The post-crisis UAE

The newly formed G20 as well as the half-century-old IMF have both confirmed that the worst economic recession to hit the world since the 1930s Great Depression is almost over.

Both global institutions insisted last week that the global economy has finally turned the corner and that the immediate task now is to ensure sustained growth for 2010.

But one year after, what have been the pains and the gains of the 2009 economic recession for the UAE and how did the country weather this tumultuous global financial crisis? Did it honourably pass or miserably fail the toughest challenge in recent years? And what should the agenda for the post-crisis era be: more of the same, or a serious revision of the vision and a radical departure from the old ways of doing business?

Certainly 2009 was a challenging year for the relentlessly optimistic and progressive-thinking UAE. It was also a complex year for the private sector across the board. The GDP dipped into negative growth for the first time in 15 years as oil price sharply dropped from $114 (Dh418.8) in 2008 to $59 per barrel on average during 2009. The vibrant local stock market, which has gained same confidence and momentum lately, lost more than 70 per cent of its value in Dubai and nearly 45 per cent in Abu Dhabi.

The initial UAE reaction to the global financial crisis was one of foot-dragging and denial. But eventually it became clear that the negative impact was inevitable in light of the fact that the UAE has one of the most globalised economies in the region.

Yet the impact of the financial crisis was vastly uneven. Some sectors of the economy were certainly more affected than others. The real estate sector came to a halt. This sector was manifestly problematic and was already inflated beyond belief. Its burst surely brought some needless pain but, in retrospect, that was a healthy outcome of the crisis.

Some of the emirates in the UAE experienced the financial jolt to a greater extent than the others. This is to be expected and is in keeping with the unique political and economic federal set-up of the UAE.

One year later the oil-rich and the cash-rich Ab u Dhabi has emerged almost with no dent. It is almost business as usual in the capital. But it is not so in Dubai, the second biggest and richest emirate in the UAE. The year 2009 was a very challenging one for this most global city in the Arab world. Dubai had to juggle not with one but two challenges simultaneously: the global financial crisis and an $8 0 billion debt.

Almost all news was bad news for the UAE during 2009. Those who managed to stay and keep their faith and did not run away were brave souls and deserve end-of-the-crisis bonuses.

But as difficult as 2009 has been for everybody, it was far from crippling for the UAE. The UAE and particularly the Dubai model was put to a severe test, but things did not fall apart as pessimists had predicted and some had wished.

The country is humbled but ready to rise once again like a phoenix. The Dubai model was seriously exposed and was visibly shaken but no one should doubt its sustainability. Even the real estate bubble which proved to be the weakest link in the Dubai model is recovering gently.

One year into the financial crisis, the Dubai Metro, the first in the region and the world's longest unmanned Metro, went into operation on time as promised. Abu Dhabi is ready to host a Formula One race, its biggest sporting event. By the end of 2009, it will be time for the grand opening of Burj Dubai, the tallest building in the world.

The first, the longest, the tallest and the biggest, it all sounds familiar and they are all trademarks of the UAE as a trendsetter in the region. The point is, the post-crisis UAE is full of confidence and determination.

The UAE and the Dubai model are here to stay and have the brand appeal, the infrastructure, the management, the location and the vision. No one should doubt the fundamentals of this model. Yet no one should underestimate current and future challenges.

Mistakes were committed all along.

The initial response to the crisis was uncharacteristically slow. Some lived in a state of denial for too long. Trust was put in some untrustworthy individuals, both nationals and expatriates. Some real estate projects were simply outrageous and totally out of character. Millions in public money was wasted. There was an element of greed involved.

The central question is what did the UAE learn from the crisis? One thing is clear; the country does not need to prove anything to anybody anymore. The big emirates have to stop needless competition and learn the art of coordination. It is also time to slow down and get over the double-digit growth mentality. The social cost of fast economic growth is not only painful but unbearable. Finally, the country needs to be much more transparent and introduce accountability.

This is the way forward for the post-crisis UAE; otherwise the end of one crisis could mark the beginning of another, especially if the same mistakes are repeated again.

Dr Abdulkhaleq Abdullah is a professor of Political Science at Emirates University.

Fairly speaking every body living in or from UAE will want to see Dubai boom but the lesson learnt from the global crises is dont rely on one product.
Zaheer A Abbasi
Dubai,UAE
Posted: October 03, 2009, 16:31

The social cost of rapid growth is often forgotten having a negative effect on the countries society not only in the short term but long term as well. If along side that growth was concern for grassroots initiatives I feel the growth would be amazing!
Mohammad Othman
Manchester,UK
Posted: October 03, 2009, 09:41

I totally agree with you, UAE was and will be proud of Arabs, example for all, I am sure with the vision for Dubai will rise just like eagle again, from my heart I do want to see Dubai as strong as ever, it give us all the strength to live.
Luai Alakhrass
Dubai,UAE
Posted: October 03, 2009, 09:30