(1) the uae business forecast report

8/6/2019 (1) the UAE Business Forecast Report

http://slidepdf.com/reader/full/1-the-uae-business-forecast-report 1/81

The UAE Business Forecast Report

Business Monitor International

(Q4 2005), (Q2 2007) and (Q2-

2008) (Q1 2009)

And News from here and there



� UAE is very conservative

� One of the last Gulf States to broadenparticipation in the political process

� Participation is mostly advisory

� There is little evidence that Al-Qaeda hasthe capacity or desire to attack targets in

the UAE

Political Outlook - 2005



News: US Puts Citizens In UAE on Terrorism

High Alert 18 June 2008

� The United States has warned its citizens about the potentialdanger of terrorist attacks in the United Arab Emirates just days

after Britain upgraded its UAE terrorism threat level to high.

� The US cautioned Americans that potential exists for terrorists

to plan and carry out violent actions in the region, includingthe UAE, it a posting on the US embassys website dated

Monday.

� The posting advised all US citizens to maintain a high level of

personal security awareness at all times, particularly in public

places, especially in the run-up to July 4 - the day the UnitedStates celebrates its independence from Britain.



News: 'Terrorism' threat in UAE high, UK says - by

Sean Cronin on Monday, 16 June 2008

� The threat of terrorism in the UAE has beenupgraded to "high" by the UK in guidance tocitizens travelling and living abroad.

The guidance, last updated on Saturday,previously stated that there was a generalthreat.

"We believe terrorists may be planning tocarry out attacks in the UAE," the Foreign andCommonwealth Office (FCO) said on itswebsite.



� Lack of democracy poses long-term riskstowards greater popular participationelsewhere in the region

� Long running territorial dispute with Iran

� Openness, thus some terrorism risks exist

� UAE has stated firmly that parts of 1974

agreement with Saudi Arabia will no longer beimplemented

� Disputed region contains 15bn barrels of oiland 25tm cubic feet of gas




� UAE wants to have direct territorial access withQatar

� Short term political risk (UAE: 88.0 Top in the

Middle East)� Long term political risk (UAE: 68.3, 4th after

Kuwait, Qatar, Jordan)




� We see few domestic political risks in the UAE.

� High per capita GDP levels promote stability in

the Emirates, and the piecemeal measures

that the government is making toward publicpolitical participation are being received well.

� The cost of living does remain an issue,

though government price controls on rentsshould help assuage discontent.

� CPI is estimated to have come in at 10% in

2006, and we expect it to fall to 6.5% this year.

Political Outlook 2007 (Q2)



� Externally, the key risk comes from a potential

US-Iran military confrontation.

� While this is not our core scenario, the UAE,

which is modeling its long-term developmenton foreign capital inflows, would suffer heavily

in the event of a major escalation of tensions.

Political Outlook 2007 (Q2)



Political outlook 2008 Q2: Government

responds to labor demand

� Following the spate of labor unrest in November, the UAEsgovernment seems to be taking the question of immigrantwelfare seriously, considering and implementing newinitiatives to address the issue.

� Worker protests pose a threat to the UAEs political

stability, with the employment and living conditions of foreign workers attracting increasing attention abroad, butthe issue is also an economic one.

� Conceding to laborers demands for higher wages is likelyto fuel inflation which reached an estimated all-time high

of 10.0% year-on-year (y-o-y) in 2007 especially in theproperty sector, where rising construction costs would havea knock-on effect on property prices.



Political outlook 2008 Q2: Construction

crusade

� While labor unrest has been an issue for some time in the UAE,

it was brought into sharper focus during widespread protests by

construction workers in November.

� Between 35,000-40,000 laborers working for Arabtec, the UAEs

largest construction firm, held a 10 day strike, demanding a

US$55 per month pay increase.

� The laborers only returned to work after a deal was struck with

Arabtecs management which reportedly gave them a US$27

monthly increase, representing a 25% pay rise for an unskilledlaborer



Political outlook 2008 Q2: Construction

crusade

� Both the government and the constructioncompanies recognize the need to keepattracting foreign labor.

� Workers from India and other south Asiancountries account for the lions share of laborers in the construction industry and the900,000 labor permits issued in the first ninemonths of 2007 illustrate the high demand forforeign workers from domestic companies.



Labor strikes erupt in Dubai

August 31, 2009

� Labor strikes erupted in Dubai today as thousands of workers stopped work and blocked

roads demanding better wages from their employer.

� Workers from Al Habtoor Engineering stopped work on its sites in Deira as well as in the

Jebel Ali port area. More than 2,000 protesting laborers in Deira stopped work at about

8am and walked on to the road, briefly halting traffic and creating chaos. Dubai police and

labor officials immediately reached the work site and started controlling the crowd.

� All the overtime that we were allowed to do has stopped and our salaries are not enough

for us to survive. We are demanding for a raise in the salary, said Abdul Rahman, one of the workers at the site. The workers are employed at the Al Ghurair City Centre expansion

project. Labor officials were seen using speakers to address the gathered crowd and urging

workers to return to work.

� Meanwhile, witnesses described workers in Jebel Ali walking on to the main Sheikh Zayed

Road leading from Dubai to Abu Dhabi and blocking traffic. The workers, who also

belonged to the same company, were quickly moved from the road by the police.

� The officials assured us that they are discussing the matter with the company and a

solution would be found in two days. We had told them that there would be no trouble

from our side for now, said another worker.

� Company officials have said that the issue has been resolved. A statement is expected from

the company soon.



Dubais Asian laborers demand higher

wages August 31, 2009

�

Hundreds of migrant workers in Dubai took to the streets Monday, demandinghigher wages and overtime pay from their employer, the company which built

the emirates landmark sail-shaped Gulf shore hotel.

� We are demanding over time (pay) or a raise in salaries, said a protester from

Pakistan, who identified himself as Mohammed al-Raoub, an Arab name.

Workers on strike here are usually reluctant to give their real names, fearing

reprisals.� He said he earns 700 dirhams ($US190) a month and has not been paid overtime

for a while. I can barely manage to survive and send money to my family, he

said.

� Rights groups have long criticized labor abuse in the oil-rich Gulf and Dubai,

which has depended on low-wage Asian migrants to build its skyscrapers and

artificial islands.� Their projects include the Dubai International Airport and the citys two

landmark hotels: the sail-shaped Burj Al Arab hotel and the neighboring wave-

shaped Jumeirah Beach Hotel.

� The company is currently building a branch of the Paris Sorbonne University in

UAEs capital Abu Dhabi



Political Outlook

�Short Term

�Long Term



Q2 2007

Short Term

Q2 2007

Long Term

Q2 2008

Short Term

Q2 2008

Long Term

Q1 2009

Short Term

Q1 2009

Long Term

UAE 88.0 72.5 80.0 63.5 75.8 64.3

Oman 82.0 71.7 89.2 72.9 87.3 72.9Qatar 80.0 74.0 81.5 67.0 80.8 66.0

Turkey 76.0 65.8 64.8 62.9 54.8 55.9

Saudi Arabia 75.0 53.3 72.1 56.0 69.6 56.0

Kuwait 74.0 56.7 83.5 74.4 80.4 75.4

Bahrain 73.0 59.2 72.9 59.1 70.6 59.5

Egypt 61.0 61.7 71.7 67.4 66.0 67.4

Jordan 61.0 68.3 76.7 56.1 69.2 69.6

Iran 60.0 55.0 51.7 51.2 51.7 50.2

Israel 56.0 68.3 71.5 79.3 65.0 79.3

Lebanon 50.0 46.7 33.8 59.4 41.9 59.4

Iraq 41.0 46.7 26.9 43.9 31.5 43.9

Global

average

68.0 70.2 70.2 65.0 69.0 63.9



� Oil directly accounts for 20% of GDP

� Real annual growth is 4%

�Has successfully diversified its economy

� Main trading partners are other Gulf States

� Located in volatile region

Economic Outlook - 2005



� Opportunity: Oil prices are expected to stay

high

�

Heavy subsidies on utility and agriculture� Fears of bubbles forming (construction and

stock market)

�

Private-led models (ADEWA)




� Long term economic outlook: UAE (70.3)Top in Middle East

� Short term economic outlook: UAE (85.0)Top in the Middle East

� Forecasted GDP growth is 6%

�

Massive surplus of balance of payment of $35bn

� Non-oil export and re-export (Dubai:accounts for $50bn of total UAE exports)




� Open-door labor

� Transfers of more than $14 bn in 2005

� ADNOC has granted exclusive negotiatingrights over the development of the offshoreUpper Zakum field to ExonMobil

�

Why ExonMobil? Technology, strategicpartner, political dimension-but breakingwith tradition of partnering with UK andFrench oil companies




� Foreign direct investment (FDI) will increase in

the future.

�

UAE is set to enjoy latest oil price boom, bothin terms of external and domestic investments

� Substantial rise in the cost of living, inflation

3.1 4.7%

� Population expansion

� Increase in rents 20-40% in 2004




From the News: UAE housing costs up by 17.5%

- August 25, 2008

� House rents and related services in the UAE surged by17.5 per cent in 2007 as the Gulf country recorded oneof its worst inflation rates, according to official figures.

� Rents jumped by 18.8 per cent while most other

associated items and services, including furniture andhousemaids, became much costlier except the heavilysubsidized water and power supply, which eitherstabilized or declined.

�

Figures by the Ministry of Economy showed that 2007was one of the best years for the UAE in terms of economic growth and revenues. But it was one of itsworst years in terms of inflation, which soared by nearly11 per cent.



� UAEs inflationary pressures have also beenstocked by the dollars persistent weakness inthe past three years, which has fed into the

rise in the price of imports� It has also affected the Dirhams purchasing

power relative to other currencies

�

UAE has an under-developed financial systemthat fails to absorb excess liquidity

� ADIA holds ample foreign currency assets




� AD has enormous financial reserves

(estimated to be $300bn plus)

�

The coincidence of an economic boom andprodigious capital flows should prevent a slide

in the UAEs stock market (many shares are

over valued)




� Ministry of Economy and Planning awaiting to

issue new company law.

�

The law heralds major changes in the wayforeign investors are treated, and is expected

to allow majority ownership in local firms.




� Under current law, foreign ownership is

limited to a maximum of 49% outside the 13

free zones.

� Dubai has already extended foreign ownership

of land to some real estate developments




� The new law should attract more FDI

� UAE has a business-friendly culture withoutincome or corporate tax, and a highly flexible

labor market

� The new company law will call for increasedtransparency requirements for firms listing on

local bourses




From the News: New UAE foreign ownership

law within 6 months: minister 12 March 2008

� The United Arab Emirates, the second-largest Arab economy, willintroduce a new company law in six months allowing majority foreignownership in some sectors, the countrys Minister of Economy said onWednesday.

� It will be ready within six months, Sultan bin Saaed al-Mansouri toldreporters in Dubai. We will allow that wherever it helps the economy of

the UAE, he said declining to name the sectors.� Nationals from outside the six oil-producing Gulf Arab states at the

moment must take a local as a majority partner, except in specified areascalled free zones.

� The company new law is likely to attract more foreign investment in thecountry and encourage competition.

� Former Economy Minister Lubna al-Qassimi said in June that 100 percentforeign equity participation could be allowed predominantly in theservices sector, healthcare and education and some partial equity in thefinancial services.



� The UAE is one of the major economic successstories within the Middle East.

� Although inflation is a problem, we expect thisto improve, and we expect the economy to

increase its diversification away from the oilsector.

� Although the UAE is not as dependent on oil forrevenues as other GCC states, it does rely

heavily on crude in terms of its budget.� There are long-term risks to the countrys bid to

wean itself off hydrocarbons.

Economic Outlook 2007 (Q2)



� In particular, we have some concerns about

the long-term viability of the real-estate

extravaganzas currently underway in the

region, not just the UAE.

� Regional political risk is obviously a major

issue here, as foreign capital could well take

flight in the event of greater instability.




� The UAE is the least dependent on

hydrocarbons for its export revenues in the

Gulf Co-operation Council region, and it is

better placed than its regional peers in lightof the oil price downturn we expect over the

forecast period.




� We expect the OPEC basket to come in at an

average of US$54.50/bbl in 2007 down from

US$66.80/bbl in 2006 (against our

expectation of US$65.00/bbl) andUS$54.00/bbl in 2008 before gradually

declining to US$47.00/bbl by 2011.




� However, this still poses a big risk as far as

budget revenues are concerned, because

hydrocarbons currently provide around 80%

of government revenues, and we expect the

fiscal surplus to reduce from 4.3% of GDP in

2007 to 0.46% of GDP by 2010.




September 1, 2008



February 16, 2009



August 28, 2009



October 30, 2009



Economic outlook 2008-Q2: Robust non-oil sector

� However, unlike some of its GCC neighbors, the bulk of theUAEs GDP (around 80%) is derived from the non-oil sector.

� This is particularly true outside of Abu Dhabi, which most of the UAEs oil reserves.

� Growth in the non-oil sector has been robust over the pastfew years, driven by the booming construction, financialservices, utilities and retail sectors.

� While these trends will continue, we are forecasting astabilization in real annual non-oil sector growth to 7.1% in2008, falling to around 5% from 2010 onwards, comparedwith over 10% in 2007.

� This is largely a reflection of cyclical factors, although inflationis also a consideration: the erosion of consumer purchasingpower will have a knock-on effect on demand in the retail and

hospitality sectors in particular



Economic outlook 2008-Q2: Continued housing demand

� Inflation has become a particular concern in the housingmarket, but we remain sanguine on the prospects for theconstruction sector moving forwards.

� The sector as a whole suffered from capacity constraints andsupply bottlenecks during 2007, which led to delays on many

housing projects, thereby pushing up prices.� At the same time, the cost of raw materials also increased.

� New housing supply should come on stream in 2008 and2009, thereby easing price pressures slightly, but the risingnumber of expatriate workers arriving in the UAE means thatdemand is expected to remain strong and we do not foresee amajor drop in house prices.

� At the same time, major new infrastructure projects, such asthe Arabian Canal in Dubai, will also contribute to demand for

construction services



Economic outlook 2008-Q2: Risk to outlook

� Despite the UAEs falling reliance on the

hydrocarbons sector, any major downturn in

global oil prices would have a negative effect

on the economy, particularly as it wouldconstrain the governments spending power: a

US$1/bbl drop in oil prices is estimated to

reduce annual oil revenues by US$865mn peryear.



Economic outlook 2008-Q2: Pressure building

against Dollar peg

� Pressure on the government to reconsider thedollar peg will increase in 2008 as thedivergence between US and Gulf monetary

policy needs widens.� The US Federal Reserve announced a total of

125bps worth of cuts in January, and followingsuit will add to inflationary pressures in the

UAE.� Comments from a number of key figures

suggest that a revaluation is being seriouslyconsidered.



Economic outlook 2008-Q2: Pressure building

against Dollar peg

� However, the official line remains that the UAE will not revalueunilaterally, meaning that any change could be held back bySaudi conservatism.

� The latest criticism of the dollar peg came from the CEO of Dubai government-owned investment company Istithmar,

David Jackson.� At a conference in early January, Jackson warned against

maintaining the current exchange rate regime, claiming thatthe element of imported inflation will increase the[inflationary] pressure, adding that the debate on the regionspeg will get further heated in 2008.

� The comments illustrate the concern among UAE businessleaders about rising costs, particularly for goods sourced fromEurope, as the dirham continues to weaken against majorcurrencies



Economic Outlook

�Short Term

�Long Term



� UAE has one of the most open business environments in the

region

� Has an open-border foreign labor policy

�

Has invested large amounts in infrastructure� UAEs diversified economy reduces risks

� Weakness: regulations are not identical across Emirates; the

regional economy is oil-dependent

Business Environment - 2005



� Opportunities: large number of free trade

zones offering advantages; social stability and

relative prosperity which means less concern

about security

� Threats: comparatively bureaucratic relative to

regional peers; strong oil prices has massively

increased liquidity in the region� Business Environment Risk rating: UAE (79.8)

Top in the Middle East




� Dubai Port Authorities recorded growth of nearly 25% in the total number of containershandled

� Dubai ports are ranked 10th largest port in theworld

� Estimated population of 4 million in 2003 (AD

39%, Dubai 30%); annual increase of 7% since1999

� Adult literacy rates (male, 76%; female, 81% in2002)




�UAE citizens comprise only 2.4% of employeesin the Abu Dhabi private sector

� Government is attempting to increase the

number of nationals in the private sector (2%of the employees of companies with over 50

employees must now be UAE citizens).

� UAE is ranked 29th (out of 1464) in

Transparency Internationals Corruption

Perception Index in 2004, with its score of 6.1

markedly better than the Middle East average

of 4.1 (Western Europe is 7.9)




� With regard to Red Tape, UAE comparespoorly with its regional peers

� According to the World Bank, it takes 53

separate procedures to enforce a contract,which takes an average of 614 days (MiddleEast average is 31 and 299; Western countriesis 18 and 213.

� According to World Bank, it takes 12procedures and 54 days to start a business inthe UAE (9 and 41 Middle East; 6 and 25Western countries)




� According to World Bank, it takes 5 years toclose a business in the UAE (3.7 years MiddleEast, 1.8 years in OECD states)

�

Gradually, the UAE investment climate isbecoming more clement for foreign directinvestors

� Significant efforts in increasing the role of the

private sector� Not necessary to obtain a labor ministry card

in addition to an immigration visa




� Firms establishing in UAE are governed by the

Federal Commercial Companies Law 8, last

amended in 1993

� Firms establishing in the UAE must have a

minimum of 51% UAE national-ownership

(though full repatriation of profit is permitted)




� Foreign investors may not own land or real

estate in the UAE

� In 2002, Dubai permitted freehold real estate

ownership for non-GCC nationals

� However, non-GCC owners are not given

access to full range of legal protections and

transactions enjoyed by GCC investors




� UAE has a free and open trade regime

� More than three-quarters of goods entering

the country is duty free

� Top export destinations are Japan, Korea,

Thailand, and Singapore




� GCC customs union took effect on January 1,2003 and established a single tariff of 5% on

1500 imported items from non-member

countries, but a number of imported productsremain subject to differing tariff rates across

the GCC)

� Under WTO Trade-Related Aspects of

Intellectual Property Rights (TRIPS) agreement

provisions, the UAE will be forced to grant

patents to pharmaceutical and agricultural

chemicals products from 2005.




� The UAEs business environment is certainlyimproving, although it will have to make

further gains if it is to continue attracting

foreign investment, particularly in thefinancial services sector.

� In our business environment rankings, the

UAE scores 52nd on a global scale in the

financial infrastructure component.

Business Environment 2007 (Q2)



� The authorities will have to continuepromoting reform within the financial

services sector if it wants to really compete

on a global scale with the major financialcenters of the world.

� One area of particular importance is the issue

of regional harmonization of regulatory

standards and practices, in terms of company

law and equity cross-listings.

Business Environment 2007 (Q2)



Inflation tampers positive view (Q2-2008)

�

Inflation remains our number one concern in the UAE, as itimpacts every area of our analysis.

� Economically, rising input costs are threatening businessprofitability while inflation is eroding the value of oil receipts.

� Politically, the falling real value of wages, particularly among

unskilled workers, is fuelling discontent and could result indelays for major construction projects.

� Inflation is also discouraging highly skilled workers fromrelocating to the UAE, thereby impacting the businessenvironment.

�In short, while our view on the country is broadly positive, thisis one area that demands serious attention



Inflation tampers positive view (Q2-2008)

� The specter of high inflation will continue to hang over the UAEeconomy in 2008.

� Although we do forecast a slight easing in inflationary pressurein 2008 to an average of 7.9% year-on-year (y-o-y), down from9.7% y-o-y in 2007, this is elevated by historic standards andinflationary expectations remain high.

� We see a currency revaluation as the best option, particularlyas the US is expected to cut rates aggressively in 2008.

� Nevertheless, the overall outlook for the economy is positive.

� Although inflation may erode private spending power slightly,we forecast continued high investment spending in 2008, aswell as a steep rise in public consumption and anticipate anexpansion in real GDP of 6.2%.

l b ( )



Bloomberg (January 2009)

UAE inflation to fall, except in Abu Dhabi

�

Inflation across the UAE, with the exception of Abu Dhabi,may drop to 7.1% in 2009 from 12.2% last year as

commodity prices fall and property prices ease, Bloomberg

has reported, citing analysts.

� Inflation accelerated above 10% in five of the six GCC

countries last year as oil-revenue-fuelled economic growth

created shortages of real estate and services, while the

weaker dollar and higher global food prices made imports

more expensive.

� According to the median forecast in a Bloomberg survey of six economists, inflation in the UAE will slow to 8.5% this

year, from an average estimate of 12.9% last year.



Standard Chartered Global Focus (22 September 2009)

UAE inflation set to fall to 7% by 2010 - report

�The inflation rate in the UAE is predicted to fall fromlast year's 11.1 percent level to seven percent in

2010, according to a new report.

� Inflation is expected to rise to 12 per cent by the end

of this year before dropping to eight per cent in2009, said the monthly Analysis of Economic and

Financial Developments study by Standard Chartered

Global Focus.

� It said the Middle East will be affected by the global

slowdown and the fall in oil prices but the region is

likely to outperform Western economies, reported

Emirates Business on Monday.



Abu Dhabi inflation below 4%



Abu Dhabi inflation below 4%

October 25, 2009

� Statistics Centre- Abu Dhabi (SCAD) issued this week its first detailed report on consumer prices

index (CPI) and the rate of inflation in the Emirate of Abu Dhabi. According to the report, the rateof inflation in the Emirate has dropped to only 1.17% during the first nine months of the current

year, compared with the same period last year, as evident from the consumer price index.

� In this report, the index base year has been shifted to 2007, on the basis of the data obtained

from the household income and expenditure survey that was carried out in Emirate of Abu Dhabi

during 2007 / 2008. The updating of the base year included updating of the weights of the index

basket and assigning of 2007 prices as the base prices for the new index.� The sub-index for "Food and Beverages" group which has a relative weight of 16.1 decreased by

2.87% over first 3 quarters of 2009 upon year-on-year comparison with 2008 figures, while the

sub-index for the "Clothing and Footwear" group, with a relative weight of 9.8, declined 3.37%.

The "household furnishings and equipment" group, which has a weight of 4.8, decreased by

2.48%. The sharpest decline was observed in the "recreation and culture" group, whose sub-index

fell 5.6%. However, the relative weight of this group is only 2.4, explaining its limited impact in

reducing the overall rate of inflation. The sub-index for the Communications Group (relative

weight7.7) edged down slightly by 0.06%.

� According to the report, the aforementioned five groups have a combined relative weight of about

41% of the overall consumer prices index and therefore largely account for the drop in inflation

during the first nine months of 2009, due to a marked decline in the prices of their component

goods and services.

(10 November 2008)



(10 November 2008)

Dubai Property Prices Falling

� However, a real bombshell was dropped last Thursday when Arabian Business

reported that Palm Jebel Alis island prices have depreciated some 40 percent in the

last two months.� After all the hype and excitement about Dubais market, this news is certainly a wake

up call for many would be investors who are standing on the brink of making a

decision right now.

� This fall in property values has been pinned on the global crisis and current investors

who liquidate their assets in Dubai in order to keep their cash flow going.

� This turn of events puts the development (and more to follow for sure) back to wherethey were some two years ago. To make matters worse, local Dubai mortgage

providers acted and reduced home financing loan-to-value (LTV) to about 70 percent

down from 90 in October. Of course this isnt helpful for those looking to finance a

property loan right now.

Its not news that Dubais property

market is expected to experiencecorrections next year and according to

Morgan Stanley gradually decline by up

to 10 percent by 2010.

27 August 2009)



27 August 2009)

Residential and office rents continue falling in Dubai

�

Residential property rents in Dubai are continuing to plummet, accordingto the latest real estate report to be published but there are signs of

some stabilization.

� Commercial rents are also falling and are set to tumble further as new

office space comes onto the market in the next 18 months, another

report warns.

� Rents in the Dubai residential property sector fell up to 30% in August,

the report from Landmark Advisory reveals. Worst hit were two

bedroom apartments in Palm Jumeirah and in International City where

rents fell 23%. Other key developments such as Discovery Gardens, JLT

and JBR have now seen rents fall by between 10 to 30% since March.

� The report says that although rents in many areas of Dubai havedecreased significantly over the past five months there are exceptions to

this trend with some unit types in preferred developments performing

well.

Dubai rental rates seem like a



Dubai rental rates seem like a

dream -October 26, 2009

� Prices for available space are falling to levels that would have seemed more fantasy than fact just

a few months ago as Dubais commercial property market becomes hamstrung by the practice of multiple owners having interests in the same development, Nathalie Gillet reports.

� The classified advertisement would have seemed unbelievable just a year ago: new offices for rent

from just Dh99 (US$26.95) per square foot near Dubais commercial heartland.

Back then, the city was unique in being able to boast 100 per cent office occupancy, with prime

rents topping Dh400 per sq ft. Today, commercial buildings around the city lie empty.

� Investors, fearful of a coming residential property crash, switched to buying offices. However,instead of acquiring entire tower blocks that could be easily let to large corporations and sold on

to major investors, many buildings were sold by the floor a decision that is now crippling the

market.

� As a result of the global financial crisis and oversupply, office rents have fallen by more than 40

per cent from their peak in the middle of last year, brokers say. Almost a third of all Dubai office

space is already empty, according to Jones Lang LaSalle, one of the worlds largest commercialproperty brokers.

� To make matters worse, Dubai is expected to double its available stock in two years to nearly 70

million sq ft of space, with most analysts predicting that about half of the existing buildings will be

empty by that time.



Q2 2007 Q2 2007 Q2 2008 Q2 2008 Q1 2009 Q1 2009



Q2 2007

Short Term

Q2 2007

Long Term

Q2 2008

Short Term

Q2 2008

Long Term

Q1 2009

Short Term

Q1 2009

Long Term

UAE 61.7 64.9 64.9 64.9

Oman 54.2 57.1 57.1 57.1

Qatar 55.1 56.9 56.9 56.9

Turkey 49.0 52.0 52.0 52.0

Saudi Arabia 51.7 60.2 60.9 60.2

Kuwait 56.8 50.5 50.5 50.5

Bahrain 55.8 59.1 59.1 59.1

Egypt 46.5 41.5 41.5 41.5

Jordan 54.3 59.3 59.3 59.3

Iran 50.9 40,2 40.2 40.2

Israel 63.2 68.1 68.1 68.1Lebanon 52.7 50.9 50.9 50.9

Iraq 32.0 23.5 23.5 23.5

Global

average

48.8 49.0 49.2 49.7



Business and operational risk rating 2008 (Q2)



Business and operational risk rating 2009 (Q1)

l f k ( )



Legal framework rating 2008 (Q2)

l f k i 2009 (Q )



Legal framework rating 2009 (Q1)

T d i 2008 (Q2)



Trade rating 2008 (Q2)



Property Market Raising Macro Concerns (2009 Q1)

� The deterioration of the global economic outlook, tighter

liquidity conditions in the Gulf, regulatory developments and

rising expectations of a property market downturn are all

weighing on our outlook for the UAE real estate sector.

� All the signs currently suggest that the pace of growthwitnessed in the real estate sector over the past two years is

unsustainable, with both prices and rents making Abu Dhabi

and Dubai unaffordable, even for many service

professionals.

� The potential for a correction poses clear downside risks to

our outlook for the UAE economy.



29 January 2009

Dh600bn plan to change look of Abu Dhabi

� Twenty-three years down the line from now, Abu Dhabi and its suburbs will lookcompletely different with an estimated investment of about Dh600 billion in real

estate in addition to billions of dirhams pumped in the infrastructure.

� The Government of Abu Dhabi unveiled its project for the next 23 years called

"Plan Abu Dhabi 2030 Urban Structure Framework Plan.

� The emirates will have four major districts: the Central Business District (CBD),

the Lulu Island District, the Grand Mosque District and the Capital District. Apart

from these districts, there will also be smaller districts such as Recreation and

Leisure Districts on Yas Island and Cultural District on Sa'adiyat Island.

� According to Urban Development Council of the Government, which designed

the plan, the population of the emirate and its suburbs is to increase from the

current 930,000 to 3.1 million in 2030.� The plan projects, the population on Abu Dhabi Island will be 1.33 million, on the

mainland, which also includes part of Grand Mosque District and the Capital

District, 1.37 million on the North Coast 470,000.

� Investment in real estate from now up to 2030 is estimated between Dh500bn

and Dh600bn.

4 J 2009



4 June 2009

Abu Dhabi prices begin to level off

� Prices in Abu Dhabi's real estate market have begun to show signs of a turn

around, while the emirate's master developers have also seen their shares rise on

the local markets.

� According to a report by HSBC's regional research bureau, advertised prices of

properties for sale in the UAE capital rose by an average of 2% in April and 7% in

May.

� Results were based on prices for apartments, which rose by 8% in May, and those

for villas, which in contrast continued to fall (losing 4% on the previous month).

� The report puts the main reason for this down to lower affordability due to the

difficulty that investors are having in accessing finance, as the entry point for villas

is more expensive than for apartments, rather than marking out a specific shift in

unit preference.� The HSBC report also points to a decline in the number of listed properties being

offered for sale, down 30% from February (1,215) to May (854 units), as the

amount of distressed stock clears.

� Projects on Reem Island and Hydra Village seem to have witnessed the largest

slides from their peak asking prices.

7 M 2009



7 May 2009

Abu Dhabi villa rental prices fall by 20%

� While rental prices in Abu Dhabi have held steady for apartments, with

pent up demand holding the market firm, villas have seen a fall of 20%,

as the plummeting prices in Dubai and Al Ain provide prospective

tenants with alternative choices.

� A report on the Abu Dhabi real estate market by the Landmark Advisory

group has found that while rents stabilized in Q1 2009, after having sky

rocketed throughout 2008, there are signs of a marginal decline.

� This is attributed in part to competition for tenants from Dubai, where

rents have plummeted, as well as to the roll out of some new supply as

planned developments come online.

� 'The faltering demand for villas in Abu Dhabi is likely due to intense

competition from Al Ain and Dubai, where housing costs are plunging.� For many expats, low rents and lifestyle preferences justify to work in Abu

Dhabi but live in Dubai,' the report says.

� While apartment rates have, for the most part, held steady across the city,

villa rates have seen average declines in annual leases of between 10% to

15%, with four bedroom properties seeing falls of up to 20%.



UAEs Elected Parliament (2009 Q1)

�

Although the first term of the UAEs first elected parliamenthas passed without incident, any rapid moves to furtherwiden the countrys democratic stance remain unlikely.

� There has so far been little indication as to when the nextelections to the Federal National Council (FNC), the UAEsadvisory assembly, will take place (members were elected in

December 2006 for a two-year term) and no suggestion of any extension of the countrys limited suffrage.

� This is not a problem at present the governments hugewealth means it can ensure its citizens enjoy a high standardof living.

�It would surely sustain this spending during a potential oilprice fall, even at the risk of entering into fiscal deficit, inorder to stave off the risk of political turmoil.



UAEs Economic Growth (2009 Q1)

� We forecast real economic growth to dip in 2009, as theimpact of lower oil prices and rising concern over thesustainability of the UAEs property market boom kick in.

� That said, we are not forecasting anything approaching arecession and still see growth coming in at 4.6%.

�From 2010 onwards, our current forecast is for a slightrebound in oil prices and an improvement in US andEuropean growth, which will buoy confidence generally.

� While the Emirates quest to become a regional financialleader leaves it vulnerable to contagion from global financial

conditions, we believe that there are still growthopportunities, in the Islamic banking sector for example.



Real Estate (2009 Q1)

� While fears over the real estate market may be growing, theUAE continues in its attempts to bring its utilitiesinfrastructure up to date with its rapid property growth.

� Transport is a major avenue of expansion.

� The newest transport project on the table is Abu Dhabismetro system.

� According to the Emirates Department of Transport, a studyconducted in partnership with the Urban Planning Councilwill be submitted in December this year, with anannouncement on specific routes to follow in January 2009.

� Construction is due to be completed by 2015.

� Dubai is already one step ahead in the public transportstakes construction of its own metro system is already inthe advanced stages and the first services are due to startrunning in 2009.

(1) the uae business forecast report

Documents