Reuters discusses Dubai's spending on infrastructure

Published on 18 Dec, 2016

Observing the efforts of countries around the world to keep up their infrastructure, experts are noticing that these kinds of investments tend to pay off very well. A Reuters report from Nov. 28 shows a consulting firm ranking world nations in terms of infrastructure maintenance, and details how this kind of effort promotes long-term financial health.

Researchers from a firm called Arcadis found China to be in first place worldwide; the United States placed second. Gulf coast countries were generally in a different echelon when it comes to infrastructure spending.

According to study data, Qatar has headed the region on infrastructure spending on a per capita basis, while Saudi Arabia gets the top overall ranking, above Egypt and the Emirates, expressed by Arcadis this way: “The top ranking Middle East state was Saudi Arabia, which has seen a 47 percent increase to $364 billion (from $248 billion). Egypt came next (2016 value of $357 billion) and then the UAE (up 16 per cent from the 2014 level of $302 billion) to $351 billion. Another finding was that the UAE is spending almost 50% of its gross domestic product on infrastructure.”

Experts cite the country's 2021 Vision as a driver of this higher infrastructure investment, with the report noting the following: “This reflects the level of investment that the UAE continues to make in its real estate and infrastructure sectors as part of its 2021 Vision. It also suggests that the country is performing very well when it comes to securing a healthy return on this capital investment.”

Analysts expect that some of the future investments that UAE makes could depend on the economic conditions. “Infrastructure spending in Dubai is expected to remain buoyant amid construction activities related to the Dubai Expo 2020 and the emirate’s emergence as a major tourist hub,” Aniket Mittal, Senior Analyst at Investment Research & Analytics at Aranca, told the Gulf News Journal Monday. Mittal tracks capital markets in the Middle East region. Among other factors, Mittal said, tourism plays a central role. “Tourism is a key driver of the economy as Dubai welcomed 14.2 million tourist visitors in 2015, almost six times the emirate’s domestic population of 2.4 million,” Mittal said. “Thus, Dubai -- and the UAE, in general -- would witness higher buildup of assets on a per capita basis. Dubai has invested in projects such as the Al Maktoum Airport expansion and the Dubai Water canal, and is fast developing more tourist infrastructure.” Meanwhile, Mittal said, Abu Dhabi may face the pinch of subdued oil prices. “The decline in oil prices has brought less revenue to government coffers and created liquidity issues in the emirate’s economy,” Mittal said. “This may impact some near-term infrastructure projects.” However, long-term development plans such as the UAE Vision 2021 and Abu Dhabi Economic Vision 2030 emphasize infrastructure development, which should translate into a faster asset build up in the UAE.