Today, as the economies around the world are brought down to their knees due to the impact of coronavirus, UAE is relying heavily on India and Israel. But how did the situation come to this?
The cardinal missing-point lies way back with after the discovery of oil, Dubai started to ‘buy and build’ and soon became the ‘centre-point’ of world biggest buildings and skyscrapers with splendid landscapes that are not even that easy to encapsulate in a camera.
Dubai and the UAE went wrong as it did not build its own industries, it did not synergise its indigenous population towards enterprise, and slowly and steadily, started to become increasingly dependent of borrowed-work-force, which all is in disarray, due to the outbreak of COVID-19 pandemic, sending Dubai into deep trouble.
Today Dubai’s emblematic, most iconic and its ambassadorial and tallest building in the world i.e. Burj Al Khalifa builder Arabtec is learnt to have gone bankrupt! As news is pouring-in that Arabtec is now on its way towards liquidation which by itself is nothing short of a landslide.
Arabtec is said to have been given capital-injections between 2013-17, but due to ‘management changes, layoff and rounds of restructuring, Arabtec shareholders, which include Abu Dhabi state fund Mubadala decided last week that the Gulf’s largest listed contractor should file for insolvency.
The liquidation, likely to lead to further layoffs in a company which had a 40,000 strong workforce at the end of last year, marks the end of an era of plentiful construction for local contractors.
When Burj Khalifa was inaugurated in 2010 the world was in awe and Dubai was tagged to be the next business and tourism hub of the world, and within a matter of a decade, the economy of Dubai and UAE has downsized to such an extent that a gloomy picture is a writ large on it, as Arabtec which once aimed to be one of the ten top builders of the world has down spiralled to be on the verge of oblivion, as civil-aviation, hospitality, hotel, travel and tourism industries, which were the bedrock of Dubai economy have been the worst ever hit by COVID-19 virus.
The tactics even from the pre-COVID-19 era, in order to upkeep its thriving economy, by roping-in Indian cinema star Shahrukh Khan (2017) or Argentine soccer sensation Lionel Messi (February 2020) as a global ambassador of Dubai Expo 2020, have, however, not yielded the desired results as COVID-19 seem to have painted ‘the whole scenario bleak’ for the times ahead in Dubai.
It would also be worth noting that debt over Dubai has straddled to such heights that, according to CNBC on October 8, 2020, UAE’s ‘S&P Global Ratings expects Dubai’s economy will contract sharply by around 11% in 2020, owing in part to its concentration in travel and tourism, two of the industries most affected by COVID-19, the agency wrote in a client note last week.
It sees the economy will “only recovering to 2019 levels by 2023.”’ Hence, broadly speaking, Dubai’s economy does not seem to recover anytime before the next three years, but even that could be wishful thinking as things may take until 2030 to finally recover.
However, the construction business in Dubai will not be able to find any redemption, in any near future, as Dubai in the past recent years had built buildings almost so indiscriminately, that it could not attract the desired investors and hence it led to this stalemate.
In order to recover, Dubai implemented VAT from January 2018, which was likewise done in Kingdom of Saudi Arabia too, but it actually resulted in the rise of inflation and turned out to put a negative impact on the economy.
According to Forbes, ‘signs of strain in Dubai’s tourism industry – one of the critical parts of its economy – (were) growing, with a $15bn hotel building boom taking place against a backdrop of plateauing visitor numbers.
Among the indications of difficulty, the local Emaar Properties reported a sharp drop in revenue from its hospitality business in the first quarter of this year, with the figure falling by 14%. And in late July Bloomberg reported that Dubai-based Jumeirah Group – which operates the iconic Burj Al-Arab hotel as well as numerous other properties around the city – was laying-off 500 staff.’
The construction business sector, which was the spine of Dubai’s economic wherewithal, has nosedived to such a low that ArabianBusiness.Com on October 8, 2020, ran a story ‘Why property prices are falling faster in the UAE than the rest of the world’.
The report said ‘The real estate sector was already battling sluggish market conditions long before Covid-19 arrived. But the pandemic, in combination with the postponement of Expo 2020, has added further uncertainty, characterised by projects being delayed, and both values and rental yields reflecting the unfavourable climate.’
With the economic meltdown, the UAE has decided to invite people from all across the world with offers of its nationality but the move has not found a ‘race’ for it. Perhaps, the time for it has long passed, as the entire world is scared out of Coronavirus, with rumours of its ‘second-wave’ looming large, has made people stick to their nerves.
But, what the Arab world is facing today, alongside KSA, Bahrain and Kuwait etc, is the cardinal wrong of not developing its own industries and export system, and no breakthrough in terms of any educational or scientific achievements, whereas, Israel, their new neighbour, though thoroughly supported by the US, has made strides in the field of education, science and technology, to such an extent that Israel is just second to none in terms of computer software building and information technology so much so that Arab states engage Israel services for phone hacking etc!
How will now Dubai lift its sinking fortunes? Considering the morass it is right now into, it seems that the lower-paid-job-workers are now to be packed-off, and certainly the bulk of them are from Pakistan and Bangladesh.
India, however, is sitting pretty as India and Israel are the nations Arab-states are looking for their future with. The UAE and Bahrain have established full diplomatic relations with Israel and very soon all the 22 Arab states are to embrace Israel with the exception of maybe Qatar, Iran and Pakistan.
Israel will provide the military and security apparatus while India can continue to provide its mammoth bulk-force, and Arab states can make merry until the last drop of oil oozes out, with no industry and enterprise of their own.
No wonder India and Israel are to have a ‘field-day’ in future Dubai with the spectre of Greater-Israel hovering at the end of the road.