Dubai's economy must return to the basics of trade and logistics to ensure a more sustainable growth after the financial crisis, the director general of the emirate's chamber of commerce says. Property, once the driver of Dubai's rapid expansion, is expected to take only a supporting role in the emirate's economic future, said Hamad Buamim, the director general of Dubai Chamber of Commerce and Industry, which has more than 100,000 members.
Trade and logistics, along with financial services, are expected to account for two thirds of Dubai's economy by 2015, Mr Buamim said yesterday. "Dubai is really going back to basics," he said. "The future of Dubai is to move from the drivers of the last three or four years, such as real estate and construction, into the traditional sectors which Dubai is known for." The emirate's location ensured it became a regional and international centre for trade and logistics. As a re-export hub for the Middle East, Africa and the Far East, analysts expect Dubai to gain from a pickup in global commerce.
The new Al Maktoum International Airport, due to open this year, and Jebel Ali port would help Dubai consolidate as a trade centre, Mr Buamim said. He said the Dubai International Financial Centre (DIFC) provided the infrastructure to further build the emirate's financial services sector. "Tourism and real estate will support the main elements of the economy," he said. "Real estate will shift from being a core driver of the economy to an enabler of the future of Dubai."
Property has been at the root of many of the emirate's problems since the financial crisis. The downturn burst a property bubble in Dubai fuelled by easy credit and high oil prices that helped accelerate economic expansion. Analysts do not expect a recovery in the sector until next year at the earliest. The Government-controlled conglomerate Dubai World is seeking to restructure US$26 billion (Dh95.49bn) of debt, much of it linked to its property units.
It could take years for Dubai to reshuffle its economy, said Dr Henry Azzam, the chief executive of Deutsche Bank MENA. "Real estate will not feature at the top of investors' interests," Dr Azzam said. "Banking will continue to be there, transport, travel and services will gain additional importance." Deutsche Bank expects the UAE to return to growth this year, with GDP expanding by less than 2 per cent, sharply down from the years before the financial downturn.
"The high growth of the boom years is no more," said Dr Azzam. "The new strategy - will be to solidify what was built before, maintain growth at a reasonable level." Dr Azzam said he expected more property foreclosures. "We still have excess supply, an increase in mortgage defaults, limited lending by banks to real estate projects," he said. tarnold@thenational.ae
