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Dubai World Expo Win a Boost for Businesses

Published: 29th November 2013 12:07 PM  |   Last Updated: 29th November 2013 12:07 PM   |  A+A-

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Dubai's win as the first Middle Eastern city to host the World Expo scheduled for 2020 is slated to be a big boon for business, but analysts say billions of dollars spent on construction for the exhibition and speculation by investors could also lead to rising debt and an economic bubble.

The announcement Thursday that Dubai had been chosen was somewhat of a redemption for the emirate, which grabbed the world's attention in 2009 with its high-profile financial crisis that forced multi-billion dollar bailouts.

The debt squeeze was the result of heavy borrowing to fuel the city's frenetic building boom that left it bristling with futuristic skyscrapers, including the world's tallest building— the Burj Khalifa— and numerous manmade islands in the shape of palm trees and a map of the world.

As the global economy began to recover, so did Dubai's internationally connected economy, which relies heavily on transportation logistics, tourism and trade.

Fireworks greeted the news that Dubai had bested competing bids from Izmir, Turkey; Sao Paulo, Brazil; and Yekaterinburg, Russia, after three rounds of voting by delegates of the 168-nation Bureau International des Expositions in Paris.

Already one of the Mideast's premier gateways for businesses seeking a toehold in the region, Dubai could also become a more attractive destination for foreign corporations looking for a place to invest, said Moad Touhami, head of distribution at Natixis Global Asset Management.

"The win creates a virtual road-map for Dubai over the next six years. The public and private sector will in effect have a deadline to complete a number of ambitious projects," Touhami said in a statement.

Dubai planners estimate a successful Expo 2020 bid will generate $23 billion between 2015 and 2021, or 24 percent of the city's gross domestic product.

Google celebrated the win by tweaking its logo on the local version of its search page. The new blue "Doodle," as the Internet company refers to its dressed up logos, replaced one of the o's in the Google name with the Dubai bid's logo — an interconnected, geometrical Arabesque design that mirrors how Dubai leaders envision the futuristic city, as a geographical link between Europe and Asia.

The logo has been plastered all over the city for months on police cars, convenience store bags, storefronts, taxis, receipts, government buildings and even on a flag on Mount Kilimanjaro.

London-based consultancy firm Capital Economics said in a statement Dubai's economy looks set to benefit from higher investment and tourist arrivals, but expressed concerns "about the probable rise in corporate debt and potential legacy of overcapacity in the economy."

Dubai authorities say total financing for the 6-monthlong event will cost $8.4 billion. They estimate that new residential and commercial projects around the exhibition will create more than 277,000 jobs, mostly in hospitality and construction.

Fitch Ratings said in a statement that "ambitious plans create longer-term risks" such as a surge in construction that "will throw off the balance of supply and demand after the expo."

"The longer-term impact is uncertain," the credit rating agency said. "A big enough mismatch between supply and demand following the event would create the risk of another sharp drop in real estate prices, as happened in 2008 when property values fell by more than 50 percent."



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