Aside from his role at the American Business Council in Dubai, Mr. Sabouni is also engaged within organized efforts to advocate on U.S. public policy issues, and based on his unique perspective, regularly consults with American and Middle Eastern governments on issues of importance to American citizens and U.S. corporations overseas.
On November 13-15, Mr. Sabouni will participate in the 5th annual Transatlantic Economic Forum organized by the Center for Transatlantic Relations at the Johns Hopkins University, School of Advanced International Studies (SAIS) in Washington D.C.
This interview is part of a series, where we sit down with several participants of the upcoming Transatlantic Economic Forum in Washington, D.C.
The hashtag for the three-day conference is #TEForum2017.
The Emirates NBD Dubai Economy Tracker Index (DETI) was unchanged at 56.3 in August, signaling a continued expansion in the non-oil private sector. Many have cited “an increase in projects” as the main reason for growth. What are your expectations for the U.A.E. economy in coming months?
The U.A.E. economy continues to rapidly diversify away from its traditional oil-based economic structure, and as it continues to do so, indicators such as the DETI will continue to show strong figures. The American Business Council in Dubai recently hosted a breakfast to kick off the Cityscape Global real estate and investment conference that took place in Dubai last September. The breakfast panel discussions provided us with insight into projects and infrastructure plans set in place for the region in the next few years. Whether its plans for tall towers, mega malls, or the extension of metro lines, Dubai and the wider U.A.E. are working hard to build a vibrant and modern country for its citizens and millions of residents and visitors. This of course is a strong sign for the U.A.E.’s economy.
Further, upcoming mega-events such as Expo 2020 Dubai, which is expected to bring roughly 25 million visitors to Dubai, will also be significant drivers to the economy. The city is now preparing the necessary infrastructure and stretching the limits of its urban planning to absorb the expected influx of people. It is believed that Expo 2020 will not be the end of mega-events gracing the U.A.E., with rumors of a bid for the Olympics and other major global events and gatherings in the next decade.
One potential hurdle that we are paying attention to is the introduction and implementation of Excise and Value Added Tax (VAT). From sentiment to commercial impact, the American Business Council in Dubai is monitoring the tax’s short-term impact and long-term net effect to the country’s economy. An Excise Tax has already been announced and was implemented on October 1, 2017. VAT is set to be implemented on the first day of 2018. These new taxes will put pressure on inflation and will likely also place a burden on the cost of living, and indirectly, the cost of doing business. To offer some respite, there does not seem to be any indication that the
country will be introducing corporate or personal income taxes anytime soon, which will be a relief for businesses and residents as Dubai and Abu Dhabi have both gone up in the rankings for the most expensive cities to live in 2017.
Having said this, the U.A.E.’s safety and security, quality of life, connectivity, and high-end business infrastructure will continue to make it one of the top business investment destinations in the world. This was highlighted by Amazon’s recent entrance into the market. The value of the U.A.E.’s retail sector was estimated at $56.6 billion at the end of 2016 and is predicted to exceed $71 billion by 2021. The sector contributes around 11% to the country’s GDP, while Dubai’s retail and wholesale sector accounts for an even larger percentage, 29% of total GDP.
Add to all of this the U.A.E.’s long list of countries with visa-on-arrival agreements and the country’s continued emphasis on not just high-end luxury hotels, but also budget to mid-range offerings, we expect the tourism and retail sectors to continue to thrive and drive much of the rest of the country’s economic diversification plans.
In the past decade, trade between the U.A.E. and the U.S. has grown over 118%, and since 2009, the U.A.E. has been the top export market for U.S. goods in the entire Middle East and North Africa (MENA) region. What is your expectation for U.S.-U.A.E. trade relations in the future?
The U.S. and the U.A.E. has enjoyed a long and historic trade relationship, and it may be beneficial to review the past in order to anticipate the future. Only 14 years after its formation, the U.A.E. began opening its doors to international trade bodies, and the U.S. Chamber of Commerce’s international affiliate, the American Business Council in Dubai was formed in 1985. The establishment of the American Business Council represented the very first bilateral trade organization in the U.A.E., and cemented the U.S.-U.A.E. bond for generations to come.
It is well-known that the U.A.E. has one of the most open and fastest growing economies in the world. The country, which is roughly the size of South Carolina and the population of New Jersey, enjoys a trade relationship with every state of the United States. For the past eight years, the U.A.E. has been the largest buyer of U.S. exports in the Middle East and North Africa, and there does not appear to be any slowdown in this pace. The U.A.E. represents the 16th largest export market globally, contributing to the U.S.’s 3rd largest country-to-country trade surplus anywhere in the world.
The American Business Council in Dubai sees several sectors that will continue to drive economic growth and increase the size of the U.S.-U.A.E. commercial relationship. Infrastructure development and related projects across the U.A.E. continue to support billions of dollars in U.S. exports. Aeronautics and aerospace is a promising sector for the U.S. to continue to support the U.A.E. and its growing economy. In June 2017, NASA Administrator Charles Bolden visited the U.A.E. and signed an outer-space and aeronautics agreement with the U.A.E. Space Agency. This partnership aims to help develop the U.A.E. space program, and I envision many more opportunities for American companies in this industry [in the UAE]. As one recent example, Lockheed Martin announced that it will work with the U.A.E. Space Agency on a training program for students and early career professionals in space fundamentals.
In recent weeks, there have been debates about the U.S.-U.A.E. Open Skies Agreement (a bilateral agreement that eliminates government interference in the commercial decisions of air carriers about routes, capacity and pricing). Certain voices have criticized the Gulf carriers for allegedly violating the Open Skies Agreement with the U.S. by unfairly subsidizing their own airline carriers. The CEOs of Delta, United and American Airlines met with Secretary Tillerson to discuss this issue just a few weeks ago. The U.A.E. aviation sector is valued at $80 billion, or 15% of the country’s GDP. What is your take on this?
There is no question that the U.A.E. airlines are among the best in the world. Their quality, safety records, technology implementation, and high standards make them sought after by individual passengers, corporations, and cargo movers. With the U.A.E. positioned as an ideal global hub, the U.A.E. airline business is flourishing. There are many factors contributing to their success, but unfortunately, instead of increasing focus towards completion, some U.S. and European airlines have opted to push their governments to reconsider 25 years of Open Skies aviation policies and limit U.A.E. airlines’ access and expansion by government intervention.
The Open Skies agreement leads to great benefits for Americans and the Emiratis alike. Combined, U.A.E. airlines are the largest buyers of U.S.-made airplanes. At the 2013 Dubai Airshow, Emirates, Etihad, and Flydubai placed $120 billion-worth of orders for more than 300 Boeing passenger and freighter airplanes, most with GE-made engines. These orders are supporting hundreds of thousands of U.S. jobs. In fact, Emirates supported more than 104,000 American jobs and contributed $21.3 billion in revenue to the U.S. economy, including $10.5 billion to the country’s gross domestic product (GDP) and $6.4 billion of labor income in 2015.
In addition to the above-mentioned figures, Emirates Airline alone have carried over 14.7 million travelers to the U.S. since 2004, many of who would not have otherwise traveled if it were not for the direct connection. This load helps feed the United States’ domestic routes and networks.
As a significant trade stakeholder, nestled between both U.S. and U.A.E. economic interests, we at the American Business Council in Dubai feel that the Open Skies agreement should be left in place and protected. Due to the value and contribution to the U.S. (and the UAE) economy, we ask that U.S. carriers try to take better advantage of the agreement and look for means to better compete in global markets while protecting the interests of their wider economy.
In November, you will participate in the 5th annual Transatlantic Economic Forum in Washington D.C. What are the possibilities to improve cooperation between the U.A.E., U.S., and the countries of the larger Mediterranean?
There are several Middle East countries which recently have been, or are currently in, a state of turmoil and instability. Cooperation between some of these countries and the U.S. has been tested, but this has only strengthened the bonds between the U.S. and its stable, traditional allies in the region. With one of the main anchors of the U.A.E.’s foreign policy being building cooperation-based relations with all countries of the world, it’s no surprise that one of the UAE’s best foreign relationships is with the United States.
I’m very excited to be participating in the 5th annual Transatlantic Economic Forum as one of the esteemed speakers. This year the forum is bringing together government and business leaders from over 20 countries across the Mediterranean, Arabian Gulf and wider Middle East, in addition to a range of the U.S.’s think-tank and academic elite. This is the American Business Council’s first-ever involvement and I look forward to enlightening the discussion, establish new relationships, and create a deeper understanding of how we can inspire further growth in regional and transatlantic economic and political cooperation.