Few places in the world better symbolise the power and opportunities of globalisation than Dubai. Without large oil reserves, our future depends on our success as a trading hub and our strategic position in the world. We are an open society not just in economic terms but in the make-up of our population. More than 200 nationalities live and work in harmony within our borders.
Given our location, heritage and ambitions, the shape of global trade is crucial to our future success. We need to understand not just the major trends but the details which put the bigger picture in focus. Too often, and in defiance of traditional economic thinking, trade is seen in terms of winners and losers. The true picture, as a new authoritative report on the trade between the countries of the Gulf Cooperation Council and the rest of world highlights, is more balanced.
The report, of course, captures the astonishing rise in economic power of the emerging markets over the last two decades. In 1987, they made up just 16 per cent of global GDP. Today, they account for 31 per cent, a figure forecasted to rise to 41 per cent by 2015. The skyline, and not just the bottom-line, illustrates the remarkable shift underway. In 1989, the ten tallest buildings were all in North America. Today seven are in Asia, with the tallest in Dubai.
As you might expect, the GCC's trade experience underlines this mega-trend. Thirty years ago, 85 per cent of the GCC's trade was with OECD members, a group of countries dominated by the developed economies of North America and Europe. By 2009 the emerging markets' share was 45 per cent.
This switch, however, does not mean trade with the developed world has fallen. It has not. It is just that its annual growth of five per cent cannot keep up with the boom in trade with the economies of Asia and Africa. The underlying figures also show that OECD countries will remain an important trading partner, especially in knowledge-intensive sectors such as education and healthcare. For investment, too, it will continue to be an attractive destination for capital from the Gulf, particularly for risk averse funds.
It is easy to caricature trade with the new economic powerhouses of the East as a transfer of raw materials to them with low-cost manufactured goods flowing the other way. In this scenario, the smartphone in your pocket is the perfect symbol of the new global economy. Again, it is only a partial picture. It is not only goods but also capital which is flowing out of an increasingly prosperous Asia. A third of Dubai's 2009 sovereign bond issue was taken up by Asian investors.
Across Asia, too, the purchasing power and aspirations of a rising middle class are starting to be felt. Walk through Dubai Airport's terminal three and you will see just how popular luxury brands are with Chinese and Indian tourists. In an extraordinarily short period of time, they have developed the same tastes and love of travel as their counterparts across the world.
China, in particular, figures large in any discussion of global trade trends. The country's growing need for oil — 70 per cent of which will come from the Gulf states by 2015 — creates a long-term co-dependence between the Middle and the Far East.
But to focus narrowly on such raw data is, once again, to miss the nuanced picture. India, culturally, is the GCC's closest neighbour and there are more than six million Indians living in the Gulf. Indian merchants pre-date the British presence here.
Such deep historical and cultural affinity will be an important driver for bilateral trade.
Nor can we afford to ignore the south when we consider future trends. Trade between the GCC and Africa is rising, from an admittedly low base, by an impressive 11 per cent per annum. Strong economic growth and increased political stability within Africa is likely to continue this performance.
There are, however, two further factors which could have an important impact on the links between Africa and the Gulf region. The natural fit between the continent's abundant and under-used arable land and the GCC's declared aim of securing food security for its citizens seems certain to be an important driver of future investment and trade.
Africa also has the youngest and fastest-urbanising population in the world. GCC firms are already investing in these smaller, faster-growing consumer markets. The potential for low cost manufacturing in Africa is also likely to be increasingly significant.
In a world changing more rapidly than ever, it is becoming more and more difficult to predict the future. We can, however, be certain that as prosperity continues to spread, global trade will keep expanding. We can be also be confident that, through our location, our open attitude and continued investment, Dubai is ideally placed to help the increased flow of goods, services and people among the north, south, east and west.
(The author is CEO of Dubai Foreign Investment Office. A new report from the Economist Intelligence Unit — ‘GCC Trade and Investment Flows; the Emerging Market Surge' — examines trade between the Gulf Cooperation Council and the rest of the world. Read the full report from the EIU at >www.eiu.com/sponsor/falcon/south-south )
