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Assessing the Impact of Coronavirus Spread on Business Setup in Dubai

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How COVID19 (Coronavirus) impacted business in Dubai

The widespread global breakout and circulation of the emerging ‘Novel Coronavirus’ (2019-ncov) has economically impacted international businesses, markets, and regional enterprises in mainland China. More importantly, the dynamics of international flight and travel between the United Arab Emirates (UAE) and contaminated regions in China has disrupted very discrete sectors of the UAE economy.

Although coronavirus’s impact on flight-travel restrictions have been restricted to populations in China, the massive loss of incoming tourists and workers will directly impact business establishment and key industries in the UAE. For business setup in Dubai, this means a temporary blow on critical inflowing UAE industries.

Due to the hysteria-effect of the novel coronavirus on global markets, and the UAE positioned as China’s #1 trade partner, general local business setup in the UAE has worsened for the first time in over a decade.

Due to coronavirus’s threat towards the Gulf’s pre-existing trade and tourism, malls have drastically decreased in consumer activity and cash inflow, according to regional reports in Abu Dhabi and Dubai.

In addition to Dubai’s disrupted status quo on malls and large shopping centers, it’s important to acknowledge that China is Dubai’s biggest spender on international tourism, the leading exporter of clothing and textiles, and a key player in the global supply chain.

With China’s significant role in tourism sectors, export systems, and the emerging 2020 supply chain, the ncov outbreak could be three to four times larger than the $40 billion impact from SARS virus in 2003.

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Further, the operating conditions in the UAE have already deteriorated in the previous month (January) as recognized by IHS Markit. Following analysis of UAE’s Purchasing Managers’ Index, the country’s non-oil private sector dropped to 49.3, declining from an original threshold of 50.

Ultimately, this critical decline in UAE’s national non-oil sector signifies a potentially dangerous downward trend for emerging businesses in Dubai due to weakening economic activity and purchasing indexes.

Perhaps, most importantly, the novel coronavirus has already negatively disrupted employment levels in UAE firms. Firms are attempting to reduce employment in order to streamline costs which, when coupled with the impact of ncov, will significantly minimize profit margins in the next quarter.

Finally, the most protruding industry sectors, such as global tourism and consumer-level luxury goods, will be swayed the most by coronavirus’s economic ripple effects.

In 2019, Chinese shoppers made up nearly 40 percent of the global market for luxury goods bought internationally and within China. The critical rise in tour cancellations by free-spending Chinese with high purchasing power have resulted in net loss for retailers in Dubai.

Ultimately, the novel coronavirus has generated unprecedented negative impacts on global markets, firms, and companies in the UAE, creating a never-before-seen situation of declining local economies, decreasing employment, and dwindling tourist sectors.

Although Dubai has emerged as the epicenter of purchasing power in the UAE, the 2019-2020 novel coronavirus outbreak creates a precarious situation for business leaders to setup under current conditions.