March 05, 2006
Dubai: Some Background
For those members of our readership who hadn't come across Dubai before the P&O deal hit the headlines, here is some basic information about the city.
If you were to arrive in Dubai and look at all the glass and concrete buildings, you might easily believe yourself at first to be in a medium-to-large American city. This is not true – the city runs along rather different lines from any in the West, and similarities are often only superficial. However, there is one important way in which Dubai resembles the United States: the business of Dubai is business.
Dubai has obviously benefited from oil directly. There is no income or personal tax here, and the government has invested massively in infrastructure. The city also benefits greatly from the oil wealth of its neighbors, whose citizens invest in the mega projects throughout the city. However, since government figured out long ago that its own hydrocarbons would be exhausted one day, it made it a point to diversify its own economy. Its largest source of revenue today is probably land sales, with construction in the city proceeding at a pace possibly unparalleled in the world, and the city’s economic growth rate last year amounting to a staggering 16 percent. The population of the city – about 1.1 million people – grows by nearly 10 percent a year, buoyed by an influx of foreign workers. While reliable figures are hard to come across, expatriates probably account for well over 90 percent of the city’s population.
A hundred years ago, Dubai grew as a trading center, drawing traders from ports like Linjah in Iran, then in decline due to government intervention there. As a stable, well-run city surrounded by chaotic neighbors, Dubai continues to benefit from turmoil and inefficiency in neighboring countries. Terrorist attacks in Saudi Arabia? Get American expatriates to Dubai, where they are safe. Concerned about the security of your investments in America after 9/11? Put the funds in Dubai. Afraid the Iranian government won’t last too long? Put the money in Dubai’s property sector. Have trouble conducting direct trade between India and Pakistan because of red tape? Ship the goods through Dubai’s port.
Dubai has four ports, at least if you counts the city’s creek, which still hosts small wooden vessels plying to Iran and other parts of the region. The big one, however, is at Jebel Ali, where the world’s largest artificial harbor was completed just over 20 years ago, with a free zone alongside. Confounding early skeptics who predicted white elephants, each has been a massive success. The city is one of the world’s ten busiest ports for container shipping and governments throughout the region have tried to copy the formula, albeit with less success.
By working closely with the government, port authorities have kept delays down to a minimum by eliminating red tape as far as possible, and using technology to speed up operations. More importantly, however, this typifies how the Dubai government has tried its best to encourage people to come to the city and spend their money there. It has used the airline Emirates to encourage visitors to stop by in the city, even enticing them with lotteries for luxury cars in the airport, itself no joke, having served some 25 million people last year. The city’s main annual event involves month-long discounts throughout the city’s innumerable shops, whether in the faux-traditional old-style markets, or in the dozens of air conditioned shopping malls. There is only one real rule in Dubai – you don’t trouble the rulers and they don’t trouble you. This has worked rather well in creating a laissez-faire economy.
The city’s main focus these days is tourism, with a massive marketing campaign drawing in over 5 million tourists a year, notably from neighboring Gulf states, India, Pakistan, England, Germany, and Russia. Alcohol is easily available – it encourages people to visit from both less liberal parts of the region and parts of the world where it is common, thus making it good for business. All of the city’s 60 kilometers of beachfront have already been used up or are under development, but large islands are being built off the coast to expand this and add new residential and tourist developments. The rulers of Dubai have long aimed to build a name – and image – for their city worldwide. This might not have happened as smoothly in North America as in Europe, seeing as their name has been spread largely by people who didn't much care for them, as opposed to an expensive marketing campaign. But Dubai is unlikely ever to languish in obscurity again – watch this space.
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It is helpful to note for our readers that Dubai's Business First, red tape banished, can-do no rubbish attitude is a vast, vast exception to the normal state of affaires in the MENA region. Which would be vampire states strangling business with ridiculous regulation which largely succeeds in creating opportunities for vicious petty underpaid theiving scum of bureaucrats to rob the ordinary citizen of his last few dinars (or dirhams, etc). As well as the average entrepreneur.
I should when I get a moment return to my WB Doing Business Database (the 2005/2006 update is a positive gold mine of business comparatives).
Posted by: The Lounsbury at March 5, 2006 11:20 PM
Dubai is also one of the most accessible "modern" cities from a lot of Africa - I suppose in competition with Cape Town or J'burg in SA, with the advantage on Dubai's part that it's actually on the way to anywhere at all. So there's a fair amount of traffic back and forth to east Africa, as well.
Posted by: Tom Scudder at March 6, 2006 01:28 AM
You have to wonder about all the canards concerning the UAE's support of Al Queda given that AQ frequently calls for attacks on Western-friendly Arab governments like this idiot just did again.
Posted by: elemental at March 6, 2006 10:10 AM
Here's an article on Dubai and the incredible speed and scale of its growth from The Observer:
I suppose the main drawbacks of the Dubai model are the lack of political freedom, including the restriction of web sites, censorship of the press etc., and the working conditions and pay of 3rd world workers; basically, it seems to be a society for the "haves".
Posted by: Carsten Agger at March 19, 2006 11:10 PM
Does anyone have any information on refuse / recycling policies in Dubai
Posted by: adam Griffin at March 24, 2006 04:49 AM
The government had a campaign to get people to waste less, but it failed miserably. Dubai's levels of waste per capita are among the world's highest. There are some recyclers here (for paper, for instance), but there's no good, organized governmental campaign.
Posted by: dubaiwalla at March 24, 2006 05:21 AM
Some 'no rubbish policy' ... ho-ho
Posted by: Nicholas Ridout at March 26, 2006 03:48 PM