WFU-MBA-BGE-Team5-UAE-5Dec2008

UNITED ARAB EMIRATES COUNTRY ANALYSIS Team 5 Business in the Global Economy

UAE Perspective UAE Emirate: Dubai 1990

UAE Overview
Background
UAE: Who are the Emirates
Government structure
Sources of Revenue
Oil
Real Estate/Tourism
Infrastructure
Technology/Digital Media
Healthcare
Education
UAE Vision
Dubai’s 2015 strategic plan
Diversification away from oil

UAE Annual Growth
Key Drivers
GDP - Avg 23%
BOP Surplus - Avg 32%
Foreign Reserves - Avg 26%
FDI - Avg $13B USD
Consequences of Growth
Inflation reached 11% in 2007
External debt increased to $170B USD in 2007, up 17%
Effects of Recent Global Slowdown
A strong surplus and foreign reserves will shield UAE from long term impacts
Short term decrease in consumer debt and inflation

Recommendations: Real Estate
Current Outlook
Appreciation in real estate prices: e.g. condos experienced ~226% in 4 years
Improved infrastructure needed to support growth
Some markets are overheated, bubble?
Global credit crunch
Long Term Drivers
Population growth: 3.8%
Strategic focus on being an international destination; Deregulation
Continued investment by foreign entities
Recommendation
Short Term Investors: Opportunities exist in middle income housing; More conservative investors may want to wait until the global market rebounds
Long Term Investors: Invest in companies providing infrastructure; Real Estate Investment Trusts (REITs); Direct investment in Dubai Real Estate

Recommendations: Health Care
Current Outlook
Investments by John Hopkins, Cleveland Clinic and other institutions
Need for attracting investors and skilled laborers from developed nations
Limited impact by global slowdown
Long Term Drivers
Creation of Dubai Healthcare City
Increases in median ages of men (74) and women (76)
Increase in heart disease and diabetes
Recommendation
Short Term Investors: Invest in companies providing high tech healthcare equipment or supplies; Drug companies
Long Term Investors: Foreign Hospitals and insurance organization may consider expansion into the UAE
Dubai’s Health Care City: Under Construction

Recommendations: Education
Current Outlook
Majority of skilled labor and expertise comes from other countries like India
Campus investments by NYU, Michigan State, and George Mason Universities
Uneducated labor force
Limited impact by global slowdown
Long Term Drivers
Strategic vision of UAE
Progress towards educational equality
Recommendation
Short Term Investors: Invest in companies supplying education resources; IT Education
Long Term Investors: Universities should consider satellite campuses in Dubai.

Recommendations: Stock Market
Current Outlook
UAE market down ~60% YTD
High level of uncertainty in the global economy
Limited liquidity and market information
Global credit crunch
Long Term Drivers
Strong country fundamentals
Projected appreciation in oil prices
Converting to GCC common currency in 2010
Recommendation
Risky Investors: Wait until market confidence returns; signaled by VIX level in the 30-40 range; Invest in Market Vectors Gulf States Index (ETF TICKER: MES )
Risk Adverse Investors: Wait until market confidence returns to historic levels; signaled by VIX level in the 10-15 range; Invest in ETF TICKER: MES

Risks to Consider Before Investing
Societal and Cultural Risks
Stable cultural and societal environments attract foreign workers
Though UAE is one of the most progressive Emirates, it still is behind many other cultures
Infrastructure Showing Cracks
Considered by the BMI institute as the second highest risk in the Gulf region.
Lacking in the following areas:
Water Generation
Sewer Systems
Power Generation
Energy Usage
Threat of Terrorism
Alliance with United States causes tension with Iranian neighbors
High level of expatriate population from western countries
Potential Economic Bubble
Though UAE continues to experience growth, many experts think it may be overheated
Continued dependence on oil
Continued inflation
Long term effects of the credit crunch on foreign investors

Summary Recommendation: United Arab Emirates has a positive long term investment horizon Sector Investment Short Term Trend Long Term Trend Real Estate Healthcare Education Stock Market Negative Even Positive

Questions and Discussion 2009 International Study: Dubai anyone…

WFU-MBA-BGE-Team5-UAE-5Dec2008

by bgracely on Dec 31, 2008

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