Bahrain long has long seen itself as the financial capital of the region, but is now being challenged by Dubai and Qatar. The latter two are also building huge airlines- Dubai's flag carrier, Emirates, has an order book worth $30 billion, while Qatar Airways has ordered nearly 100 planes. Gulf Air, based in less wealthy Bahrain, has found it hard to compete. Dubai has also raced ahead of Qatar and Bahrain in terms of attracting tourists- 6 million last year. But there's a new kid on the block. Abu Dhabi, the capital of the UAE, seems to be making a big push to compete with Bahrain, Qatar, and neighboring Dubai. Bankrolled by the deepest pockets in the region, it is spending tens of billions of dollars on purchasing aircraft for its own airline, Etihad, and to develop a new airport.

Abu Dhabi has just stuck its finger in Dubai's eye by clinching a deal to host a Formula 1 grand prix starting in 2009. Despite intense lobbying, Dubai lost out to Bahrain a few years ago while trying to attract the first such race in the region. It did build a track and start its own motor racing series, this hasn't been a roaring success so far. With Abu Dhabi now hosting an F1 event, Dubai has lost all hope of stealing Bahrain's race or getting one of its own, and will feel deprived of the chance to attract the attention it loves to bask in. Not only is the UAE is too small to attract two races, one could legitimately wonder whether the same is true of the region as a whole. That having been said, visitors are unlikely to come to Abu Dhabi without also stopping in Dubai, which is under two hours away by car. Dubai will thus derive at least some benefit from the hosting of a grand prix next door.

The most intriguing of Abu Dhabi's projects is Saadiyat Island, with its poorly thought out official website. After years of idle talk about developing the island, the Abu Dhabi government has decided to spend billions to make it a mixed commercial, residential and leisure project that will house 150,000 people, but also its own Louvre, and Guggenheim.

While Abu Dhabi claims this project will complement Dubai's tourism industry, rather than compete with it, it remains to be seen if this is what it actually has in mind. The two could certainly gain by joining forces, and deciding upon an informal division of labor for their respective economies. However, they seem bent on outdoing one another- as well as Bahrain and Qatar- and this author expects too much infrastructure to be built, leading to worrying times for all involved.