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Dubai is increasingly becoming a safe haven for investors from Saudi Arabia. These investors are putting funds in property, the stock market and businesses at large.
According to the May issue of the Arabic version of Forbes magazine, some 30,000 Saudi nationals invested a hefty $15 billion in the Dubai stock market in 2006.
Saudis are second only to UAE nationals among investors in the bourse. The emergence of initial public offerings (IPOs) over the last two years served to attract a larger number of Saudi investors to the UAE at large and Dubai in particular.
Saudis, like other Gulf Cooperation Council (GCC) nationals, like to invest in property. There is an old saying in this part of the world suggesting that properties do get sick but that they never die. Not surprisingly, some 343 Saudi nationals owned property in Dubai in 2006. Together, they invested some $1.7 billion on buying and selling property in Dubai last year.
Certainly, some valid reasons explain why Saudis choose Dubai. These include absence of ownership restrictions on GCC nationals and availability of liquidity among investors interested in trading in property.
Saudi firms are big players in Dubai Media City. Of the 1,213 companies operating in the purpose-built facility, about eight per cent, or 108, are Saudi Arabian. Saudi businesses include the Middle East Broadcasting, better known as MBC TV, which was relocated from London to Dubai.
Quoting statistics from the Department of Tourism and Commerce Marketing, Forbes reported that more than half a million Saudi nationals stayed in Dubai hotels in 2006. Some 1.1 million Saudis stopped by Dubai airport in the same year.
In 2005, Saudi investors possessed some 4,176 permits to set up business activities in Dubai. The number comprised 43 per cent of permits extended to GCC investors. More than 80 per cent of the permits were related to setting up commercial activities followed only by industrial undertakings.
The influx of Saudi investors to Dubai stems from hard facts. In reality, all such reasons focus on one main thing, namely the dynamism of Dubai's economy. Nationals of more than 100 countries work and live in Dubai.
Initiatives such as the Dubai Strategic Plan (DSP) further consolidate potentials available in the emirate. Released in February, DSP covers the period 2007 to 2015. Among other things, DSP aims at increasing Dubai's gross national product (GDP) from $37 billion in 2005 to $108 billion by 2015.
Also, the plan calls for raising annual per capita income from $33,000 in 2005 to $44,000 in 2015. Such desirable results are based on the GDP growing at an average of 11 per cent per annum.
Saudi investments in Dubai fall in line with GCC's common market project, in turn requiring unrestricted access for factors of production. To be sure, GCC states are not yet required to adhere to the principles of common market, as the scheme must be implemented by the start of 2008. Nevertheless, Dubai opted to open up to GCC investors as part of efforts to strengthen its competitive advantage. Likewise, Bahrain applies the common market principles for fellow GCC nationals for the same reasons.
Money leaving the kingdom is not necessarily good news for Saudi authorities. Funds invested at home could help in addressing economic challenges such as creating jobs for nationals. Investors cannot be blamed, though, for looking for the best possible return from their investments.
The writer is a Member of Parliament in Bahrain.
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