Sher Value: Competing Interests

After sending off my book to the publishers the mind plans the next one; hence a book about Dubai has been a work in progress. One of the things I used to marvel at was that Dubai was creating an enabling economy, where the government sets up the infrastructure and private business flourishes creating services income for the government. Indeed, in some areas an element of aggregating competition has happened and government owned entities have been competing with the private sector. This has been all together healthy; up to a point. Now I am afraid its all getting a little too unbalanced.

In the past two years one of the major concerns seems to be the emergence of the government or semi government companies becoming competitors with the private sector. There is on the one hand a good feeling that the government is supportive and confident enough of the economy to be an active participant. However, there is a propensity for some officials to actually consider its role to be actively competitive with the private sector. As someone said that what these public sector companies are doing is to take the model from the private sector and expand it to a much larger size, re-brand it and launch it as their own.

The result is that the private sector is feeling squeezed by the pressures that come from this strategy. Some will argue that instead of the enabling model the competition that has been created is cornering the private sector to the point that their new business formations is declining. A leading retailer told me the other day that a public sector entity has been approaching foreign franchises to enter into retail franchising and felt that this was likely to create a monopolistic trend that cannot be healthy for the market.

By all means there is no doubt that the government here has been extremely supportive of the private sector and that is why this alliance has flourished. I strongly advocate that balanced competition is good but head on competition between the public sector and the private sector is likely to be counter productive. The answer is that the public sector should become a 'co-investor' with the private sector, thus taking equity positions of up to 40% of the private sector businesses and this is where the synergy works best.

This will ensure that the entrepreneurial spirit of the private sector remains intact, public sector financial strength works to create expansion, and most importantly brings together a synergistic sustainability to the market model. Thus the public sector companies should be setting up private equity operations rather than companies that compete. Just the rumor that a major public sector hotel strip is considering to enter into the theme park and attraction model creates competition that makes existing private sector developers wonder what they were doing for the past three years developing alliances in what is a very difficult market.