in Dubai
6,430,336 6,348,125
5,696,569 5,878,057
1,304,427 1,349,101 1,382,968 1,413,717
2014 2015 2016 2017
Number of active mobile lines Number of fixed telephone lines

Source: Dubai Statistic Center
Figure 7.21: Fixed telephone lines per 100 inhabitants
23.4
20.8
19.3
12
11
9.8
Ranking 41 48 54 76 80 82
UAE Bahrain Qatar KSA Kuwait Oman
Source: World Bank: Information Technology Statistics
Figure 7.22: Mobile lines per 100 inhabitants
216.9
204
159.2 157.6
147.1 146.6
Ranking 2 3 13 15 22 24
Bahrain UAE Oman KSA Qatar Kuwait

7.15 The number of broadband lines has also In terms of the percentage of Internet users, the United
grown significantly in recent years in terms Arab Emirates ranks 11th in the world and third among
of number of individual and business users. the GCC in 2017, but it ranked first in the region in
Installations rose from about 412,000 in 2012 to about terms of a data size index converted in kilobytes / sec
493,000 in 2014, and then jumping to more than per Internet users. (Figures 7.24 and 7.25)
623,000 in 2016, to finally reach about 657,000 in 2017.
Figure (7.23)

Figure 7.23: Broadband lines in Dubai
Total 421,161 458,839 492,965 607,219 623,379 657,379
533,650
473,956 494,950
421,039
391,276
358,975
133,263 128,429 123,729

62,186 67,563 71,926
2012 2013 2014 2015 2016 2017
Business Residential
Source: Telecommunications Regulatory Authority (DU & ETISALAT)
Figure 7.24: Percentage of Internet users
98
94.3
90.6
78.4
73.8
69.8
Ranking 2 7 11 33 45 53
Bahrain Qatar UAE Kuwait KSA Oman
Figure 7.25: Size of converted data in kilobytes / sec per Internet users
Oman 66.2
Kuwait
69.5
KSA
78.2
Qatar 86.9
Bahrain 112.8
UAE 133.7

CHAPTER 8 |
Construction and
Real Estate Activities
Jumeirah Palm Island Development In Dubai.

T
he real estate sector in Dubai is fuelled by property acqui-
sitions by GCC nationals as well as freehold investments
by foreign investors. Transactions1 (sales and mortgages)
in the Dubai real estate market increased in terms of value
and number in 2017, rising in value from AED 268 billion in
2016 to AED 284 billion in 2017. To provide sustainable economic benefits
from the Expo 2020 project, the Government has allocated AED 23 billion
for infrastructure projects. Real estate development drives the pace of
construction, the most labour-intensive sector in Dubai, and employing
27.6 per cent of workers in Dubai (about 556,000 workers in 2016).
↗↗ Dubai is a top real estate market in the world and real estate activities
accounted for 6.8 per cent of GDP in 2017 and construction for 6.5
per cent.
↗↗ Allowing freehold for foreigner investors, and granting 10-year visas

for these investors and their families, contributes to the influx of
foreign investment capital into Dubai.
↗↗ The Government of Dubai has allocated a total budget of AED 33

billion for Expo 2020, AED 23 billion (70 per cent) will be invested in
infrastructure projects.
↗↗ Real estate sales and mortgages in the Dubai increased in value from
AED 268 billion in 2016 to AED 284 billion in 2017.
1 Data includes all transactions involving completed and off-plan units registered during
the year.

CHAPTER 8 | Construction and Real Estate Activities
Construction and Real Estate

Projected to Grow
Real Estate and Construction are the 5th and 6th largest contributors to Dubai’s GDP,
and new laws and projects are looking to increase the strength of this sector as
Expo 2020 approaches.
1 Construction & Real Estate 2 Government Initiatives
Construction AED 23 billion will be invested in

6.5% of Dubai’s GDP, employing 27.6% of all infrastructure projects for Expo 2020
workers in Dubai (the largest percentage of the
workforce) 25 million visitors are expected that year
(300,000 per day) during Expo 2020
Real Estate
6.8% of Dubai’s GDP, employing 2.6% of all New 2018 laws will grant investors
workers in Dubai 10-year residence visas, to encourage
property ownership
27.6%
of all Dubai’s workers
Dubai South
a unique complex for the exhibition
are employed in and a new economic and cultural centre
Construction
Bridges, rail
networks and
new roads
for Dubai South
Expanded
highways
3 Private Initiatives Utilities,

water and
electricity
Dubai Creek Project network
• A residential and shopping area for Dubai South
• Dubai Creek Tower, expected to be a new global
icon similar to the Burj Khalifa
New 15-km-long
Mohammed Bin Rashid City metro line
• A development focuses on theme parks, retail, for Expo site
art, entrepreneurship and innovation
• 1,500 villas by 2020
New airport
Deira Islands
Al Maktoum International Airport,
• 4 interconnected islands
will be the world’s biggest airport
• 15 kilometers
• With residential, tourist, retail and marina projects

Construction and Real Estate Activities | CHAPTER 8
Introduction
Dubai is one of the most important real estate invest- In the real estate sector, allowing freehold for foreign-
ment destinations in the world, thanks to its laws which ers contributed to the influx of foreign investment
allow foreigners to own freehold property and the emir- capital into Dubai which was enhanced by increased
ate’s advanced infrastructure. The construction and savings by residents to buy property. Further, the
real estate sectors have become increasingly import- continuous growth in the construction and real
ant in Dubai’s GDP in recent years, with real estate estate sectors helped establish industries associat-
activities accounting for 6.8 per cent and construc- ed with the construction sector, such as the building
tion for 6.5 per cent of Dubai’s GDP in 2017. However, materials industry.
these two sectors differ greatly in their absorption
of labour. Construction is a labour-intensive sector Dubai and the United Arab Emirates are making efforts
that employs more than any other sector in Dubai’s to attract more foreign investment. The federal govern-
economy. It employed about 556,000 workers in 2016, ment has announced that new laws will be issued by
or 27.6 per cent of all workers in Dubai. On the other the end of 2018, granting investors, and all members of
hand, the real estate sector employed only 2.6 per cent their families, 10-year residence visas. The real estate
of the total number of workers in Dubai. This indicates sector will benefit from these laws which will encour-
a large disparity between the two sectors in terms of age higher rates of property ownership in Dubai.
labour productivity. Unskilled labour represents a large
share of workers in the construction sector.
Dubai is a top real estate market in

the world and real estate activities
accounted for 6.8 per cent of GDP in
2017 and construction for 6.5 per cent.

Construction
8.1 Construction is the activity of building hous- in the construction sector between 2014 and 2016,
es, residential and commercial buildings, as rising by about 50,000 workers during that period. On
well as infrastructure, such as roads, bridges the other hand, the value of capital formation in the
and pipelines. The construction sector includes enter- construction sector was stable, which explains the
prises that build and maintain buildings and decline in worker productivity (the value added per
infrastructure. worker) in this sector during that period. (Figure 8.3)
There have been improvements in the construction 8.4 Small and micro-enterprises (less than 50
sector’s economic indicators in 2017. Following a workers) play a vital role in the construction
contraction in 2016, its output (in constant prices) sector, numbering about 12,000 companies,
rose from AED 23.6 billion to about AED 24.5 billion in representing 91 per cent of the total number of
2017, growing at a rate of 3.5 per cent compared with construction enterprises operating in Dubai. Small and
a decline of 3.5 per cent in 2016. The sector’s contri- micro-enterprises employ a total of about 146,000
bution to Dubai’s GDP in constant prices rose slightly workers, 26 per cent of the total number of workers in
from 6.2 per cent to 6.3 per cent. (Figure 8.1) the sector. Given the important role of small and
micro-enterprises in stimulating growth in Dubai, the
Labour and enterprises in the Government of Dubai took a number of initiatives in
Construction sector 2018 to support these businesses. In particular, accel-
8.2 Construction is the most labour-intensive erating settlement by government departments of
sector in Dubai and it employed about dues to small companies, which will help them have
556,000 workers in 2016. The industry’s sufficient liquidity to continue their operations and
share of the total number of workers in Dubai rose from increase their investment. In addition, the percentage
23.8 per cent in 2015 to 27.6 per cent by 2017 as of government tenders allocated to small and
construction activities picked up in the context of micro-enterprises was raised from 10 per cent to 20
preparations for Expo 2020. (Figure 8.2) per cent, which will boost the demand for their services,
help expand the business turnover of small entrepre-
8.3 The average annual compensation of work- neurs and create more jobs.
ers in the construction sector was about
AED 23,000 per worker in 2016, the lowest To ease the burden of employers, the UAE Cabinet
among other economic sectors: the average annual decided to cancel the bank guarantee paid by the
compensation of workers in Dubai was AED 59,000 in employer, which amounts to AED 3,000 per worker,
2016. Compensation of workers represented 57 per and replace it by an annual insurance system under
cent of value added in the construction sector in 2016. which the employer pays AED 60 per worker per year.
There was a huge increase in the number of workers

Figure 8.1: Development of the Construction Sector (%)
7,2
8 6,9 6,7
6,2 6,3
3,5
4
1,3
2 0,5 0,5
-2
-3,4
-4 2013 2014 2015 2016 2017
Contribution to GDP Growth of the Value Added

Figure 8.2: Development of total workforce in the Construction sector (%)
28.7
27.6
25.7 25.6
23.8 24.0 23.8
2011 2012 2013 2014 2015 2016 2017
Source: Dubai Statistics Center - Labour Force Survey
Figure 8.3: Average worker productivity (thousand dirhams) 2014-2016
55
51
48
2014 2015 2016


Price of building materials networks and new roads for Dubai South, expanding
8.5 The Dubai Statistics Center’s Construction highways, and connecting utilities and water and
Cost Index tracks changes in the prices of electricity networks to the area. In addition, it is build-
construction goods and services and ing a new 15-kilometer-long metro line to the Expo
includes 421 goods and services. The index was stable site and a new airport that will be the largest in the
between 2012 and 2017, fluctuating by 2 per cent. world. Dubai expects 25 million visitors to Expo, an
However, it rose by 4.12 per cent in the first quarter of average of 300,000 visitors per day. All of this will
2018, which may be attributed to the increasing activ- contribute to boosting the construction sector in
ity in the construction sector and the increase in the coming years.
demand for building materials as Expo 2020 nears. In
addition, there has been a rise in global prices of some Private projects
building materials such as metal products, particular- 8.7 In addition to mega government projects,
ly steel. (Figure 8.4) real estate developers are expecting signif-
icant opportunities to expand their invest-
Implications of Expo 2020 for ments in preparation for the Expo 2020 in Dubai. The
the Construction sector exhibition also provides a window for them to show-
8.6 As part of preparations for hosting Expo case their new projects. A number of large-scale
2020, the Government of Dubai has allocat- current projects will increase the demand for construc-
ed a total budget of AED 33 billion for the tion. Most prominently, the Dubai Creek project
Expo project, of which AED 23 billion (70 per cent) will includes the development of a residential and shop-
be invested in infrastructure projects. This expan- ping area around the Dubai Creek Tower, which is
sionary fiscal policy of the Government of Dubai aims expected to be a new global icon similar to the Burj
at increasing government spending to bring lasting Khalifa. The construction of the new Mohammed Bin
economic impact through the organization of the Rashid City, which will include a number of residential
Expo. One of the most important construction proj- communities and commercial spaces, is also under
ects for Expo 2020 is the construction of a unique way. It is expected to comprise 1500 villas by 2020.
complex for the exhibition and the development of There is also the construction of Deira Islands, which
Dubai South (the area which will host the event), consist of 4 islands covering an area of 15 kilometres
creating a new economic and cultural centre in Dubai. and encompassing a number of residential, tourist,
The Government of Dubai is also building bridges, rail retail and marina projects.
Figure 8.4: Construction Cost Index
108
106.6
106
104
101.97
102 100.97
100.6 100.66
100 100.08
100
98
96 2012 2013 2014 2015 2016 2017 2018 (Q1)

The construction of The Museum of the Future, one of the top Expo 2020 projects.

Real Estate activities
8.8 The real estate sector continued to grow Developments on the supply side
strongly at a rate of 7.3 per cent in 2017, 8.9 The real estate supply side consists of the
compared to 9.8 per cent in 2016. This rapid residential sector and the business sector,
growth, which exceeded GDP growth for the same year with the latter comprising the office, hotels,
in constant prices (2.8 per cent), led to an increase in retail and industrial sectors. Major supply develop-
the contribution of real estate activities to real GDP ments in each sector are described in the
from 6.8 per cent in 2016 to 7.3 per cent in 2017. The sections below.
real estate sector has also contributed almost one fifth
of Dubai’s total GDP growth, which is the second high- The residential sector
est contribution among other key economic sectors. 8.10 The supply of residential units continued to
grow in Dubai’s real estate market in the free-
hold and non-freehold categories. The total
increases in the number of residential units are estimat-
Although the real estate sector plays an important ed at 28,712 units in 2017, compared to 19,535 units in
role in Dubai’s economy, it employs only 2.6 per cent 2016. 2 The number of apartments rose from 410,000
of Dubai’s total workers in 2017. Therefore, real estate in 2016 to 432,000 in 2017, a growth rate of 5.3 per cent.
activities are highly productive, with intermediate The number of villas rose from 88,000 in 2016 to 96,000
inputs accounting for 30 per cent of the output value. in 2017, a growth rate of 9 per cent. (Figure 8.6)
The value added per worker (one indicator of produc-
tivity) is very high, reaching AED 486,000 per year 8.11 The number of residential apartments under
according to 2016 data. (Figure 8.5) construction decreased from 51,714 in 2016
to 47,195 in 2017. Therefore, the supply of
residential apartments is expected to decline in the
coming years. (Figure 8.7)
Allowing freehold for foreigner investors,

and granting 10-year residence visas
for these investors and their families,
contributes to the influx of foreign
investment capital into Dubai.
2 Source: Dubai Statistics Center.

Figure 8.5: Development of Real Estate activities (%)
10 9.8
7.3
8 7.1
6.5 6.8
6.3 6.4
4.5
4
2.6
2
1.6
0 2013 2014 2015 2016 2017
Contribution to GDP Growth of the Value Added

Figure 8.6: Evolution of housing units
410,863 432,278
Apartments
88,623 96,222
Villas
111,502 118,799
Others
2016 2017
Figure 8.7: Buildings under construction
51,714 47,195
Apartaments
17,041 18,753
Investment
Villas
6,024 6,523
Private Villas
2016 2017

8.12 Freehold units are the main source of the all residential units in Dubai.3 The map shows the distri-
increased supply of residential units, bution of new residential units by area in Dubai. In 2017,
accounting for 71 per cent of the total new Dubai Land had the largest number of new residential
residential units built in 2017 and about 52 per cent of units built followed by Dubai Silicon Oasis. (Figure 8.8)
Figure 8.8: Distribution of New Freehold Units in Dubai
Culture Village
Trade Center (SZR) 1,028
665
Al Wasl
1,346
International
City
1,196
Meydan City
1,071
Business Bay
Al Quoz 1,080
2,214
Al Furjan Dubai
1,909 Silicon Oasis
3,708
Dubai Sports City Dubai Land

1,752 6,629
Dubai Investment Park

1,022
Source: Data collected from REIDEN database
3 Source: Dubai Statistics Center and the REIDEN database.

Real estate transactions Distribution of sales by area in Dubai

8.13 Transactions4 (sales and mortgages) in the 8.14 The Burj Khalifa area saw the highest number
Dubai real estate market increased in terms of sales in Dubai in 2017, with AED 7.368
of value and number in 2017, rising in value billion changing hands through 2008 trans-
from AED 268 billion in 2016 to AED 284 billion in actions. It was followed by Business Bay, with sales
2017. There were 69,000 transactions in 2017, volume reaching AED 7.12 billion as a result of 3,763
compared to 60,000 transactions in 2016, an transactions. Dubai Marina ranked third with more than
increase of 15 per cent. Sales accounted for about 3,300 transactions worth more than AED 7 billion.
40 per cent of the value of real estate transactions, Sheikh Mohammed Bin Rashid Gardens followed in the
while mortgages accounted for about 48 per fourth place, with a total sales value of AED 5.67 billion.
cent. (Figure 8.9) Al Barsha South 4 was in fifth place with 3,138 sales
worth a little more than AED 4 billion. (Figure 8.10)
Figure 8.9: The movement of real estate transactions in 2017 (number of units)
47,320 41,561 49,279

Sales
14,144 14,530 15,666

Mortgages
3,710 4,250 4,099

Other
2015 2016 2017

Source: Dubai Statistics Centre
Figure 8.10: Sales Value in 2017 (in billion dirhams)
Burj Khalifa 7.3

Business Bay 7.1
Dubai Marina 7.0
Sheikh Mohammed
bin Rashid Parks 5.7
Al Barsha South four 4.0
Jebel Ali 1 2.4
Al Yafrah 2 2.3
Al Yalays 2 2.2
Airport City 2.1
Warisan 1 1.8
Source: Land Department
4 Data includes all transactions involving completed and off-plan units registered during the year.

8.15 Real estate price data indicates5 that the 8.18 The situation in the retail sector was similar
average price of a freehold unit was AED to that of the office sector: supply declined
13,803 per square metre in 2017, down from from 475,000 square metres in 2016 to
AED 13,983 per square metre in 2016. The REIDEN 302,000 square metres in 2017. In addition, the retail
Dubai Residential Property Sales Price Index fell from sector faces strong competition from e-commerce
295 in September 2014 to 237 in August 2018. sites, which are expected to play an important role and
(Figures 8.11 and 8.12) could challenge the retail industry’s demand for
space in the future.
8.16 The decline in residential property sale pric-
es affected real estate rentals, which 8.19 The hotel sector saw a drop in the additional
dropped from AED 83 per square metre per supply volume from 16,234,000 square
month in 2016 to AED 78 in 2017, a fall of 5.2 per cent. metres to 8,093,000 square metres in 2017.
The rate of return on leases fell slightly to 7.06 per cent However, it is expected to see a strong growth in
in 2017, compared to 7.36 per cent in the previous year, supply as Expo 2020 approaches. In the industrial
due to the fast decline in rents associated with lower sector, the number of industrial buildings decreased
real estate prices. (Figures 8.13 and 8.14) from 378 in 2016 to 336 in 2017.7
The business sector 8.20 Despite the slowdown in growth in the real
8.17 There has been a decline in the additional estate sector, several factors are expected
supply of real estate in office, retail, industri- to improve the future demand for residential
al and hotel categories. In the office sector, units in the medium term. These include a continuation
additional space decreased from 721,000 square of Dubai’s average population growth rate of 6.6 per
meters in 2016 to 710,000 square metres in 2017. cent between 2011 and 2017 and the initiatives
Despite this decline, the continued surplus in office launched by the Government of Dubai in 2018 to
space amid decreasing demand led to a decline in develop mortgage systems and mechanisms to attract
Dubai office rents from AED 108 per square metre in foreign property investment portfolios.
the fourth quarter of 2016 to AED 104 per square
metre in the fourth quarter of 2017.6
Figure 8.11: Real estate prices per square meter
16,000 15,469 30%

14,617
13,983 13,803
25%
11,968
29.3%
12,000 20%
15%
8,000 10%
5%
4,000 0%
-1.3%
-4.3% -5%
-5.5%
0 2013 2014 2015 2016 2017 -10%
Residential selling prices AED / m2 Change of Sales price %, YoY

Source: REIDEN Database
5 Source: REIDEN database.

6 Source: REIDEN database.
7 Dubai Statistics Center.

Figure 8.12: REIDEN Residential Sales Price Index in Dubai (base year 2003)
350
300
250
200
150
100
50
0
01 07 01 07 01 07 01 07 01 07 01 07 01 07 01 07 01 07 01 07 01 07 01 07 01 07 01 07 01 07 01
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Figure 8.13: Rental prices AED (sq. metre)
100 86 87 25%
83
78.6
20%
80 71.1
21.0%
15%
60 10%
5%
40
1.2% 0%
20
-4.6% -5.3% -5%
0 2013 2014 2015 2016 2017 10%
Residential Rental Price AED / m2 Change of Rental Rate%, YoY

Figure 8.14: Rental income returns in Dubai (%)
7.37 6.89 7.39 7.36 7.06
2013 2014 2015 2016 2017

Global Real Estate Transparency Index established another Sharia-compliant real estate
8.21 John Lang LaSalle publishes the Global Real investment fund which was listed on the Abu Dhabi
Estate Transparency Index. It is a composite Securities Market (ADX). Its investment portfolio is
index that comprises 6 sub-indices: perfor- AED 418 million, distributed over apartments and villas
mance measurement; market fundamentals; gover- located in Dubai and Ras Al Khaimah.
nance of listed vehicles; regulatory and legal; transac-
tion processes and sustainability. The index classifies 8.24 In 2017, Emirates NBD established a real
real estate markets into highly transparent, transpar- estate investment fund managed by Emirates
ent, semi-transparent, low-transparency and opaque NBD Asset Management Limited to invest in
markets. Dubai leads the Middle East and North Africa a diversified portfolio of properties in accordance with
real estate markets in terms of transparency by inter- Islamic Sharia, with a focus on investment in the UAE.
national rank. Nevertheless, it is still classified in the The value of the real estate portfolio reached US$ 463
semi-transparent category. The Government of Dubai million, and the fund was listed on NASDAQ Dubai in
is working to improve the emirate’s performance in all 2017. The fund works to generate returns to investors
of the areas that comprise the index. (Table 8.1) in the form of regularly distributed dividends, which are
derived from rental income. The entry of financial insti-
Real estate investment funds tutions to Dubai’s real estate market will certainly stim-
8.22 Real estate investment funds are new invest- ulate investment in this market.
ment vehicles that facilitate investment in
the real estate sector by individuals and help Real estate investments
them diversify their investments. They also support 8.25 Total investments by investors in real estate
the demand for real estate by buying properties of all amounted to more than AED 107 billion in
types and then renting them or benefiting through 2017, compared to AED 91 billion in 2016, a
capital gains in net asset value from increases in pric- rise of 17.5 per cent. UAE nationals topped the list of GCC
es. These funds provide returns to investors in the investors in 2017, investing AED 25 billion. Investments
form of dividends. by GCC nationals totalled AED 12 billion in the same year,
down significantly compared to AED 13 billion in 2016.
8.23 Dubai has allowed real estate investment Indian investors are the second biggest investors in the
funds to invest in the real estate market in real estate market in Dubai, with investments amounting
Dubai since 2006. In 2007, Equitativa Real to AED 15.6 billion. Saudis come in third place with more
Estate was established as the first real estate invest- than AED 7 billion, followed by the British and then Paki-
ment fund and was listed on the Dubai Financial Market stanis with investments of AED 6 and 5 billion respec-
in 2014, which allowed the fund’s portfolio to grow to tively. Chinese, Jordanian, Egyptian and Canadian inves-
AED 3 billion comprising 11 properties (buildings, tors are in the next four places. (Figure 8.15)
schools and retail buildings). In 2010, the company
The Government of Dubai has allocated

a total budget of AED 33 billion for Expo
2020, AED 23 billion (70 per cent) will be
invested in infrastructure projects.

Table 8.1: Global Real Estate Transparency Index for the Middle East and North Africa
Country International Ranking Level of transparency
Dubai 40 Semi transparent
KSA 54 Semi transparent
Abu Dhabi 55 Semi transparent
Egypt 57 Semi transparent
Bahrain 62 Opaque
Morocco 63 Opaque
Jordan 68 Opaque
Kuwait 70 Opaque
Oman 82 Opaque
Tunisia 83 Opaque
Source: John Lang LaSalle
Figure 8.15: Real estate investments in Dubai by nationality 2017 (billion dirhams)
25
15.6
7
6
5
Emiratis Indians Saudis British Pakistanis

Source: Land Department

CHAPTER 9 |
Industry

D
ubai’s industrial sectors, Manufacturing, Mining and Quar-
rying and Electricity and Gas, are important pillars of the
economy. The Dubai Industrial Strategy 2030 aims to
boost the global competitiveness of Dubai’s industrial
sectors and make them a powerful economic growth
engine. The strategy’s key objectives: transform Dubai’s industrial sector
to be innovation-based; a home for global businesses; to be environ-
mentally sustainable and support a green economy; and to adopt Islamic
standards to manufacture “Halal” products and contribute to Dubai’s goal
to become the capital of the Islamic economy.
↗↗ The Dubai Industrial Strategy 2030 aims to transform Dubai’s indus-

trial sector into a global platform for knowledge-based, sustainable
and innovative industries.
↗↗ The electricity and gas sector’s total output more than doubled over
the period 2009-2017 and achieved a value added in constant prices
of AED 10.2 billion in 2017, up 4.6 per cent from the year before.
↗↗ The sector’s total output more than doubled over the period 2009-
2017 and its contribution to GDP rose from around 1.5 per cent in
2009 to 2.5 per cent in 2017.
↗↗ Manufacturing is one of the main employment sectors for the work-

force in Dubai, both in direct manufacturing operations and indus-
try-related operations.
↗↗ Dubai’s logistic network and its excellent air, sea and

land transport capabilities, and its strategic location
between East and Western Europe, will foster its industrial
transformation.

CHAPTER 9 | Industry
Dubai Industrial Strategy 2030

To boost global competitiveness in the industrial sector, Dubai has launched the
Dubai Industrial Strategy 2030.
1 Five Objectives: 2 Six Sectors:
Transform Dubai’s industrial sector to: There are six industrial sectors have been
identified to lead its economic transformation:
be innovation-based
Aviation
be a home for global businesses
Ships
be environmentally sustainable and
support a green economy Pharmaceuticals & Medical equipment
Fabricated Metals
adopt Islamic standards to manufacture
“Halal” products and contribute to
Dubai’s goal to become the capital of Machinery & Equipment
the Islamic economy.
Consumer goods
3 Performance indicators:
Create
27,000 Boost
NEW SKILLED JOBS AED 16 BILLION
An addional of in Manufacturing in exports
AED 18 BILLION
in real value added Invest
in Manufacturing AED 700 MILLION
in R&D

Industry | CHAPTER 9
Introduction
Dubai’s industrial sector mainly consists of these except for mining and quarrying, whose contribution
three sectors: Manufacturing, Mining and Quarry- to GDP slightly decreased from 2 per cent in 2015 to
ing. and Electricity and Gas. The industrial sector 1.7 per cent in 2016 and plateaued in 2017.
is one of the primary pillars of the economy due to
its numerous contributions to economic and social Recognizing the importance of stimulating industry in
development. In addition, it is collectively the second order to drive economic growth, the Emirate of Dubai
largest main sector in the economy of Dubai. launched in 2016 the Dubai Industrial Strategy 2030,
which aims to transform Dubai’s industrial sector into
The total industrial sector’s value added in constant a global platform for knowledge-based, sustainable
prices stood at AED 53.7 billion in 2017 up from and innovative industries. Since the start of imple-
AED 52.4 billion in the previous year, registering a mentation of the strategy, various government and
growth of 2.5 per cent. Manufacturing accounted for private entities as well as industrial free zones were
the highest share of industrial output with 68.5 per assigned specific roles and tasks to achieve. To this
cent, followed by electricity and gas (19 per cent) end, key performance indicators (KPIs) were set to
and mining and quarrying (12.5 per cent). Collectively assess achievements in light of the numerous initia-
they account for 13.7 per cent of GDP in constant tives they adopted to drive growth and increase the
prices. The three industries have maintained their sector’s contribution to the emirate’s GDP.
current shares in the GDP for the past five years,
The Dubai Industrial Strategy 2030

aims to transform Dubai’s industrial
sector into a global platform for
knowledge-based, sustainable
and innovative industries.

Mining and Quarrying
9.1 Extractive industries rely on materials compared to a fall of minus 2.6 per cent the year
extracted by mining and drilling including oil, before, the fourth consecutive year of negative growth.
natural gas and mineral and non-mineral
ores. The extractive sector is not considered to be a The sector’s contribution to GDP has fallen, dropping
major part of Dubai’s economy, but it contributes in from 2 per cent in 2014 to 1.7 per cent in 2017. This
terms of employment and it also covers the market has been partly attributable to the sharp decline in the
demand for the primary, intermediate and final prod- international prices of primary commodities, due to
ucts related to the sector. The value added generated falling demand, which in turn had adverse effects on
in constant prices of mining and quarrying activities the local production and exports of primary commod-
amounted to AED 6.7 billion in 2017 slightly up from ities and energy. This situation coincided with the
AED 6.5 billion in 2016. The mining sector saw a reverse depleting resources of traditional energy that Dubai is
in its fortunes growing by 3.4 per cent in 2017 endowed with, as highlighted in the Energy and Water
chapter of this report. (Figure 9.1)
Figure 9.1: Value Added of Mining and Quarrying (AED million) and Contribution to Constant Price GDP (%)
8,000 2.3%
2.5%
7,376
7,111
6,904
6,689 6,733
7,000 2.1% 6,514
2.0%
2.0%
1.8% 1.7% 1.8%
6,000
5,337 1.7% 1.7%
5,269
5,000
1.3% 1.5%
3,959
4,000
1.0%
3,000
2,000
0.5%
1,000
0 2009 2010 2011 2012 2013 2014 2015 2016 2017 0.0%
Value Added Contribution to GDP (%)


Electricity and Gas
9.2 The electricity and gas sector is defined in rose from around 1.5 per cent in 2009 to 2.5 per
the National Accounts of Dubai as the supply cent in 2017. The workforce in electricity and gas
of electricity and gas, steam and air condi- accounts for around a half per cent of the total
tioning. The sector has made strides in recent years workforce in Dubai. The rise in employment in the
achieving a value added in constant prices of AED 10.2 electricity sector resulted from the growing demand
billion in 2017 and growing at 4.6 per cent from for electricity and gas due to the rapid growth in
the year before. population and the rising demand from the industrial,
real estate and tourism sectors. Further details are
The sector’s total output more than doubled over provided in the Energy and Water chapter of this
the period 2009-2017 and its contribution to GDP report. (Figure 9.2)
Figure 9.2: Electricity and Gas Value Added (AED million) and Contribution to Constant Price GDP (%)
12,000 3.0%
2.6% 2.6%
9,861 10,224
2.4% 2.4% 2.4%

10,000 2.3% 2.5%
8,876
2.1% 8,406
2.0% 8,011
8,000 7,481 2.0%
6,649
1.5%
6,042
6,000 1.5%
4,449
0.9%
4,000 1.0%
2,735
2,000 0.5%
0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 0.0%


Manufacturing Industries
Recent Developments in tion, the relative size of the value added and employ-
Manufacturing ment. The leading manufacturing industries were the
9.3 The value added of manufacturing (in manufacture of basic metals and metallic products
constant prices) rose to AED 36.8 billion in accounting for 26 per cent of Dubai’s manufacturing
2017 compared to AED 36 billion in 2016 and value added, followed by the manufacture of machin-
34.5 billion in 2015. However, the rate of growth in ery, transport equipment and vehicle repairs (16 per
manufacturing more than halved to 2 per cent in 2017, cent), then the manufacture of food products and
compared to a growth of 4.6 per cent in 2016. Overall, beverages (13 per cent), basic chemicals and pharma-
manufacturing has witnessed fluctuating growth rates ceuticals (11 per cent), and the manufacture of wood
during the period 2007-2017. Though the annual and paper products (11 per cent). Together, these five
growth remained positive throughout this period industries amount to 77 per cent of the total value
except for 2009, following the global financial crisis added of the manufacturing sector in Dubai. (Figure 9.4)
when the value added of manufacturing registered a
sharp drop of around 7.0 per cent. Thereafter, the The relative importance of the manufacture of basic
sector recovered and registered its highest growth of metals and metallic products in the emirate’s manu-
8.2 per cent in 2010 but the growth of the sector’s facturing base is primarily attributed to Dubai’s urban
value added slowed again reaching its lowest rate of growth especially in the construction sector and
0.6 per cent in 2015. infrastructure.
In 2017 manufacturing accounted for 9.4 per cent The structure of Dubai’s manufacturing is still dominat-
of total GDP in constant prices. The average annual ed by low technology and medium-low technological
contribution to GDP in the past ten years has been activities, such as basic metals and consumer goods
slightly higher (9.6 per cent) but did not exceed 10 per production, characterized by low wage, labour-inten-
cent of GDP in any of the previous years. (Figure 9.3) sive production methods. International comparisons
of Dubai’s structure of manufacturing with the world
In terms of international comparisons, the average and emerging industrialized countries shows a pattern
share of manufacturing value added (MVA) in Dubai’s that medium-high and high-tech products dominate
constant GDP is considerably less than the average manufacturing production in industrialised econo-
of 13.9 per cent of GDP in the industrialized economies. (Figure 9.5)
mies and the average of 20 per cent in developing
and emerging industrial economies, according to the In Dubai low-tech manufacturing accounted for 36 per
UNIDO’s Industrial Development report 2018. The cent of all production compared to a lower world aver-
report attributes the high MVA share of GDP in the age of 29 per cent. Low-tech production employs more
latter countries to the relocation of manufacturing than two thirds of the total workforce in this sector.
production from industrialized countries to develop- In contrast, the share of medium-high and high-tech
ing countries. activities in total manufacturing account for 24 per
cent, a substantially lower proportion of total manu-
Sectoral Composition of facturing value added, than the world average of
Manufacturing Value Added and 44.7 per cent.
Technology Level
9.4 Dubai Statistics Center data for the various The higher share of the latter industries in total MVA
manufacturing activities in the emirate in indicates a country’s technological intensity in manu-
2016 reveals the main sectors that dominate facturing and its capacity to introduce new technology
the manufacturing sector in Dubai in terms of produc- into the sector.

Figure 9.3: Manufacturing Value Added (AED billion) and Contribution to Constant Price GDP (%)
36.1 36.8
40.0 33.5 34.3 34.5 15.0%
11.2% 31.1
28.7 28.9 29.8
27.3 27.4 26.7
30.0
9.4% 9.5% 9.6% 9.6% 9.6% 9.9% 9.7% 9.4% 9.5% 10.0%
9.1% 9.4%
20.0
5.0%
10.0
0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 0.0%

Figure 9.4: Contribution of Main Industries to the Value Added of Manufacturing in Dubai (2016)
26% 16% 13% 11% 11% 11% 4% 4% 5%

2016
25% 16% 12% 12% 11% 10% 5% 4% 5%

2015
uc nd
or d
od Pap and
od ne r &
w e ,
pm ic s,
er
ot th s
cc d
tic s &
sp an
fo ea tile
ui ctr nic
ba an
th
ts
uc er
ts l
ea r
en al,
od l a
Pr Mi be
uc ra
al
eu al
O
an y
ts
t
d g, l ex
Eq le ro
Pr eta
To &B
ac ic
b
Tr iner
oo
Ru
al E ect
an hin T
m em
F
Its M
W
h
l
ar Ch
ac
E
Pr
M
ot
Ph
cl
ic
pt

O
Figure 9.5: Technology Composition of Manufacturing Value Added in

Dubai and Industrialized Countries (%)
36% 29% 33.2% 31.4%

Low Tech
40% 26.3% 29.5% 29.9%

Medium-low Tech
24% 44.7% 37.3% 38.8%

Medium-high
and high Tech
Dubai (2016) World (2015) Developing and Emerging

emerging industrial industrial
economies (2015) economies (2015)
Note: the three technology groups follow UNIDO’s & OECD (2005) technology classification based on R&D intensity
relative to value added and gross production statistics
Source: Dubai Statistics Center: Manufacturing Survey 2017, and UNIDO’s Industrial Development Report 2018.

Manufactured Exports Manufacturing employment

9.5 Manufactured exports (from Dubai’s main 9.6 Manufacturing is one of the main sectors in
zone) accounted for 94.5 per cent of Dubai’s terms of the employment of the workforce in
merchandise exports in 2017, decreasing Dubai, both in direct manufacturing opera-
from 95.1 per cent in 2016. Manufactured exports tions and industry-related operations.
reached AED 116.9 billion in 2017, falling 5.1 per cent
from AED 123.2 billion in 2016. Manufacturing employed around 269 thousand work-
ers or 9.6 per cent of the total Dubai’s employed work-
Most manufactured exports are resource-dependent, force estimated at around 2.8 million workers, in 2017.
low-tech products reflecting Dubai’s manufacturing Despite its importance, the contribution of manu-
base, which is dominated by low- and medium-tech facturing to total employment has remained steady
industries. The share of these low- to medium-tech between 2010 and 2017. (Figure 9.7)
manufactured exports accounted for 92.8 per cent in
2017, after falling from 96 per cent in 2010. In contrast, According to Dubai Statistics’ survey of manufacturing
medium high-tech manufactured products such as in 2017, there are 53,886 workers employed in the
chemicals, machinery and transport equipment, manufacture of fabricated metal products, except
and communication equipment accounted for 7.2 machinery and equipment, or 20 per cent per cent
per cent of all manufactured exports in 2017, raising of total employed in the manufacturing sector. The
their contribution to Dubai’s manufactured exports of manufacture of machinery and transport equipment
these goods from 4.0 per cent in 2010. Such increase and motor repairs employs around 44,866 workers
in the share of high-tech industries’ exports indicates (17 per cent), food & beverages around 32,571 (12
Dubai’s successful industrial diversification path per cent), wood and paper products around 41,135
aimed at inducing a higher technological intensity in workers (16 per cent) and metal and rubber products
manufacturing. (Figure 9.6) employs 38,484 workers (15 per cent). (Figure 9.8)
Figure 9.6: Technology Composition of Manufactured Exports
4 4.1 3.6 4.9 8.6 7.2 7 7.2

96 95.9 96.4 95.1
91.4 92.8 93 92.8
2010 2011 2012 2013 2014 2015 2016 2017
Low -medium Tech Medium & High Tech


Figure 9.7: Share of Manufacturing in Total Employment in Dubai
12.0% 30.0%
27.1% 10.4% 10.3%
10.2% 10.2%
9.9% 10.0%
9.7% 9.6% 25.0%
10.0% 9.4%
9.1%
8.8%
8.4%
20.0%
8.0%
15.0%
15.0%
6.0%
10.0%
8.1%
6.4%
4.0% 4.9% 5.1%
3.7% 4.0% 5.0%
2.1%
1.2%
2.0%
-0.3% 0.0%
-0.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 -5.0%
Percentage in total employment Employment growth rate in manufacturing sector

Figure 9.8: Contribution of Main Manufacturing Industries to Total Manufacturing Employment
20% 20%
17%
16% 16%16%
15%
14%
13%
12%
11%
10%
4% 4% 4% 4%
3%
2%
Metal Machinery Wood and Rubber & F&B and Textiles, Chemicals & Electronics, Other
and Its and Paper Mineral Tobacco clothing, Pharmaceuticals Electrical,
Products Transport Products Products leather and Optical
footwear Equipment
2016 2015

Foreign Direct Investment in Manufacturing
9.7 Foreign direct investment (FDI) is one of the Despite the important role of the manufacturing
main drivers of growth in manufacturing sector in Dubai’s economy, the sector has been less
value added. It is also an important indicator successful in attracting foreign direct investment.
determining future growth and sustainable develop- Available data on FDI by economic activity shows
ment in a country. A large flow of foreign direct invest- that manufacturing received 4 per cent of incoming
ment has numerous benefits, as it allows the manufac- FDI in 2016 and was ranked fifth, lagging behind key
turing sector to employ capital-intensive technology, economic sectors such as the wholesale and retail
therefore raising labour productivity and gaining trade, financial services and real estate. Neverthe-
competitiveness in global markets. less, it outperformed other sectors such as construc-
tion, and scientific, professional and technical activ-
Foreign capital and know-how also play a vital role ities. (Figure 9.9)
in the global production network or so-called Glob-
al Value Chains (GVCs). FDI in manufacturing can FDI inflows in manufacturing have been rising in recent
accelerate technological changes and intensify the years, but at a relatively slow pace. The weak growth of
use of advanced technology to produce high-tech the incoming FDI to this sector may be due to inves-
products. This also can be achieved through active tors’ preferences for other sectors due to the ease of
participation of manufacturing industries in GVCs, doing business and to their perception of risks in the
which allow companies in many geographical locations sector. (Figure 9.10)
worldwide to cooperate with each other to manufac-
ture one product.
Manufacturing is one of the main

employment sectors for the workforce
in Dubai, both in direct manufacturing
operations and industry-related operations.

Figure 9.9: Share of Manufacturing in Total FDI by Sector in Dubai, 2016

Manufacturing
4.0%
Wholesales Financial and Real estate Other
and Retail Trade insurance activities activities 7.2 %
36.5% 24.4% 21.6%
Professional,
Scientific and
technical activities
3.4%
Construction
2.9%
Figure 9.10: Trends in incoming FDI to Manufacturing (AED billion)
5.1% 5.1%
11,553
12,000 11,397 5.0%
4.6% 10,915
4.5% 4.3% 4.4%
4.2%
9,389 4.0%
10,000
8,956 9,009 4.0%
7,839
8,000
3.0%
5,707
6,000
2.0%
4,000
1.0%
2,000
0 2009 2010 2011 2012 2013 2014 2015 2016 0.0%
Values of investments in Manufacturing (AED billion) % contribution


Dubai Industrial Strategy 2030
9.8 Recognizing the importance of stimulating R&D is estimated to be around 0.7 per cent of GDP
the industrial sector, the Dubai government in 2013, which is below the 2.8 per cent average
launched the Dubai Industrial Strategy 2030. achieved by the G7 economies, according to
This initiative aims at transforming the emirate to OECD data.
become a global platform for knowledge-based and
innovative industries in order to achieve the econom- There are a number of challenges that Dubai Indus-
ic growth targeted by the Dubai Plan 2021. trial Strategy has to overcome in order to succeed in
achieving its objectives. One of them is to change the
The strategy has laid down 5 objectives: transform technology structure by intensifying the use of tech-
Dubai’s industrial sector to be a growth engine; to be nology in manufacturing and reducing the employment
innovation-based; a home for global businesses; to of labour, especially non-skilled labour. Such structural
be environmentally sustainable and support a green change is necessary for the strategy to succeed in
economy; and to adopt Islamic standards to manufac- increasing the share of high-tech products and achiev-
ture “Halal” products and contribute to Dubai’s goal to ing a technological upgrade in manufacturing.
become the capital of the Islamic economy.
The Dubai Industrial Strategy also aims to raise the
The strategy has identified six industrial sectors to lead productivity of its workforce by attracting FDI and
its economic transformation: Aviation; Ships; Phar- know-how into the targeted six strategic industries.
maceuticals & Medical equipment; Fabricated Metals; This will require a better skilled workforce to provide
Machinery & Equipment; and Consumer goods. incentives for technological innovation, which are also
integrated with global production networks.
The strategy also has set performance indicators to
achieve the following: Another main achievement that the strategy has
called for is the growth of exports in high-tech prod-
↗↗ Manufacturing is targeted to generate an additional ucts. This can be achieved through an active partic-
AED 18 billion in real value added, half as much ipation in Global Value Chains (GVCs), which will help
again as existing manufacturing value added; adopt international standards and keep abreast of
technological advancements, and provide an overall
↗↗ Create 27,000 new skilled jobs in manufacturing; gain in competitiveness in global markets. Dubai’s
logistic network and its excellent air, sea and land
↗↗ Boost exports by AED 16 billion; transport capabilities, in addition to its strategic loca-
tion between East and Western Europe will be instru-
↗↗ Invest AED 700 million in R&D, catalysing Dubai’s mental to Dubai’s industrial transformation.
transition to a knowledge-based economy. Current


CHAPTER 10 |
Energy and Water

T
he demand for electricity in Dubai is impacted by its desert
climate and tied with economic growth and increased
population in the emirate. The main energy issue is the
widening gap between locally available resources in Dubai
and the demand for different types of energy. The top
challenge is securing investments in high-cost energy infrastructure
to accommodate future expansions. The Government is proactively
addressing these issues with initiatives such as the Dubai Clean Energy
Strategy 2050, which has the goal of transforming Dubai into a global
clean energy and green economy hub, and making it one of the world’s
ten least carbon footprint cities.
↗↗ New power plants have been built and existing ones expanded, which
enables Dubai to cover 100 per cent of the electricity and water
needs for the population and for manufacturing.
↗↗ Due to Dubai’s desert climate, the average per capita water

consumption there is one of the highest in the world. Desalination
plants provide the bulk of water and are a major energy consumer.
↗↗ Dubai is exploring options to provide future energy for the sustain-

able growth of its economy, necessitating the adoption of policies
for effective management of both production and consumption.
↗↗ The emirate intends to attract foreign investment in the energy sector

by opening the way for the construction of reactors to generate
electricity by nuclear power.
↗↗ The goal of Dubai Clean Energy Strategy 2050 is to transform Dubai

into a global clean energy and green economy hub and make it one
of the world’s ten least carbon footprint cities.

CHAPTER 10 | Energy and Water
Dubai Clean Energy Strategy 2050

Dubai plans to attract foreign investment and public-private partnerships to make
its clean energy strategy a reality. Dubai Clean Energy Strategy 2050 aims at
transforming Dubai into a global clean energy centre by 2050.
1 Aim: 2 Goals:
To reduce carbon emissions by Reduce the share of natural gas in the energy mix to
16% by 2021 and transform Dubai 61 per cent
into a city with the world’s smallest
Increase the portion of clean and renewable energy
carbon footprint by 2050. in Dubai from:
16%
in carbon emissions by 2021
7% 25% 75%
2020 2030 2050
3 Dubai Electricity and Water

Authority (DEWA)’s initiatives:
Dubai Green Mobility Initiative

Shams Dubai
• To promote the use of electric and
Initiative
Mohammed bin hybrid vehicles
Rashid Al Maktoum • Reduce carbon emissions in the road
Solar Energy Park transport sector
• In March 2017, DEWA announced an
increase in the number of electric
vehicle charging stations to over 200
stations throughout Dubai

Energy and Water | CHAPTER 10
Introduction
The Emirate of Dubai has a small share of the total needs rose to unprecedented levels, it began import-
conventional energy sources, oil and gas, available ing LNG from Qatar. To address this issue, the Dubai
in the United Arab Emirates1. Therefore, the Govern- Supreme Council of Energy (DSCE) developed the
ment of Dubai has sought to import sufficient quanti- Dubai Integrated Energy Strategy 2030 at the end of
ties of energy to meet the growing demand for power 2010 and launched it in 2011. This initiative will deter-
generation and the needs of the industrial sector. It has mine the strategic direction of the emirate to ensure
also used natural gas to inject old oil wells in order to sustainable energy and enhance the efficiency and
increase their production. Sharjah and Abu Dhabi have effectiveness of the electricity, water and fuel used to
been the two traditional sources to meet the ener- meet transportation demands.
gy needs of Dubai, especially natural gas. As Dubai’s
Due to Dubai’s desert climate,

the average per capita water
consumption there is one of the
highest in the world. Desalination
plants provide the bulk of water
and are a major energy consumer.
1 Dubai has 4 per cent of the UAE’s oil reserves and 2 per cent of gas reserves, while Abu Dhabi has 94 per cent of oil and 92 per cent of gas. See
Dubai Economic Report 2017, p. 61, http://www.dubaided.ae/StudiesandResearchDocumentsinArabic/DubaiEconomicReport_AR_2017.pdf

Electricity, gas, steam and air conditioning

Supply (Electricity sector)
10.1 The output of the electricity and gas sector 10.2 The electricity sector employed 11,290
rose from AED 9.861 billion in 2016 to AED workers in 2016, accounting for less than 0.5
10.224 billion in 2017. The value added of per cent of the total number of workers in
this sector grew by 3.7 per cent between 2016 and Dubai, which stood at 2,649,069 workers in 2016. The
2017, which is higher than the economy’s real GDP productivity of workers in the electricity sector
growth rate of 2.8 per cent. The contribution of the measured in the value of output per worker was AED
electricity sector to real GDP in 2012-2017 ranged 874,000 on average in 2016, down from AED 879,000
from a minimum of 2.3 per cent in 2012 to a maximum in 2015. (Table 10.1)
of 2.6 per cent in 2017. (Figure 10.1)
Figure 10.1: The Contribution of the Electricity sector to GDP (%)
2.65 2.6 2.6 13.0

12.5
2.6
11.0
2.55 11.1
2.5
9.0
2.45 2.4 2.4 2.4
2.4 7.1 7.0
2.35 2.3 5.6

4.9 5.0
2.3
2.25 3.7
3.0
2.2
2.15 2012 2013 2014 2015 2016 2017 1.0
Electricity sector contribution (%) VA change (%)

Table 10.1: Economic Indicators of the Electricity sector in Dubai (Thousand Dirhams)
2012 2013 2014 2015 2016
Average worker productivity in the Economy 140 139 142 142 143
Average worker productivity in the electricity sector 829 852 863 879 874
Average compensation of workers in electricity sector 162 198 208 226 256
Average worker productivity in the water sector 54 51 75 94 109

Water supply, drainage and waste management

and treatment (Water sector)
10.3 The output of the water sector in Dubai 10.4 The water sector employed 1,987 workers in
increased from AED 217 million in 2016 to 2016, representing a small percentage of
AED 275 million in 2017, a growth of 26.7 per Dubai’s 2,649,069 workers in 2016. Average
cent during this period. The contribution of the water productivity per worker in the water sector was about
sector to real GDP in 2012-2017 ranged from a mini- AED 109,000 in 2016 with average compensation per
mum of 0.03 per cent in 2012 to a maximum of 0.07 per worker at about AED 48,000 in 2016. (Table 10.2)
cent in 2017. (Figure 10.2)
Figure 10.2: The Contribution of the Water sector to GDP (%)
0.08 40.0
0.07
34.5
0.07 32.1 35.0
0.06
0.06 27.1 26.4 30.0
0.05 25.0
0.04 0.04
0.04 20.0
0.03 0.03
0.03 15.0
0.02 10.0
0.01 1.4 1.6 5.0
0 2012 2013 2014 2015 2016 2017 0
Electricity sector contribution (%) VA change (%)

Table 10.2: Economic Indicators of the Water sector in Dubai (Thousand Dirhams)
2012 2013 2014 2015 2016
Average productivity per worker in the economy 140 139 142 142 143
Average compensation per worker in Water sector 42 33 40 48 48
Average productivity per worker in the Water sector 54 51 75 94 109

Energy production and consumption
Petroleum products 10.7 The electricity needs of Dubai are covered

10.5 Dubai has one oil refinery in Jebel Ali run by by 11 power plants in different areas. Power
ENOC, with a capacity of 120,000 bpd. Built generation capacity in the emirate has
in 1999 and upgraded in 2010, the refinery increased from 10 gigawatts (one gigawatts is equal
supplies a large part of the domestic market needs of to one billion watts) in 2016 to 10.2 gigawatts in 2017.
petroleum products. Oil derivatives are distributed in Electricity is generated in Dubai using gas turbines,
Dubai exclusively by three companies (Emarat, ENOC which make up about 75 per cent of the installed
and EPPCO). Emarat is owned by the UAE Federal capacity. In addition to domestic electricity sources,
Government, while ENOC is owned by the Government Dubai is connected to the UAE national grid and to the
of Dubai. EPPCO is owned by the Government of Dubai GCC interconnection grid. (Figure 10.3)
through ENOC (60 per cent) and by Chevron Interna-
tional (40 per cent). 10.8 Dubai has gone through a period of rapid
population growth that has led to similar
Electricity growth in the emirate’s energy needs, espe-
10.6 Overall energy needs in Dubai have increased cially electricity. The number of DEWA customers
dramatically in recent decades as a result of increased from 752,505 residential, commercial,
the rapid growth of the emirate’s economy. industrial and other consumers in 2016 to 796,764 in
In order to meet domestic electricity demand and effi- 2017, a growth rate of 5.9 per cent. The residential
ciently cope with the increased consumption, the sector accounts for 74.5 per cent of the total number
Government of Dubai has built new power plants and of customers. (Figure 10.4)
expanded existing ones, enabling it to cover 100 per
cent of the electricity and water needs for the popula- 10.9 The emirate’s electricity consumption
tion and for manufacturing. DEWA2 is the exclusive increased from about 38.204 GWh in 2016
producer and distributor of electrical power in the up to about 40.153 GWh in 2017, represent-
emirate. Since its establishment, DEWA has built an ing an annual growth rate of around 13 per cent. (Figure
integrated production and distribution system that 10.5) The demand for electricity is expected to contin-
matches the best international standards. It is expand- ue increasing in the near future as a result of the
ing and developing that system to cope with the rapid economic growth in the emirate. However, overall ener-
growth in the emirate’s electricity needs. gy, and electricity efficiency in particular, is expected
to be brought in line thanks to. the Demand Side
Management Strategy 2030 and the Dubai Integrated
Energy Strategy 2030.
2 DEWA: Dubai Electricity and Water Authority

Figure 10.3: Power Installed Capacity in Dubai (GW)
10.3 10.20
10.2
10.1 10.00
10
9.9
9.8
9.65 9.65 9.65
9.7
9.6
9.5
9.4 2013 2014 2015 2016 2017
Source: Dubai Electricity & Water Authority
Figure 10.4: Electricity Consumption by sector in Dubai in 2017
Commercial
24.2%
Residential
74.5%
Others
0.9%
Industrial
0.4%
Figure 10.5: Total Electricity consumption in Dubai (GW-hours)
50
43.15
37.20 38.20
40 35.16
33.14
30
20
10
0 2013 2014 2015 2016 2017

10.10 The major development of urban centres in million gallons of per day. DEWA has 11 power and
the emirate and the increased air condition- water plants; 3 power plants in Al-Awir area, and eight
ing requirements during Dubai’s hot summers power and water plants in Jebel Ali. Annual demand for
have made it one of the world’s most energy-consum- desalinated water reached a peak of 362 million
ing regions. Average per capita electricity consumption gallons per day in 2017, compared to 347 million
is 15,110 kWh per year, compared to 9,660 kWh in gallons per day in 2016. (Figure 10.7)
Saudi Arabia, 12,080 kWh in the USA, 15,500 kWh in
Canada and 7,480 kWh in Russia. (Figure 10.6) 10.12 Because of Dubai’s desert climate, large
quantities of water are needed and large
It must be noted that Dubai’s average per capita elec- amounts of energy are consumed to provide
tricity consumption has dropped from about 15,110 water for homes, facilities, irrigation and industry. In
kWh in 2014 to 13,900 kWh in 2017. This drop is in 2017, the total consumer demand for desalinated
line with the directives of the Dubai Supreme Council water reached 120.8 billion gallons, compared to 116.9
of Energy and Dubai Integrated Energy Strategy 2030. billion gallons in 2016, an increase of 3.4 per cent. This
also means that average per capita water consumption
Water production and consumption in Dubai is one of the highest in the world: it reached
10.11 DEWA supplies the emirate’s water needs 40.6 thousand gallons in 2017, down 6.2 per cent from
and operates with high efficiency at 8 desali- its peak of 43.3 thousand gallons in 2016. Groundwa-
nation plants located in Jebel Ali. In 2017, ter covers a small percentage of the emirate’s needs,
water desalination combined capacity remained at the while desalination plants provide the bulk. As a result,
same level as in 2016 (470 million gallons per day), these plants are a major energy consumer in Dubai.
while its groundwater production capacity was 32 (Figure 10.8)

Figure 10.6: Average per capita electricity consumption (1000 KW/ hour a year)
19.06
16.20
15.55 15.11 15.06
13.90
12.08
9.66
8.13
7.48 7.45 7.37
5.39
4.31
Kuwait UAE Canada Dubai Qatar Dubai USA KSA Bahrain Russia Oman Japan European China
(2017) Union
Source: http://en.wikipedia.org/wiki/list_of_ countries_by _electricity _consumption
Figure 10.7: Peak demand for desalinated water in Dubai (Million Gallons/Day)
400 362
337 347
316
296
300
200
100
0 2013 2014 2015 2016 2017
Figure 10.8: The demand for desalinated water in Dubai (Billion gallons)
130
120.81
116.86
120
113.77
106.18
110
100.11
100
90 2013 2014 2015 2016 2017

Management of the Energy Sector in Dubai
Dubai Supreme Council of Energy 10.15 In terms of renewable energy, DEWA is imple-
(DSCE) menting the Dubai Clean Energy Strategy
10.13 The Government of Dubai has entrusted the 2050, which aims at transforming Dubai into
DSCE with the task of planning and coordi- a global clean energy centre by 2050. The share of
nating with the concerned authorities and clean and renewable energy in the total energy output
agencies to find new energy sources, following a in Dubai is planned to increase from 7 per cent in 2020
balanced approach to environmental protection, the to 25 per cent in 2030 and to 75 per cent by 20504. By
rationalization of consumption and cooperation with 2030, DEWA expects the share of natural gas in the
other emirates of the UAE. The DSCE has the following energy mix to be reduced to 61 per cent. The main
entities under its auspices: DEWA, Dubai Aluminium focus of Dubai Clean Energy Strategy 2050 is to signifi-
Company Limited (DUBAL), Emirates National Oil cantly increase the use of solar energy to reach 25 per
Company (ENOC), Dubai Supplies Authority (DUSUP), cent of Dubai energy mix by 2030. DEWA is currently
Dubai Petroleum Establishment (DPE), Dubai Nuclear undertaking two solar initiatives: Mohammed bin
Energy Committee (DNEC), Dubai Municipality (DM) Rashid Al Maktoum Solar Park and the Shams Dubai
and Roads and Transport Authority (RTA). The DSCE project. The emirate has also launched a number of
Board consists of a General Secretariat and an advi- other initiatives aimed at diversifying its energy mix to
sory committee of qualified and specialized staff. The both meet the growing demand in Dubai while minimiz-
DSCE Board has the full support of the Govern- ing its impact on environment.
ment of Dubai3 .
Mohammed bin Rashid Solar
Dubai Clean Energy Strategy 2050 Energy Park
10.14 Dubai is exploring options to provide future 10.16 With the launch of the first phase of the proj-
energy for the sustainable growth of its ect with a capacity of 13 MW generated
economy. This requires the adoption of poli- using photovoltaic technologies 5. The
cies that address effective management of both second phase of the solar park was inaugurated in April
production and consumption. On the production side, 2017 with a total capacity of 200 MW. Two other
these policies aim to select and provide the right mix phases are planned. The third phase will be launched
of fuel to provide sufficient and reliable energy to meet in stages up to 2020 with a capacity of 800 MW. The
growing economic needs. While power generation fourth phase, a concentrated solar power (CSP) plant,6
currently relies heavily on natural gas as a fuel, DEWA with a capacity of 700 MW, will be executed in cooper-
has announced its intention to diversify the energy ation with a consortium consisting of Saudi Arabia’s
sources it relies on to include clean coal and nuclear ACWA Power, The Silk Road Fund and China’s Shanghai
power in the future. In this context, the Authority Electric as the main contractor for engineering,
intends to attract foreign investment in the energy procurement and construction. This phase will be
sector by opening the way for the construction of reac- completed in 2030.
tors to generate electricity by nuclear power.
3 https://www.dubaisce.gov.ae/ar-AE
4 DEWA 2017 Sustainability Report
5 Photovoltaic technology (PV)
6 Concentrated Solar Power (CSP)

Shams Dubai Initiative hybrid vehicles and reduce carbon emissions in the
10.17 As part of Smart Dubai Initiative to make road transport sector in line with Dubai Plan 2021 and
Dubai the smartest and happiest city in Dubai Clean Energy Strategy 2050. The aim of the
the world, DEWA launched the Shams latter is to make Dubai the world’s least carbon foot-
Dubai initiative to connect solar energy to buildings print city by 2050, as well reduce carbon emissions by
and households. 16% by 2021. In March 2017, DEWA announced an
increase in the number of electric vehicle charging
Shams Dubai encourages owners of houses and stations to over 200 stations across the Emirate
buildings to install solar panels for power generation of Dubai.
and connect them to DEWA network. These owners
consume the solar-generated electricity in their Green Charger Initiative
properties and then export the surplus to the DEWA 10.19 Through its Green Charger Initiative, DEWA
network, with its price deducted from their next bill. aims to encourage residents to use sustain-
As of January 2018, 40 MW peak capacity has been able means of transportation such as hybrid
installed through solar systems in 613 buildings which and electric vehicles to help reduce carbon emissions
are connected to DEWA network. in the land transport sector, which is the second largest
producer of greenhouse gas emissions in the Emirate
Dubai Green Mobility Initiative of Dubai. This initiative will effectively contribute to the
10.18 Within the framework of the UAE’s policy realization of the UAE Vision 2021 and the Dubai Plan
aimed at reducing carbon emissions and 2021 to make Dubai a smart, integrated and connect-
maintaining a healthy environment, the DSCE ed city that is sustainable with its resources and has
issued Circular No. 1/2017 dated 1 March 2017 clean and healthy environmental practices. DEWA has
concerning the establishment and installation of elec- stressed that the Green Charger Initiative is in line with
tric vehicle charging stations in the Emirate of Dubai. Dubai Clean Energy Strategy 2050’s goal of transform-
The circular aims at achieving sustainability and meet- ing Dubai into a global clean energy and green econ-
ing the technical requirements of DEWA and is part of omy hub and making it one of the world’s ten least
the efforts to implement Dubai Green Mobility Initiative. carbon footprint cities.
This directive will promote the use of electric and
The goal of Dubai Clean Energy Strategy

2050 is to transform Dubai into a global
clean energy and green economy
hub and make it one of the world’s
ten least carbon footprint cities.

Challenges to Energy Management in Dubai
10.20 The management of the energy sector in DSCE is considering a restructuring of the energy
Dubai is of great importance due to its sector to involve the private sector in some limited
impact on the sector’s efficiency and activities within the sector. In this context, Decree No.
sustainability. The Government of Dubai has adopt- 1 of 1992 establishing the DEWA was amended to
ed effective policies in the management of the ener- facilitate private sector participation in power gener-
gy sector that rely exclusively on public sector insti- ation and in desalination. In addition, Decree No. 9 and
tutions in both production and distribution. As Law No. 6 of 2011 were issued, amending some provi-
mentioned above, DEWA produces and distributes sions under which DEWA was established and regu-
electricity and water, and a limited number of state- lating the private sector participation in the production
owned companies produce and distribute petroleum of electricity and water in the Emirate of Dubai. This
products and domestic gas. The provision of various allows the private sector to participate in power gener-
sources of energy by the Government of Dubai, as ation alongside DEWA, while the distribution and sale
represented by public sector companies, has been of electricity and water to the final consumer is still
successful. However, case studies from around the limited to DEWA.
world show that the public sector is capable of meet-
ing energy needs, but less efficiently than the Efficiency and Energy and Water
private sector. Pricing Policies
10.23 The UAE subsidizes energy and water pric-
10.21 The authorities in charge of energy in Dubai es at relatively low levels. The subsidy was
have been successful in providing the ener- primarily intended to provide all types of
gy sources needed today to preserve energy and water to low-income groups, to increase
economic growth and sustainable development in the the competitiveness of local producers in internation-
emirate by providing operational infrastructure for the al markets and to stabilize local energy prices to help
production and distribution of energy with the highest reduce volatility in prices of goods and services in
quality. However there are future challenges facing the general. Another objective of the subsidy was to help
energy sector in Dubai. Further studies and analyses distribute oil and gas revenues to UAE nationals so
are in order to modernize the mechanisms for provid- that they benefited from their country’s wealth.
ing energy and managing the demand for it. In general, However, experience has shown that subsidizing
the main energy issue is the widening gap between energy and water consumption does not help the
locally available resources in Dubai and the demand economy because it does not benefit the target
for different types of energy. The top challenge is groups of the population. On the contrary, the bene-
securing investments in high-cost energy infrastruc- fits of subsidy are usually reaped by high-income
ture to accommodate future expansions. non-target groups.
Public-Private Partnerships 10.24 The GCC region in general suffers from low
10.22 The Government of Dubai plans to ease energy efficiency, with average energy
some of the pressure on the public sector by density7 in Dubai being over 480 tonnes of
providing necessary investments through oil equivalent (TOE) per a million dollars of GDP, which
partnerships with the private sector, especially by is high by global standards. The high energy density
encouraging private sector investments in electricity is likely to be due to several factors, most prominent-
generation using public-private partnership standards. ly the climate in Dubai: the hot dry climate results in
These partnership projects require changing existing high levels of consumption and density, thus increas-
laws and regulations to incentivize the private sector ing the emirate’s energy needs. The second factor is
to invest in energy projects. Recognizing this fact, the a low efficiency in the use of energy. Effective policies
7 The term "energy density" refers to the volume of energy required to produce one unit of GDP.

are needed to improve efficiency in consumption, 10.25 Energy demand management policy involves
such as correcting the pricing system used for all the use of pricing to reduce consumption by
kinds of energy. Therefore, the Government of Dubai, phasing out consumer subsidies under
through its various institutions, has recently adopted which energy sources are available for final consump-
programs aimed at promoting more efficient and tion at a much lower price than in most other countries,
effective consumption, including some programs to and sometimes at a price lower than cost. The Govern-
manage the demand for electricity and water and ment of Dubai, through DEWA, has recently adopted a
measures that increase the effectiveness of the end new system for electricity and water tariffs called the
user. These include awareness campaigns aimed at segment system. This system is specifically designed
educating individuals about the importance of prudent to charge higher when the customer exceeds certain
consumption of electricity and water. Campaigns are levels in the consumption of electricity or water. In
complemented by more comprehensive policies to addition, since January 2011, DEWA has introduced a
increase the efficiency of the final consumption of new pricing system that includes a 15 per cent increase
electricity, known as demand side management in the price of electricity and water consumed by resi-
programs. The programs include a set of consum- dents. The new tariff system partially corrects the low
er-focused measures aimed at influencing the time prices and encourages a more efficient use of resourc-
and amount of energy use by residents to increase es. However, the current tariff does not reflect the total
efficiency, including the pricing structure for cost to the community, including the environmental
power and water. cost. It is still lower than prevailing levels in most coun-
tries of the world although the tariff is the highest
among the GCC countries. Figures (10.9) and (10.10)
Figure 10.9: Electricity tariff in UAE and selected countries ($ per thousand KWh)
26 26 26 37 78 86 104 107 129 165 190 350
Kuwait Qatar KSA Bahrain UAE China Turkey Canada USA Singapore France Germany
Source: Global Energy prices.com, (June 2018)
Figure 10.10: Gasoline prices in UAE and selected countries (August 2018, US$ per litre)
0.35 0.53 0.54 0.56 0.67 0.83 0.97 1.1 1.14 1.15 1.59 1.65 1.85
Kuwait Bahrain KSA Qatar UAE USA Turkey China Canada India Singapore UK Italy
Source: Global Energy Prices.com

CHAPTER 11 |
Developments in
Social Indicators

T
his chapter highlights developments in social indicators in
Dubai affecting the welfare of the population. Rapid popu-
lation growth is a key issue. Dubai’s population has grown
at an average rate of 6.6 per cent per year, now topping
about 3 million people in 2017. Increased population has
also required the evolution of education and health services. These social
areas are important for economic development and the Government
has taken great care to create and manage services to improve social
welfare and a good quality of life for people in the UAE. The results are
positive — the UAE ranks first among Arab countries and 21st globally in
the World Happiness Report.
↗↗ Education and health are important employment sectors in Dubai. In

2016, about 25,000 people were employed in the education sector
and almost 22,000 people were working in the health sector.
↗↗ Only a very small percentage of the population in Dubai are illiterate,

the majority of men and women are well educated and there is a
strong infrastructure of private and public schools.
↗↗ Life expectancy at birth in Dubai has risen rapidly from 75 years

in 2013 to 80.7 years in 2017, which is the highest among the
MENA countries.
↗↗ Non-communicable diseases, such as obesity, heart disease and

diabetes, reflect a problem in the UAE population and are a typical
health challenge in modern, affluent developed countries.

CHAPTER 11 | Developments in Social Indicators
The Happiest Arab Country

Dubai has risen to meet the challenges of a rapidly growing and diverse diaspora
from around the world.
1 Education 2 Health
1
Managed by the Federal
NO. OF STUDENTS NO. OF SCHOOLS
Ministry of Health and
the local Dubai Health
281K 72% Authority (DHA)
100K 28%
2
Almost 22,000 people
2010 2018 were employed in the
Public schools Private schools
(75 schools) (194 schools)
Health sector in 2016
25,000 PEOPLE
employed in the Education
3
sector in 2016 Life expectancy at birth
has risen rapidly from
75 years in 2013 to
80.7 years in 2017
3 Lifestyle
Ministry of Ministry of
Tolerance was Happiness was
created to reinforce established to Dubai Healthcare City has
4
Dubai’s culture of cultivate residents’ approximately 160 health facilities
tolerance and happiness and in the free zone developing quality
mutual respect wellbeing healthcare standards according to
the best of international health
practices
World Happiness Report
UAE RANKS 1st HAPPINESS SCALE: (10 is the highest)
among Arab countries A new law stipulates
5
(21st globally) 8pt Men 8.1pt Women mandatory health
94.5% insurance for all Dubai
residents and those in
of respondents are satisfied
with their family life the free zones
pt
Developments in Social Indicators | CHAPTER 11
Population developments
Population growth
11.1 Dubai has seen a rapid and sustained popu- many expatriate workers (mainly unskilled workers) do
lation growth over the past years. Its popula- not bring their families to Dubai, which results in the
tion doubled between 2005 and 2017. number of males being higher than that of
According to estimates by the Dubai Statistics Center females. (Figure 11.2)
(DSC), the population of Dubai reached about 3 million
people at the end of 2017. Dubai accounts for about Educational level of the population
one third of the UAE population, which reached 9.12 in Dubai
million at the end of 2017. Dubai’s population grew at 11.3 In terms of education, a very small percent-
an average rate of 6.6 per cent between 2011 and 2017. age of the population in Dubai are illiterate
The rapid population growth — of UAE nationals — (unable to read or write). According to statis-
indicates a marked improvement in healthcare services tics from the Dubai Statistics Center (DSC), about 25
and living conditions. As for the growth of expatriate per cent of Dubai’s male population has a university
population, it is mainly related to demand conditions in degree, and 50 per cent of the male population has a
the labour market. Net migration rates increase during high school diploma. Females in Dubai fare better than
periods of economic recovery, which results from the males as far as education achievement is concerned,
recruitment of labour from abroad. (Figure 11.1) with 50 per cent of women having completed their
university education. (Figure 11.3)
Demographics
11.2 Dubai has a unique demographic structure, 11.4 Population increases in Dubai have been
with UAE nationals representing only an esti- accompanied by an increase in the number
mated 8.2 per cent of the emirate’s population of individuals holding academic qualifica-
in 2017.1 The rest of the population consists of expatri- tions. As shown in Figure 11.4, the percentage of indi-
ate workers and their families. Thus, the majority of the viduals holding university degrees has increased from
population in Dubai is of working age and the percent- 17 per cent of Dubai’s population in 2000 to 33
ages of people below 19 or above 60 are low. In addition, per cent in 2017.
Figure 11.1: Dubai’s population (in millions)

3.0
2.7
2.4
2.3
2.2
2.1
2.0
1.9
1.8
2009 2010 2011 2012 2013 2014 2015 2016 2017
1 Dubai Statistics Center, Annual Estimates of Dubai Population, 2018

Figure 11.2: Dubai’s population pyramid by age and gender in 2017
Age
0.2% 75+ 0.6%
0.2% 70-74 0.2%
0.6% 65-69 0.6%
1.2% 60-64 1.3%
2.8% 55-59 2.5%
3.5% 50-54 3.9%
7.7% 45-49 4.9%
11.6% 40-44 8.5%
13.7% 35-39 12.3%
19.3% 30-34 14.8%
17.8% 25-29 13.7%
8.1% 20-24 7.2%
2.5% 15-19 5.3%
3.2% 10-14 7.2%
3.7% 5-9 8.5%
4.0% 0-4 4.0%
Males Females
Figure 11.3: Population by educational status and gender
university
27.0% & post graduate degree 50.2%
under university degree

5.9% 4.6%
intermediate degree
56.7% 38.5%
literate
7.7% 4.8%
illiterate
2.7% 1.9%
Males Females
Figure 11.4: The evolution of Dubai’s population structure by educational status
17.3% 16.3% 26.3% 33.5%
2000 2005 2015 2017
82.7% 83.8% 73.7% 66.6%
Under university degree University and post graduate degree


Social harmony and happiness — is 8 among men and 8.1 among women. In terms of
11.5 Dubai and the UAE are both characterized by satisfaction with family life in Dubai, the results of the
social diversity in terms of nationalities, survey indicate that 94.5 per cent of respondents said
languages and religions. This diversity is they were satisfied with their family life. Work stability
based on tolerance and mutual respect. The Ministry is one of the most important indicators of happiness
of Tolerance was established to expand and consoli- and mental health of individuals, and 92 per cent of UAE
date these positive traditions in the UAE society. The nationals said they were satisfied with their job stability.
UAE and Dubai have paid great attention to the happi-
ness of UAE nationals and residents in the country, and Developments in education and health
the Ministry of Happiness was established at the feder- 11.6 Education and health represent the corner-
al level to ensure their happiness and wellbeing. In stones of development and prosperity and
addition, a number of initiatives were launched to are the most important means for reducing
support the community’s happiness. poverty and promoting gender equality. The health and
education sectors together have contributed 1.8 per
The UAE ranks first among Arab countries and 21st glob- cent of Dubai’s GDP in 2017, with the health sector
ally in the World Happiness Report.2 The DSC measures contributing 1.1 per cent and the education sector
the happiness of UAE nationals every two years through contributing 0.7 per cent. Education and health are
a survey that follows an established scientific meth- also important sectors in terms of employment in
odology. The results of the survey show that the aver- Dubai. In 2016, about 25,000 people were employed
age rate of happiness for individuals in Dubai on the in the education sector and almost 22,000 people were
happiness scale — from 0 (least happy) to 10 (happiest) employed in the health sector.
Education and health are

important employment sectors in
Dubai. In 2016, about 25,000 people
were employed in the education
sector and almost 22,000 people
were working in the health sector.
2 Federal Competitiveness and Statistics Authority

Primary and secondary education indicators
11.7 The growth of population in the Emirate of schools. There is a growing trend among Emirati
Dubai has been accompanied by a steady students to choose private education: a majority (57
increase in demand for primary and second- per cent) of UAE national students are enrolled at
ary education. The number of school students rose private schools. 98 per cent of expatriate students are
from 100,000 in 2010 to 281,000 in 2018. The number enrolled at private schools and only 2 per cent are
of public schools in Dubai reached 75 in the academic enrolled at public schools. (Figure 11.6)
year 2016-2017 (the latest year for which data is avail-
able), while the number of private schools reached 194 11.9 The increase in the number of UAE national
in 2017-2018. The private sector plays an important students enrolled at private schools during
role in providing education in Dubai. Private schools the period 2000-2017 resulted in a decrease
represent 72 per cent of the total number of schools, in the percentage of UAE national students enrolled at
and they are expected to increase with the projected public schools, from 69 per cent in 2000 to 33 per cent
population growth in Dubai. (Figure 11.5) in 2017. During the same period, the percentage of
UAE national students enrolled at private schools
Public and private education increased from 31 per cent to 57 per cent, which
11.8 Although public education is free, only 10 per reflects the recent preference among UAE national
cent of the total number of students in Dubai students for private education over public educa-
(29,597 students) are enrolled at public tion. (Figure 11.7)
Only a very small percentage of the

population in Dubai are illiterate, the
majority of men and women are well
educated and there is a strong infrastructure
of private and public schools.

Figure 11.5: Percentage of schools in Dubai by type
Private Education Public Education

72% 28%
Source: Ministry of Education
Figure 11.6: Enrolled Students by education type and nationality (%)
44% 2% 10%
Non
Emirati Emirati Total
56% 98% 90%
Private Education Public Education

Figure 11.7: Emirati students by type of education in 2000 and 2017
31% 57%
2000 2017
69% 33%
Private Public

Curricula at Dubai schools at British schools. Expatriate students prefer the Brit-
11.10 Dubai schools offer a number of different ish curriculum because it is widely spread around the
educational curricula to suit the needs of world, which makes it easier for students to transfer to
UAE nationals and residents. These include British schools in their home countries if they leave the
the curriculum of the Ministry of Education and the UAE. (Figure 11.9)
British, American, Indian, French and German curricu-
la. The British curriculum is the most prevalent one at 11.12 Dubai has a special distribution of students
Dubai private schools, with 40 per cent of private by stages, which relates to the social status
schools in Dubai teaching it. It is followed by the curric- of expatriate workers. The majority of work-
ulum of Indian schools and then by the American ers in Dubai have families with young children. There-
curriculum. There are 79 schools teaching the British fore, the largest concentrations of students enrolled
curriculum in Dubai. (Figure 11.8) at Dubai schools are in the primary stage of education,
and the number of students gradually decreases in
11.11 There is a preference for the British curricu- higher stages as workers are older. For example, the
lum among parents in Dubai, with 36 per cent number of students in the first grade is about twice the
of private school students in Dubai enrolled number of students in grade 11. (Figure 11.10)
Dubai private school student.

Figure 11.8: Dubai’s schools by curricula Figure 11.9: Enrolled Students by School
Curricula
British British
40% 36%
Others Indian
22% 28%
Indian American
17.5% 17%
American Others
17.5% 17%
French French
3% 2%
Source: Knowledge and Human Development Authority Source: Knowledge and Human Development Authority
Figure 11.10: Enrolled students by Stage of Education
945 12 639
1024 11 639
989 10 695
1007 9 719
939 8 817
1036 7 774
1201 6 934
1193 5 1035
1310 4 1012
1351 3 1073
1402 2 1112
1529 1 1234
1678 KG2 1540
1663 KG1 1488
Females Males
Source: The Knowledge and Human Development Authority

Performance and quality of education assessed in 2017 ranged from outstanding, very good
in Dubai schools to acceptable and poor. In that year 41 schools or 24.7
11.13 The Knowledge and Human Development per cent of the 166 total schools were rated outstand-
Authority (KHDA) assesses private schools ing or very good. 119 schools, or 71.7 per cent of the
in order to provide information to parents. total were rated good or acceptable; and 6 schools,
The assessment is based on a number of standards 3.6 per cent were assessed as poor. (Figure 11.11)
the most important of which are: student achieve-
ments: the results of international tests in mathemat- 11.14 Dubai schools have improved in internation-
ics; reading and science, and the commitment of the al tests in mathematics and science. (See
school to the curriculum. The rating of most schools Box 1)
Figure 11.11: Dubai schools’ performance in 2017
68
51
27
14
Weak Acceptable Good Very Good Outstanding
Dubai private school student.

Box 1: Results of Dubai Students in International Tests*
A number of Dubai schools participated in the Trends in Mathe-

matics and Science Study (TIMSS) 2015, which focuses on eval-
uating the achievements of fourth and eighth grade students in
mathematics and science. Dubai students have made remark-
able progress in mathematics and science in the last eight years,
achieving higher than the international average (500 points) in all
tests for the first time, see Figure 11.12.
Scores of Dubai students were also higher than the average

scores for MENA countries. The figure also shows that Dubai students also outperformed students
in other GCC countries, such as Saudi Arabia and Bahrain. Despite the improvement in TIMSS
scores, there is a marked disparity in scores between students in private schools and those in
public schools of the Ministry of Education. Dubai private schools achieved better results than
Dubai public schools in all tests, which may explain the growing trend among the UAE nationals
for a preference towards private education in Dubai.
Figure 11.12: Dubai’s student achievements between 2007 and 2015
540
524
518
520 512
511
500
489
485
480 478
461 468
460 460 461
444
440
420
400 2007 2011 2015
Science grade 4 Science grade 8 Mathematics grade 4 Mathematics grade 8

* The Knowledge and Human Development Authority

School fees in Dubai 2. Foreign universities, which are branches of foreign

11.15 According to KHDA estimates, average universities based in the free zones (27 universities).
tuition fees for the academic year 2016-
2017 were about AED 27,000 per year. It is 3. Local universities accredited by the Commission
also estimated that 53 per cent of students pay for Academic Accreditation3 and funded by the
tuition fees of less than AED 20,000 per year. The Government of Dubai or by the private sector (29
results of the Household Expenditure and Income universities).
Survey conducted by the DSC in 2017 indicate that
the average expenditure of UAE households on 11.17 The total number of students in higher educa-
education was AED 21,700 per year, on average, tion in Dubai reached 56,8674 comprising
representing about 4.7 per cent of the total annual 19,895 UAE national students and 36,972
consumption and expenditure of UAE households in expatriate students. UAE national students represent
Dubai. Non-UAE households spent an average of 35 per cent of the total number of students.
AED 20,600 on education, representing 10 per cent
of the total annual consumption and expenditure of 11.18 UAE national students are concentrated in the
non-UAE households. federal universities and universities outside
the free zones. Expatriate students are most-
In order to reduce the financial burden on parents, the ly in universities within free zones, and to a lesser extent
Ruler of Dubai issued in mid-2018 a decision to freeze in universities outside free zones. (Figure 11.13)
school fees for all private schools in the Emirate of
Dubai for the academic year 2018-2019. 11.19 In terms of disciplines, the majority (60 per
cent) of students in Dubai universities are
Higher education indicators enrolled at business administration colleges,
11.16 Higher education institutions in Dubai are while about 20 per cent are studying engineering. The
divided into several categories: percentage of students studying medicine and health
disciplines is very small, which results in a permanent
1. Federal universities funded by the federal govern- shortage in these disciplines in Dubai’s labour market
ment (3 universities). with a continued reliance on foreign professionals in
those disciplines. (Figure 11.14)
The average expenditure of UAE households on

education was AED 21,700 per year. To reduce
the financial burden on parents, the Ruler
of Dubai issued a decision to freeze school
fees for all private schools in the emirate of
Dubai for the academic year 2018-2019.
3 The Commission for Academic Accreditation is a federal entity that is responsible for ensuring quality and promoting educational excellence in
higher education institutions in the UAE in accordance with international standards.
4 Dubai Statistics Center

Figure 11.13: Placement of students by area in Dubai in 2016/2017
26,618
10,214
8,856 8,685
2,354
140
Federal Inside Free Zones Outside Free Zones
Emirati Non-Emirati
Figure 11.14: Student Enrollment by field
Business Engineering
59.5% 14.8%
Media
6.7%
Architecture
5.3%
Information
Technology
5.3%
Humanities
2.9%
Education
1.7%
Natural Science
1.3%
Law
1.3%
Health and Medicine Tourism
0.1% 1.1%
Source: the Knowledge and Human Development Authority

Developments in health indicators
Primary Health
11.20 Dubai has made clear progress in primary density of physicians in Dubai reached 3 per 1,000
health and health-related indicators in recent people in 2013, while the OECD average was 2.86. On
years. Life expectancy at birth in Dubai has the other hand, Dubai suffers from shortage of profes-
risen rapidly from 75 years in 2013 to 80.7 years in sionals in some medical specialties, such as oncology
2017, which is the highest among the MENA countries. and occupational medicine5.
Dubai has also been able to reduce the gap in life
expectancy at birth between UAE nationals in Dubai 11.25 The total number of public hospitals in Dubai
and citizens of the OECD countries at a very rapid reached six, including four local hospitals
pace. (Figure 11.15 and two federal ones. In addition, there are
26 private hospitals regulated by the Dubai Health
Under-five mortality rate Authority and 4 private hospitals regulated by Dubai
11.21 Dubai has also made significant progress in Healthcare City.
reducing the under-five mortality rate, which
is a key indicator of public health and a Health Insurance
sustainable development goal (SDG) indicator. The 11.26 A health insurance system has been estab-
under-five mortality rate in Dubai is 6.07 per 1,000 lished in Dubai under Law No. 11 of 2013
children, which is lower than that of OECD countries concerning comprehensive health insur-
(above 6.8 per 1,000 children). Dubai has also set an ance, which provided for comprehensive health cover-
ambitious plan to provide high quality healthcare age by 2016. Through this law, the Government of
services as part of Dubai Vision 2021. Dubai is keen to ensure that UAE nationals and resi-
dents in Dubai do not face financial difficulties in
11.22 Most of the other primary health indicators obtaining health services. The new law also stipulates
continued to improve. The maternal mortal- that health insurance is mandatory for all residents in
ity rate per 100,000 live births, an SDG indi- Dubai and in the free zones, and requires that the
cator, has fallen from 7.68 in 2010 to 3.47 in 2013. employer/sponsor bears the cost of workers’ health
However, it has recently reversed, rising to 9.41 in insurance and that workers bear the cost of the insur-
2016. This needs to be addressed, and awareness ance of their family. The new law allows every UAE
campaigns concerning the health of UAE mothers may national and resident in Dubai to receive basic health
need to be intensified. coverage of at least AED 150,000 a year. This covers
visits to the general practitioner, emergency treat-
11.23 On the other hand, the rapid change in the ments, and visits to specialist doctors, surgical proce-
lifestyle and diet of people in Dubai has led dures, diagnosis procedures and baby delivery.
to an increase in non-communicable diseas-
es, such as diabetes and heart disease. Other factors Regulation of healthcare services
contributing to this include the high temperatures in 11.27 There are two regulators of healthcare in
Dubai that limit physical activity. (See Box 2) Dubai. The first is the Ministry of Health,
which represents the federal government.
Healthcare services infrastructure The Ministry of Health delegates part of its functions
11.24 Healthcare services indicators show that to the Dubai Health Authority (DHA), which represents
Dubai has a well-developed healthcare infra- the local government. The DHA plays a dual role as a
structure and that this is constantly improv- regulator and provider of healthcare services in
ing in terms of the density of physicians and nurses Dubai: it regulates Dubai’s healthcare sector and
and hospital beds (per 1,000 people). For example, the operates a number of hospitals in Dubai. Together,
5 The Economist Intelligence Unit, Investing in quality healthcare in the UAE. (2015).

Figure 11.15: Life expectancy in Dubai and OCED countries
79.4 79.6 79.7 79.9 80.2 80.1 80.1

OECD
75.9 74.6 75.6 75.6 76.7 79.2 79.8 80.7

Dubai
2010 2011 2012 2013 2014 2015 2016 2017
Source: Dubai Health Authority and World Bank
Box 2: Non-Communicable Diseases*
Despite the improvement of health indicators of the population in

Dubai, there are still many challenges facing the health of Dubai
population, especially UAE nationals. As in developed industrial
countries, non-communicable diseases are the most important
challenge to the health of citizens. For example, Dubai and the
UAE have a high diabetes rate of 19 per cent of the total popu-
lation, especially among UAE nationals. The UAE is among the
top 15 countries in the world in terms of the spread of diabetes.
Furthermore, 37 per cent of UAE nationals suffer from high blood
pressure. The obesity rate is 15 per cent among adults (18 years and older), 29.3 per cent among
UAE nationals, and 14.4 per cent among children in the UAE as a whole.
Cardiovascular disease is the leading cause of death, accounting for 30.4 per cent of all deaths
in Dubai hospitals. In addition, smoking, lack of physical activity, dependence on cars and the
increased consumption of junk food are among the main causes of non-communicable diseases
in the UAE. The mortality rate for non-communicable diseases in the UAE increased from 67 per
cent in 2000 to 76 per cent in 2015.
*Source: World Bank Database

Dubai Healthcare City.

the Ministry of Health, DHA and the private sector decrease with the implementation of the comprehen-
provide healthcare services to individuals. The sive health insurance system.
private sector provides most of the healthcare
services in Dubai, which is consistent with the vision 11.30 The cost of overseas treatment amounted to
of the Government of Dubai for the private sector as about AED 426 million in the budget of the
a strategic partner. About 77.6 per cent of patients Government of Dubai in 2017. The average
visit private outpatient clinics to receive healthcare cost is AED 269,000 per patient. In 2017, 1,582 patients
services, and 72.7 per cent of in-patients are cared benefited from the overseas treatment program. The
for in private hospitals. cost of actual treatment per patient is 74.2 per cent of
the total cost of overseas treatment, while the associ-
11.28 In addition, Dubai Healthcare City, which has ated expenses represent 25.8 per cent. (Figure 11.16)
approximately 160 health facilities in the free
zone, is developing quality healthcare stan- 11.31 Thailand is the leading destination for
dards according to the best of international health patients covered by the overseas treatment
practices. Healthcare providers in Dubai Healthcare program, followed by the United Kingdom
City must meet DHA standards. and the Germany. A study conducted by the DSC and
DHA revealed that the reasons for choosing overseas
Expenditure on healthcare treatment, despite the availability of healthcare
11.29 The health sector accounted for 1 per cent services in Dubai, can in many cases be explained by
of Dubai’s GDP in 2017. The share of the lack of information about specialized treatment in
Government of Dubai of current expenditure Dubai. This highlights the need for intensifying the
on healthcare is about 33 per cent. Households cover awareness and building confidence in the competence
out of their income about 22 per cent of current expen- of local medical institutions among UAE nationals and
diture on healthcare. This percentage is expected to Dubai residents.
Figure 11.16: Overseas treatment expenditure by type of expense in 2017
Medical Expense Cash

74.2% 15.7%
Salaries
4.2%
Tickets
3.5%
Others
1.2%
Transport
0.7%
Hotels
0.4%
Source: Dubai Health Authority, Dubai Annual Health Statistics 2017

Notes

Notes

MISSION
Develop, regulate and
promote the sustainable
growth of Dubai’s economy
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VISION MISSION
Dubai to Become a pivotal hub Develop, regulate and promote the
in the global economy sustainable growth of Dubai’s economy
The Department of Economic

Development (DED) is the government
body entrusted to set and drive the
economic agenda of the emirate of
Dubai, UAE. The DED supports the
structural transformation of Dubai into
a diversified, innovative service-based
economy that aims to improve the
business environment and accelerate
productivity growth.
The DED and its agencies develop

economic plans and policies, identify
and support the growth of strategic
sectors, and provide services to
domestic and international investors
and businesses.
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of Economic Development
13223 Dubai
United Arab Emirates
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Dubai

In Brief About the Dubai Economic Report 2018 1

Dubai and the Global Economy (in 2017-2018) 3

Recent Developments in Dubai’s Economy 21

Dubai’s Foreign Trade 43

Sustainable Tourism for Dubai’s Economic Development 57

II Dubai Economic Report 2018 Dubai_DED DubaiDED Dubai DED

Banking, Insurance and Capital Markets 95

Transport, Storage, Communications and Information Technology 117

Construction and Real Estate Activities 141

Energy and Water 171

Developments in Social Indicators 185

dubaided.gov.ae Dubai Economic Report 2018 III

Dubai and the Global Economy (in 2017-2018)

Recent Developments in Dubai’s Economy

Table 2.1: Sector Contribution to Overall GDP Growth Rate in 2017 28

Dubai’s Foreign Trade

IV Dubai Economic Report 2018 Dubai_DED DubaiDED Dubai DED

Sustainable Tourism for Dubai’s Economic Development

Table 4.1: Rank of Dubai and International Cities, 2016-2017 68

Wholesale and Retail Trade

Table 5.1: Importance of the Services Sector in GDP (%) 87

Banking, Insurance and Capital Markets

dubaided.gov.ae Dubai Economic Report 2018 V

Transport, Storage, Communications and Information Technology

Construction and Real Estate Activities

VI Dubai Economic Report 2018 Dubai_DED DubaiDED Dubai DED

Energy and Water

Developments in Social Indicators

Box 1: Results of Dubai Students in International Tests 196

dubaided.gov.ae Dubai Economic Report 2018 VII

excellent infrastructure and

flexible legislation offer the best

environment for international

investment and exceptional talent.

HIS HIGHNESS SHEIKH MOHAMMED BIN RASHID AL MAKTOUM

VICE PRESIDENT AND PRIME MINISTER OF THE UAE

The primary contributors to the writing and

Dr. Brian Sturgess was external contributor and

The analysis has benefitted from comments and

The team was privileged by the continuous

X Dubai Economic Report 2018 Dubai_DED DubaiDED Dubai DED

dubaided.gov.ae Dubai Economic Report 2018 XI

About the Dubai

1 Dubai Economic Report 2018 Dubai_DED DubaiDED Dubai DED

dubaided.gov.ae Dubai Economic Report 2018 2

Dubai and the

3 Dubai Economic Report 2018 Dubai_DED DubaiDED Dubai DED

↗↗ The IMF adjusted global and regional growth forecasts, in Octo-

↗↗ Real growth among the Emerging Market and Developing Economies

↗↗ In contrast, the MENA (Middle East, North Africa) region experienced

dubaided.gov.ae Dubai Economic Report 2018 4

1 Attractiveness and competitiveness

5 Dubai Economic Report 2018 Dubai_DED DubaiDED Dubai DED

Global, Regional & Dubai Growth Trends

dubaided.gov.ae Dubai Economic Report 2018 6

0 2012 2013 2014 2015 2016 2017 2018E 2019F

2016 2017 2018F 2019F

7 Dubai Economic Report 2018 Dubai_DED DubaiDED Dubai DED

7.1 7.37.4 7.4

World Emerging & MENA China India Iran Turkey

dubaided.gov.ae Dubai Economic Report 2018 8

Global & Regional Trade & Financial Developments