Professional Documents
Culture Documents
Sustainabile Urban
Development in United Arab
Emirates
By David Knezevic
Budapest 2009.
TABLE OF CONTENTS
7. Independent variable
7. Dependant variables
4.1. Geography
4.2. History
4.3. Politics
4.4. Economy
4.5. Dubai
7. Conclusion
7. Literature
1. Independent variable
We live in a world where sustainability is more important than ever before. Current
approach reaches far beyond its verbal meaning and calls to action, as it has become a wide-
ranging term which can be applied to every aspect of life and can vary from a local to a
global scale and over various time periods.
Efforts to live more sustainably should be made and usually take many dimensions,
from reorganising living conditions, revaluating economic sectors, redesigning work
practices. All these should use science to develop new technologies which can upgrade living
on Earth to a higher level, the level which will harm environment far less and will ensure
sustainable development to our descendants.
According to Bruntland Commission this is development which meets the needs of the
present without compromising the ability of future generations to meet their own needs.
Essence of this concept is within two key concepts:
• the concept of needs,
• the idea of limitations imposed by the level of technology and social organization
on the environment's ability to meet present and future needs, and to recover from
contaminations.1
2. Dependant variables
In order to successfully conduct such a research project one should look for the main
factors that have influence on independant variable. By using only legitimate literature author
will take an educated guess, based on objective indicators and unbiased information.
1
International Commission on Education for Sustainable Development Practice – Final Report – October 2008.
Analysis of these variables will be the main body of this research project and will result
in positive or negative outcome related to our Hypothesis.
4.1. Geography
The United Arab Emirates is a federation of seven states (emirates) situated in the
Soutwest Asia, on the southeast of the Arabian Peninsula on the shores of Arabian Gulf. UAE
is bordered from the north by the Arabian Gulf, and from the west by the Kingdom of Saudi
Arabia, and from the south by the Sultanate of Oman and the Kingdom of Saudi Arabia, and
from the east by the Gulf of Oman.
The capital and second largest city of the United Arab Emirates is Abu Dhabi. It is also
the country's center of political, industrial and cultural activities. The total area of the country
is 83600 Sq km, which includes an archipelago with an area about 5900 Sq km.
The total population in 1995 was 2.411.041 persons, and in oly 10 years increased up to
4.1 million. Very interesting is that over 80 per cent are expatriates.
4.2. History
Recent history of United Arab Emirates is connected to the personality of Sheikh Zayed
bin Sultan Al Nahyan, father of UAE nation. Other two very important factors were British
influence and discovery of oil reserves in 1960s.
Discovery of oil led to quick unification calls made by UAE sheikdoms. Sheikh Zayed
became ruler of Abu Dhabi in 1966 and the British started losing their oil investments and
contracts to U.S. oil companies.2
At the time of the imminent withdrawal of the British military and diplomatic
protection between 1968 and 1971, the sheikhs of the Emirates decided to form a Trucial
States Council to coordinate matters between them and took over the development office.
Shaykh Zayed had been a proactive advocate of cooperation between the Gulf states when
his emirate and a group of other small shaykhdoms had to decide on their political structure
and future statehood. In the beginnings of the Trucial States Council, Qatar and Bahrain were
expected to form part of a federal solution. When these two decided in 1971 to go alone, the
seven
Trucial States formed a federation, called the United Arab Emirates.3
4.3. Politics
The presidency and premiership of the UAE is de facto hereditary to the Al Nahyan
clan of Abu Dhabi and the Al Maktoum clan of Dubai. The President of the United Arab
Emirates and the head of state is the ruler of Abu Dhabi (Khalifa bin Zayed Al Nahyan) and
the Prime Minister and Vice President of the United Arab Emirates, is the ruler of Dubai and
the head of government (Mohammed bin Rashid Al Maktoum). The political influences and
financial obligations of the Emirates are reflected by respective positions in the Federal
government. While each Emirate still retains autonomy over own territory, a percentage of its
revenue is allocated to the UAE’s central budget.5
4.4. Economy
The UAE is one of the most developed countries in the world. This assumption is based
on various economic indicators such as GDP per capita(PPP), energy consumption per capita,
and the Human Development Index. Their GDP per capita is currently 17th in the world as
measured by the IMF; while at $168 billion in 2006, with a small population of 4 million, the
GDP of the UAE ranks second in the Cooperation Council for the Arab States of the Gulf
2
http://countrystudies.us/persian-gulf-states/85.htm
3
The United Arab Emirates: Statehood and Nation-Building in a Traditional Society, Middle East Journal, Vol. 59, No. 3
4
The United Arab Emirates: Statehood and Nation-Building in a Traditional Society, Middle East Journal, Vol. 59, No. 3
5
http://www.uaeinteract.com/government/political_system.asp
(just behind Saudi Arabia), third in the MENA region after Saudi Arabia and Iran, and 38th
worldwide.6
There are various comments and estimates about the actual growth rate of the UAE’s
Gross Domestic Product. However, all available findings indicate that it currently has one of
the fastest growing economies in the world. UAE’s economy grows around 35% annually.
Although the UAE is becoming less dependent on exploatation of natural resources as a
source of revenue,especially comparing to other GCC countries, oil and gas exports still play
an important role in the economy (25% of GDP), especially in Abu Dhabi (as it contains
approximately 9% of worlds known reserves of oil and 1,3% of worlds known gas reserves)
A massive construction and real estate boom, an expanding manufacturing base, and a
thriving services sector are helping the UAE diversify its economy. UAE has one of the
lowest unemployment rates in the world, and attracts a great number of foreign workers.
4.5. Dubai
Globally recognized as a city of inspiration and imagination, sand and sea transformed
into Heaven on Earth, and a biggest manmade development in the world, Dubai is a symbol
of 21st century and an EST capital of the World. In 2007 when estimated worth of all
construction works in progress was $360bn, Dubai’s share was between 10 and 30%,
according to various sources.
Among the other interestings it’s very important to mention that Dubai has the smallest
share of its GDP (less than 6%) contributed by oil and gas exploitation, comparing to all
other oil rich areas in the world. Mainstream of Dubai’s income comes from Real Estate and
Property development. The other contributors are: Logistics, Tourism, Financial Services,
Manufactoring etc.
Capital of Imperatives or the EST capital got its nickname with such projects as:
Burj Al Arab – Probably one of the first incredible buildings in Dubai, host to
the worlds Best Hotel.
Burj Dubai –When completed (2010), will become the world's tallest building,
Dubai World Central International Airport - When completed, will be the most
expensive and luxorious airport ever built
Palm Islands - The largest artificial islands in the world, that increased UAE’s
coastline for over 800km.
Dubai Mall - The world's largest shopping mall.
The World - Largest and probably the only man-made archipelago.
Dubailand – When completed will be the largest entertaining park (is expected
to be twice the size of Disney World)
Dubai Sports City - Will provide homes for local sports teams and may be part
of future Olympic bids.
investments in financial services and tourism. Abu Dhabi is the wealthiest emirate of the
UAE in terms of per capita income and GDP. The average net worth for Abu Dhabi's 420,000
citizens is $17 million. More than $1 trillion is invested worldwide in this city alone.
In order to make a huge step
forward and reach a success of the older brother, rulers of Abu Dhabi designed a five-
year strategic plan for municipality that communicates bold and far reaching vision, that will
be executed from 2008 till 2012.
The plan defines 8 pillars for best services:
1. Premium education, healthcare and infrastructure
2. Large empowered private sector
3. Creation of sustainable knowledge based economy
4. Optimal transparent regulatory environment
5. Continuation of strong and diverse international relationships
6. Emirate resource optimization
7. Maintenance of Abu Dhabi values, culture and heritage
8. Significant and ongoing contribution to the federation of UAE
• Will the state’s economy be stabile after exploiting all fossil fuel resources?
Dubai in 2007 was announced as a biggest shopping destination in the world, where
existence of high-end shopping malls (Ibn Battuta, Emirates Mall, Dubai Mall etc.) and
favorable tax and customs policies attracts shoppers from various parts of the globe.
Unemployment rate is very low – 2,4%, and UAE employs about 80% of foreign labor.
Inflation is forecasted to fall during 2009, but not as much as in low-income countries,
where food constitutes a dominant share of the consumption basket. The completion of new
housing units in UAE is likely to help alleviate the supply constraints that have fueled
inflation in the GCC, but inflation is expected to remain in double digits in 2009.7
• Will it be able to keep attracting foreign labor force and foreign direct investments in a
long run?
When we look at 2008 FDI in numbers and over 480 projects, creation of 87.000 new
jobs, and $36bn in capital expenditures, there is no doubt of emergence and increased
investment activity in UAE. "This report is a testament to the strategy of both the UAE and
Dubai under the directives of HH Sheikh khlaifa bin Zayed Al Nahyan, President of the UAE
and HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of
the UAE and Ruler of Dubai; a strategy of openness and diversification. The number of
projects initiated, the capital investment and jobs created in the UAE are proof of the
economic strength of the country. It is a remarkable achievement by Dubai to become the
leading city in the world for foreign direct investment and we are committed to continuing to
demonstrate the benefit of investing in Dubai and the UAE.“8
7
Regional Economic Outlook 2008 – International Monetary Fund
8
His Excellency Dr. Omar Bin Sulaiman, Governor of the Dubai International Financial Centre and Vice Chairman of the Central Bank of
the UAE
In 2008, Financial Times announced Dubai as a top FDI destination city in a world,
surpassing Shanghai and London.9 Dubai started to be recognized as a strong financial center
with sharp anti-money-laundering controls
Large government spending on job creation and infrastructure transformation increased
in 2009 despite the global economy collapse.
Summarizing all facts of UAE economy, I will notice that economic environment is
on desirable level of sustainability as FDI combined with non-oil contributors in GDP
drive economic activity.
• Will the government remain friendly tax environment once the mainstream cash flows
derived from oil and gas dry out?
The United Arab Emirates are an attractive destination in which one invest or set up
business operations favored by relative inexistance of personal and corporate taxes. Most of
the taxes, which form the significant part of an individual’s or company’s fiscal expenses in
other countries, either do not exist or are not levied in the United Arab Emirates.
Furthermore, only a few industries (oil, gas and petrochemical companies and branch offices
of foreign banks, etc.) are in subject to these taxes.
It is not expected that this approach will deviate in the medium to long term. Further,
those taxes of more general application are not demanding and the United Arab Emirates has
signed number of double taxation treaties with other countries (to restrict paying and
charging taxes to a person in connection with the same matter in the two different countries).
Countries that already signed are: France, Holland, Italy, Germany, India, China, Thailand,
Belgium, etc.10
Few weeks ago, Dubai’s government decided to permanently deduce business and
permitting fees up to 50%.11 This incentive was explained as their support to investors and
businesses during recession period.
There is no federal tax legislation in the United Arab Emirates. Every single Emirate
has its own tax law.
Overall the following taxes are not applicable in the whole country:
= Personal income tax
= Capital gain tax
= Value-added tax
9
https://www.menafn.com/qn_news_story_s.asp?StoryId=1093247379
10
Al Tamimi & Company: Taxation law in the UAE
11
http://www.government.ae/gov/en/biz/howdoi/start.jsp
= Withholding tax
= Corporate tax
Especially benefectoral for individuals and companies who have chosen to invest in
Dubai is the constantly developing legal and regulatory framework that is necessary to
provide the legal protection and clarity that property ownership and investment require in
order for the Dubai property industry to be successful. Much of this framework in the real
property area has only been in place since 2006 in Dubai, and the goverment is putting all
possible efforts to attract, satisfy and expand the umbrella of potential annd existing
investors.
By 2020, more than 60% the world’s population will live in cities. This cities already
consume 50-70% of the world’s energy. All around the globe cities are now tied up in
competition with industry for power. Climate change is predicted to increase local
temperatures, so keeping cool in a warm climate will be one of world’s most demanding
challenges.
In a strong move, the United Arab Emirates are looking to provide acceptable solution
in craftinging environmentaly friendly regulations which provide accessible and fair method
of reduction regarding our environmental impact especially in urban areas.
Motioned by Shaikh Mohammed bin Rashid Al Maktoum’s 2007. Decree, all the UAE
require all new buildings to be Green Buildings.
Green Building is the construction practice which boost the efficiency with which
buildings and appended sites use resources (energy, water, materials (including waste), the
site, and the environment) while reducing building impacts on human health and the
environment.
In Dubai and Abu Dhabi, prime objective of Green Building is to develop buildings that
are healthy places to live and work, environmentally responsible and fully profitable. These
buildings accomplish efficiency through improved: design, construction, operating
management and ultimatelly disposal.
Sustainable buildings:
• cost less to operate,
• command a premium and improved rents,
• preserve natural resources for longer,
• improve health and productivity,
• can reduce pressure on city infrastructure.
In year 2008. Dubai government announced requirements for all new projects to have
LEED (Leadership in Energy and Environmental Design) expert in development team.
Just two years ago, Sheikh Mohammed assigned WSP expert Tim Armstrong to craft
detailed Green Building Regulations. These include:
• Site Sustainability (Site Protection, Dust Suppression, Soil Erosion, Building Shading
and Orientation, etc.)
• Water Efficiency and Conservation (Water Use Reduction, Outdoor Water Use and
Water Efficient Landscapes, Grey water Use, Reduction of Wastewater, etc.)
• Energy Efficiency and Conservation (Lighting, Energy Efficiency, HVAC systems –
Heating Ventilation Air Conditioning, Elevators/Escalators, Computerized Control
Systems, Insulation, Metering, etc.)
• Material Conservation and Resource efficiency (Demolition and Construction Waste,
No Asbestos Usage, Reduced Lead Usage, Recycled materials, Thermal Insulation
Materials. Certified Wood, Based Paints Collection, Regional materials,etc.)
How serious about this issues are the UAE shows the creation of Masdar City. That’s
the world’s first Carbon-Neutral, Zero-Waste city, fully powered by renewable energy located
nearby Abu Dhabi. The city is planned to cover 6 square kilometres and will be home to
45,000 to 50,000 people and 1,500 businesses, primarily commercial and manufacturing
facilities specialising in environmentally-friendly products, and more than 60,000 workers
are expected to commute to the city daily. No car access is allowed in Masdar City.
Business and real estate development will provide the greater wealth and independence
needed to stimulate social and political advancement.
But not everybody in the region is underperforming! Still there are beacons of
development and modernity in every sense, and especially in terms of their real estate
markets. Like nowhere southern hemisphere, the United Arab Emirates,Kuwait and Israel,
show the richness in supply and understanding investors requirements..
In year 2007 Construction and Real Estate (residential, office, retail, hotels etc.) were
main contributors to Dubai’s GDP (over 50%). This number present stress and significance
the UAE sheikhdoms gave to real estate developments. The office market within the Middle
East is directly linked to the stability of the region. Currently, the GCC states are creating
large scale real estate market development and in particular, locations such as Dubai and
Muscat are growing quickly. Dubai, as an office space market has taken advantage of its
location and time zone and is marketing itself as a financial hub located between the major
financial markets of London and Tokyo.
In June 2009., among Cushman & Wakefield top three investments projects worldwide,
there was an Office center in Dubai. What made this project so special was guaranteed 10 %
Return On Investment. Not so many markets and real estate developers are keen to guarantee
to investor so much, especially not this high yield, which will at the end, not be taxed. If we
compare it with worlds top real estate markets and their volatilities (London’s yield is 5-6%),
investing in Dubai is like buying diamonds.
Dubai already has the largest supply of AAA office space in MENA followed by the
highest rent levels - $550 sqm/year. Advanced calculation that explore the real benefit of
investment in the UAE office building is following.13
Not only in office market, the UAE posses the highest amount of premium quality
property on the MENA Real Estate market, and that includes:
• Hotels – Return on investment is very high, as many high-end hotel operators (Hilton,
Ritz Carlton, Four Seasons, Atlantis, Trump Hotels, etc.) are willing to manage new
projects. Simultaneously, Arabs are establishing their own great hotel brands (Burj Al
Arab, Medina Jumeirah, etc.), which sometimes boost more profits than international
hotel chains.
• Commercial real estate – As a world’s top shopping destination, retail space in modern
shopping centers (Ibn Battuta, Emirates Mall, Dubai Mall, etc.) is worth as gold. This
establishments are usually pre-let and operate under 98-100% capacity. For
comparative reasons, cost of building in Hungary is almost the same as there
(2500e/sqm), but vacancy rate is higher (15-20%) and retail space rent is far lower
13
Annual research of emerging markets – Africa and Middle East, Cushman & Wakefield, Global Real Estate Solutions
(600e sqm), so there should be understandable why educated investors are running onto
investing opportunity in the UAE.
• Residential real estate – Because of high demand for residential space, as of huge
amount of foreign labor force working in UAE, investing in this type of property is a
good choice. Most of the property is newly built and buying process is straight. Foreign
investors really appreciate this conditions.
Overall, even with all other dependant variables on satisfactory and promising
level, there will be no fair reason for Dubai to keep the development pace if there is no
forth element. Investors go where the money is, and that is true for small individual and
especially for institutional incorporated investor. Having great return on investment
rate, low vacancy rate, high rents, high quality property, transparent ownership title
law and stabile political and tax regime are major indicators of the UAE’s high profile
and definite sustainability for a long term.
6. Conclusion
MENA region is very diverse area, as it includes some of the world’s most advanced
and some of the most closed and undeveloped economies. On the top of the first group that
stands for advanced reaches in HDI, high level of GDP and other economic indicators are
the United Arab Emirates.
Their Jewel when it comes to urbanization and FDI attractiveness is Dubai, one of
the seven Emirates located on the North part of this small Gulf state.
As this research confirmed, Dubai must be considered as one of the World Cities and
the place which represents leadership in energy and environmental design. Sustainability
of the building techniques, investment yields, regulatory and economic environment says
in favor of this leadership
.
Through this paper it was proved that:
• There are fair reasons for Dubai to keep the development pace, as investors
always go where the money is, and that is true for small individual and especially
for institutional incorporated investor. Having great return on investment rate,
low vacancy rate, high rents, high quality property, transparent ownership title
law and stabile political and tax regime are major indicators of the UAE’s high
profile and definite sustainability for a long term.
7. Literature
Annual research of emerging markets – Africa and Middle East, Cushman & Wakefield,
http://www.uaeinteract.com/government/political_system.asp
http://www.government.ae/gov/en/biz/howdoi/start.jsp
https://www.menafn.com/qn_news_story_s.asp?StoryId=1093247379