The Choice for Investors in the Middle East

Foreign direct investment (FDI) is the life-blood of any economy. It drives change and growth, brings prosperity, and improves the quality of life. Increased jobs, opportunities, more knowledge sharing and technology transfer alongside the inflow of foreign currency are some of the key advantages of FDI.

The UAE has always lead the Middle East region in terms of investor confidence, and Dubai is the main hub. Dubai’s competitive advantage stems from the fact that it is much safer compared to other Middle Eastern countries; perhaps something that is a result of its political neutrality. It is slightly less bureaucratic and has a sustained high level of investments made in road and rail infrastructure to keep up to speed with the growth in the countries’ economic development.

The global economic crisis has affected most aspects of the economy worldwide. Though FDI levels have certainly reduced due to the global recession, there are signs of recovery and indications of a more positive future, especially in the medium and long term.

Pre-crisis, the UAE economy was booming and business opportunities were limitless. The UAE’s investment climate has always been open to foreign direct investment it allows full repatriation of profits. However, according to the Dubai Economic Department’s FDI survey, despite the recession in the UAE, majority investors have not considered shifting their investments elsewhere, unless they suspect fundamental changes to the growth prospects of Dubai and the region. Respondents of the survey were C-level executives and business heads across a variety of sectors, nationalities and countries.

“I have been in Dubai for the last 8 years or so. Investing in this city has changed by business and my life,” says Kabir Mulchandani, entrepreneur and CEO of SKAI Holdings. “Despite all the challenges, I continue to invest in the real estate sector of the UAE because I believe there are clear opportunities for success.”

The 2010 AT Kearney FDI Confidence Index tracks investors’ affinity to invest in countries over the next few years. The top Middle Eastern destination according to this index is the UAE which ranks at 11. It is also the sixth highest-ranked emerging market in the world, after large growth markets such as China and India.

In addition, Dubai was recently crowed as the Middle East City of the Future 2010 / 2011 by FDI Magazine. According to newspaper Emirates 24/7, in their evaluation, Dubai scored a 100/100 for economic potential. Evaluation was on the basis of aspects such as population, GDP, total number of FDI projects, number of companies in R&D, global competitiveness, etc

According to an article in Gulf News, Foreign Direct Investment (FDI) in the UAE is believed to have reached $13.7 billion in 2010 and FDI flow would grow from $1.5 trillion in 2010 to $1.8 trillion in 2014.

Kabir Mulchandani stated: “There are still many challenges to overcome, but with the strength of existing businesses, and the commitment to develop the UAE further, the future of Dubai and the UAE looks promising”.

Kabir Mulchandani
Dubai-UAE

To Invest or Not to Invest that is the Question? Kabir Mulchandani

The recent Arab Spring shook the Middle East. However, the UAE remains stable and safe, with business activities at a normal level. There as been no such uprising in the region and the country has become a default refuge from unrest. These aspects have lead to a trend slightly different than the usual: more traffic from Arab countries to the UAE and more business.

Europe’s growing sovereign-debt crisis and the unstable US economy could well be the cause of this “regionalization” – Arabs investing their petrodollars in other Arab countries, the UAE being the centre of such activity. Dubai has seen none of the violence that has destabilized the region. Its hotel, retail and residential real estate sectors are enjoying a boost from general stability of the country.

According to Reuters, anecdotal evidence suggests that Arabs, middle class and above, are buying Dubai property to hedge their risks in other countries. Similarly in India, a weaker currency is encouraging Indian expatriates in the Gulf to invest in domestic markets. According to the Economic Times, non-resident Indians, especially those living in the Gulf, have invested about Rs 75 crore in August and September of this year in the region, the largest pay-in in over 2 and a half years.

Recently, Russell Investments classified the UAE as an emerging market as opposed to the frontier market designation given by MSCI (Morgan Stanley Capital International) and Standard and Poor’s. The UAE is the first Gulf Cooperation Council (GCC) country to graduate from frontier to emerging market status within the Russell Global Index series.

The market in the UAE seems to be welcoming investments. In addition, articles say that those willing to invest in the UAE, have a longer term approach to investing and are not phased by short-term market fluctuations. This clearly demonstrates the relatively higher comparative value of investing in the UAE over other parts of the world.

According to the UAE Investor Attitudes Index as published in UAE daily – The National, about 60 per cent of the investors surveyed said it was a good time to put money in gold, and half said fixed-rate bank deposits were smart investments. The survey was based on interviews with over 750 people in the UAE, who are market investors, majority whom were expatriates.

Dubai’s roar and rumble has always been connected to the real estate market. There is still over-supply in the market and investors seem to not want to invest heavily in real estate. Though there are still a number of challenges to overcome, it seems stability is on its way up.

To add to that my own experience: I transfer property every day. My optimism comes from real demand and real purchasers with real money.  I see a steady growth in prices until 2014 but then I see a significant jump between 2014 and 2016. Then probably in 2017 and 2018, when suppliers are against us to come back, hopefully we will have some stabilization.

Once pending infrastructure projects are near completion, more investors are likely to look into investing in the property market which is certainly taking an upturn.

According to a recent survey of the industry by PricewaterhouseCoopers (PwC) and INSEAD Abu Dhabi, the private equity industry in the Middle East and North Africa (MENA) has emerged stronger from the global financial crisis and the recent political turmoil in the region. In addition, the survey showed the small-and medium-sized enterprises (SMEs) sector has emerged as new investment target for the regional private equity players.

All in all, there seem to be enough good reasons to invest in the UAE in the long-term. The rest, time will tell!

Kabir Mulchandani
Skai Holdings
Dubai, UAE

Why it’s Business as Usual in Dubai

Mark Twain once famously quipped, on seeing his own obituary printed in error by a newspaper:  “Rumors of my passing have been greatly exaggerated”.

The same could have been said by Dubai at any point over the past three years. Even at the height of the debt crisis, when newspapers the world over were fighting with one another to do the city down, they all missed the point.

Sure, the mega real estate projects and developments, and the luxury malls and the 7-star hotels captivated the world’s attention. And so, when real estate, retail and tourism took a hit, it was obviously game over for Dubai, no?

Far from it. Dubai has never been about just hotels, real estate, mega projects, or bling. At its heart, this thriving city has been built on strong foundations of trade and tolerance, two things that have gone hand in hand, and helped the city establish itself as a world-class logistics and commerce hub.

Of course, trade, with its huge warehouses, gritty ports and dusty industrial parks will never be glamorous, or attract the attention of the mainstream press. A trip to Jebel Ali Free Zone takes you further from the glitzy and glamorous side of Dubai life than the 30km journey suggests, but these docks and these warehouses are the bedrock on which the luxury projects were built.

Hand in hand with the mega projects, too, came basic infrastructure developments that are second to none not just in the region, but in the world. Airports, the metro, roads and bridges were put up along with the skyscrapers and the malls, making the city easy to navigate, and not just for commuters, but for multinationals needing a secure, convenient and well serviced location in the Middle East.

Commerce, although dented by the global recession, is today helping to restore Dubai’s reputation as playground for the rich and powerful. The Dubai International Financial Centre (DIFC), the heart of the city’s commercial life, has in a few short years established itself as the GCC’s de facto finance hub. No mean feat, considering the equally ambitious, but wealthier, competitors.

For anyone looking to do business in the Gulf, or even further afield, the reasons to pick Dubai as a base are obvious. Great infrastructure, first-class services, a liberal environment, in terms of both business climate and society, combined with a strategic location straddling East and West, has made the city hugely attractive for multinationals and entrepreneurs from all corners of the globe.

In all, some 200 nationalities have chosen to live in this city. Safe, stable and full of opportunity, I first moved here to seize those opportunities in 2004. What I’ve found is a remarkable and unique place, a city that rewards risk and innovation, and one that I’m proud to call home.

Good Luck
Kabir Mulchandani

Skai Holdings

Dubai-UAE