Dubai Expo win to boost GCC growth
Dubai, December 29, 2013
Dubai’s successful bid for the World Expo in 2020, the third largest global event after the FIFA World Cup and the Olympics. will provide UAE and GCC a healthy GDP boost, said a report.
Considering that the World Cup is being held in Qatar in 2022, the combination of both events in a reasonably short timeframe should provide considerable impetus to growth in the UAE, Qatar and the GCC as a whole, stated a report by Qatar National Bank (QNB).
Dubai beat off bids from cities in Russia, Brazil and Turkey to host the 2020 World Expo. Dubai will be the first city in the Middle East to host the Expo, which takes place every five years. World Expos attract companies, governments and international organizations to stage exhibitions and host events over a 6-month period.
The aim of the Expo is to bring people together to build connections and advance economic and cultural development across the globe. The Dubai World Expo will be based around the theme: “Connecting Minds, Creating the Future”, aiming to help pioneer new partnerships for economic growth and sustainability for the future.
The scale of the event should provide considerable economic benefits for the UAE. The government has announced plans for $8 billion of infrastructure spending for the event, including the acceleration of plans to expand the Dubai metro, rail and road networks.
A report from HSBC estimated that there would be a further $10 billion of private sector spending to cover all the costs of putting on the Expo. This stimulus will directly impact consumption and investment growth, which in turn, will create new jobs, drawing in workers and providing a further boost to consumption.
In 2020 itself, the Expo could attract up to 50 million visitors, based on the experience of previous events, providing a strong boost to tourism and consumption.
QNB Group estimates that these factors should add an average 0.5 percentage points GDP growth annually in the run up to 2020 and an additional 1 percentage point in 2020 itself as the influx of people into the country boost domestic demand.
Dubai also hopes to reap long-term benefits from the 2020 Expo by leveraging the event as a catalyst for economic transformation, stated the top Qatari lender.
The 2010 World Expo in Shanghai, China, helped transform a former-industrial area into a thriving cultural and commercial district. In Dubai, a purpose-built exhibition center is planned in the desert on the road to Abu Dhabi and close to the new Al Maktoum International Airport and Jebel Ali port, one of the world’s largest.
The Expo has the potential to help regenerate this strategic location as a center for business and trade, leading to the creation of permanent jobs and communities and “a new era of growth for the UAE based on the development of human talent”.
Dubai’s government has been promoting the event as beneficial for the entire GCC region. The increase in activity in the UAE should lead to spillover economic benefits to the rest of the region, sustaining jobs and economic growth in the GCC. In combination with the 2022 World Cup in Qatar, the GCC region looks set for a vigorous growth spurt early next decade, said the report.
There are, however, potential risks of overheating and large increase in debt related to holding such large events in relatively small economies,warned QNB.
The extra demand generated in the GCC infrastructure sector by the 2020 World Expo and the 2022 FIFA World Cup could create pressures on regional supply chains, driving up the cost of raw materials and fueling real estate and asset-price bubbles.
Higher cost of living could erode the competitiveness of these economies. The real estate market in Dubai is booming with rapid increases in property prices and rents, bringing back memories of the years leading up to the financial crisis, stated QNB in its report.
Optimism about Dubai winning the World Expo has already helped lift the stockmarket 82 per cent year to date. Similar to the previous crisis, there is a risk that exuberance related to the Expo could lead to further buildup of debt among Dubai entities, putting into question its sustainability. These risks could be mitigated through a careful management of the additional spending.
Overall, Qatar and UAE’s success in capturing two such important global events in the early 2020s bodes well for the future of the GCC.
These events can be leveraged to showcase the region to the world, helping to promote the GCC as a leading destination for business, research and development, culture and tourism. The events should provide an impetus to short-term growth and also help drive the long-term economic diversification of the region into an innovation and services hub.-TradeArabia News Service