Business services sector in Dubai – industry facts and trends

The UAE has seen service businesses getting more revenue now more than before. This is perhaps due to the recent focus on outsourcing services rather than employing permanent member of staff to do the job. The HSBC recently forecasted that this trend will go on regardless of the recent developments in the political climate of the western nations.

The HSBC conducts a research on global trade twice per year and the most recent research report revealed that there is likely to be trade flows between two sets of countries at any one time for 360 nations. They would ideally be exchanging goods between one another.

The latest data revealed that these activities, without regard to the direction they would take and the countries they would favor, would work well for the services sector of the UAE. The report had a more specific focus on the travel and tourism sector seeing it as having the potential to drive trade growth in the years leading to 2030.

The report showed that oil would still be as important to the economy as it had been in the past but its rate of growth would slow down.

The oil price drops of 2014 saw the UAE government place urgency to their diversification efforts a move which has had a massive pay off so far. The strategy has fostered the strengthening of other services such as financial and tourism services.

According to Ahmad Abdelaal, the regional head of corporate clients coverage MENA, countries that place a great premium on diversification, are the ones with the acumen to navigate the difficult conditions of today’s market. Abdelaal sees the UAE’s government investment in services and especially in tourism as a reflection of the government’s discerning, futuristic approach.

Last year, 58 percent of exported services were from the tourism and travel sub-sectors. This was up from 40 percent in 2000.  Additionally, HSBC predicts this amount to increase to 62 percent by 2030.

Projects such as Expo 2020 and the Transport Master Plan for Abu Dhabi are some of the initiatives are expected to drive the growth in the services sector. In particular, the Ministry of Economy in the UAE expects tours and travel growth will expand by over 5 percent per annum over the next ten years to a worth of Dh236.8 billion by 2026 which would be an increase from last year’s Dh134 billion.

The services sector has been fueled by advances in technology, increased consumer expenditure, decrease travel costs and of course, tourism. The sector should provide more opportunities for service businesses as opposed to businesses that focus on the trade of merchandise.

However, investors still look to the hydrocarbon sector for confidence in their investments even with the growing importance of the services industry. Petroleum products contribute to about 40 percent of the expected growth in goods export in the years leading to 2030.

Globally as the export of merchandise is expected to have decreased by 3 percent, HSBC forecasts that the both services and goods will create $50 trillion in revenue. However, given the unpredictability of the global politico-economic environment, the projections could also drop to somewhere close to $48 trillion as per HSBC.