CCBLA - Arab-Belgium-Luxemburg Chamber of Commerce - ABLCC

FOCUS ON THE UNITED ARAB EMIRATES

Meeting HH Sheikha Lubna Al Qasimi, Minister of Foreign Trade of the UAE
March 25th, 2010

The Chamber had the pleasure to welcome on March 25th, 2010, HH Sheikha Lubna Al Qasimi, Minister of Foreign Trade of the United Arab Emirates. More than 100 officials and company representatives assisted the seminar organised by the Chamber during which Sheikha Lubna detailed the business and investment opportunities in the UAE.

Ever since becoming responsible for foreign trade relations, Sheikha Lubna has travelled the world to explore trade and investment opportunities and to reinforce the UAE trade exchanges abroad. Foreign trade relations are today a key element for growth and economic development and recent data point at a most successful experience in the United Arab Emirates. The total foreign trade volume of the Emirates indeed grew by 86% during the period 2005-2009 and the value of exports even increased by 9% in 2009, a particular difficult year due to the global crisis.

Diversification and sustainability are now the key elements of the UAE economic policies and reflect the emergence of a most competitive and dynamic market, growing at 7.4% last year amidst the worldwide economic turmoil. The Minister stressed the numerous business and investment incentives offered by the UAE such as the world-class free zones, repatriation of capital and profits, easy access to raw materials and energy sources and zero corporate profit and personal income taxes. Further improvements to the country’s commercial and company laws are underway and will provide the economic partners with the best environment for doing business.

Sheikha Lubna noted that the UAE account for 460 billion euro of the Gulf’s more than 940 billion euro worth civil building projects currently underway and she underlined that many other non-oil businesses remain to be explored. The Minister more particularly referred to the rapidly growing transportation sector, in which the Emirates plan to spend as much as 5.68 billion euro to build a country-wide network of railways extending almost 1,400 kilometer by 2016.

Sheikha Lubna furthermore called for energising the global trade and to consider Islamic banking as an opportunity to boost growth and to ensure more stability within the world’s financial markets.

The Minister also lauded the significant level of trade exchanges between Belgium and the Emirates and referred to the cooperation agreement on the mutual exploration of economic, scientific, industrial, mining, agricultural, investment and technological opportunities. Belgian exports to the UAE increased by 12.1% in 2008 to reach 1.9 billion euros, while imports rose the same year by 3.6% to 1.46 billion euros. There was, however, a drop in exchanges in 2009, with Belgian imports decreasing by 36% to 924 million euros and exports narrowing by almost 23% to 1.4 billion euros. “We look forward to sustaining our strong trade in pearls, precious stones and metals, machinery, chemical products, plastics and textiles,” she added. The visit of Sheikha Lubna provided an excellent opportunity to contribute to the reinforcement of the cooperation and partnership with the UAE.

At the end of the seminar, Etihad Airways, the national carrier of the UAE, awarded free tickets to Abu Dhabi to two participants in a move to further increase the awareness of the attractiveness of its services and destination.

New IMF Country Report on the United Arab Emirates

The International Monetary Fund published in February its new Country Report on the Untied Arab Emirates. The IMF hails the country’s excellent infrastructure, business environment and commercial dynamism which are a solid basis for future growth. The report underlines the successful economic development of the country and its role as a major engine for regional growth.

The fiscal position of the country achieved a virtual balance in 2009, following a surplus of 21% in 2008, as both oil and non-oil revenues decreased due to the declie in oil prices and the slowdown in economic activity. Total government spending also increased by an estimated 14% and the nonhydrocarbon deficit increased by about 7% to 34% of the non-oil GDP due to higher spending by the Abu Dhabi government

The external current account balance is estimated to be in the red (2.7% of GDP in 2009), the first deficit registered in decades. As a result of production cuts and lower prices, hydrocarbon export revenues indeed dropped by about 45% in 2009, although imports decreased also by some 22%.

The UAE financial system entered the global crisis exposed to a highly leveraged economy. Commercial banks expanded credit considerably during 2004-08, generating some $100 billion of credit above the underlying trend growth and credit growth was the fastest among emerging markets.

The UAE has a net external creditor position well in excess of 100% of GDP, among the largest in the International Monetary Fund membership. The position is mainly with Abu Dhabi, but several of Dubai’s government-related entities also have accumulated substantial assets abroad. The Emirates’ 2009 International Investment Position (IIP) stands at $437 billion in assets and $132 billion in liabilities, resulting in a net positive position of $305 billion or 132% of the country’s gross domestic product. This is substantially more than the figures provided for Norway ($238 billion, 52% of GDP), Singapore ($192 billion, 105%), and Bahrain ($15 billion, 83%).

At $250,000, the UAE’s net assets per national are also remarkably better than the comparative set, with Norway standing at $50,000 per national, Singapore at $40,000 and Bahrain at $30,000.

Future prospects

The IMF believes the Emirates will continue to benefit from its large external credit position, the country’s excellent infrastructure and business environment and its strategic geographic location between Europe and Asia.

Yet, the IMF believes the UAE will have to confront a further deceleration in non-oil growth in 2010, followed by a gradual recovery.

Economic activity in Dubai in 2010 will depend on global demand, recovery of the property market (real estate accounts for 25% of Dubai’s GDP) and debt restructuring of the Government Related Enterprises. Given the share of the emirate in the total non-oil GDP of the UAE (above 50%), real GDP growth for the federation as a while will be about 0.5% only.

Growth is expected to recover in 2011 owing to higher activity in the oil and trade sectors and the restructuring programmes in Dubai. Medium-term nonhydrocarbon growth is thus projected to average about 4.5%.

The growth of the UAE will most probably require access to long-term capital to improve infrastructure and to implement the country’s mega-projects. The domestic market is unlikely to be sufficient and foreign borrowing is likely needed to fill the gap. The authorities are therefore working to develop the local debt markets and to develop a treasury securities market to help finance government development projects.