INTERVIEW: MENA partner at EY Matthew Benson lays out economic benefits of UAE’s ‘Expo effect’

Matthew Benson, a partner covering the Middle East and North Africa at auditing and consulting firm EY. (Illustration: Luis Grañena)
Updated 21 April 2019
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INTERVIEW: MENA partner at EY Matthew Benson lays out economic benefits of UAE’s ‘Expo effect’

  • A total investment of 40.1 billion dirhams will create more than 900,000 “job years” at Dubai Expo 2020
  • In 18 months’ time the doors will open on the event

DUBAI: "I’m having a fairly busy life at the moment," said Matthew Benson, a partner covering the Middle East and North Africa at auditing and consulting firm EY.
He had just presented the findings of a two-year-long study into one of the most high-profile events in the near half-century history of the UAE — the looming Expo 2020 trade fair that the country, and Dubai in particular, expects will be an economic and developmental game-changer.
“I think it’s going to be an amazing event,” Benson said, a couple of days after he had unveiled his report and had had time to assess reactions to the heavily researched work.
The headline findings were eye-catching, confirming that the UAE would get huge economic benefit from the event. Dubai won the right to stage the show back in 2013, to much fanfare, and the clock has been counting down ever since.
In 18 months’ time the doors will open on the event, which has been called the biggest gathering in the history of the Arab people. Some 25 million visits are expected to be made to the site in south Dubai, putting the UAE even more firmly on the map as a global destination.
The report by EY — formerly known as Ernst & Young — was commissioned by the organizers of the show to analyze the financial and economic benefits of the event, and confidently concluded that the Expo would indeed be a step-change in the country’s history.
In the 17-year period since the event was won up until 2031 — a decade after it closes its doors — EY found that some 122.6 billion dirhams ($33.4 billion) of gross value will be added to the UAE economy. At its peak, the Expo’s contribution will be equivalent to 1.5 percent of the UAE’s annual GDP.
A total investment of 40.1 billion dirhams will create more than 900,000 “job years” — nearly 50,000 new jobs per year — and leave the permanent legacy of a brand new mini-city between Dubai and the capital Abu Dhabi. The city, dubbed “District 2020,” will be a mixed-use conurbation with offices, residential, exhibition space and leisure facilities.
“It’ll be a new city south of Dubai, and the economic benefit will go on long beyond that time frame (2031) as well … You might get more economic benefit but that has not been included in this model,” said Benson.

What the UAE has done is they had a vision and knew that (they) had to do something bold. 

Matthew Benson

However, some skeptics have argued that those benefits are not guaranteed. They point to the ambitious figure for visits — 25 million in a six-month period, with the Dubai government forecasting 20 million tourists per annum by 2020.
A viable “legacy” — a challenge faced by other Expos and big events such as the Olympics and FIFA World Cup — is not assured, the critics argue.
In addition, they point to EY’s reliance on official statistics to reach its conclusions, rather than building in other data and scenarios.
Benson, who has been working for the firm since 2013 as head of “transactional diligence” for the MENA region — rebutted those criticisms in detail.
“(The report) focuses on the impact of Expo 2020 and not on the development of the wider economy. So it’s maybe a fine distinction, but it’s based on a set of assumptions around Expo and how that would impact the economy.
“This is a forward-looking study. Really we focused on Expo and where that fits in the wider economy. It’s a macroeconomic model focusing on the incremental effects only, so it’s about what Expo has brought to the economy. It doesn’t focus on other investments that are happening. If Expo didn’t happen, this economic impact wouldn’t happen either,” he explained.
He clarified that the study — based on data from the Expo organizers and several other Dubai government departments like the transport and tourism authorities and official statistics department — is not a cost-benefit analysis of the event, weighing financial gains and returns.
“There are certain other questions that (the report) does not answer and which are not part of the aim of the study. he said.
In the early phase of the Expo project — which is currently nearing completion — the EY team expects a big boost to the UAE’s construction industry, the so-called “Expo effect,” in the UAE’s otherwise sluggish economy. “There are people working on the construction site and the Expo is happening. The impact is there. There are multiple effects going on, maybe counterbalancing the effect or maybe increasing it. Economies go through cycles over time as well,” Benson said.
When the event is up and running, the benefit will come from the spending by visitors at the site as well as in the wider Dubai economy, and also through the multiplier effect of employees specially engaged for the event.
When the curtain falls in April 2021, the Expo site will transform into District 2020, with its own internal economy. Two multinationals — German engineering giant Siemens and consultancy Accenture — have already said they will set up there, and Benson expects others to follow. The Dubai Exhibition Center will give the emirate even more capacity for the big forums and conferences, in which it is already a regional market leader.

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BIO

BORN

•Chichester, Sussex, UK, 1973

EDUCATION

•University of Bristol, mathematics

•Duke’s Fuqua School of Business, North Carolina, US

•Goethe Business School, Frankfurt, Germany

CAREER

•With EY since graduation, working in UK, Germany and Dubai

•Currently partner and transactional diligence leaderfor MENA

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The site will be “repurposed” — made ready for its long-term role — but that will not involve knocking down or removing many of the extravagant pavilions and facilities currently in place or under construction. The “construction” element of the final phase is relatively small, at 1.2 billion dirhams out of a total economic impact of 62 billion dirhams, Benson said.
In the detailed technical report which accompanied the study, EY set out the assumptions on which its findings are based. Some look optimistic, others not.
For example, a projected figure of 1.5 million local and 1.1 million international visitors for the new exhibition center, and that 55 percent of the center’s total available area will be used, look like conservative calculations in the legacy phase.
On the other hand, an 85 percent occupancy for offices, retail and food and beverage developments, in a city already bulging with such facilities, looks ambitious, as does a projected 80 percent occupancy for hotels in an already hospitality-rich environment.
And who can say with any certainty that local visitors — who make up the bulk of the total projected visitor numbers — will really stay an average of 2.4 days at the Expo, or that international visitors will visit for five days?
Similarly, the EY report says with certainty that “all Expo 2020 assets are assumed to be sold off” by the end of the event, but that forecast is surely subject to market vagaries.
Are the findings of the EY report too optimistic? “I don’t really have a view on whether they’re optimistic or not. I’d rather say they’re based on a set of assumptions as presented, and they have been modeled through,” said Benson.
Did the EY team look at the track record of previous Expos? “We haven’t focused on comparing this directly with those, on the basis that this is the first in this part of the world. Previous ones were in more mature parts of the world. For example Shanghai in 2010 was a much bigger economy,” Benson explained.
The report was also criticized for being based only on “best case scenario” figures prepared by the government, with no alternative factors — such as geopolitical or economic volatility — modeled through.
“It’s difficult to say what’s ‘best case’ and what’s not. This is all forward-looking and there’s no real range on outcomes. This is in the middle of what you’d expect to happen — it could be higher than this, it could be lower than this. The assumptions are set out as best we can. We have not assumed any real variation in the economic outlook. We haven’t taken a view on the UAE economy or the global economy. It’s based on today,” Benson said.
He did allow, however, that economic fluctuations might affect the outcome, although EY economists did not model these factors in preparing the report.
Benson, who spends a lot of time in Saudi Arabia as part of the EY team advising on various aspects of policymaking, believes that the Kingdom can learn and benefit from the Expo experience as it gets on with its own program of big events and projects.
“I think there’s a lot that Saudi Arabia is doing really well, but one can always learn. Saudi Arabia is already doing big projects and events. NEOM is one, but there are others like Formula E, the recent golf event and others. They’re much shorter than a six-month event like Expo. But they’re already doing quite a lot,” he said.
Benson expects the Expo will permanently change the way the world looks at the Middle East.
“What the UAE has done is they had a vision and knew that (they) had to do something bold,” he said. “It’s not just organic, it’s a big splash, a big push. It’s consistent with their vision to do something profound for Dubai.”


After one year in office, Pakistan's economy remains government’s biggest challenge

Updated 20 August 2019
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After one year in office, Pakistan's economy remains government’s biggest challenge

  • Pakistan’s stocks declined by 32 percent and its currency lost its value by 29 percent in a year
  • Economist say Pakistan has got major support from the Arab world due to its new political leadership

KARACHI: Pakistan’s ongoing economic turmoil has overshadowed the ruling Pakistan Tehreek-e-Insaf (PTI) party’s first anniversary celebrations, as analysts and traders point out that the country’s stock market has witnessed a decline of 32 percent, the national currency has lost its value by 29 percent and the bullion market price has escalated by 60 percent within the last one year.
Prime Minister Imran Khan assumed the country’s top political office on August 18, 2018, promising wide-ranging reforms and economic turnaround. However, his administration found itself struggling against tough economic challenges that included mounting current account and fiscal deficits.
The situation triggered tremendous uncertainty in the stock exchange, making it one of the worst performing markets in Asia. The bench mark KSE 100 index declined from 42,446 points on August 17, 2018, to 28,764 points on August 16, 2019, recording a staggering decline of 32 percent.
“The situation of the market became worse as it remained in the grip of negative sentiments in the backdrop of economic conditions fueled by current account deficit, interest rate hike, and currency devaluations,” Muhammad Faizan Munshey, head of foreign institutional sales at Next Capital, told Arab News.
The stock market on Monday rebounded and gained 798 points to close at 29,562. “The worst condition is almost over and the market is expected to rebound in the future as well,” he added.
Analyst believe that the country’s bourse has bottomed out and the prices are expected to rebound, provided that the growth drivers remain in place. “The government must focus on growth drivers, such as exports, job creation and tax collections, for economic recovery,” Samiullah Tariq, director research at Arif Habib Limited, told Arab News.
During the PTI’s first year in office, the country devalued its currency by almost 29 percent from Rs123.50 against a dollar to Rs159.10 in the interbank market.
Analyst believe the rupee devaluation was done to fulfil the conditions of the International Monetary Fund (IMF) before Islamabad could avail $6 billion bailout package. “There were two reasons cited for the rupee devaluation: the first was the IMF’s free-float requirement and the second was that the Pakistani rupee was overvalued and needed stabilization,” Zafar Paracha, general secretary of Exchange Companies Association of Pakistan, told Arab News.
Pakistan’s central bank governor in June this year tried to dispel the impression that the state bank was reluctant to intervene in the currency market due to the IMF conditions, saying that the country had “adopted a market-based exchange rate system.”
According to Paracha, however, the policy shift took place after the Pak rupee hit a high of 165 against the dollar, saying “it was only then that they [the State Bank and the IMF] realized that free float was not suitable for our market and decided to adopt the market-based exchange rate mechanism instead.”
He added that the lull in the currency market was due to Eid al-Adha related foreign currency inflows. “I don’t see any steps taken to stabilize the economy. Pakistan’s economy does not need ad hoc measures. The change of finance ministers also resulted in a complete shift in policies earlier this year. What the country requires at the moment, however, are carefully crafted stabilization policies that are kept in place for five to ten years.”
Much like the stock and currency markets, the bullion market also experienced volatility as the rate of gold hit Rs89,000 per tola – or approximately 12 grams – on Saturday before cooling down to Rs88,000 on Monday. This rate stood at Rs54,750 a year earlier.
Bullion traders expect the volatility to continue in the market, saying that there has also been a decline in the purchasing power of consumers. “We expect that gold would hit Rs100,000 in the foreseeable future,” Haji Haroon Rasheed Chand, president of All Sindh Saraf Jewelers Association, told Arab News.
Under the circumstances, senior economist say that the country will have to take tough measures with harsh economic and political implications. “Last year, around one million people lost their jobs, poverty increased because the prices of goods jacked up and the growth rate of our economy slowed down,” Dr Hafeez Pasha, former finance minister, told Arab News, adding that “hard times are going to end.”
“Due to our new leader, we have got major support from the Arab world,” he said. “The good thing is that our Arab friends supported the country when it was in dire need and we must thank them for what they have done for us.”
“We received $3 billion from Saudi Arabia and they also extended us the deferred oil payment facility that began in July this year. The United Arab Emirates also deposited $2 billion and Qatar extended $500 million as well,” he added.