Dubai's 2010 budget to focus on infrastructure

The first few months of a new year always involves uncertainty and speculation as analysts and commentators grapple with the major trends and fall-out from the preceding year.

A Dubai Chamber of Commerce and Industry analysis of the Dubai Government’s 2010 budget indicates a strong commitment to balance growth with economic welfare. This reflects the Emirate’s determination to pursue fiscal spending after a challenging 2009.

Dubai Chamber Director-General HE Eng Hamad Buamim said the budget represents a balance between the necessity to support and stimulate economic activity on the one hand, and a commitment to sound financial rules and principles of public funds management on the other.

“This sound and prudent balance will send a strong message to the business community about the seriousness of the government to push ahead with a rational budget in 2010, and ensure that the economy is on a long-standing, stable growth trajectory.

“The budget is more likely to boost investor confidence on the back of the government’s handling of the adverse situation, and in providing a timely stimulus to the overall economy of the Emirate, which is looking forward to a better trading year,” said Buamim.

It is estimated that government revenues will reach AED29.4 billion, while government spending will reach AED35.4 billion. This represents a deficit of AED6 billion (equivalent to 2% of GDP). In terms of the operating budget, the government has suggested that it will operate a surplus on its current budget (revenue minus current expenditure) of AED1.9 billion in 2010 (though the government has not provided a breakdown of how it will accomplish this surplus).

Key features of the 2010 budget are the completion of the Emirate’s infrastructure projects, fostering advancements in public and social services, and improving overall security measures:

The estimated spending on the economic sector, infrastructure and transportation (which includes the RTA, Airport Foundation, Dubai Air Wing, municipality and tourism) is AED17.45 billion;

The estimated allocation on the social sector and public services (which includes health services, education, social development and Islamic affairs) is AED8.10 billion;

The estimated expenditure on the security and justice sector (which comprises police, nationality and residence, the courts and public prosecution) is AED6.98 billion;

The estimated spending on the support, transferring and government excellence sectors is AED2.80 billion;

The estimated allocation of government investment expenditure is AED10.7 billion for the development of infrastructure projects in accordance with set plans.

The analysis concludes as follows: “It is clear that the sectoral distribution of government spending reflects the balanced strategy of the Dubai government, which focuses on achieving high rates of economic growth and upgrading the welfare of the community. It takes into account the need to continue developing the Emirate’s infrastructure and to support the economy, as well as adhering to the recommendations of the Dubai Supreme Fiscal Policy Committee.”

This bodes well for such sectors as construction and MEP in 2010. The Dubai government’s continued commitment to infrastructure – both in terms of completing existing projects and developing new ones – is a light at the end of the gloomy economic tunnel.