Not long ago, Gulf states used to look up to the global economic powerhouses to strengthen relationship to help their economies grow. In three decades, that has changed to a certain extent.
An increasing number of US companies are now looking at Dubai and the UAE to help boost their weak economy.
“Dubai is an important economic partner for us,” Betsy Price, Mayor of Fort Worth, tells Gulf News while wrapping up her visit to the emirate. “It is a gateway for $2.5 billion (Dh9.2 billion) of exports from Dallas-Fort Worth to the UAE.”
In its largest job-supporting authorisation to date, US Export-Import Bank (Ex-Im Bank) on Thursday approved a $4.97 billion direct loan to Sadara Chemical Company for the export of American goods and services required in the construction of a petrochemical complex at Jubail in Saudi Arabia.
According to the US Census Bureau, the financing will support approximately 18,400 American jobs, 12.5 per cent of which come directly or indirectly from small businesses, in 13 states. Among the approximately 70 American exporters involved in the transaction are KBR, ABB Inc, and The Dow Chemical Company. More than 20 of the exporters are small businesses.
Support for small business
Ex-Im Bank Chairman and President Fred P. Hochberg, said, “No other transaction in Ex-Im Bank’s storied history has supported as many American jobs as this transaction, and no other single transaction has provided so much support to small businesses. Furthermore, the manufacturing jobs supported by this transaction will in turn support other jobs, allowing the benefits of the transaction to reverberate throughout key corners of the US economy.”
This comes a few weeks after Ex-Im Bank approved $2 billion export credit to the UAE’s first nuclear power plant that was aimed at saving more than 5,000 jobs in 17 states. In financial year 2012 to date, Ex-Im Bank has approved approximately $8.9 billion worth of authorisations in the Middle East and North Africa — its highest in the region.
The US with gross domestic product (GDP) of $15.09 billion represents less than a quarter of the $69.99 trillion global economy according to the World Bank, compared to which the UAE — the 28th biggest economy on earth with a GDP of $360.25 billion, represents only 0.51 per cent of the world economy. However, despite this, no one denies the fact that the UAE plays a catalyst role in bridging gaps and helping other economies.
Total trade between the US and the GCC totalled almost $100 billion last year. The GCC countries, together, ranked tenth as an export market for the US in 2011 with US goods exports to the region totalling nearly $38 billion.
Trade agreement
The US and the GCC signed a framework agreement for trade, economic, investment and technical cooperation last week which will establish a joint committee to discuss areas where both the GCC and the US share mutual interests, including considering opportunities for enhancing economic, commercial, investment and technical cooperation, fostering their economic relations and increasing the volume of trade and investment between them.
“This important trade and investment agreement will help to grow and strengthen our economic ties with the GCC – which is a key strategic US partner in the Middle East and North Africa region,” US Trade Representative Ron Kirk, said. “The US greatly values its economic relationship with this group, which is a focus of our efforts to increase American jobs and US exports under President Obama’s National Export Initiative.”
The GCC region collectively was the sixth largest supplier of imports to the United States in 2011 with US goods imports from the region totalling nearly $62 billion. Leading US imports from the GCC include oil, aluminium, fertilisers, and organic chemicals. US foreign direct investment (FDI) in GCC countries was $23.5 billion in 2010.
Emirates airline launched daily services to Dallas Fort Worth in February this year — a move that Price says will help the twin cities’ economy. Emirates and Etihad connects eight US gateway cities to the Middle East.
“Emirates’ services will create over $200 million of local economic activity every year,” she says.
Her message to the people of the UAE is — “Come, enjoy and invest in Texas.”
She is extending a red carpet to UAE investors, instead of a red-tape. “We have reduced bureaucracy and there is no red tape for investors. I urge them to visit Texas and invest.”
Growth
“The UAE is the single largest export market for American goods in the Middle East and trade continues to grow sharply, up more than 20 per cent in 2011 compared to the previous 12 months,” said Yousuf Al Otaiba, the UAE Ambassador to the United States, said in an earlier statement. The GDP of the Dallas-Fort Worth metroplex was estimated at $382 billion, equal to the national GDP of Norway and Saudi Arabia, and larger than that of Austria and Denmark. The metroplex is home to 24 Fortune 500 companies, including ExxonMobil, Texas Instruments, Kimberly-Clark, J.C. Penney and Southwest Airlines.
“The US is on target to surpass its pre-downturn 2008 record of $14.4 billion in total exports to the UAE and this new Emirates route will spur hundreds of millions more in local economic activity,” Al Otaiba said. “It will also attract more UAE investment to Texas and more Texas investment in the UAE.”
Betsy holds similar views.
Various US entities and local governments are now trying to ease visa restriction to the UAE nationals and citizens from Arab countries in a bid to ease passenger traffic that could help the struggling tourism and airline business in the US and help create more jobs.
Easing visa restrictions
“We are now working closely with the federal government to ease visa restrictions and loosen the processes so that more people from this part of the world could visit Dallas and Forth Worth,” Price says.
“Our Ambassador in the UAE is trying to process 10-year visas within seven days that will help greater mobility between the two destinations.”
This is in contrast to the position adopted by different US states and cities a few years ago.
Jeffrey P. Fegan, Chief Executive Officer of Dallas Fort Worth (DFW) International Airport, says, “We are investing more than $5.1 billion in redevelopment and expansion of facilities at Dallas Fort Worth International Airport over a period of ten years, in addition to about $3 billion in associated infrastructure to boost air and passenger traffic.
“We have one of the fastest immigration and passenger services in the country.”
Dallas, hub to American Airlines – one of the world’s biggest airlines – handled about 58 million passengers last year. It ranks eighth in passenger handling globally. In contrast, Dubai International Airport serves more than 52 million – ranking 13th busiest airport in the world. However, Emirates is expanding to new gateway cities to bring more passengers that will help it surpass DFW.
Since its launch of flights, Emirates is operating at 90 per cent seat load factor — which reflects the extent of people travelling between the two hub airports.
Major gateway
“DFW serves 144 airports while Dubai is a major gateway airport to Asia and the Middle Eastern destinations. Dubai-DFW flights serves as a major gateway for passengers living in two different regions giving them access to a wider destinations in the other parts,” Fegan says.
Unlike many other states, where governments utilise their power to deny traffic rights to foreign carriers in order to protect their own airlines, the Texas government and officials of DFW have openly embraced Emirates and supported its services, despite the fact that American Airlines — which uses DFW as a hub — is under bankruptcy protection.
“The US airlines are struggling [to survive from] bankruptcies. The last ten years have particularly been tough,” Fegan says.
“However, compared to them, Emirates has a very different business model of connecting all the major cities in the world and carrying passengers from those cities through its hub Dubai. It is a great enabler.”
He says, 50 per cent of passengers passing through DFW are transit while the rest are local passengers. Emirates services will help strengthen this.
“Emirates flights certainly has helped in creating an awareness and interest among residents of Texas and this will help greater traffic among the two destinations,” Fegan says.
