Invest in Dubai? Of All

¶ … Invest in Dubai?

Of all the financial centers throughout the Middle East, only one has the ability to meld together cultures, businesses, financial institutions and a government that favors foreign investment to create exceptional opportunities for growth. Dubai, United Arab Emirates has emerged as one of the leading banking and finance centers globally because of these factors. The intent of this paper is to explain why U.S. companies need to consider investing in Dubai. There are many factors favoring this decision, and examples of major U.S. corporations who have already made the move. One of the world's leading construction and projects services companies, Halliburton, moved the worldwide headquarters to Dubai (Donahue, 2007). Auto manufacturing firms have also created centers in Dubai (Sa Joe, 2006). Law firms have also opened branch offices in Dubai, significantly growing their customer bases as a result (Taylor, 2008). Dubai has emerged as one of the global hubs of financial management and wealth management, having the highest per capita income for investors of $38,900 (U.S.) of the entire Middle East Region (UAE Report, Q3, 2010).

First, from a commercial banking standpoint, Dubai was able to overcome the onset of the global recession by having investments spread across multiple sectors of the oil industry value chain (Haines, 2007). This significantly lessoned the impact of the global recession on the UAE in general and Dubai specifically. Second, Dubai has invested heavily in creating its own International Financial Centre, which the UAE government is underwriting 60% of the cost of (UAE Report, Q3, 2010) (CIA Research Division, The World Factbook, 2010). Third, the UAE banks in Dubai are known for their ability to manage both westernized and Islamic banking requirements, often in the same divisions (Balfour, 2006). Islamic banking is actually more egalitarian in its approach to managing new venture development, and as a result has been more successful in funding new ventures during challenging economic times (Balfour, 2006). Also from a commercial banking perspective, the UAE government is more developmental vs. compliance-driven in its initiatives. There are checks and balances just as Sarbanes-Oxley (SOX) in the U.S., yet the UAE finance ministries look to promote more fluidity and growth by encouraging cross-national and international transactions through both the western and Islamic banking systems (UAE Report, Q3, 2010). All of these commercial banking strengths equate to greater opportunities for growth and the ability to fund new expansion, regardless of which nation a company is originally from. The standard of living for the typical UAE citizen is very high by Middle Eastern standards according to analysis by the U.S. Central Intelligence Agency

(CIA Research Division, The World Factbook, 2010). The CIA also reports that the UAE in general and Dubai specifically is efficient and profitable as an economic system, the per capita income is consistently in the range of $38,000 to $41,000, which is the 23rd highest in the world (CIA Research Division, The World Factbook, 2010).

From an economic standpoint, the UAE is well positioned for long-term growth as well. It is a ranking member of the Gulf Cooperation Council, is considered a common market (free market economy) today, and is planning to migrate to a common currency in 2012. The UAE's economic policies have been designed to support foreign investment and global trade by offering tax-free enterprise zones throughout Dubai and other major cities. In addition, the government's finance ministries are concentrating on a diversified investment portfolio to mitigate the fluctuations in oil prices.

UAE is unique out of all Middle Eastern nations in that it has tax-free trade zones and also will underwrite new businesses that bring UAE leaders on their board of directors (UAE Report, Q3, 2010). For such a prosperous nation, the policies of the government show an enlightened and focused series of strategy aimed at stimulating economic growth (Balfour, 2006). Additional economic factors include the role of the UAE in the six-member common market that is part of the World Trade organization (WT), which the nation helped create and joined in 1996. The UAE is the leading investor in shared infrastructure enhancements with neighboring nations Oman, Qatar and Saudi Arabia in the areas of national defense and air traffic coordination and control throughout the region (UAE Report, Q3, 2010). All of these economic factors point to the nation setting a solid foundation for future economic investment by American companies seeking growth.

In addition to the many financial advantages that Dubai offers from an economic, political stability and financial services standpoint, the city has also emerged as a major supply chain and logistics hub omit (UAE Report, Q3, 2010). The reliance on this location on the Persian gulf for both air and ship freight is expected to experience a 50% growth rate in the coming three years (Yoders, 2010). This will be reflected in an increase in investment for warehousing systems, supply chain management centers and the development of more efficient airline terminals specifically designed for the needs of air freight companies (Yoders, 2010). This will also translate into the need for greater services across the value chains of many of the world's most advanced and quickly changing industries, including the automotive industry (Sa Joe, 2006). A second example is that of professional services in construction and development (Donahue, 2007). Many American manufacturers have production centers in China and India, and need a more efficient route to European markets. The investments in supply chain infrastructure on the part of the UAE government are deliberately aimed at the needs of western nations (UAE Report, Q3, 2010). In effect, the UAE government is creating a state-of-the-art supply chain hub to rival any in the world, also offering tax-free export and outsourcing zones to attract investment. American companies whose supply chains and logistics systems stretch across China, Russia, and through North America can save days, even weeks of travel and delivery time using the Dubai centers for supply chain management. The potential for American companies to completely change the competitive dynamics of their companies is well within reach. Any American manufacturer who sells into Europe, the Middle East, Africa or Asia needs to consider Dubai as a potential supply chain hub.

Dubai's investments in two state-of-the-art airports, the free trade status granted freight carriers, and the development of tax incentives to foster new venture development all also show how committed the city and its supporting nation are to growing this area of the economy (UAE Report, Q3, 2010). For American companies looking to move a significant portion of their supply chain operations here, the financial advantages are very favorable.