Dubai: Country and Foreign Investment
Economy and Currency
For decades, the economy of the UAE has been dominated by petroleum. The immense wealth oil has generated has been invested in capital improvements and social services in all seven emirates. Petroleum production is centred in Abu Dhabi and Dubai. Industrial development is essentially related to oil refining and allied industries, though it is limited by a lack of trained personnel and raw materials.
After seeing big rises in GDP for many years, the global financial crises affected the UAE badly mainly because of the country's heavy exposure to depressed property prices. GDP in 2012 rose by 4.5% (est.). The estimated increase in 2011 was 3%. In 2010, GDP grew by 2.5%, following a drop of 3.2% in 2009. Trade, logistics, transportation and tourism accounted for almost 60 per cent of Dubai's GDP in 2011.
Dubai is ideally placed between Africa and the Middle East and between the Far East and Europe, making it a gateway to over 1.5 billion consumers in countries surrounding the Red Sea and the Gulf. Its superb infrastructure has enabled it to become a key link in the global transport and distribution system. This now forms a significant component of the emirate’s economy.
Dubai is served by more than 170 shipping lines and more than 86 airlines offering links to over 100 cities worldwide. The strong shipping and transport sector is composed of most of the leading regional and international freight forwarders, insurers and shipping agents. It has a rapidly developing high quality manufacturing sector and a buoyant and prosperous domestic market. In a nutshell its infrastructure and services match the highest international standards.
Despite a relatively small population, in 2011, total non-oil imports stood at US$185.6bn. The reason is that Dubai is the major re-export centre for the region. Many of the economies of the region served by Dubai are still at a relatively early stage of development, so there is plenty of long term scope for diversification and expansion in the future. Another important consideration is Dubai's rapidly developing role as a supplier to such emerging markets as India, the CIS, Central Asia and South Africa. Total non-oil trade reached a record US$297bn in 2012.
There are no foreign exchange controls, quotas or trade barriers. Import duties are extremely low, with many products being exempt. The UAE dirham is freely convertible and is linked to the US dollar, the currency in which oil revenues are paid. The current exchange rate is AED3.6725 = US$1 and no revaluation has occurred since pegging was introduced in 1978.
Following the success of the Jebel Ali free zone, the government has developed Dubai Internet City (DIC), which has a highly developed technical infrastructure.
The DIC occupies 3,200 hectares in the South of Dubai, near the Jebel Ali Free Zone. It offers state of the art facilities and sites for manufacturing, offices, housing, and academic, research, distributions and logistics institutions.
The Dubai International Financial Centre (DIFC) is proving to be a major financial entrepot. The DIFC fills what was once a significant gap in the market for international Islamic banking, fund management and life assurance. One of its biggest selling points is that it appeals to both Arab money looking for a local centre of excellence and Western cash seeking sophistication and safety.
Deutsche Bank, HSBC and Standard Chartered Bank were among the many international financial sector firms which signed up to be among the first residents of DIFC. By the end of 2012, the number of firms licensed by the Dubai Financial Services Authority (DFSA) to operate in the DIFC had reached 345, comprising 293 authorised firms, 50 ancillary service providers and two Authorised Market Institutions.
It had been hoped that the DIFC would double - to 20% - the financial sector's contribution to the GDP of the United Arab Emirates by 2010, but recently released reports put the contribution at 3.6% for 2010.
The Real Property Law, enacted in June 2007, guarantees ownership of freehold land and buildings, and other interest in land, within the DIFC. The Law is based on the underlying principles of English common law, but also incorporates the Torrens system of land registration, well known in countries such as Australia, New Zealand, Canada and Singapore.
Under the Real Property Law, land transactions are registered in a central register administered in the DIFC. Once registered, the Law certifies them to be fully effective. Unlike some other systems of land registration, title interests registered under the Real Property Law are “indefeasible”. In practical terms, this means that persons buying real estate in the DIFC, lending on the security of real estate in the DIFC, or taking a lease of real estate in the DIFC, can be assured that their investment is backed by the full protection of the law.