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Viva Las Dubai?
Does the UAE metropolis show the path to economic development?
 

 
North London on a mild winter's afternoon might feel like a long way from Dubai, but in late 2006 a particular dimension to globalization is blurring all such geographical distinctions: clearly visible from the intercity railway tracks coming into King's Cross mainline station is the glittering new Emirates Stadium, named after a luxury airline with its headquarters in what is arguably the most economically dynamic city in the Middle East.

And it's not just north London which is undergoing a process of "Dubaization." Up in Liverpool, the iconic Anfield-based Liverpool FC are close to finalizing their own buyout at the hands of Dubai International Capital, an investment arm of Dubai Holding and an entity belonging to no less than the ruler of Dubai himself, Sheikh Mohammed bin Rashid Al-Maktoum. At the other end of Europe, Istanbul's Manhattan-style Levent business district will soon host the tallest buildings in the metropolis of around 11 million people: Dubai Towers, two pencil-thin structures being erected at the cost of $500 million.

Everywhere -- from the Land of the Free, where the Dubai-based Emaar Properties acquired U.S. homebuilding behemoth John Laing Homes via a $1.05 billion cash transfer in June 2006, to the Axis of Evil, where the same company are engaging in property ventures worth hundreds of millions of dollars with both private sector partners and the Syrian government -- the mantra is the same: Dubai. States, local governments, individuals: all want a piece of the Dubai pie.

Indeed, the economic vibrancy of Dubai has made such a strong impression globally that some are beginning to talk of a "Dubai model" that poor countries can leverage to catapult themselves into first-world levels of affluence.

The story runs something like this: for much of its history, Dubai made a relatively small imprint on the global economy. Then under the visionary leadership of the Al-Maktoum dynasty, Dubai turned itself into an economic powerhouse through reinventing itself as a hub for international finance, business, tourism and transport, approximately in accordance with the stated aim of Sheikh Rashid Bin Saeed Al-Maktoum, Emir of Dubai from 1990 until his death earlier this year, of transforming Dubai into "The Hong Kong of the Middle East."

Through concerted efforts towards this goal, it is argued, Dubai has attracted sufficient capital investment to construct what appears to be a phenomenal physical infrastructure. In Jebel Ali port, it vaunts the largest man-man harbor in the world; the new Jebel Ali airport, currently under construction and with an anticipated finish date of 2008, is expected to become the world's busiest, with projected passenger numbers of 120 million by around 2030.

Dubai's hotel capacity, expanding at a phenomenal rate, includes the world's tallest such building, the Burj Al-Arab, a self-styled "seven star" establishment with the reputation of being the last word in decadent luxury, if not taste. The city's credentials as a major player in corporate office space are being augmented by developments such as Business Bay, a new commercial district which will comprise 500 skyscrapers built on artificial land.

As a shopping and leisure destination, Dubai has tried to position itself as a global leader through a multi-faceted strategy. Firstly, it has utilized its historic cachet in sectors such as gold to project an image of long-standing commercial acumen. Secondly, it has taken advantage of its zero tax regime by throwing up countless malls -- the Dubai Mall, presently being built, will be the world's largest when completed -- in a brazen attempt to remake the city as a shopper's paradise.

Added into this mix is the plentiful supply of hotels and rental apartments, relatively clean beaches, year-round sunshine and an increasing number of tourist attractions, from the implausible Ski Dubai -- the world's largest indoor ski resort -- to the Burj Dubai tower, an $8 billion project containing around 2 million square meters of prime real estate. Another gargantuan initiative presently being constructed - it is estimated that 15-25 percent of the world's cranes can be currently found in Dubai -- Burj Dubai will be the tallest edifice on the face of the earth when it is finished around the turn of 2009.

The results of all this looks impressive: Dubai's GDP per capita levels are those of a fully-developed country; oil revenues account for less than 6 percent of the emirate's total GDP; economic growth per annum is pushing double digits. But is Dubai a realistic, or even a desirable, model for emulation?

 
There are several factors that would suggest that would suggest otherwise. Firstly, Dubai does possess a collection of advantages that, when put together, make it virtually unique. Its position as an established port city is difficult to better: located in an oil-rich region, but with relative proximity to the new manufacturing centers of the rest of Asia, particularly the burgeoning market of the Indian sub-continent.

Dubai's location also yields a number of other distinct modalities. While oil is no longer a major income stream for the emirate, it did give Dubai a massive head start in terms of economic development: as recently as 1985, oil accounted for around half of the Dubai's GDP. Moreover, Dubai is part of the UAE, which is one of the most energy-endowed nations on earth. Neighboring Abu Dhabi has oil and gas reserves that even today are estimated to last for another 100 years.

The geographical and cultural proximity of Dubai to other petrodollar states in the region has also granted it particular advantages as part of the fallout from 9/11: in an era of massive hikes in oil prices, the Persian Gulf region is experiencing sensational levels of liquidity, but the United States and, to a lesser extent, Europe -- the traditional destinations for spare Middle Eastern cash -- are now decidedly cooler towards receiving it.

Consequently, Dubai is now awash with literally hundreds of billions of dollars in surplus funds from nearby Arabic- and Persian-speaking states that would in other times have found a home in New York or Zurich.

However, there also exist a series of problems with the Dubai model that render it not just hard to copy, but potentially unmanageable.

The first is that the much-vaunted transfer of technology and skills from expatriates to locals is simply not happening. This is a common problem in many oil-rich Middle Eastern states where there are certain restrictions on foreign ownership of companies: while expatriates are forced to have their venture in joint registration at least in part with a partner possessing local nationality, the de facto reality is that the latter has little if any input into the day-to-day running of the business. While this may be the desired outcome for all parties involved, it does nothing for boosting the indigenous skills base.

The second major problem is that the Dubai model is contingent to an important degree on almost fantastical levels of exploitation of foreign labor at the lower levels of the economy. This is apparent on at least two levels: the purely economic, and the social.

Much of Dubai's construction frenzy has been made possible by the fact that most of the laborers are destitute citizens from India, Pakistan and other South Asian countries who are remunerated appallingly. For example, the Burj Dubai development detailed above -- including the world's tallest building, no less -- is being put together by laborers earning around $4 per day. Their salaries and working conditions have already inspired riots, including at the construction site of Dubai Mall in March 2006.

Meanwhile, in social terms, the Dubai model's lack of flexibility is likely to severely undermine it owing to the issue that dare not speak its name: citizenship. Not only do those who are foreign-born have nil prospect of ever becoming a citizen of the UAE, but even people who are born and raised in the Emirates -- including Dubai -- cannot become citizens unless they are of Emirati parentage.

In the long term, this is a huge weakness given that around 80-90 percent of the UAE workforce -- including that of Dubai -- is composed of citizens of countries other than the UAE. These people have no attachment to Dubai other than the economic and the sentimental. While this is perhaps more easily ignored in periods of significant economic expansion, in leaner times it is inconceivable that a large immigrant population without access to elementary social security and medical care will not present the potential for pan-societal tumult.

A third questionable element of the Dubai equation is its environmental feasibility. While much of the city has been thrown up in an era of arguably greater awareness of green issues, the modern city has been designed as if global warming did not exist. Cars dominate a U.S.-style cityscape that is massively inefficient in terms of energy, and while the first phase of a new multi-billion dollar four-line metro project is scheduled to be operational by May 2009, this represents no more than a relatively small fraction of potential trips.

Similarly, Dubai's development strategy - based as it is on cheap mass international transport -- is highly vulnerable to any environmental or economic shocks. Even relatively small rises in the cost of jet fuel -- rises which are being mooted by governments the world over in response to global warming and which will make long distance air travel considerably less affordable -- could make Dubai a much less attractive prospect for shopping sprees, let alone indoor skiing.

Finally, and perhaps most disturbingly, the Dubai development model seems to make little allowance for spiritual and cultural sustenance: seemingly designed by Mickey Mouse, it is a city which is the last word in ersatz. Dubai is where fake Eiffel Towers vie for their place in a disjointed urban milieu with artificial ski slopes, oversize theme parks and gigantic cathedrals of consumption.

Predictably for a place where the cranes of the Saudi Binladin Group loom large across the landscape, Dubai represents perhaps a pinnacle in the realization of a certain form of soulless materialism. With similar inevitability, it is renowned as the prostitution and human trafficking capital of the Middle East, with amongst the most open soliciting and exploitation of women and children found anywhere in the world.

In terms of statistics, Dubai's economic development is undoubtedly impressive: any city state with $100 billion of projects currently being built or starting construction imminently cannot -- at least in one sense -- be said to have fallen short in the scale of its ambition.

But outside a handful of Persian Gulf Dubai-wannabees such as other emirates in the UAE and perhaps Doha and Muscat, the Dubai model will be very difficult to replicate. And even if the conditions should arise to make emulation possible, those undertaking such a task should have no illusions about the technical, social, environmental, cultural and spiritual limitations of the paradigm; in trying to make their entities more like Dubai, they may simply end up making them resemble Las Vegas.

 

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