Mohammed Bin Rashid Housing Establishment’s expenditure of each Dirham Yielded an Added Value of 1.3 to Dubai’s Economy
Arif Almuhairi and Sami Gargash
DSC disclosed that each Dirham spent by Mohammed Bin Rashid Housing Establishment yields AED 1.3 as an added value to Dubai's economy. This was disclosed through the joint initiative between the Establishment and DSC, which is studying the economic impact of the Establishment's yearly expenditure. The study is based on assessing a multiplier, through measuring its actual expenditure shown in the cost of the completed projects, after subtracting from it the citizens' contribution in the total costs. The multiplier equals the total added value realized in economy from expenditure on the projects, divided by the actual expenditure, the average of which was assessed for the period from 2007 to 2014 at AED 1.3.
Sami Gargash, CEO of Mohammed Bin Rashid Housing Establishment, said that the Establishment is seeking to translate the vision and directives of HRH Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister and ruler of Dubai, so as to provide citizens of Dubai with good housing to satisfy the needs of living comfortably, meeting the highest standards of a decent life and achieving the utmost luxury in housing of citizens. Hence, the Establishment was keen to diversify its services on the housing level to meet the actual housing needs of citizen families. These services include providing residential lands, governmental housing and ready-made houses, expanding existing houses and granting housing loans. It was also keen to develop its organizational procedures so as to be in line with HRH Sheikh Mohammed bin Rashid Al Maktoum's directives to facilitate and expedite utilizing housing services, in a way that would make them happy. The most important part of these procedures is to give priority to smart transformation and delivering quality and smart services to our customers.
Gargash pointed out that this partnership with DSC in preparing this annual report comes as part of the Establishment's keenness to measure its performance indicators from different aspects, not to limit them to the organizational procedural aspects and feedback indicators alone. Hence the Establishment approached DSC - as a specialized, neutral consultancy that is highly professional and credible, especially in light of the technical and legal capabilities it has - to measure the economic impact of the Establishment's yearly expenditure. This allows for developing the indicators based on a comprehensive view of the economic, demographic and cultural position, as such reports require information that exceed the information provided by the Establishment for measuring the indicators for all of Dubai.
Gargash pointed out that measuring the Establishment's organizational performance in this way is considered a leading, innovative approach, which is one of the fruits of organizational integration between Dubai Government entities. He expressed his gratitude for the great support DSC has given and the cooperation it showed whether in this report, or generally in providing statistical support for the Establishment's planning processes.
Arif Al Muhairi, DSC's Executive Director, also commended this initiative. He considered that announcing such reports to the public concerning governmental performance reflects the great competitiveness that the governmental authorities have, especially as regards transparency. He added that this initiative is characterized by being creative and innovative on the level of governmental housing, as it was capable of measuring the actual performance of the Establishment on the organization operational level and its direct results. Al Muhairi also stressed that DSC is utilizing all of its capabilities to support planning processes, developing policies and making decisions. It gives first priority in this support to governmental establishments, especially on the level of initiatives, strategic projects, due to their direct connection with the implementation of Dubai Strategic Plan 2021. Moreover, DSC provides statistical support to investors, potential investors and researchers and the different stakeholders, in order to realize its vision in becoming an international statistical center that supports development in Dubai.
Al Muhairi pointed out that the information that flowed from the Establishment to DSC for the sake of preparing the study is considered an added value to DSC's database, on which developing economic and social indices is based.
The study conducted by DSC showed that the number of direct beneficiaries from the services of Mohammed Bin Rashid Housing Establishment, ever since it was founded, amounted to 12,348 customers. These services are housing grants and loans, thus the Establishment contributed to providing housing to 40% of the residents of Dubai. The Establishment also constructed 3675 ready-made houses, with an annual growth rate of 35% since 2007 till 2014. Hence, the Establishment has provided ready-made houses for about 11% of the Emirati families residing in Dubai, meaning that about 19,000 individuals benefitted from the ready-made houses the Establishment provided between 2007 and 2014.
Also, the DSC report indicated that the loans the Establishment provided to citizens between 2007 and 2014 contributed to constructing about 2,796 houses, with an average annual growth rate of 65%, thus the housing loans the Establishment granted during this period covered 8% of Emirati families in Dubai.
The actual total expenditure of Mohammed Bin Rashid Housing Establishment on the different types of housing projects between 2007 and 2014 amounted to about AED 5.452 BN according to the study. This led to enhancing construction activity in Dubai and improving the productivity of this economic activity during that period directly. Also, it increased the demand on goods and services in categories related to constructions and supporting it, such as construction materials manufacturing and trading, engineering services, construction equipment provision and lease services, which indicates the expansion of the Establishment's economic impact and its covering of other economic activities that are considered an integral and supporting part of realizing the goals of the Establishment. This enhanced the added value that the Establishment realized as regards Dubai's economy, and its exceeding the actual expenditure of the Establishment.
The data stated in DSC's report shows that the added value in today's rates of Mohammed Bin Rashid Housing Establishment achieved an average annual growth of 5.4% from 2009 to 2014, as the added value amounted to AED 41.4 M in 2008, to reach AED 55.7 MIO in 2014, with a growth rate of 34.6% than 2008.The study indicated that the Establishment's production is assessed through the cost of its services, as Mohammed Bin Rashid Housing Establishment is a governmental entity that offers its services at non-commercial prices for the beneficiary citizens. The added value that the Establishment achieves is assessed through the total employee remunerations and fixed asset deprecation, as there is no surplus since it is a governmental non-profit organization. The study indicated that in principle, there are opportunities to enhance the economic impact resulting from the Establishment's expenditure on Dubai's economy, especially in light of the projects and ambitious future plans of the Establishment.
The study pointed out that this direct contribution of Mohammed Bin Rashid Housing Establishment in the GDP of Dubai is considered modest in comparison to the economic impact resulting from the Establishment's expenditure on Dubai's economy.
The study also dealt with the sectorial expenditure of Mohammed Bin Rashid Housing Establishment and its 'indirect' contribution. It indicated that the government makes highly efficient use of the tools of the financial policy to redirect economy and impact the standard of living and income of individuals, due to the fact that the governmental service sector and its affiliated organizations are a main part of the components of a consistent economy integrated with the rest of the economic activities, which makes the economic impact of the government well felt in the rest of the economic sectors. Governmental expenditure is considered influential on economic variables in different degrees according to the form of expenditure and flexibility of demand, which is reflected in the government's financial performance and announcing 2016's budget of AED……. BN as the largest budget historically for the Government of Dubai without deficiency.
The study indicated that the average added value achieved from the expenditure of the Establishment in construction activity amounted to AED 355 M between 2007 and 2014. 2013 witnessed the highest added value of AED 621 M, equivalent to a contribution of 2.2% in the construction sector.
Also, the assessments of the study revealed that the average added value achieved from the expenditure of the Establishment in real estate activity amounted to AED 406 M between 2007 and 2014. 2014 witnessed the highest added value of AED 650 M, equivalent to a contribution of 1.1% of the total real estate and business services sector.
The study also discussed the impact of the Establishment's expenditure on other activities directly affected by the Establishment's activities. The assessments indicated in the study showed that the average added value achieved in the other economic activities amounted to AED 395 M from the Establishment's expenditure on housing between 2007 and 2014. 2013 witnessed the highest added value of AED 546 M, as housing projects require soliciting the services of other activities in economy, such as suppliers and producers of construction materials and logistic consultation services which supports construction activity and is connected to it. Hence, the expenditure of the construction activity to obtain these materials and services generates revenues and productivity for other economic activities, such as retail and wholesale business, transportation and storage and leasing equipment. Each of these activities has an added value achieved, which seeks in turn to spend a part of its revenues to renew its resources, which means the circulation of cash flow from Mohammed Bin Rashid Housing Establishment in more than one cycle and activity, realizing a production and an added value each time.