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

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This is a presentation given on 5 Dec 2008, in the EXFT2009 class of WFU MBA. It was given as part of a Foreign Investment investigation project for Dr. Chuck Kennedy's BGE class.

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

  1. 1. UNITED ARAB EMIRATES COUNTRY ANALYSIS Team 5 Business in the Global Economy
  2. 2. UAE Perspective UAE Emirate: Dubai 1990
  3. 3. UAE Perspective UAE Emirate: Dubai 2003
  4. 4. UAE Perspective UAE Emirate: Dubai 2007
  5. 5. UAE Overview <ul><li>Background </li></ul><ul><ul><li>UAE: Who are the Emirates </li></ul></ul><ul><ul><li>Government structure </li></ul></ul><ul><li>Sources of Revenue </li></ul><ul><ul><li>Oil </li></ul></ul><ul><ul><li>Real Estate/Tourism </li></ul></ul><ul><ul><li>Infrastructure </li></ul></ul><ul><ul><li>Technology/Digital Media </li></ul></ul><ul><ul><li>Healthcare </li></ul></ul><ul><ul><li>Education </li></ul></ul><ul><li>UAE Vision </li></ul><ul><ul><li>Dubai’s 2015 strategic plan </li></ul></ul><ul><ul><li>Diversification away from oil </li></ul></ul>
  6. 6. UAE Annual Growth <ul><li>Key Drivers </li></ul><ul><ul><li>GDP - Avg 23% </li></ul></ul><ul><ul><li>BOP Surplus - Avg 32% </li></ul></ul><ul><ul><li>Foreign Reserves - Avg 26% </li></ul></ul><ul><ul><li>FDI - Avg $13B USD </li></ul></ul><ul><li>Consequences of Growth </li></ul><ul><ul><li>Inflation reached 11% in 2007 </li></ul></ul><ul><ul><li>External debt increased to $170B USD in 2007, up 17% </li></ul></ul><ul><li>Effects of Recent Global Slowdown </li></ul><ul><ul><li>A strong surplus and foreign reserves will shield UAE from long term impacts </li></ul></ul><ul><ul><li>Short term decrease in consumer debt and inflation </li></ul></ul>
  7. 7. Recommendations: Real Estate <ul><li>Current Outlook </li></ul><ul><ul><li>Appreciation in real estate prices: e.g. condos experienced ~226% in 4 years </li></ul></ul><ul><ul><li>Improved infrastructure needed to support growth </li></ul></ul><ul><ul><li>Some markets are overheated, bubble? </li></ul></ul><ul><ul><li>Global credit crunch </li></ul></ul><ul><li>Long Term Drivers </li></ul><ul><ul><li>Population growth: 3.8% </li></ul></ul><ul><ul><li>Strategic focus on being an international destination; Deregulation </li></ul></ul><ul><ul><li>Continued investment by foreign entities </li></ul></ul><ul><li>Recommendation </li></ul><ul><ul><li>Short Term Investors: Opportunities exist in middle income housing; More conservative investors may want to wait until the global market rebounds </li></ul></ul><ul><ul><li>Long Term Investors: Invest in companies providing infrastructure; Real Estate Investment Trusts (REITs); Direct investment in Dubai Real Estate </li></ul></ul>
  8. 8. Recommendations: Health Care <ul><li>Current Outlook </li></ul><ul><ul><li>Investments by John Hopkins, Cleveland Clinic and other institutions </li></ul></ul><ul><ul><li>Need for attracting investors and skilled laborers from developed nations </li></ul></ul><ul><ul><li>Limited impact by global slowdown </li></ul></ul><ul><li>Long Term Drivers </li></ul><ul><ul><li>Population growth: 3.8% </li></ul></ul><ul><ul><li>Creation of Dubai Healthcare City </li></ul></ul><ul><ul><li>Increases in median ages of men (74) and women (76) </li></ul></ul><ul><ul><li>Increase in heart disease and diabetes </li></ul></ul><ul><li>Recommendation </li></ul><ul><ul><li>Short Term Investors: Invest in companies providing high tech healthcare equipment or supplies; Drug companies </li></ul></ul><ul><ul><li>Long Term Investors: Foreign Hospitals and insurance organization may consider expansion into the UAE </li></ul></ul>Dubai’s Health Care City: Under Construction
  9. 9. Recommendations: Education <ul><li>Current Outlook </li></ul><ul><ul><li>Majority of skilled labor and expertise comes from other countries like India </li></ul></ul><ul><ul><li>Campus investments by NYU, Michigan State, and George Mason Universities </li></ul></ul><ul><ul><li>Uneducated labor force </li></ul></ul><ul><ul><li>Limited impact by global slowdown </li></ul></ul><ul><li>Long Term Drivers </li></ul><ul><ul><li>Population growth: 3.8% </li></ul></ul><ul><ul><li>Strategic vision of UAE </li></ul></ul><ul><ul><li>Progress towards educational equality </li></ul></ul><ul><li>Recommendation </li></ul><ul><ul><li>Short Term Investors: Invest in companies supplying education resources; IT Education </li></ul></ul><ul><ul><li>Long Term Investors: Universities should consider satellite campuses in Dubai. </li></ul></ul>
  10. 10. Recommendations: Stock Market <ul><li>Current Outlook </li></ul><ul><ul><li>UAE market down ~60% YTD </li></ul></ul><ul><ul><li>High level of uncertainty in the global economy </li></ul></ul><ul><ul><li>Limited liquidity and market information </li></ul></ul><ul><ul><li>Global credit crunch </li></ul></ul><ul><li>Long Term Drivers </li></ul><ul><ul><li>Strong country fundamentals </li></ul></ul><ul><ul><li>Projected appreciation in oil prices </li></ul></ul><ul><ul><li>Converting to GCC common currency in 2010 </li></ul></ul><ul><li>Recommendation </li></ul><ul><ul><li>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 ) </li></ul></ul><ul><ul><li>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 </li></ul></ul>
  11. 11. Risks to Consider Before Investing <ul><li>Societal and Cultural Risks </li></ul><ul><ul><li>Stable cultural and societal environments attract foreign workers </li></ul></ul><ul><ul><li>Though UAE is one of the most progressive Emirates, it still is behind many other cultures </li></ul></ul><ul><li>Infrastructure Showing Cracks </li></ul><ul><ul><li>Considered by the BMI institute as the second highest risk in the Gulf region. </li></ul></ul><ul><ul><li>Lacking in the following areas: </li></ul></ul><ul><ul><ul><li>Water Generation </li></ul></ul></ul><ul><ul><ul><li>Sewer Systems </li></ul></ul></ul><ul><ul><ul><li>Power Generation </li></ul></ul></ul><ul><ul><ul><li>Energy Usage </li></ul></ul></ul><ul><li>Threat of Terrorism </li></ul><ul><ul><li>Alliance with United States causes tension with Iranian neighbors </li></ul></ul><ul><ul><li>High level of expatriate population from western countries </li></ul></ul><ul><li>Potential Economic Bubble </li></ul><ul><ul><li>Though UAE continues to experience growth, many experts think it may be overheated </li></ul></ul><ul><ul><li>Continued dependence on oil </li></ul></ul><ul><ul><li>Continued inflation </li></ul></ul><ul><ul><li>Long term effects of the credit crunch on foreign investors </li></ul></ul>
  12. 12. 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
  13. 13. Questions and Discussion 2009 International Study: Dubai anyone…

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