Thursday, September 23, 2010

Exploring UAE beyond Abu Dhabi and Dubai


DUBAI: As Dubai and later Abu Dhabi have developed into internationally recognized hubs for business and trade over the last 10 to 15 years, the five remaining emirates that make up the United Arab Emirates have been left behind.

However, during the last couple years Dubai has been busy dealing with the fallout of the global finical crisis and other emirates have taken the crisis as an opportunity to grow.

The United Arab Emirates was founded in 1971 when the seven emirates of Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al-Quwain, Ras Al-Khaimah and Fujairah merged to form a unified state, with the city of Abu Dhabi chosen as its capital by virtue of it being home to the largest tribe - Al Nahyan - despite city of Dubai being the largest city.

Having the largest tribe also meant that Abu Dhabi became the biggest of the emirates, which proved invaluable since oil had been discovered in the newly founded country by the British.

As a result, Abu Dhabi could preserve its more conservative charter, while Dubai - with its well-situated port - embarked on a diversification drive under the leadership of Sheikh Muhammad to broaden the emirate's economic base to include more than just oil. This has led to Dubai's current status as a regional center for trade and business, as well as a tourist destination with a more liberal view than its neighbor Abu Dhabi.

The five other emirates, however, have not done as well.

"The emirates of Abu Dhabi and Dubai represent almost 90 percent of the United Arab Emirates GDP (Gross Domestic Product)," Philippe Dauba-Pantanacce, senior economist with Standard Chartered Bank in Dubai, told The Media Line.

"If we add the emirate of Sharjah, which acts essentially as an industrial backyard extension and a cheaper housing option to Dubai, then the four other emirates don't even represent five percent of the United Arab Emirates Gross Domestic Production," he said.

Ayesha Sabavala is an economist specializing in the Middle East and North Africa for the Economist Intelligence Unit agrees that Dubai is playing a leading role economically in the region.

"Most major companies have established offices mainly in Dubai because Dubai has built itself into a trading hub and free zones like (the port of) Jebel Ali and business environments like the Dubai International Financial Center offer facilities that you won't find in the smaller emirates," Sabavala said.

But some Emirati business people are trying to turn the tables, like Oussama El-Omari, CEO of Ras Al-Khaimah Free Trade Zone, home to some 4,000 companies currently enjoying, on average, a 10 percent surge in revenue.

"The factors that helped us to continue to grow are our keen customer focus, innovation, affordability and flexibility," El-Omari told The Media Line.

"Customers are the major stakeholders in Ras Al-Khaimah Free Trade Zone success and we are constantly striving to provide them with better business solutions, infrastructure, technology and support," he said. "We adopt a customer-centered approach and a 'can do' attitude."

Ras Al-Khaimah Free Trade Zone has also established business centers and promotional offices in Dubai and Abu Dhabi and is the first free trade zone to open international liaison offices in India, Turkey, Germany, USA and China. "Our services are provided in these markets to make it easier for them to penetrate the United Arab Emirates market and surrounding regions, without the hassle of traveling back and forth to the United Arab Emirates," El-Omari said.

"Our focus on small and medium enterprises and especially those with an eye to doing business in emerging markets makes great economic sense for us," he said. "Flourishing small- and medium-sized industries encourage private ownership, which in turn, provide employment opportunities to the local population."

Sabavala from the Economist Intelligence Unit said that the focus on small- and medium-sized firms could be a good strategic move.

"It's true that Sharjah and Ras Al-Khaimah have their own free (trade) zones and Ras Al-Khaimah especially is trying to attract more foreign investment, but they don't compare to Jebel Ali," she said. "You've also got all the ancillary businesses, such as law firms established in Abu Dhabi and Dubai, thereby making it much easier to access these services when necessary."

"That said, smaller companies might well find it cheaper to operate from the five emirates other than Dubai and Abu Dhabi as rents and business costs are lower in these emirates," Sabavala added.

"I don't think the other five emirates are overlooked, simply because they do not offer the facilities, the financing, the business environment and the infrastructure that Dubai and Abu Dhabi offer," she told The Media Line.

El-Omari says that the outside world does not overlook the smaller emirates when planning their business establishment in the region.

"There is a healthy demand for our services as you can see from our results," he said. "Year after year we are seeing an increase in revenue and registration despite the economic crisis. I don't think it is a case of overlooking the smaller emirates; it is more about targeting the businesses that are relevant to each emirate." "For example, for us we are focusing on small and medium enterprises," El-Omari reiterated.

"Therefore, we would only focus our promotional efforts to our targeted market. That doesn't mean that we are losing out on the bigger projects."

Dauba-Pantanacce with Standard Chartered Bank said that while Ras Al-Khaimah has been successful its growth potential is limited.

"We have seen a few businesses expressing some opportunistic interests in the northern emirate of Ras Al-Khaimah," he said. "Indeed, the emirate has often been seen as offering preferential treatments in terms of regulatory environment: easier access to visas, very favorable fiscal environment, and port operations greatly facilitated."

"But things have to be put into perspective," said Dauba-Pantanacce. "The other emirates cannot realistically represent an alternative to Dubai or Abu Dhabi for businesses."

"The economic activity is overwhelmingly in these two emirates and their wealth will surely continue to attract more new business opportunities," he said.

"Furthermore, the infrastructure level of the 'other emirates' is very far from being any closer to the development achieved in both Dubai and Abu Dhabi. In fact, even in the slightly richer and more active economically emirate of Sharjah, we are witnessing today massive disruptions in all activities because of repeated and prolonged power shortages."

"Finally, the smaller, much poorer, northern emirates live under the infusion and control of Abu Dhabi; their autonomous ability to develop is fairly limited," he added.

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