Capital market reforms must for successful diversification: Essa Kazim

Kazim was speaking on the need for diversification of Middle Eastern economies in the light of the growing challenges posed by changing times at an energy series conference entitled: "Oil, Economic Change and the Business Sector in the Middle East" organized by Chatham House in London last week.

This event discussed the new strategies needed to meet the governments' terms on crucial issues and also examined how reforms of the national infrastructures would affect the region's business environment.

Kazim said that regional governments should be committed to capital market reforms to achieve successful diversification objectives. Pointing to the rapidly growing market capitalisation of the UAE's stock markets, he said they are testimony to what reforms can achieve.

DFM's market capitalisation rose from $14.3 billion in 2003 to $28.6 billion this year. Trading volumes have also witnessed a phenomenal growth during the last three years rising from $267 million in 2001 to cross the $9.6 billion mark by the end of November this year.

Kazim admitted that the Middle East's GDP has been highly dependent on oil as it accounted for more than 75 per cent of government revenues in the region. However, he emphasized that it would not be enough to deal with the growing demands for employment and better public goods and services.

It has thus become imperative that regional governments prioritise their policies focusing on privatisation, liberalisation and deregulation of major service sectors and emphasise on attracting foreign direct investment, he added.

Citing Dubai as a major success story in diversification in the region, he underlined the various initiatives undertaken by the Emirate. "Dubai's experiment with cluster economies began with the Dubai Internet City (DIC), which has been a runaway success. Launched in 2000, DIC has over 5,500 knowledge workers today, while Dubai Media City houses most of the global leading media companies," said Kazim.

He gave credit to the underlying vision of the leadership of Dubai that has constantly directed the government to play the role of facilitator and partner of the private sector. The government has taken significant strides in reforming its services, including launching excellence awards to record performers within the government, encouraged e-government initiatives and created the Economic Council, business groups and sub-sector groups to facilitate Dubai's business sector.

The opening up of Dubai's real estate sector is also significantly impacting the diversification drive of the emirate. Between 2004 and 2010, investments in Dubai's real estate sector would cross over $50 billion. This is working as a strong support to the emirate's tourism promotion plans as it targets drawing 15 million guests by 2010, a three-fold increase over 2003, he said.

"A two-track strategy is proposed for the Dubai economy covering 2001-2005. The first track aims to consolidate the economy's major components, including trade, transport, tourism and real estate sectors. The second track involves the promotion of the new economy, consisting of the IT-based and multi-media activities, e-commerce and capital intensive, high-tech manufacturing and services," Kazim said.

"Dubai's long-term strategy is to sustain high income level and maintain prosperity, while also raising considerably the general productivity levels of the population over the next 15 to 20 years," he added.

The conference was organized by Chatham house (The Royal Institute of International Affairs), a globally renowned centre of excellence for research, analysis and discussion of international affairs. The institute helps organisations to be at the forefront of developments in an ever-changing and increasingly complex world. Its commercial conference programme has gained an unparalleled reputation for staging international events that meet the needs of the business community for topical analysis of emerging issues.