Dubai needs to diversify for stable growth



AlixPartners is a global consultancy known for its work on corporate turnarounds and restructuring. Eugenio Berenga, managing director of the company’s enterprise improvement practice in Dubai, talks to Sean Cronin about the economic prospects of the emirate and the region five years on from the Dubai World crisis.

What are the biggest challenges facing regional corporates in the current economic cycle?

This region is a growing economy that has invested significantly in its basic industries. Many companies have grown very fast and have become very profitable. But now many of them face a different paradigm because if they want to grow faster they need to go international, and that is a completely different ball game. If you look at the economy here, it is not very diversified. A significant portion of the economy is driven by oil and gas and there is another big portion driven by construction and real estate development. The third element is consumer goods trading. All of the large organisations have developed on these three main sectors. The more people who get involved in this, the fewer opportunities there are. So they need to diversify into different industries.

Is there a danger that Dubai re-leverages to excess again?

I think there is a general concern but I think measures have been but in place, especially since the announcement of Expo 2020. However, Dubai is really in the middle of a portion of the world that is going through very complex changes and geopolitical tension. They have been able to create a very secure environment so that has attracted a lot of resources from countries where people no longer want to live because of security or because of changes in regimes and democracy.

What about the debt repayment obligations of the next few years that emanated from the 2009 Dubai World restructuring?

The companies that were involved in the previous debt restructuring are now trying to anticipate the refinancing needs that are coming up. So it looks like they are working ahead of schedule. I think the lesson has been learnt, and they need to protect their environment in light of 2020.

How successful has Dubai been in diversifying its economy in the last five years?

Jebel Ali Free Zone has been pretty successful and copied by other countries. Maybe in terms of logistics, Saudi Arabia is better placed, but Dubai has definitely developed as a hub for trade and I don’t honestly see how this can be challenged in the short term.

Has shale gas changed the narrative of industrial development in the region?

In the US maybe we are seeing a second industrial revolution and I think this has helped North America become more detached from the region from a political standpoint because they are almost independent in gas and oil. Although there has been some shale investment in the region; it is still in an early stage. Oil prices will most likely decrease unless there are geopolitical tensions. Regional economies need to think how to use their energy resources better. If they do not invest in energy efficient initiatives they will have less and less resources going forward.

Is there potential to take some of the emerging regional family industrial groups public?

The ones I see going public now are mainly real estate or retail driven. The real question for me is whether companies are ready to go public. The need to be transparent and show results every three months requires a lot of work and preparation. Many companies see going public as a way to solve generational change issues, but I don’t think this is necessarily a solution.

scronin@thenational.ae

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Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
 
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
 
Round 3: February 7-9, Dubai Autodrome – Dubai
 
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
 
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
Squid Game season two

Director: Hwang Dong-hyuk 

Stars:  Lee Jung-jae, Wi Ha-joon and Lee Byung-hun

Rating: 4.5/5

Libya's Gold

UN Panel of Experts found regime secretly sold a fifth of the country's gold reserves. 

The panel’s 2017 report followed a trail to West Africa where large sums of cash and gold were hidden by Abdullah Al Senussi, Qaddafi’s former intelligence chief, in 2011.

Cases filled with cash that was said to amount to $560m in 100 dollar notes, that was kept by a group of Libyans in Ouagadougou, Burkina Faso.

A second stash was said to have been held in Accra, Ghana, inside boxes at the local offices of an international human rights organisation based in France.

Other workplace saving schemes
  • The UAE government announced a retirement savings plan for private and free zone sector employees in 2023.
  • Dubai’s savings retirement scheme for foreign employees working in the emirate’s government and public sector came into effect in 2022.
  • National Bonds unveiled a Golden Pension Scheme in 2022 to help private-sector foreign employees with their financial planning.
  • In April 2021, Hayah Insurance unveiled a workplace savings plan to help UAE employees save for their retirement.
  • Lunate, an Abu Dhabi-based investment manager, has launched a fund that will allow UAE private companies to offer employees investment returns on end-of-service benefits.
MATCH INFO

Manchester United v Brighton, Sunday, 6pm UAE

Shooting Ghosts: A U.S. Marine, a Combat Photographer, and Their Journey Back from War by Thomas J. Brennan and Finbarr O’Reilly

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

Brief scoreline:

Liverpool 5

Keita 1', Mane 23', 66', Salah 45' 1, 83'

Huddersfield 0

UPI facts

More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions

Three ways to get a gratitude glow

By committing to at least one of these daily, you can bring more gratitude into your life, says Ong.

  • During your morning skincare routine, name five things you are thankful for about yourself.
  • As you finish your skincare routine, look yourself in the eye and speak an affirmation, such as: “I am grateful for every part of me, including my ability to take care of my skin.”
  • In the evening, take some deep breaths, notice how your skin feels, and listen for what your skin is grateful for.

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Rating: 2/5

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Mubalada World Tennis Championship 2018 schedule

Thursday December 27

Men's quarter-finals

Kevin Anderson v Hyeon Chung 4pm

Dominic Thiem v Karen Khachanov 6pm

Women's exhibition

Serena Williams v Venus Williams 8pm

Friday December 28

5th place play-off 3pm

Men's semi-finals

Rafael Nadal v Anderson/Chung 5pm

Novak Djokovic v Thiem/Khachanov 7pm

Saturday December 29

3rd place play-off 5pm

Men's final 7pm

THE LIGHT

Director: Tom Tykwer

Starring: Tala Al Deen, Nicolette Krebitz, Lars Eidinger

Rating: 3/5