Private finance will set the pace in run-up to Dubai Expo building boom

Public-private partnerships are set to play a bigger role in Dubai's infrastructure projects.

Pawan Singh / The National

A Dh30 billion building boom in the run-up to the World Expo 2020 in Dubai is expected to draw heavily on public-private partnerships, reducing the need to saddle the emirate with excessive debt.

Hamad Buamim, the president and chief executive of Dubai Chamber of Commerce and Industry, said public-private partnerships (PPPs) would play a bigger role in infrastructure projects.

“We start to see the Government of Dubai focus on a new model, which is a public-private model, and I expect to see more infrastructure spending based on this model, whether it’s the Metro or even more on utility companies,” he said, speaking yesterday at the launch of Oxford Business Group’s new investment guide for Dubai.

Authorities in Dubai will invest Dh30bn in new infrastructure in preparation for Expo 2020, Sheikh Ahmed bin Saeed Al Maktoum, the chairman of the Expo 2020 Preparatory Committee, said before Dubai won the right to host the event in November. But Deutsche Bank has estimated the total cost of infrastructure projects as likely to reach $43bn.

Viewed as a cost-effective and efficient model to deliver projects in western markets, PPPs have gradually begun to gain popularity in the UAE in recent years, a trend accelerated by the 2009 financial crisis, which squeezed government funds. In Dubai, the Roads and Transport Authority partnered with at least five multinationals to develop the Dh28bn Dubai Metro.

Analysts had fretted about the potential extra debt burden Dubai may take on to finance the Expo.

Mr Buamim also sought to ease worries about a potential oversupply of capacity once the event ends. Dubai expects to add 80,000 new rooms by 2020, according to Dubai Tourism and Commerce Marketing. Many of those will be needed to cater for the estimated 25 million visitors to the Expo over the six months of the event’s duration.

“We learnt a lot from the past in terms of building infrastructure and financing for the long run instead of short term,” he said.

Before the Expo decision, Dubai set a target of attracting 20 million tourists by 2020. Officials say that target would have remained in place, even if Dubai’s bid had not been successful.

“In as much as one might mobilise a lot of resources around one single event, the question is how do you sustain the growth,” Iyad Malas, the chief executive of Majid Al Futtaim Holding, the Dubai-based retail giant, said at the same event.

“If we can sustain the tourism growth in Dubai with the vision of attracting 20 million tourists by 2020, that will go a long way to supporting Dubai as a major destination for retail and tourism.”

Officials hope hosting the Expo at the Dubai World Central site in Jebel Ali will help to stimulate the development of what is a rapidly emerging area of the city.

Visitors will arrive via the new Al Maktoum International Airport, which is eventually planned to handle up to 150 million visitors a year once Emirates Airline and other major carriers can be persuaded to switch from their current base across the city at Dubai International Airport.

Supporting the airport and related services will be Dubai World Central, a logistics park.

“Dubai World Central is a key opportunity to develop logistics and supply chain management, which is actually not here,” said Nicholas Maclean, the managing director of the Middle East region at CBRE, the property services company. “It is critically important, not just for Dubai and the UAE but the GCC, as what happens here will have implications for elsewhere.”

Hosting the event was expected to generate more than 277,000 jobs between 2013 and 2021, according to an economic impact report from the Dubai Expo 2020 team.

Mr Buamim said he believed the forecast for number of jobs likely to be created was “very, very conservative”.