Dragoman Digest

Key aspects of the EU’s Draghi review remain a work in progress

Europe still lacks the political will to address major competitiveness challenges

In 2024, Mario Draghi’s landmark report warned that the EU’s lack of economic competitiveness risked a “slow agony”. Two years on, few of the former Italian prime minister’s most substantive recommendations have materialised. At its core, the Draghi report’s prescriptions aim to help the EU restore its competitiveness in a global economic landscape increasingly dominated by the US and China. Despite being championed by European Commission President Ursula von der Leyen as the policy blueprint for her second term, only 15.7 percent of Draghi’s 383 recommendations had been fully implemented by July. Another 41.3 percent had only been partially implemented. The most consequential recommendations around integrating capital markets, cutting strategic dependencies, and removing barriers inside the single market have proven stubbornly elusive. More broadly, the EU has been consumed by contentious debates over internal borders and funding for Ukraine.

Progress has largely come where the Commission could act unilaterally. Internally, the EU has managed to trim red tape through omnibus simplification packages, ease access to financing, and expedite permits for clean energy projects. Yet, bridging the gap between ambition and implementation ultimately rests on states accepting deeper economic integration and relinquishing control. For instance, while European leaders such as German Chancellor Friedrich Merz regularly champion a more unified capital market, their own national ministries have stymied these attempts. With major upcoming European elections across Spain, France, and Poland likely to result in nationalist populist gains, the prospect of individual European states transferring major additional sovereign powers to Brussels appears remote.

Indonesia’s richest families look offshore

Pressure on tycoons risks adding domestic capital flight to foreign outflows

Indonesia’s wealthiest business dynasties are sending money abroad as relations with President Prabowo Subianto sour. Known locally as the “nine dragons”, these mostly ethnic Chinese billionaires have hedged before, with many moving wealth to Singapore and Hong Kong after the anti-Chinese riots of the late 1990s. The Hartonos, the banking and tobacco family whose roughly US$30 billion fortune is the country’s largest, were the exception, having rarely invested overseas. Since late 2023, they have spent at least US$1.4 billion on acquisitions abroad. One peer reportedly sold US$300 million of stocks and bonds in April and sent the proceeds to Singapore. These capital outflows coincide with foreign investors’ net sales of almost US$4 billion in Indonesian shares since January, nearly four times the 2025 total.

The Hartonos’ original aim, predating Prabowo’s October 2024 inauguration, was to diversify their revenue into other currencies. The concern now is reported friction with Prabowo’s government. To help fund its spending, the administration has asked wealthy families to buy Patriot bonds paying below-market rates. Danantara, the sovereign wealth fund Prabowo created, convened the 10 wealthiest families in August 2025 to discuss the bonds. Only the Hartonos sent a proxy, which Prabowo reportedly took as an affront. Within days, the National Awakening Party, a member of Prabowo’s ruling coalition, alleged the family had underpaid for Bank Central Asia (BCA), Indonesia’s most profitable lender, in 2002 and urged the state to reclaim the stake. Months later, family scion Victor Hartono was detained in a tax probe. Neither threat was carried through, but the episodes have been read as a reminder that even the Hartonos must fall into line.

Investing offshore, however, offers limited protection. The bulk of the Hartonos’ fortune is in businesses such as BCA and cigarette maker Djarum that cannot be relocated – their peers are similarly anchored. BCA shares fell 17 percent in 2025 and a further 18 percent this year as the imbroglio raised doubts about the bank’s future. Jakarta says it is committed to a “fair and rules-based business environment”. Yet the Hartonos – who credit their longevity to their political adaptability – are considering further foreign options.

Iran war poses major threat to traditional Dubai model

Dubai has thrived in a world of unfettered commerce and relative peace

Since the 1980s, Dubai has transformed from a regional trading outpost into one of the world’s great commercial hubs. This evolution has largely been driven by the Jebel Ali port and associated commercial free zone, which allows companies to import, assemble locally, and re-export goods outside the normal customs regime. The zone is now home to 12,000 companies that leverage the cost-effective combination of integrated maritime and air freight capacity using Jebel Ali and the nearby Al Maktoum airport. Jebel Ali accounts for more than a fifth of Dubai’s GDP. Its success has given rise to the globally admired “Dubai model”, which combines port infrastructure, free trade, and the free movement of capital, goods, and labour.

Now, however, the US-Israeli war with Iran has exposed the model’s vulnerabilities and Dubai’s dependency on Jebel Ali. The conflict’s severe disruptions to shipping in and around the Strait of Hormuz have seen Jebel Ali’s cargo volumes plunge by more than 90 percent since the start of the war. Despite Jebel Ali’s operator DP World partly cushioning the blow with its global network of 60 ports and operations in 84 countries, the war has revived longstanding questions around whether Dubai and the UAE can build viable alternatives bypassing the Strait. DP World has already committed to opening two new port terminals in Fujairah (around 120km east of Dubai) outside the Persian/Arabian Gulf on the UAE’s Gulf of Oman coast.

Yet, replicating Jebel Ali’s sophisticated ecosystem will be a tall order. Current commitments to expand Fujairah will take years to develop. Currently those commitments only equate to around half of Jebel Ali’s general cargo capacity, and may provide limited returns for Dubai with the port’s location in the Emirate of Fujairah. Fujairah is also still targetable by short-range Iranian missiles. Ultimately, the war has exposed the inherent vulnerabilities of Dubai as a trade hub, and the threat more broadly to the UAE’s much-vaunted economic diversification strategy.

Saudi Arabia is no longer having a “good war”

Riyadh’s early political and economic resilience is unravelling as Saudi confronts renewed fighting in the Red Sea

For a variety of political and geographic reasons, Saudi Arabia’s early experience of the Iran war was less deleterious than its neighbours’. Although there were several major strikes on the Kingdom, Saudi experienced markedly fewer Iranian attacks than the UAE and Kuwait. Although it retaliated against several Iranian strikes in March, Saudi Arabia notably refused US requests to use its bases and airspace for the Pentagon’s short-lived Project Freedom operation, which aimed to escort ships through the Strait of Hormuz. Another salient factor is Saudi’s relationship with Israel. Closer Israeli-Emirati ties appear to have been a factor in Iran’s extensive targeting of the UAE. Perhaps most critical to the Kingdom’s resilience was Saudi’s 1,200km East-West Pipeline, which links its eastern oil fields to the Red Sea port of Yanbu in the west. By April, the pipeline was carrying seven million barrels per day (bpd), helping restore Saudi exports to around 80 percent of prewar levels. The UAE’s Fujairah port lacks the same capacity, while other Gulf neighbours like Qatar had no means of avoiding Hormuz.

The same East-West Pipeline has now become Saudi Arabia’s greatest point of exposure. Within the past week, Riyadh has been subject to escalating attacks on two fronts. Iranian-backed Iraqi militias to its north have shut down the East-West Pipeline. Drones hit the pipeline in an area where it lacked parallel or “twinned” pipelines which are used to build redundancy. To the south, a Tehran-backed offensive led by the Houthi rebels has dislodged Yemen’s internationally recognised and Saudi-backed government from the strategic port of Mocha, shattering the existing four-year-old ceasefire. The Houthis, who had already imposed a limited blockade on Saudi shipping through the Red Sea in July, are now seeking to tighten their grip over the Bab al-Mandeb Strait and have begun targeting energy and military assets inside the Kingdom. President Trump has declined Saudi entreaties for direct military support. This may have several reasons, including depleting stocks of critical munitions, the impending US mid-terms, and bilateral non-aggression deals between the Houthis and the US.

This coordinated Iranian-backed campaign has left Riyadh in a vulnerable situation. Saudi oil exports plummeted in August to around three million bpd, their lowest level since 2013. With Riyadh viewing Houthi demands for additional concessions as extortion, Saudi Arabia looks at risk of being drawn back into another Yemeni quagmire.