You need hard work to grow an economy

Last week saw some interesting news reports. A leading one was around Emirati Women’s Day. A raft of announcements in support of Emirati women declared the appointment, or intention to appoint, women to senior positions across the public and private sectors. Such decisions are welcome but are not enough to ensure gender equality. This requires the enactment of laws that criminalises gender discrimination and the creation of support departments for women who have been discriminated against. This is good for the economy. I have hear that women make up around 50% of the Emirati population and are therefore an important demographic.

Which brings me to technology export by Abu Dhabi to Dubai. I find this extremely exciting: The Emirate of Dubai has awarded a contract to a consortium led by Masdar, an energy solutions company that is part of Mubadala, an Abu Dhabi SWF. In a context and history that was more sibling rivalry, think Emirates Airlines versus Etihad Airlines, than commercial co-operation this increase in inter-emirate trade is a great step forward.

Of course, this is not the first time that trade and commerce strengthening behaviour has happened. A great example is Emirates Global Aluminum, another Mubadala company, that merged the aluminum operations of Abu Dhabi and Dubai.

However, the awarding of the solar energy contract by the Dubai Government to Masdar is a step forward as it is not the merging of two similar businesses but is actual service and product production from one emirate that is consumed by another emirate. I believe that the more we see in terms of inter-emirate trade the stronger the economies will be both at a local as well as a federal level.

Speaking of improving the economy, for Dubai the tourism sector is key to theirs and they have gotten good at it. The recent news about a third change of the location of the Mall of the World projects garnered a little too much cynicism. It’s a huge project. Optimising the location is not to be sneezed at. I remember the cynicism surrounding Dubai Mall. Boy where the cynics wrong. I was one of them.

Nasdaq Dubai has announced the launch of equity futures. For those who don’t know what an equity future is, it effectively allows an investor to leverage their position by up to 10 times or even more. This basically circumvents central bank rules on leverage and adds even more leverage into the equity trading system, just what we need. Especially in the financial markets, which provides high value to the economy in terms of, e.g., jobs and exports. Economists, brokers and financial markets will tell you that futures are an important hedging tool and bring new ways to mange your risk. That’s like being set up on a blind date and being told that the date has ‘a nice personality.’ Possibly true, but not the point, is it?

Far more positive is the news on a bankruptcy law that will include the decriminalisation of default on cheques. I guess the banks will have to learn to actually do their job now. I continue to find it saddening that banks do not voluntarily stop sending people to jail simply because they cannot pay. Have they no compassion?

The news on the bankruptcy law along with the news of a possible 100% foreign ownerships are the type of moves that will provide strong, sustainable support to the economy. Financial engineering makes the financial sector rich and bankrupts everyone else, simply go back to the global financial crisis of 2008.

On the other hand allowing hard working people to own the fruit of their labour and to be able simply to risk their money rather than their freedom when engaging in commerce in the UAE will be remembered as a pivotal step for our country.

This bears repeating. Sustainable economic growth comes from consistent hard work by a large percentage of the population. Gender inequality, diverting funds from developmental and value creating projects to the capital markets, unjustly jailing people, not allowing people to own what they build are all impediments to economic growth.

1 Comment

  1. Tony Abou Jawad

    Well said!

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