Dubai's economic growth from 2000 to 2005 was remarkable, with double-digit real GDP growth and a relatively high per capita income despite negligible dependence on oil. (The driving force behind Dubai's economic performance has been the government, through investments and other initiatives, supported by the private sector.)
Economic performance at the sectoral level has also been impressive, and was led by trade, construction and real estate sectors, with good signs of successful diversification.
GDP Growth (2000-2005)
Dubai's historical economic growth has been truly impressive. In particular, since the year 2000, real GDP has been growing at a compounded annual growth rate of 13 per cent, by far exceeding that of its GCC counterparts (see figure 1).
The Dubai economy has also been growing faster than the emerging economies of China and India, and the developed economies of Ireland, Singapore and the US.
Much of Dubai's current success has been a result of its bold and visionary leadership and innovative human resources, mainly driven by government policies aimed at improving the business and investment environment, in addition to initiatives to establish specialised zones and mega projects (e.g. Internet and Media City, Healthcare City, The Palm, Dubailand, etc).
Those developments ensured a leading role for Dubai and helped attract excess regional liquidity in the form of Foreign Direct Investment (FDI).
Economic growth has also been fuelled by private sector participation in developing sectors for which the government has set the stage by establishing a conducive business environment, coupled in many instances with heavy initial investments to boost private sector confidence.
Other supporting factors are supply-side factors such as availability of labour and land for major real estate projects; the existence of efficient government services; a solid institutional framework and good mechanisms for service delivery; strong laws and regulations; excellent infrastructure, a strategic location coinciding with the rapid rise in global trade, especially in China and India, and openness to other cultures, giving Dubai a reputation as a safe and comfortable place to live and do business.
Per Capita GDP Growth
The factors discussed above have put Dubai's real per capita GDP at Dh114,362 ($31,140) in 2005, with an annual average growth rate exceeding six per cent over the 2000-2005 period. Dubai's per capita income today compares very favourably with that of many developed countries such as Singapore [Dh98,555 ($26,836)] and Hong Kong [Dh93,623 ($25,493)] (data are for 2005, calculated in current 2005 US dollar, and extracted from IMF World Economic Outlook), countries which required a much longer period of time to reach their current levels.
Sectoral Performance
Economic performance at the sectoral level has also been impressive. The non-oil sector played a more prominent role in 2005 with a 95 per cent contribution to GDP, compared to 90 per cent in 2000 (and as much as 46 per cent in 1975).
This was mainly the result of the reduced dependence on oil as well as a deliberate policy of diversifying the economy in favour of the non-oil sectors in which both the overall business environment and sector-specific programmes have played vital roles.
The service sector has been the key driver of economic growth with an annual growth rate of 21 per cent since 2000, constituting Dh101.4 billion ($27.6 billion) or 74 per cent of Dubai's current GDP in 2005.
In particular, figure 4 above shows that the trade sector has experienced the highest increase in GDP share, while the contribution of the manufacturing and oil and gas sectors has decreased although the manufacturing sector has grown by an average of 12 per cent since 2000.
The construction and real estate sectors have also exhibited share gains, primarily due to the availability of land, labour, domestic and foreign capital, and changes in regulations.
Dubai's current GDP mix is very favourable, as its strongest sectors by international standards happen to be highly conducive to future global growth. As shown in figure 5, these sectors are tourism, transportation, construction, and financial services, and are well placed to constitute the focal point of Dubai's future growth path within the economic development sector plan.
Aims
Building on Dubai's remarkable economic performance and future trends, economic aims for 2015 have been set and classified into the following categories:
(1) Economic growth
• Sustain a real GDP growth rate of 11 per cent per annum for the next 10 years
• Increase real GDP per capita to Dh162,000 ($44,000) in 2015 (calculated at constant 2005 prices)
(2) Enhanced labour productivity and sector development
• Increase productivity by four per cent per annum
• Move existing sectors of strength to new frontiers, both domestically and internationally
• Create new sectors of strength with sustainable competitive advantage
• Promote innovation to develop new sectors and increase productivity
Strategic Thrusts
The recommended future strategic growth path is based on six combinations of sectors, or building blocks (verticals), which include, among others, sectors such as tourism, trade, transportation, and financial services; i.e. strong sectors by international standards which are highly conducive to future growth.
These sectors were identified based on their current status, international competitiveness, Dubai's capacity to develop them and local availability of required factor conditions.
However, targeting these building blocks will not yield rapid and sustainable growth unless seven horizontal enablers for growth are addressed in parallel, namely human capital, productivity, innovation, cost of living and doing business, quality of life, economic policy and institutional framework, and laws and regulations.
The strategic thrusts supporting the achievement of economic development aims are described below:
(1) Sector focus and development
Moving Dubai to a new growth path, coupled with further diversification, while maintaining focus on high-value added sectors that can boost overall economic growth
(2) Productivity growth
Transforming Dubai into a hub of business excellence by raising the productivity of economic sectors and maintaining high production quality standards
(3) Human capital excellence
Preparing Dubai's workforce for the high-value, knowledge-driven economy, which requires attracting and retaining highly skilled employees, improving the UAE nationals' qualifications and increasing their motivation
(4) Science, technology, and innovation capacity building
Turning Dubai into a vibrant science and technology hub in targeted sectors, by supporting the development of existing sectors, and establishing the right environment for nurturing the post-2015 economy
(5) Cost of living and doing business management
Ensuring and maintaining Dubai's competitiveness by managing the rising cost of living
(6) Quality of life improvement
Establishing Dubai as a preferred home for current and future residents by improving the well-being of citizens and residents, and helping them live healthier lives enriched with opportunity and choice
(7) Policy and institutional framework excellence
Striving for excellence in economic policy-making and deployment through coordination with the Federal Government, provisioning of adequate data, and strengthening the institutional framework and capabilities
(8) Laws and regulations alignment
Aligning Dubai's economic laws and regulations with international best practices and standards
The pursuit of the proposed strategic growth path will promote GDP growth to Dh397 billion ($108 billion) by 2015.
This approach would strengthen Dubai's healthy sector mix by ensuring focus on key sectors while further promoting diversification and ensuring reduced vulnerability to external shocks, and a systematic integration into the regional and global economy.
To achieve target economic growth, it is estimated that 882,000 additional workers are required to join the workforce by 2015, bringing total employment to 1.73 million with a significant move towards higher skilled employment.
