Market traders at the Iranian Spice Souk in Dubai.  Stephen Lock  /  The National
Market traders at the Iranian Spice Souk in Dubai. Stephen Lock / The National

UAE economy to gain $13bn from lifting of Iran sanctions, IMF predicts



The IMF forecasts that US$13 billion will be added to the UAE’s economy by the ending of sanctions on Iran, as trade between the two countries steps up between now and 2018.

That is equivalent to a 1 per cent gain in real GDP growth each year over the next three years, the IMF said in its annual report on the country’s economy.

In 2013, Iran accounted for 12 per cent of the UAE’s non-oil exports, valued at $12bn that year. Most of this came in the form of re-exports traded through Dubai’s Jebel Ali Port.

The potential boost comes amid more bearish forecasts from IMF for economic growth in the Emirates. It predicts that the UAE economy will grow by 3.0 per cent this year, and 3.1 per cent next year.

That’s considerably slower than its previous estimate of growth of 4.5 per cent for this year – and has been revised down three times in nine months in light of the size of the impact of low oil prices, and the magnitude of UAE government spending cuts.

The IMF also said this week that the UAE’s planned spending cuts would shave 1 per cent off GDP growth each year until 2020.

However, the impact from the lifting of sanctions could be much bigger as Iranian tourists make their way back into Dubai’s hotels.

The number of hotel guests from Iran almost halved in the wake of sanctions, with 4,000 visiting in 2013, down from 8,000 in 2010.

The IMF estimates that about a quarter of all trade between the two countries has been permanently lost.

“The UAE is well positioned to benefit from an opening of the Iran market by serving as a transshipment point for renewed trade activity,” the IMF said.

Ahmed Badr, regional chief executive at investment bank Renaissance Capital, said: “Dubai and the UAE will most likely be the trade gateway to Iran because the country has the ports and infrastructure. It is the easiest place for multinationals to locate in order to invest in Iran.

“In finance, trade, banking, real estate investment – it will all be managed from Dubai. If you are a multinational, it makes sense geographically and economically to manage your business in Iran from Dubai.”

This means that the city will register an even bigger influx of expats, Mr Badr said, which will benefit banking and real estate.

But investment from Iranians, who have had their money trapped in the country since its citizens were frozen out of the international Swift money transfer system, is also likely to make a big contribution to Dubai’s economy.

“We are going to see a lot of investment coming out of Iran coming into Dubai as well,” Mr Badr said. “There is a lot of money in Iran – there was no flight of capital or pre-movement of capital before sanctions. So it makes sense that over the first two years you will see this money entering Dubai. Dubai banks and real estate will benefit from the extra liquidity,” he said. “Dubai is regarded as a safe haven within the region – especially when it comes to real estate investment.”

The Middle East Economic Digest estimates that there are about $167bn of planned or under way energy projects that will become available to international investors after the lifting of sanctions. These include the construction of a $4.5bn gas project off Kish island, and a $3.2bn oil refinery in the west of Iran.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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6 UNDERGROUND

Director: Michael Bay

Stars: Ryan Reynolds, Adria Arjona, Dave Franco

2.5 / 5 stars

What can you do?

Document everything immediately; including dates, times, locations and witnesses

Seek professional advice from a legal expert

You can report an incident to HR or an immediate supervisor

You can use the Ministry of Human Resources and Emiratisation’s dedicated hotline

In criminal cases, you can contact the police for additional support

WHAT IS A BLACK HOLE?

1. Black holes are objects whose gravity is so strong not even light can escape their pull

2. They can be created when massive stars collapse under their own weight

3. Large black holes can also be formed when smaller ones collide and merge

4. The biggest black holes lurk at the centre of many galaxies, including our own

5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed

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UPI facts

More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions

The biog

Full name: Aisha Abdulqader Saeed

Age: 34

Emirate: Dubai

Favourite quote: "No one has ever become poor by giving"

Squid Game season two

Director: Hwang Dong-hyuk 

Stars:  Lee Jung-jae, Wi Ha-joon and Lee Byung-hun

Rating: 4.5/5

How to register as a donor

1) Organ donors can register on the Hayat app, run by the Ministry of Health and Prevention

2) There are about 11,000 patients in the country in need of organ transplants

3) People must be over 21. Emiratis and residents can register. 

4) The campaign uses the hashtag  #donate_hope

UAE currency: the story behind the money in your pockets
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Brief scores:

Manchester United 4

Young 13', Mata 28', Lukaku 42', Rashford 82'

Fulham 1

Kamara 67' (pen),

Red card: Anguissa (68')

Man of the match: Juan Mata (Man Utd)