Dubai still has the ring of the Arabian nights about it. As recently as the early 20th century, it was no more than a village living off fishing and trading pearls. With all due respect to this ancient culture, one could say that until oil was found in 1966, the country was as backwater-ish as a place could be.
The subsequent oil boom happened on the back of the West’s rapid economic expansion after World War II, and it brought incredible wealth to Dubai. After becoming independent from Great Britain in 1971, Dubai allied with five other former Emirates to form the United Arab Emirates.
Today, Dubai is a dream-like city of world records. Skyscrapers, luxury hotels, shopping malls: Dubai offers everything and anything, most of which comes in a Premium De-Luxe XXL format.
There is hardly a corner of Dubai where there isn’t any construction work going on. Even the sea is used to create real estate, with land reclamation projects in Dubai outdoing anything that has ever been done in other parts of the world. Dubai wants to grow its economic base – a desire that didn’t quite come voluntarily but instead was born out of the fact that in a few years, the country’s oil reserves will be depleted.
Dubai is now the New York of the Arab world, having captured the premier position among Arab financial centres. In an ongoing quest to catapult the country to the front pages of the world’s business and property magazines, it is also trying to grow its involvement in international sport, tax exile relocation (for those tired of the cold winter weather in Switzerland), and jet-set tourism.
The Al-Makhtoum dynasty has ruled over the country since 1833, giving the country remarkable political stability. The country is indeed successful at attracting new residents, many of which first came as tourists and then – impressed by the world-class infrastructure and the high standard of life – came back to put their roots down…
Among all the superlatives that Dubai is renowned for, one has so far been overlooked. It’s the effect that the general affluence and decadence has had on the waistlines of its residents.
Just like in the USA and Europe, the downside of mass affluence seems to lie in the occurrence of obesity. In most affluent societies this has grown to epidemic-like proportion. According to estimates of experts, roughly one third of all children in the Gulf region are now well above the weight that a kid of their age should be.
Just like in Western countries, childrens’ birthdays are now often celebrated with Coca Cola and fries. The resulting habits lead to an entire generation growing up with eating habits that are detrimental to good health. The risk of diabetes and heart disease is sky-rocketing in Dubai, as well as in other countries in the region.
Diabetes has already reached the state of an epidemic in the Arab region, with some kids being diagnosed with the disease as early as their 10th birthday. In a country where fuel costs 10 pence per litre, a lack of exercise only adds to the problem. Diabetes II is already the 4th biggest cause of death in the Arab world.
From an investor’s point of view, it seems that investments into diabetes-related companies should continue to do well. This is a business that only relatively few companies are well-established in.
Moreover, the growth in region’s collective waistline highlights the growth opportunities still available for Western companies in the relatively untapped markets of Arabia – coffee shops. These are not exactly a growth business in theUK. There seems to be a Starbucks, Costa Coffee or CaféNero on just about every street corner. It’s a mature market. And that’s why one chain is looking further a field.
Costa Coffee now has 18 stores in Dubai and in the coming four years it plans to open not less than 10 new stores each year. In the entire North African region, it plans to expand from currently 75 stores to 300 stores over the next few years. At currently 700 stores in total, this will become a market large enough to influence Costa Coffee’s profits – and the value of the entire firm.
Costa isn’t listed directly on the stock market. It is owned by the pubs and hotels group, Whitbread. But there are other UK and European firms also aiming to profit from Dubai’s astounding growth rates. Speculative investors may not need to buy Arab equities to gain exposure to the UAE:
** Balfour Beatty (BBY), the construction company, has a strong position in this fast-growing market. In fact, it’s recently secured the £400m contract to build Burj Mall, the world’s largest shopping centre.
** WSP Plc (WSH) is a multi-disciplined consultant firm operating in the building industry in 50 countries worldwide – and has recently merged with UAE company, PHB Group to get in on the Dubai growth trend.
** Hallin Marine (HMS) – recently admitted to the AIM market in London – is involved in the provision of subsea solutions to the oil and gas industry in South East Asia, China… and the Middle East. Of course, it’s early days with this stock but it could one day turn out to be an interesting way to speculate on the great oil bull market.
We haven’t studied any of these stocks in detail and we are certainly not recommending you buy them. These details simply give you an idea of the scope for UK-listed exposure to Dubai.
The Arab region has excellent demographics, with one of the world’s youngest populations. What’s more, some Arab countries have started to attract foreign workers as well as investors. In Dubai, 90% of the population consists of expatriates. The place feels a bit like London or New York, and with a friendly tax regime and lots of sunshine more expatriates are bound to move in.
New legislation will now make it possible for the first time for foreigners to own the majority of a Dubai-based company. The government clearly aims to bring entrepreneurs into the country. And perhaps most important of al, Dubai is going to open its own international stock exchange, the DIFX, in September.
That has to be a great thing for people wishing to invest directly into Dubai and the United Arab Emirates.