The economy and Dubai's hospitality

The emirate of Dubai is growing at an incredible pace in terms of population and economic activity, with the government continuing commitment to pursue aggressive plans to develop and diversify the economy to further transform Dubai into the business and leisure centre of the Middle East.

This can be gauged accurately by the ongoing expansions of Emirates airline and Dubai International Airport, which will raise the airport capacity to 60 million passengers annually. Meanwhile Al Maktoum Airport, which is under construction at Jebel Ali Dubai World Central, planned capacity is to be 120 million passengers annually.

And so, Dubai's hospitality sector has been growing in volume and quality at an unmatched grand scale, causing the emirate's hotel market to be ranked among the worlds' best for several years.

Dubai Department of Tourism & Commerce Marketing (DTCM) is predicting 10 million hotel visitors by 2010 (from around seven million in 2007) and the Dubai Strategic Plan 2015 is targeting 15 million by 2015. This is self-evident in the Dubailand project, currently under construction.

His Highness Shaikh Mohammad Bin Rashid Al Maktoom, Vice-President and Prime Minister of the UAE and Ruler of Dubai, has said many times in different ways that what has been achieved in Dubai is only the beginning.

Given the government's impressive track record, many industry professionals believe that these forecasts, most likely, would have held true if the crisis in the international financial markets had not taken take place.

The enormity of the global financial crisis has not yet been fathomed and is just beginning to show its magnitude throughout the world, which is expected to last at least a couple of years.

Apart from the global scene, though we are part of it, the UAE scene is not expected to be as gloomy as the rest of the world's scene, thanks to Abu Dhabi's liquidity and its commitment towards the UAE federation and its welfare. The UAE Central Bank has declared that the UAE government will guarantee deposits in local and foreign banks' branches operating in the UAE.

That was immediately followed by allocating Dh120 billion to be injected into the local banking sector as needs demand. In following this solid commitment, the UAE Central Bank has laid out new stringent lending terms to safeguard the banking sector stability besides its long encouragement to financial institutions to merge.

Measures

The Ministry of Finance announcement on November 22 that Amlak and Tamweel, the two leading UAE real estate finance providers, will be merged into a new entity under the umbrella of the Abu Dhabi-based Real Estate Bank. This merger has been followed by the announcement of the decision to merge the Real Estate Bank with Emirates Industrial Bank.

It is evident that those mergers are along the aforementioned directions of the UAE Federal Government's policy to cope with expected rough sailing ahead. The new entity's name is Emirates Development Bank (EDB).

The newly laid out policies and guidelines by the UAE Central Bank will also allow scaling down of projects that have not broken ground yet and phasing out many development plans with attractive and practical propositions, especially those in areas that have no infrastructure yet, inducing a much-needed reduction in inflation and cooling down an overheated economy.

The new financial policy will shift attention and focus of the local governments, as well as involving the private sector in the interim period, on projects that can accommodate some of their ambitious plans within areas where infrastructure exists. This will alleviate some of the expected negative effects of the world economic crisis on the local economy. Meanwhile, they have to deal with teething problems of finished developments, which are many.

Such measures will help increase efficiency of established projects and services geared to higher than present loads by providing more infrastructure and amenities. These new policies will have a positive impact on the jittery state of mind of UAE residents, increase the efficiency of local business and boost tourism.

The recent global financial crisis is a blessing in disguise to the UAE cities and should be welcomed as shape-up time.

Needless to say, as a result of the current economic turmoil, a new world economic and political order will gradually emerge, within which none of the present thumbrules and regulations would be applicable as they are at present. It will be prudent to participate in formulating the new world order and adjust to new realities.

Saqr Bin Zayed Bin Saqr Al Nahyan is a Dubai-based author.