A high caliber Finance Professional with an experience amounting over 30 years, majorly across various facets of Investment.
Dubai Development Model
Dubai One of most shining cities of world. Known of development and extravaganza. The theme is very simple Build and People will come. The concrete Jungle is ready to be occupied but no one to buy.
It is high time Dubai Must think differently. Dubai present development model is not sustainable. World is in deep Crisis, the crisis created by Covid will stay here for quite long.
The City states which are competitors to the Dubai is Singapore, and Honk Kong. Hong Kong is financial hub of world's second biggest economy China. It is well supported by China and its investors, it is part of China's global ambitions and money is not problem there.
Singapore, an independent City State has development its name. Presently it has best and most sustainable Development Model in development. Singapore is one of worlds top ranked education center, it is very big achievement in itself.
Singapore is Asia's Financial Heart and can compete with any one including China in terms Independence, Governance, and Transparency. Singapore has built its name in Financial Sector as least corrupt and most transparent country. Singapore at heart of Asia's Happening Place, near to Japan, Indonesia, Malaysia, China, and India. Singapore has unique reputation of coexistence and governance. That is made its economy robust and strong. It is financial hub of Asia. The top rank Financial Center.
Another Important thing is
1. Singapore Airline
2. Singapore Airport
3. Singapore Port
4. Singapore Tourism
These are four cornerstone of Singapore Development, still economy is less dependent on it. It contributes less than 20% of total GDP.
Singapore is ranked as worlds most competitive economy. Manufacturing is almost 30% contributor to the economy, this is most important point and it is self driven economy.
Dubai stands far away on most of Global Standards of Doing Business.
Dubai is Surrounded by Rich Neighbors and Brotherly States. The Low Oil Prices, the sentiments are down. The second important thing, investors who invested in Dubai long time ago, 2008 and before and after, are still struggling to find buyers for their assets, and valuations are down or artificially kept high. Where ever transparency of market is not there, the investors will suffer, and they will suffer badly. This sentiments has really affected Dubai's Tall Real Estate Market driven investment. This is not going to be easy for the investors to come back.
Dubai The Middle East's Financial Hub In Crisis
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Dubai Economic Impact
Dubai The Pain
Even though lot of Data is available on Dubai's economy and GDP and contribution in GDP. It is equally difficult to analyse the data and see through. The data from World Bank and IMF is for UAE and Dubai is part of it. The data available from Dubai Government and Independent sources are difficult to match or read through.
We assume following data as best possible Scenario, major contributor to the GDP.
- Retail and Shopping 26% ( Hotels and Creations)
- Travel Tourism 15 %
- Logistics 15% ( Port, Airport, Airline)
- Manufacturing 9%
- Financial Services 10%
- Real Estate 7%
- Communication and IT 5%
Excluding Manufacturing everything else is in deep contraction and 60% of Dubai's economy is almost halted producing anything other than pain.
It is wishful thinking that everything will come back to normal soon. The crisis is deep and will take long time to come back to normal.
The economy continue to suffer for quite long time.
The Major Impact Can Be Measure on Three Sectors.
Air Line - Revenue Loss , Job Losses and Its Impact
Tourism - Revenue Loss , Job Losses and Its Impact
Retails - Revenue Loss
The overall impact is economy can contract up to 60%. Even though some estimates show more but let us keep it in mind, it will be deep losses.
We see immediate loss of livelihood for 30% people and its impact on real estate. The real estate will see deep downturn in Mid Term. Of total Population of 3.3 million we can see at least 1 million will have direct impact of loss of livelihood in short term to mid term, mean they will got get second job in next 9 months time .
This will impact Real Estate and Retail and everything else, it will have spiraling effect on its economy.
Dubai Has Another Problem it Debt
Dubai has another problem, the problem which triggered 2008 default . The debt which is partially restructured is maturing in 2021. Like other economies, Dubai's growth is debt funded. This has triggered default in 2008 and same debt will come back to haunt the Government Entities in 2021.
Dubai's ambitions are funded by Debt. The debt is not sustainable. This is real challenge for Dubai.
Unless the debt is again restructured it is very tough time to repay in 2021. We have to wait and watch what actions will be taken.
It is better, entities should start talking to lenders from now, so that there is no last minute situation.
Default By Major Groups.
The default by NMC group Dubai based company owned by an Indian is another challenge facing the financial sector. The actual size of default is not known but is huge, some unconfirmed reports said 20 Billion USD. The distributed nature of the debt is the reason to know exact cost. Even though lenders are taken over the companies, they need complete restructuring and re-engineering to survive. The substantial haircut will come to the banks and lenders.
Suicide By Businessman
Two Indian Businessmen committed suicide, Joy Arakkal in April and Ajith Thayyil in June. Both of these businessmen has substantial expose to the market and lenders. This will trigger market reaction. It will have major impact on Single Biggest Community of Dubai, Kerala Indian Population.
The pain is Big and will take long time to come back to normal.
Dubai The Pain
- Dubai's DP World 'prepares for worst' as COVID-19 impact looms | Daily Sabah
Dubai's DP World 'prepares for worst' as COVID-19 impact looms
Dubai, the glittering commercial hub of the Gulf, is facing the risk of a debt crisis reminiscent of the 2009 crash that wiped out thousands of jobs and nearly half the value of the emirate's stock market.
Nearly half the restaurants and hotels surveyed by the Dubai Chamber and three-quarters of travel and tourism companies expect to go out of business in the next month alone.
- Timeline: NMC Health's expansion and ailments - Reuters
- Kerala businessman living in Dubai’s Meadows jumps to death from Sharjah tower | Uae – Gulf News
Police confirm suicide of Ajith Thayyil, former KPL Dubai T20 cricket director
- Death of Keralite industrialist in UAE a case of suicide, confirms Dubai Police | Uae – Gulf News
Joy Arakkals’ family to fly with his body to their hometown subject to exit clearance
The Dubai Development Pain
Dubai Development is Driven by Debt, in 2008 it was stated that almost $130 billion to $140 billion was in debt, GRE (Government Related entities), this number varies from $110 billion lower side to much higher side what I mentioned.
Today as per Forbes Magazine it is around $89 Billion, which will start maturing by 2021, this is 80% of GDP, this is very difficult to service and refinance. There will be rescue like last time Brotherly Emirate.
The present model is Come Enjoy and Go, which is not sustainable. Even long term Ownership and Residence are designed to attract foreigners but not to much successful.
The Problem is, What is really Needed to be sustainable. Why do people go to US and Europe, not to just fun but many other things.
Dubai's Single Biggest Problem is cost of living, if this number comes down then there is much better prospects for development.
Pension - Non availability of Pension for long term Expat Worker is one of the reason. The Government must think how they they can bring Pension for the Expat Workers, those works for all life and while going back, they are empty.
Healthcare - Healthcare should be Free/Affordable for Migrant Workers, presently it is very high cost.
Education - The present cost of Education, government must build schools for Expats Kids at affordable prices and it will make make better for Migrant Workers.
The New Direction for Development
Two very important thing which can be focus of future development is Healthcare and Education, Every year thousands of students goes to US and America from Gulf and Third world countries for treatment, if specialized care is developed here, it will be better to travel to Dubai. Kuwait, Saudi, Oman Government spent Billions of dollars every year in sending their nationals for treatment abroad.
Education - Every years thousand of Students from Kuwait, KSA, and other Gulf countries goes all over the world for higher education. Thousands of Indian Students Goes to Russia, CIS, and Even China for Education. This is biggest untapped market for Dubai to think on.
Research and Innovation and Startups
Even though there is much talked about all this but there is not much done on ground level, we have not seen any major changes on ground. This is a sector where we can see huge potential to grow.
Attracting Talent is most important part. Unfortunately I do not see much success into this particular segment.
IT sector, security solutions and development even though is growth area but remain small size. This sector needs more focused approach to grow. This sector remain Promising Sector for Middle East.
Dubai Financial Hub
This is another sector, where lot of money is available. It can grow big in this direction. One of stumbling blocks is legislation and transparency.
There is need of Transparency and Legislation where investor find confidence that justice is delivered. This is lacking.
The Collapse of GRE, the ABRAJ Private Equity and many more Companies over last 12 years has proved, more needed to grow as financial sector. The companies moving away from Hong Kong, definitely can come to Dubai, if there is plan.
Has anything really changed from 2008 to 2020 Really NOT.
Investors lost money in 2008 and they are continuously losing money over last 12 years in Dubai. It has dented the confidence of Investors, this need repair. The investor will come if they see changes and feel confident.
Dubai and Singapore
- Singapore ranked fourth least corrupt country in the world, Latest Singapore News - The New Paper
Singapore News - Singapore has been ranked the fourth least corrupt country in the Transparency International (TI) Corruption Perceptions Index (CPI) 2019. The CPI, which started in 1995, ranks the countries by its perceived levels of public sector c
- Singapore tops global education rankings - BBC News
Northern Ireland does well at maths, but England fails to advance in global school rankings.
- Report: Singapore Overtakes The U.S. To Become The World’s Most Competitive Economy [Infographic]
The World Economic Forum has released its annual Global Economic Competitiveness Report which assesses the drivers of productivity and long-term economic growth across 141 economies.
- Is Dubai About To Get Another Bailout From Richer Neighbor Abu Dhabi?
The two emirates are reportedly discussing a potential rescue package for the troubled Dubai economy, but what assets might be involved?
- Multibillion-dollar Debt Crisis Looms For Dubai
The city-state and its related government businesses have massive debts, much of which are coming due soon.
Devika Primić from Dubrovnik, Croatia on August 31, 2020:
Informativem and important to know of and you have a well written hub.