DUBAI SUCCESS STORY

Why Dubai? Anatomy of a business success story
This month 20,000 VIPs, officials and their entourage descend on Dubai for the annual meetings of the IMF and World Bank. Like many business executives they will be intrigued by the success of this city. So why has Dubai done so well?
United Arab Emirates: Wednesday, September 10 - 2003 at 16:00


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That Dubai is a business, economic and development success story is not difficult to establish.

In the 1990s the three fastest growing cities in the world were Dublin, Las Vegas and Dubai. This has accelerated in the 21st century with 23% population growth in Dubai in the past four years. The present real estate boom is obvious enough, particularly in the Jebel Ali-Dubai corridor.

Today Dubai is the trading, business and increasingly financial hub of the Middle East, and for parts of Africa, the CIS and even the Indian subcontinent. It's a vast hinterland for such a small place.

To step back in time a little, the success of Dubai has been very much a part of the success of the UAE. Under the leadership of Sheikh Zayed the development of the country since independence in 1971 has been peaceful, proactive and well administered.

Far from kicking out the British colonial administrators, Sheikh Zayed invited most of the key officials to stay on after independence. This avoided many of the problems of transfer of power which afflicted most newly independent nations.

Then came oil. In the 1970s oil wealth turned the UAE from a desert kingdom to a modern metropolis, and its rulers took a keen interest in this development. Not for them the idleness and corruption that afflicted some nations blest with oil wealth.

There also developed a symbiotic and friendly relationship between the local citizens and the expatriates. The labor law defined expatriate rights and created a system where both nationals and expatriates could prosper, although nationals retained majority ownership rights of companies and complete control of property.

In Dubai the late Sheikh Rashid developed his tiny emirate into a trading hub with the timely development of port infrastructure and a driving ambition to invest oil wealth back into the local economy. Again this was sharply at variance with the policy of investing oil wealth abroad pursued in many countries.

Now in the early 1990s Sheikh Rashid's legacy was passed to a triumvirate of his sons of whom the Crown Prince General Sheikh Mohammed bin Rashid Al Maktoum has emerged as the dominant figure.

A very clear policy emerged. Dubai was to become the business and commercial hub of the Middle East. The Dubai Government and the leading local families invested even more into the physical infrastructure of the emirate and pursued more and more ambitious plans.

Surprisingly, to many observers, most of them succeeded, usually better than expected. Perhaps it was because the Government could act decisively, eliminating red-tape and shortening the planning process to a simple 'build it there' decision by the CEO of Dubai Inc. as Sheikh Mohammed is often known.

One thing that was not true is the idea that Dubai borrowed money and never had to pay it back. All projects have been established on a commercial basis with their own business plans, and a quick return of capital for the next big project has always been an essential feature of Dubai's success.

Of course, funding on favorable terms has always been available. The Middle East is awash with cash from its oil wealth as the extraordinary capital ratios of its banks testify. But financially viable projects for investment have not always been available, except in Dubai.

In 1998 Dubai looked to be pausing for breath with the oil price at $10. Some people thought the completion of the tallest free-standing hotel in the world, the Burj Al Arab, and the 10th tallest commercial tower, the Emirates Towers, would mark the high point of Dubai's development.

But this was not the case. Indeed, the early years of the 21st century have seen Dubai's expansion accelerate again with the creation of a network of free zones covering almost every area of business activity.

Technology has received new focus and impetus from the Dubai Internet City and Dubai Media City. There is even a dedicated free zone for the sale of used cars which has become a big business for Dubai. And at the same time the original Jebel Ali Free Zone has become a huge concentration of business activity and continues to expand.

Now the Dubai International Financial Centre and Dubai Metals and Commodities Centre represent the next challenge for Dubai. The aim is to lever commercial and trading advantage to create new hubs for finance and commodities.

At the same time a massive government-led real estate boom has been unleashed by the decision to allow foreigners to own property in Dubai, and a state-driven expansion of the tourism sector.

Clearly the massive population expansion implied by the further expansion of Dubai requires a great deal of investment in new accommodation. And this is now underway with huge projects from the eye-catching Palm Island to skyscrapers on the man-made Dubai Marina and the villas in the hinterland.

At the same time, the infrastructure of Dubai is growing to meet population growth. For example, $4.2 billion is being spent on the Dubai International Airport, and the road network changes by the day. And the Mall of the Emirates will be the largest shopping mall outside North America. The Burj Dubai will be the tallest building in the world.

If Dubai has got its timing right - and it looks to have got it right - then all this development will happen at a time when the Middle East is undergoing an economic transformation thanks to a high oil price. This will compound the well thought out business planning of the emirate with an economic windfall.

Great cities emerge from time to time in world history, often at the epicenter of trading empires. This seems to be the destiny of Dubai.