Oasis in the Middle East

If there was an Oasis in the Middle East, Dubai must be it. I just returned from that place a couple of days back. Frankly, it was partly to settle my dilemma of career choice. The reason I said it was only partly is because I had already kindda made up my mind even before I left for that place. Hence my role kindda changed from what I was originally meant ot set out for. Michael understood very well and I thanked him for that. Yet at the same time I had to fulfill my obligation to him. It was a short four days but it was more than enough for us to have some R&R, understand the market and the overall situation for starting a business, the culture, and potential growth areas of that country. Being very similar to my hometown, it was easy to compare and understand. Nevertheless, I tried to keep my opinions as independant as possible.

I probably will try to give a brief overview of what I observed there but will not go into the details. Most of what I blog here are based on observations and what I heard or read about. Should they really be of specific interest, I would advise you to seek professional opinions from within the market itself. As much as they may or may not deny, Dubai is still a very closed economy. Controlled mainly by the Sheiks (hope I spelt it correctly), the local Arabs, many rules and regulations exist to protect their interests. In fact, I personally felt it was a little excessive. Dubai entails great potential to become a major financial and trading hub and the country and its people experience much excess liquidity in cash than most other countries by a grotesque proportion. The government however is not like the democratic free trade nations hence if there is to be a company registered in Dubai, the name of a UA local is required. And this is the tricky part, this sponsor could demand a hefty amount just to let you register the company using his name. On top of that, he is supposed to retain majority share, meaning he may own 51% of the company and the remaining 49% split amoung the rest of the shareholders. Now try to understand that he may not contribute in any professional way not to mention he already did not pay for any of the capital. So this is one way the UA nationals get a free ride. Besides this, most property are not allowed to be owned by foreigners hence only UA nationals own land and rent them at amazingly hefty prices which many businessmen are more than willing to pay due to the exciting market opportunities. Rental however, as a standard in Dubai, has to be paid a year in advance plus security deposit. On top of all these costs and other registration legal and administrative costs, to obtain labour, most of the time you would need to hunt for your own foreign workers because contractors are not readily available. So say I would like to hire 5 labourers from India (cheap, nearby and they speak English), I would need to pay 20,000 Durhams per head, equivalent to probably USD5,500 per head amounting to about USD27,5 00, for their VISAs alone. This is excluding other expenses and their salaries. On top of that, they have [passes a minimum education of O'levels. Now that is not very common for India, and less common for labourers. So even to start a small business, it is VERY VERY expensive. So why is everyone still rushing there?

Dubai is a hub. They do not produce their own oil nor any other natural resource. It is however, according to history, a trading hub for the whole Middle East to Asia, mainly via India. It has hence developed also, into a financial hub. The UAE is hence targetting to develop it into a financial and trading hub for a much larger region. It would in fact probably become a world city if not for the fact that it would never totally be democratic. This however does not seem to be a problem anymore ever since we have seen the rise of China. Ok so this is what I have observed the moment I stepped off the plane. LOTS and LOTS and LOTS of commercials brochures, booths banners and all kinds of other marketing materials promoting properties in Dubai. When we finally really drove around the city, we realised the immensity of the number of developments. As it is, Dubai isalready very well developed and very metropolitan. Yet the number of developments going on would seem to at least quadruple the number of existing buildings. This would be the Shanghai of the Middle East. In fact I was told that most of the buildings I have seen were built on ly in the last 2-6 years. And buildings typically will reach full occupancy and be commercially functional and viable within two years. All the malls and commercial buildings are fully booked way before the construction is even finished hence to have an office space there, you would probably need to hunt for new developments before construction and even those may be booked. So we observed the construction boom there, thereafter would be the real estate boom and the lifestyle and retail boom. But it is already booming, now how intense do you want this boom to become? Would it go bust? Frankly, I am a little sceptical at the kind of growth Dubai is preparing itself for. Yet if nothing goes wrong, this is going to be an amazing economic power for a very small state. I brought home some materials from there which would be helpful to analyse the individual industries better but then again that would be more for personal interest and may be too redundant to blog it all down. Oh well...

Conclusion of the trip? WE HAVE TO ENTER THE DUBAI MARKET... but since it is so costly, cheaper entry strategies were propsed to first test the market and reduce margins in the beginning but also to reduce risk and commitment. Michael was happy so was I and I think he found an amazing partner. The next few months would be exciting for him. I guess I'll be keeping in touch and seeing his company grow.

Oh did I mention that the growth of the whole Dubai is probably driven by Indians? Yah they are the ones really running the businesses and all there. Not the UA nationals. These expatriates would leave if they earned enough and they could. However, I have not sensed any desire by the country to instill a sense of nationality and belonging to these expats. If no organic control of outflow of such talents is established, there would be no control of the outflow of cash and competencies as well. Yet this is no democratic country and it is strictly a Muslim nation.

Myself, I have other plans now... I feel a little more settled though not fully ready to start the kind of life I would. I have a few days more to prep myself. Synovate, seems like a great company. Strangely, I am not as excited as I would imagine myself to be, but I am definitely looking forward to it.