Of Dubai’s much commented “three Ts” – trade, transport and tourism – the first has always been the least glamorous.
Transport is typified by the global mega-brand that is Emirates airline; tourism by the glittering malls and luxury beach resorts. Trade, meanwhile, is the more prosaic daily business of the Jebel Ali port, or the routine commerce that takes place at the Dubai Multi Commodities Centre (DMCC).
Trade may be less glitzy, but it is arguably the most important of the Ts. Jebel Ali is the gateway for virtually all the goods and products that are essential to the UAE’s economy; it accounts for about one quarter of Dubai GDP.
So the long-term outlook for Dubai’s trade is crucial for the country’s economy. This is also the sector most sensitive to big macro trends: shifts in global economic conditions, technological innovations and geopolitical tensions.
Since the financial crisis of 2009, these factors have all made the outlook for global trade more uncertain than for many decades. The World Bank said recently that the rate of trade growth has more than halved since then, and is now probably less than 3 per cent per year.
The Baltic Dry Index, which measures the cost of shipping raw materials – coal, metals, chemical products – around the world fell to a multi-year low recently. The good news is that it’s cheaper than ever to physically transport goods around the world; the bad news is that many fewer people want to do so.
A recent research paper, The Future of Trade – prepared by the DMCC and in collaboration with a couple of top-notch think tanks – gave a snapshot of global trade at a crucial time in history, as old trading patterns change and new technologies emerge to disrupt traditional trade flows.
The message is that businesses that depend on global commerce are in for a time of challenge and disruption, but those that can adapt and implement new strategies quickly could reap enormous benefits.
The digital revolution is the most profound of these challenges. E-commerce stimulates demand for goods and services, but also adds to supply chain pressures and logistics.
Nonetheless, there are great prizes on offer for those that can adapt and embrace new digital trade techniques. Some 350 million businesses around the world could become exporters, and as much as US$29 trillion could be added to the value of the world economy.
Another recent piece of research also highlighted the benefits for trade in the region.
Ernst & Young reckons that an integrated Arabian Gulf region, with foreign investment-friendly policies, could become a major trading bloc, and the sixth largest economy in the world, by 2030.
But other factors complicate the world trade outlook, and the UAE’s role.
The eastward shift of the global economy puts the country in a great geographical place, but also makes it more vulnerable to downturn in the big economies of India and China.
These are important issues that have to be overcome. But it is clear that the future of the UAE lies in its trading strength, and everything possible should be done to foster that.
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