The United Arab Emirates is one of the more stable Gulf states and attracts a number of our clients. It has a small, wealthy population, no history of terrorism, and no sectarian tensions to speak of. The country is also supported by strong relations with the US. The UAE has a low level of democracy and transparency, but heavy oil-funded spending on security and social benefits help ensure there are few real challenges.

We ensure our clients make sound investment decisions in the UAE, using our risk-assessed total analysis model. Our teams keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. Our expert views are supported by our interactive data and forecasting. We also provide in-depth analysis on 21 of the UAE’s most important industries. Our analysts will ensure you find doing business in the UAE is made easy.

Country Risk

United Arab Emirates Country Risk

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Core Views

  • Our baseline scenario sees relatively solid growth over the coming quarters, with real GDP forecast to expand 3.9% and 4.0% in 2014 and 2015 respectively.

  • We expect Dubai to outperform Abu Dhabi, with the former benefitting from increased activity in the trade and tourism sectors, in addition to our expectation that the all-important real estate industry is now set for sustained growth.

  • Credit growth to the private sector will remain relatively slow through 2015 as commercial banks continue to increase provisioning against potential loan losses due to the debt funding cliff.

Major Forecast Changes

  • On the back of weaker oil prices, we have lowered our forecast for the UAE's fiscal surplus from 4.7% to 3.5% in 2015.

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United Arab Emirates Operational Risk Coverage (9)

United Arab Emirates Operational Risk

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The costs to businesses from property crime and organised crime are negligible. Furthermore, there are few risks facing foreign workers from developed countries, but there have been increasing concerns regarding the living and working conditions of low-wage migrants from Asia. Partly on the back of this, the UAE lags Oman, Qatar and Kuwait - its Gulf peers- countries which normally compete with the UAE for investment. The UAE receives a score of 59.2 out of 100 in the BMI Security Risks ratings, placing it fourth in the region. This score is due to its very low crime rate and correspondingly good policing and rule of law.

The UAE faces a moderate risk of terrorism due more to the country's location rather than inherent challenges. Unlike much of the region however, there have been no major cases of bombings against civilian or military targets on UAE soil. Nevertheless, the UAE could be an attractive target to...

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United Arab Emirates Crime & Security

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The UAE receives a score of 58.8 in the BMI Security Risks ratings, placing it fourth in the region. This score is due to its very low crime rate and correspondingly good policing and rule of law. The costs to businesses from property crime and organised crime are negligible. Furthermore, there are few risks facing foreign workers from developed countries, but there have been increasing concerns regarding the living and working conditions of low-wage migrants from Asia. Partly on the back of this, the UAE lags Oman, Qatar and Kuwait - its Gulf peers- countries which normally compete with the UAE for investment.

The UAE faces a moderate risk of terrorism due more to the country's location rather than inherent challenges. Unlike much of the region however, there have been no major cases of bombings against civilian or military targets on UAE soil. Nevertheless, the UAE could be an attractive target to international...

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United Arab Emirates Labour Market

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The UAE's ranking in our Labour Market Risk Index is significantly boosted by a relatively flexible workforce and very low costs of employment. While substantial migration lowers basic skills levels in the labour market, it is also the backbone of competitiveness, providing almost three quarters of the workforce and helping keep the cost of labour down.

We have given the UAE a score of 59.3 out of 100 in our Labour Market Risk Index. The country is in fourth place in the Middle East and North Africa (MENA), between its Gulf Co-operation Council (GCC) neighbour Saudi Arabia and Bahrain, and 9.4 points below the regional leader, Israel. At a global level, the UAE is 37 th, below most developed countries but ahead of Brazil, China, and India.

The UAE's high rate of urbanisation, widespread literacy and a large proportion of the working age population in employment mean the country offers a comparatively large...

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United Arab Emirates Logistics

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Overall, the UAE is a regional outperformer with regard to its logistical risks. It has relatively efficient and cheap trade procedures for importing and exporting goods, largely due to the efficient and excellent international transportation infrastructures in place. These two trading attractions ensure that its position at a geo-strategically advantageous location as a crossroads between three large land masses does not go unutilised, and ensure that the country's trading and economic forecasts look positive. For these reasons, the UAE is awarded a score of 73 out of 100 for its Logistics Risks, placing it foremost in the region and 19 th in the global rankings.

Perhaps the largest risks to investors come in the form of an impending gas crisis, which could impact fuel, electricity and water prices and availability. While the country is doing all it can to increase gas extraction capabilities and reduce its dependency on the...

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United Arab Emirates Trade & Investment

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The United Arab Emirates is one of the most attractive destinations for trade and investment in the Middle East and North Africa (MENA) region. The country possesses a well defined and implemented legislative environment, as well as strong intellectual property rights. We see little in the way of direct trade and investment risk, particularly given government support of pro-market policies.

We have given the UAE a score of 66.3 out of 100 in our Trade and Investment Risks Index, placing the country first out of the 18 countries covered in the MENA region. As one of the largest Arab economies, as well as being well-placed for trade elsewhere, the UAE offers a large market to foreign investors. Moreover, a low tax regime and relatively strong intellectual property rights help to bolster it score. Furthermore, compared with the rest of the Gulf Cooperation Council, the UAE has many incentives to foreign direct investment (FDI) and its tax and...

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United Arab Emirates Industry Coverage (21)

Autos

United Arab Emirates Autos

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BMI View: BMI is targeting 33% growth in new vehicle sales over our newly extended forecast period to 2019, to reach around 539,000 units. Our positive view on the medium-term outlook for the UAE economy continues to underpin our upbeat stance. Despite the recent fall in the global oil price, we believe that the UAE can continue to record impressive rates of growth over the coming years.

BMI remains upbeat on the outlook for new car sales across 2015, forecasting 5.1% growth, to around the 425,000 unit mark. Despite the recent fall in the global oil price, we believe that the UAE will continue to record impressive rates of growth. We forecast real GDP growth of 4.0% in 2015 and 3.8% in 2016, broadly in line with the previous...

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Commercial Banking

United Arab Emirates Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

United Arab Emirates Consumer Electronics

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BMI View: The UAE is one of the most attractive markets for consumer electronics products in the Middle East and North Africa largely due to the relatively high spending power of its citizens and the large number of well-paid expatriate workers in the country. These factors, along with population growth and high visitor numbers, will drive domestic demand for high-end and budget devices, although Dubai's trade hub status will remain an important factor in the overall growth of foreign trade in consumer electronics products.

Headline Expenditure Projections

Computer Sales: USD1.8bn in 2014 to USD2.3bn in 2018....

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Defence & Security

United Arab Emirates Defence & Security

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BMI View: The UAE's local defence industry is still in the early stages of development, and as such, domestic companies rely heavily on assistance from foreign firms to manufacture sophisticated military equipment. The armed forces' requirements for high-tech naval, air power, missile and surveillance products are therefore predominantly met through imports. However, the government - as part of its economic diversification strategy - is working to expand the local defence industrial base, and is actively encouraging joint ventures (JVs) between international companies and UAE-based entities. The country ranks in the top 15 globally for the size of its defence budget, and we expect further spending growth over our forecast period to 2019 and beyond, driven by the rising threat from Islamist militancy in the region, growing levels of...

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Food & Drink

United Arab Emirates Food & Drink

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BMI View: We maintain our bullish outlook on the UAE's economy, even with weaker oil prices. Consumer and business sentiment remains positive, underlining our particularly upbeat views on household consumption and fixed investment over the coming quarters. Following estimated real GDP growth of 3.9% in 2014, we forecast the economy to expand by 4.0% in 2015. The non-oil sector will drive GDP growth and we therefore forecast real private consumption to accelerate from 6.5% in 2014 to 7.2% in 2015.

Headline Industry Data

  • 2015 food consumption growth (local currency terms): +5.7%; compound annual growth rate (CAGR) 2014 to 2019: +7.7%.

  • 2015 per capita food consumption growth (local currency terms): +4.6%; CAGR 2014 to 2019: +5.9%.

  • ...

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Freight Transport

United Arab Emirates Freight Transport

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Our view on the UAE's freight transport sector remains overwhelmingly positive. Although our forecast for real GDP growth is for real GDP growth of 4.0% in 2015 - marginally stronger than the 3.9% we estimated for 2014, but slower than 2013's expansion of 5.2% - we expect that growth across most freight transport modes will range between 5.0% and 11.0%, driven by a trade expansion of 6.4%. Port Khalifa will be the outperformer, where we project that throughput will expand by 10.9%.The country dominates the freight transport sector in the region and its continued expansion to its ports and airports, now being matched by investment into the developing rail network, will ensure this remains the case.

Headline Industry Data

  • 2015 air freight tonnes through Dubai International Airport forecast to grow by 5.8% and to average 4.9% to 2019....

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Information Technology

United Arab Emirates Information Technology

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BMI View: Etisalat's adoption of Microsoft Lync, which can connect people across Windows and other operating systems, including mobile devices, supports BMI's view that heavy investments in next generation mobile broadband networks and the proliferation of smartphones has laid the foundations for growth in the region's enterprise mobility solutions market. We expect Microsoft's cloud-based mobility solutions to continue to be a key selling point for its software in the UAE and across the Middle East.

Headline Expenditure Projections

Computer Hardware Sales: AED8.585bn in 2014 to AED8.780bn in 2015, +2.3% in local currency terms. Growth in the corporate segment will offset stagnating growth of consumer products.

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Infrastructure

United Arab Emirates Infrastructure

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BMI View: We are maintaining our bullish forecasts for the UAE's construction sector for 2015, with our view premised on a recovery in the vitally important residential and non-residential sectors as well as an increasingly buoyant infrastructure project pipeline. Some investors remain cautious, especially given the pace of house price increases over 2014 in Dubai, although at present we do not believe there to be a risk of overheating in the market.

Factors Driving Construction Industry Growth

  • Numerous measures have been undertaken, such as rent caps and requirements of around 50% payment before property transfers hands, in order to prevent speculative buyers from overheating the residential...

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Insurance

United Arab Emirates Insurance

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BMI View: We maintain an optimistic outlook for the UAE insurance sector. Significant growth will be generated from health insurance which has become compulsory for all employees. Growth outside of health will be some way off the market's potential capacity. Positive macroeconomic figures for the country will still maintain good growth in other lines. Barriers to expansion, including low penetration levels, a fragmented market and price competition, continue to hinder companies. Moreover, the life segment is largely reliant on expatriate demand. Nevertheless, the UAE represents one of the most dynamic and stable insurance sectors in the Middle East and North Africa (MENA).

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Medical Devices

United Arab Emirates Medical Devices

Metals

United Arab Emirates Metals

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BMI View: The UAE will see rapid growth in metals consumption over the coming years after a slew of construction projects. Production growth will also be high given expansion plans by the major players and thus the UAE will remain a major metals exporter in the region.

We expect the UAE to be a key driver of metals demand on a global level as the country embarks on an infrastructure spending binge. Given our expectation for rapid growth in the economy, as well as the hosting of the World Expo 2020, steel and aluminium consumption growth will be in double digits for the period to 2018. Production growth will also be significant given plans by Emirates Global Aluminium and Emirates Steel and ensure the country maintains its position as the Gulf's largest metals exporter in the coming decade.

Booming...

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Oil & Gas

United Arab Emirates Oil & Gas

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BMI View : As oil prices have significantly decreased since last quarter, the UAE's economic diversification efforts have become that much more important to the country's long-term economic health. Indeed, the future success within the UAE's oil and gas industry will be inextricably linked to these economic diversification efforts. The most consequential economic success that the country has experienced in the last five years has been skilfully recreating the conditions of a stable investment climate, which the immediate after-effects of the global financial crisis negatively impacted. With global oil prices now lessened as a result of continued hampered recovery in major global...

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Petrochemicals

United Arab Emirates Petrochemicals

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Lower naphtha costs should help support Emirati margins in 2015, even if the impact of Abu Dhabi-based Borouge expansion drives down product prices, according to BMI's latest UAE Petrochemicals Report.

In the last four months of 2014, UAE product prices fell by 40% as markets slowed and naphtha feedstock prices declined. The situation was compounded by the commercialisation of output from the new Borouge 3 complex which includes one of the world's largest cracker units with 1.5mn tonnes per annum (tpa) of ethylene production capacity. Downstream units include 1.08mn tpa polyethylene (PE), 960,000tpa polypropylene (PP) and a 350,000tpa low density PE (LDPE) unit. The project also includes an 80,000tpa cross-linked polyethylene (XLPE) plant, which Borouge said will be a value-added complement to the 350,000tpa low-density polyethylene (LDPE) unit at the site.

  • Market pressures going forward include a...

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Pharmaceuticals & Healthcare

United Arab Emirates Pharmaceuticals & Healthcare

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BMI View: The UAE will retain its position as an attractive market for innovative drugmakers due to the population's preference for patented drugs, high per capita expenditure on pharmaceuticals and continued government investment in the healthcare sector. Pharmaceutical companies with product portfolios geared towards the treatment of chronic diseases will be provided with a rapidly expanding patient base. However, we highlight that medicine price cuts throughout the Gulf Cooperation Council states will become more frequent, dampening profit margins for innovative drugs.

Headline Expenditure Projections

  • Pharmaceuticals: AED8.14bn (USD2.22bn) in 2013 to AED8.30bn (USD2.26bn) in 2014; +2.0% in local currency and US...

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Power

United Arab Emirates Power

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BMI View: UAE's focus on expanding its nascent nuclear and solar industries will result in these two sectors making a much greater contribution to both the country's electricity capacity and generation mix over our forecast period to 2023. As such, the role of natural gas in the power mix will diminish, freeing up gas for export. Yet we remain sceptical about the ability of the country to meet its targets with the anticipated speed.

The UAE government - at both the Federal and Emirate levels - will continue to prioritise generating capacity expansion programmes, focusing on integrating a wider range of fuel sources into its electricity mix. Nuclear and renewable energy are high on the list of priorities, as the government looks to conserve domestic hydrocarbon reserves for export. Natural gas currently accounts for the...

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Real Estate

United Arab Emirates Real Estate

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BMI View : While the real estate sector in the UAE continues to outperform many other countries in the MENA region signs are beginning to show that the pace of growth in rents and value may stabilize going forward. This is both partially because of government initiatives which are being introduced to cool down property prices and a potential mismatch of supply and demand in the market.

With regard to the particular sub-sector it looks as though retail and industrial sub-sectors will continue to perform well while the office sub-sector will continue to suffer from a lingering supply...

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Retail

United Arab Emirates Retail

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BMI View: The outlook for the UAE retail sector remains bright with strong growth expected over our forecast period supported by a robust economic backdrop. Additional features that will benefit the UAE's retail market are the high levels of expatriate wealth and rising property prices, which will bode well for the positive wealth effect. Rising retail rents, however, are reducing profits for some retailers. Household spending is forecast to rise from USD32.2bn in 2015 to USD46.3bn by 2019 as incomes rise and more households move into the USD50,000-plus wage bracket.

Despite tumbling oil prices we have retained a positive economy outlook for the United Arab Emirates (UAE) owing to robust consumer confidence which will provide strong support for household spending throughout our forecast period. Real GDP increased...

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Shipping

United Arab Emirates Shipping

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The UAE is the regional giant when it comes to shipping, and we see no chance of this changing in 2015, as it continues to develop its ports. The behemoth of Jebel Ali - the largest container-handling facility between Rotterdam and Singapore - is forecast to handle a massive 14.54 twenty-foot equivalent units (TEUs) over the course of the year, on growth of 3.5%, which will be boosted by an expansion to a handling capacity of 19mn TEUs. Port Khalifa, meanwhile - only launched in 2012 - has already handled 2mn TEUs since it started operations and is expected to see more double-digit growth in 2015.

Although a relatively sluggish expansion rate in Europe will mean that throughput growth at Jebel Ali will not exceed 4.5% over the next five years, between the two facilities and ongoing investment therein the emirates will continue to dominate Gulf shipping and remain the premier transhipment destination in the region.

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Telecommunications

United Arab Emirates Telecommunications

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BMI View: The TRA's release of 800MHz LTE spectrum in the UAE will enable operators' networks to cope with rapidly rising demand for data. As content becomes an increasingly important piece of the Middle East's telecoms ecosystem, we expect operators to continue forming partnerships with and eventually move to acquire regionally focused content providers.

Key data

  • The mobile market contracted 0.7% q-o-q in Q314, but grew 8.1% y-o-y in the 12 months September 2014.

  • The fixed-line sector grew by 1.2% q-o-q in Q314 and 2.8% % y-o-y in the 12 months to September 2014.

  • The fixed broadband sector grew by 4.1% q-o-q in Q314 and 7.5% y-o-y in the 12 months to September 2014.

  • Market average mobile ARPU was flat in Q314.

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Tourism

United Arab Emirates Tourism

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BMI View: The UAE's tourism industry is strong and constantly expanding with new hotels opening throughout the country. At present the hotel industry is heavily weighted towards luxury travellers and businesspeople but companies are starting to expand further into the mid-range and budget markets. We are anticipating a rise in both inbound and outbound tourism throughout our forecast period with the Middle East continuing to provide the vast majority of inbound visitors.

In comparison to some other countries in the Middle East and North Africa (MENA) region, UAE 's tourism sector has been seen as a relatively safe bet for investors as well as international travellers and the sector continues to develop and expand. However, ongoing political instability in the area is spreading and...

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Water

United Arab Emirates Water

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We have substantially expanded our forecasts this quarter to include a number of new indicators. This data has, in turn, impacted our existing forecasts. Our extraction forecast has been upgraded following the addition of desalinated water production forecasts, a sector where we anticipate strong growth over the coming years. In addition, we have expanded our wastewater forecasts, and have good growth projections for treated wastewater, which will in turn augment the water resources available for consumption, as we anticipate treated wastewater can cater to much of the industrial and agricultural requirements, freeing up freshwater and desalinated water supplies for domestic consumers.

We expect that desalination will continue to provide the lion's share of the country's water supplies. There are concerns that ground water resources will disappear entirely...

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