Many a story abounds about the rapid emergence of Dubai as an economic powerhouse. In just 35 years, the country has morphed from a trading outpost to a unique duty-free shopping destination, from a beach holiday resort to one of the world’s busiest ports and dry docks, from a gold exchange to the premier financial centre it is today. Next it looks set to become a centre for higher education and a place for top quality medical care. But, with a global meltdown and credit crisis stifling the very lifeblood of economies, many — from the very learned, to the media, to the thousands of economic refugees who serve the work force and provide Dubai with its domestic sustenance — are predicting gloom for Dubai. And, while it is, perhaps, logical to ask how a desert town, often believed to have been built on oil, which is virtually uninhabitable for six months a year, can survive the worst economic crisis in history? The truth, as derived from an in-depth analysis, indicates that this is more than possible.
It seems to me that Dubai’s detractors have forgotten that the city never had a great deal of oil in the first place and that it certainly does not have enough today. The “black blood of Allah” as oil is known on the Arab streets, the good fortune that underpins all its neighbouring economies, was never Dubai’s destiny. Resourcefulness, rather than resources, has been the hallmark of Dubai. If ever there was a case of sound project management, entwined with consistent policies designed to support the dream, coupled with savvy marketing and brand-building, all brought together under one roof, it certainly is Dubai.
Dubai’s growth and evolution is well documented. How it grew from a small trading outpost 35 years ago to become a spectacle city, a virtual paradise, a bustling metropolis is also well known. What is less well known however is how canny Dubai’s leaders have been. How well have they done their SWOT (strengths, weaknesses, opportunities and threats) analysis and avoided the obvious pitfalls that can haunt all great strategies. Analysts and visitors alike cannot but be amazed at the audacity, at the efficiency and at the simplicity of what Dubai wants, what Dubai does and what Dubai gets. Over 35 years, there has been a pattern, a giant mosaic being built up stone by stone, but never faltering in its direction and never failing in its relentlessness.
Contrary to popular belief, in Dubai’s case it is not tourism or financial services or ports or logistics or any other specific industry which have made it a success. Those are mere consequences and manifestations of the Sheik’s insatiable appetite to build and build magnificently. He is a property developer par excellence. That is why the place is teeming with unparalleled golf courses, home to some of the world’s best horse races, state-of-the-art office buildings, cheeky hotel architecture, opulent shopping malls and an airline which flies virtually everywhere.
The objective of all this effort? To make it one of the most modern, happening and commercial of global cities with a targeted population of five million plus (currently less than two million).
Today’s global world has made Dubai an irresistible attraction for the adventurous and the upwardly mobile professionals who see it as a lifestyle choice. Today, some of the world’s best companies are calling Dubai home, some of the best skills are operating out of Dubai and some of the best technical and medical innovation is poised to take place here. Every year the world’s best golfers, tennis players, musicians, artists and horses parade their skills and reputations in this oasis of hope and aspiration. And where people go, business is never far away.
A good way to look at the Dubai economy is as a leveraged total return hedge fund. Thus, like all such entities in current times, the issue of paucity of credit and shrinking demand coupled with growing scepticism and undesired regulatory attention (and measures) can only serve as deterrents. But that is where the similarity ends! Its position today as the region’s financial, logistics, tourism, skills and commercial hub puts it in a fairly “hedged” state.
Citibank recently announced a multibillion-dollar commitment to Dubai as if to sound a warning to the naysayers that to dismiss Dubai is to do so at one’s own peril. After all we are not talking about any other region. We are talking about a region with close to three trillion dollar plus sovereign muscle, with project finance on unannounced projects crossing the trillion-dollar mark and a young and relatively prosperous population with demand for essentials growing by the day.
Throw into that the state of the beleaguered states (Iran, Iraq and Lebanon) — with their own demands for development and growing signs of Western-style capitalism and progress. And the clincher of them all — the millions of rich but “stateless” people (from as far afield as Nigeria to the erstwhile “Iron Curtain” states to Pakistan, India, Lebanon, Sudan and even RSA) who have made Dubai home.
In the shorter term — one will see tension, stock market collapse (which in this region is hardly an indication of any deeper economic malaise) and some panic selling of properties. We will even see some deliberate delays in certain projects since the powers that be can control the supply! But with the fiscal surpluses built over the years in the oil states in the region (and even at current prices the fiscus sitting pretty anyway), the penchant to build and develop can hardly disappear.
In the medium term what is likely to unfold is how the decks of influence and ownership may have changed. It stands to reason that the sovereigns with funds will extract their own “pound of flesh” to capitalise leveraged states (eg Dubai ) and distressed companies (eg the global banks).
Indeed the local media has been speculating about the many iconic Dubai companies which may possibly change hands as Dubai strives to extricate itself from cash-flow constraints. How does that matter? This may lead to a shift in power but that is merely political. Given Dubai’s pre-eminence as the capital city in the region, all that can only be positive. On the whole — one sees opportunities — not problems.