What we had hoped might be just a blip in the world economy has developed into a global downturn that will leave considerable wreckage in its wake. No country is likely to remain entirely unscathed but the chief economist at the Dubai International Financial Centre (DIFC), Dr Nasser Saidi, told Pat Lancaster why he is confident Dubai will weather the financial storm better than most.
In the present global climate, everyone seems to be looking to Dubai in the belief that if it can weather the economic storm, we all have a better chance of getting through the recession. Can you shed any light on the situation on the ground?
Dubai is going to attract a lot of attention. This is, to my mind, a sign of its success. Dubai has been in the limelight for the past few years and rightly so because it has innovated. It has diversified its economy to be the most diversified of all Arab economies. It has an open door policy which has served it very well and a liberal policy in terms of investment, labour and labour mobility. In terms of attracting capital and portfolio flows, if you look across the Arab countries, it has one of the most open, if not the most open, economies.
Dubai's integration into the international economy, or the international economies of nations, has served it very well, allowing it to achieve high growth rates. There have been two major fundamentals of growth--one is investment and the other is the demographics. These demographics include population growth, which has supported economic growth, but within that, the fact that Dubai has attracted people from across the world, with a wide diversity of skills and educational levels means it has built up its human capital.
Dubai's infrastructure--mainly driven by government and quasi-governmental entities--its roads, ports, airports, logistics and the rest--are important because they also enable private sector investment. The fact that government builds, or increases the capacity of, a port or an airport means enabling private sector investment in things like tourism, trade, logistics and the like. In this way, private sector investment piggybacks on public sector investment. The higher investment rates achieved in Dubai have attracted companies from across the world. They have mainly gone into the free zones that have freedom of access--you don't need a sponsor, you can own your company fully, you can own your land, offices, etc and you can bring in your own management. All that, combined with the fact that you have zero taxation, makes Dubai a very attractive investment environment.
As a result, on a per capita basis the UAE and Dubai have attracted the highest level of foreign direct investment (FDI) of any country in the world, estimated at something like $16bn in 2007 and probably a similar amount in 2008, and that is for the total population of around four and a half...