The article has a lot of one sided opinions but also a lot of truths in it. I operate a business out of there which is a captive manufacturer & supplier to a consumer facing operation. Sales are down almost 60% in the last 18 months & we have taken a decision to wind down the business as the cost advantage of manufacturing vs importing is removed due to economies of scale. To understand why my consumer lost so much sales especially when my customer was was almost in a space that usually gets impacted late in a downturn we reviewed the entire story & the picture emerged is that of several holes of the swiss cheese lining up. UAE is a consumption driven economy in the non petroleum sector. It benefited from investments, banking, trading & in no small way aviation.
In the past few years stricter regulation meant that money laundering that was happening openly has come to a stand still. This cut the earnings of not only the middle men, but also commission agents especially in the Defence space. Secondly with employment climbing in the west, taxes in the US reducing & cost of living in the west becoming cheaper than UAE, a lot of western expats have decided to move back home, pilots, bankers & the like, all which tend to be high paying jobs as well as people who also end up consuming locally. While there might be 3 million expats in the UAE the number who are consumers is far lower & this number has seen an alarming dip of in excess of 30% leaving the UAE. This has dropped consumption in the UAE & therefore the non oil GDP. VAT is too new to show the impact of this drop but in a years time a YoY collection of VAT will show this. Thirdly the entire Qatar fiasco has resulted in a softer real estate market with less income to the locals who in turn have curbed some of their spending. Last but not the least EK which for many was the sole choice for Westbound traffic from South Asia has not only out priced them selves but the European airlines are offering a better product & a quicker service with premium economy offerings & a far better FF program. (Take this from me who has dropped from Platinum to gold & soon to silver on EK). This has reduced the thru put of traffic of spending consumers & various incentives are being now offered in a bid to regain the frequent spending tourist & transient traveller. Effectively higher oil prices will help them but in reality with a push towards cleaner & greener living, they need to move to a consumption based economy with robust on shore manufacturing & the consumption needs to be inclusive & not geared to just the high end. The indigenous population is too small to consume the amount needed & by slowly having expats who spend leave they will have to come out with some incentive in the near future that is sustainable to the region. Saudi meanwhile has a population & has started the move to manufacturing & Oman is on a drive to skill development. In the case of Bahrain & UAE they will ultimately suffer as they have gotten used to the good life without having a back up plan. Over dependence on Saudi will hurt these 2 countries huge. The Rest of the GCC will pull thru in the long run especially as they have kept their expenses more reasonable.