Dubai Expo 2020: a unique opportunity
Hosting a World Expo in the MENASA region for the first time, on the eve of the UAE’s 50th anniversary celebrations, carries profound meaning and creates an environment for exceptional opportunity and cultural understanding.
The country’s stability and safety, its open and dynamic economic environment, the readiness of its infrastructure and the passion to forge a bright future that binds the people from 200 nationalities living here will deliver a unique environment for a World Expo that will galvanise the world.
The opportunities:
1. An inspirational theme reflecting global priorities
2. Expo Live: a 7-year programmed of collaborative innovation that starts now
3. Unprecedented global exposure for an eagerly anticipated Expo
4. An iconic and unique site
5. Unsurpassed global and domestic connectivity with a trustworthy track-record of delivery
6. A springboard for economic development
7. National and international public support and awareness for Expo 2020
Dubai: Dubai’s winning bid to host Expo 2020 is seen as a major catalyst in its economic rebound according to economists and analysts.
Hosting the World Expo 2020 is expected to add at least 1.5 percentage points per year to Dubai’s real gross domestic product (GDP) growth over 2014-2020, leading to an annual growth of 5.5 per cent, according to Institute of International Finance (IIF) a Washington based association of 450 global banks and financial institutions.please contact us for exhibition stand design
“The official figure shows World Expo 2020-related spending of Dh88 billion ($24 billion) over 2014-2020. Exporoad can provide you full services for stand construction and pavilion construction .However, a significant portion of the spending on infrastructure projects would still have taken place as part of Dubai 2020 vision. Most of the planned spending is expected to be financed by additional borrowing, leading to further increase in the already high debt,” said Garbis Iradian, Deputy Director of Institute of International Finance.
Analysts said the strong growth experienced by Dubai is driven by fundamentals rather than speculative forces. According to Dubai’s Department of Economic Development estimates, the GDP of the economy grew 4.9 per cent in the first nine months of the year. For 2013 and 2014, the emirate’s GDP is projected to grow 4.7 per cent and 4.5 per cent respectively.
Manufacturing
“Dubai’s GDP growth this year and the year ahead is largely driven my strong growth in trade and tourism. Lately we have noticed that manufacturing is also contributing significantly to the economic growth,” said Mohammad Lahouel, the chief economist of the Dubai Department of Economic Development.
Although there has been a significant surge in real estate prices in Dubai, analysts say the prices so far do not point to another real estate bubble in the making. House prices in the emirate have jumped more than 20 per cent in the last year, prompting the IMF to warn in July of the risk of another bubble.
“Dubai has been doing extremely well on economic fundamentals during the last three years. But if there is going to be an irrational exuberance in the real estate sector and that leads to another round of construction frenzy, it will be a cause of serious worry,” said Farouk Soussa, Citigroup’s chief economist for the Middle East said recently.
The IMF estimates Dubai’s current debts including the debt outstanding of government related entities (GREs) at 100 per cent of its GDP. “So far Dubai has effectively managed its debt obligations and we expect it to meet all its obligations on time. However, the US tapering could have an impact on the cost of refinancing as interest rates are likely to go up as and when it happens,” said Masoud Ahmad, the IMF’s Director for the Middle East and North Africa (Mena) last month.
The IIF’s projections show that Dubai’s debt will increase from $142 billion (Dh521 billion) in 2012 to $168.5 billion by 2020. The debt-to-GDP ratio, however, is expected to decline from 106 per cent of GDP in 2012 to 70 per cent by 2020, assuming annual real GDP growth of 5.5 per cent, and GDP deflator (CPI inflation) of 2 per cent. Although declining, a debt-to-GDP ratio of 70 per cent by 2020 is still considered to be very high.
Maturities
The IIF expects some amount of Federal and Abu Dhabi government support to the Expo related expenditures. This support could be in the form of extending a significant portion of the debt maturities falling due in 2014-2017. There is large bunching of maturities in the coming two years, including a $20 billion facility for the Government of Dubai maturing in 2014, and about $10 billion of debt maturing in 2015 related to Dubai World’s debt restructuring of 2011.
For additional funding, the IIF expects the Dubai government to tap global capital markets in the coming years as financing from local banks is constrained by the recent limits set by the Central Bank of the UAE on bank lending to state governments and government-related-entities (GREs).
Dubai’s sovereign CDS spreads have continued to narrow to around 200 basis points (bps) most recently, as compared to 225 bps at end-2012, and 445 bps at end-2011. Additionally the government could encourage private sector participation in some of the projects (including hotels), in the form of public private partnership and could raise resources through asset sales.
Bank of America Merrill Lynch estimates that given that Expo construction work would start in 2017, fiscal room to accommodate the additional spending without jeopardising debt dynamics could have sensibly increased by that time. “The Dubai government’s policy is to cover current expenditures with current revenues, and to borrow to cover capital spending. This suggests the incremental Expo-related investment needs will likely require further borrowing
By Babu Das Augustine, Deputy Business Editor
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