Ex-Patting the UAE

Okay everyone, let’s just take it easy. The markets across the Middle East (those that are open at least) are of course limit-down (DFM -10% ADX -10%), but when something like today’s market fall has been so widely expected, the surprise, no matter how negative in its effect, is nipped at the bud.

The reaction, indeed the exceptional over-reaction in our ever-so-favourite-balanced-and-oh-so-knowledgeable-British-press reeks of something almost as fetid as a British PM’s expense account. The quite frankly ridiculous amounts of joyous criticism of “Dubai’s dream turned nightmare” and other such inflammatory headlines (yawn) found throughout endless articles, gleefully resurrecting discussions about the demise of a once admired and desirable destination has amazed anyone that has spent a decent amount of time travelling around not only Dubai itself, but the rest of the UAE and the GCC in the last few days.

The western press, made-up of simple-minded media commentators caught-up in the thrill of attention that a disaster-scenario can only bring, have all pounced upon the great excuse presented last week – this was always going to happen. The international markets had been rising contrary to economic indicators and investors took the opportunity to sell during the ensuing kerfuffle. Just as those markets have bounced back though (Asia very strong today), in a few days and certainly in a couple of weeks, rational thought and considered analysis of the Mid-East region will prevail and what some suggested straight-off-the-bat last Thursday will strengthen in its conviction – this is only a good thing for the region, and indeed Dubai itself.

Short-term ignorance…
Is anyone else out there that knows even the slightest bit about the Middle East bored of the ignorance expressed by those that probably wouldn’t even be able to point out the UAE on a map? - for that matter, they are perhaps the same people that wouldn’t even be able to point out their own home-nation on a map. With much of the region on holiday there has been ample opportunity for families (locals and ex-pat alike) to make use of the pleasant weather, comparatively modern and well-thought out shopping facilities and family-orientated offerings, accessed through decent infrastructure, to shrug-aside the international overreaction and express the very reason why Dubai is set to survive – if albeit not thrive as it restructures over the next 12mths. There is no other viable alternative in the entire region – not for now, and not for another 5-10yrs.

The single most important element to remember about Dubai – apart from the fact that it has actually created and purchased some excellent brands and assets including Emirates Airlines, Jumeirah Estates (which owns revenue generating hotels and properties both in the region and internationally), Emaar (well-constructed and essential shopping facilities), Dubai Ports and even its domestic utilities firm DEWA – is that it is not a city dependent on the much mentioned western ex-pat. Indeed the entire region is not.

Ex-pat allure
Dubai has and now certainly always will be primarily a destination for the heavily overpopulated and very low average-earning sub-continental ex-pat. Regardless of the difficulty in obtaining hard-facts, what we do know still speaks for itself. Property purchases (as deemed by Emaar in recent releases) have been heavily skewed by UAE, Indian, Iranian and Pakistani residents in Dubai (24%, 15%, 15% and 12% respectively). Many of these end up as landlords and may well have been hit-hard by the sudden crash in prices and the abundant escape of western ex-pats to their (cold) homelands, especially with the largest growing ex-pat population almost disappearing back into the pubs of Manchester in one fell swoop – (didn’t they only came and sit in pubs here anyway?). Even with that exodus, it is still a very small section of Dubai’s predominantly sub-continental population - Asian ex-pats make up 65% of the current population, “others” only 4%.

Lower prices, higher growth
A great deal of attention has been spent on attempting to understand the political machinations taking place behind the scenes to make sense of whether or not Abu Dhabi actually supports Dubai etc. How about spending a little time on trying to figure out what Dubai will have to do in the next year or so regardless of the political manifestation. A simple solution screams through the mess. For the last year, Dubai has held in its hands a tough pill to swallow – but one that after an initial spurt of painful ego-reduction would usher in a period of renewed growth, albeit at a very different pace and with a visibly dissimilar look and feel. The pill is lower prices.

More affordable homes, better value-for-money hotels and an end to an opaque set of indirect taxes in a supposedly tax-free nation would attract a good number of new residents and visitors. Indeed, the city has tried to hang on too hard and fast to the dream of being up there with super-expensive cities like Monaco and Tokyo – but this dream must be let go. Dubai must become a destination of choice for a value-conscious resident. It may not be what the leaders here originally envisioned, but quite honestly it is the only choice in a city devoid of natural allure and natural resources. Comfort in numbers it seems. Those numbers will be met by the sub-continental ex-pat dreaming of a better life in a nearby destination. Dubai fits the bill.

Abu Dhabi has always been a key factor in the future of the GCC. Its own ambitions and development, from cultural landmarks to eco-friendly cities, Abu Dhabi’s leaders have learnt lessons from Dubai’s experience and taken on a very different tone. The truth is that Dubai may well have forfeited its status as the financial-hub of choice, but the impressive work elsewhere (not so much those islands that ironically sank Dubai’s reputation as they themselves sank back into the waters from which they were reclaimed) will ensure it remains a city of choice for those seeking a decent quality of life or even those wanting to work in Abu Dhabi.

New developments in Abu Dhabi (indeed the development location of its own financial hub) present only a 45min drive away from parts of Dubai. A very viable outlook is that the two cities will grow closer together both geographically and politically after a period where their paths seemed to be increasingly diverging.

As with any period of change, there will be some friction ahead – ultimately though, the UAE will have two liveable destinations working hand-in-hand (or closer at least) and offering quite different choices for quite different populations.