October 04, 2006
Dubai, the Attraction
A quick note to draw attention to a recent arty by Roula Khalaf of FT on Dubai and the why behind its success to date: Dubai cultivates oasis of calm where Arab business life can flourish
The main thrust of the article is to highlight some of the why behind Dubai's success to date, beyond just stupid amounts of capital. Although that is a clear major condition, it is not a sufficient one as the other petro-giants of the region never managed to achieve Dubai's success (even if we mitigate our appreciation of the success by noting a definately unsustainable aspect doped by too much liquidity chasing too few quality assets).
Despite my own critical attitude towards Dubai - much is clearly illusion and can not survive, there are also clear lessons with respect to the ability of the Arab/MENA region entreprenurial classes actually being able to flourish when a moderately liberal (quite liberal for the off-shore aspects) business environment is established. I do note that some of - indeed in some ways much of Dubai's liberalism is rather Potemkin liberalism insofar as it is all of a very temporary, Enlightened Despot Suffrage quality. That being said, if one takes Dubai with a grain of salt, it does illustrate via its off-shore business services sector the degree to which Arabo-Muslim entrepreneurship is seeking a place to flourish away from the dead hand of the state, and the degree to which even in the temporary, Prince-dependent liberalism of Dubai seems vastly attractive in a world where the West is growing stupidly more hostile to Arabo-Islamic money.
Some key quotations:
"I came here for the scale and because they [the leadership] think about something and it happens," says Mr Atallah. "That's what makes Dubai the destination of choice for professionals from the region and beyond."
That is what this quote tells you.
There is a disease in the region of announcing big reforms, projects, etc. and then nothing or very little happens. Not by bad faith, necessarily, although that occurs as well, but simply a lack of follow-through. Poor planning, lack of realism about capital, human and financial necessary, etc. Unrealistic, prestige driven deadlines, the very State centered conception of economic development - one might say that the American project in Iraq was very Arab in its execution and even in its rather magical conception.
But then this American government has struck me as very Arab in its habits. I do not mean that as a compliment.
Ambitious and dynamic, Dubai has become the city of Arab yuppies, an oasis where business thrives as if unaffected by the turbulent politics around it.
While the Middle East conjures up pictures of conflict, youth unemployment and radicalism, Dubai, growing at more than 10 per cent a year, has carefully nurtured its reputation as a centre of economic opportunity and prosperity during the regional oil-driven boom.
According to government figures, non-nationals make up nearly 80 per cent of the 4.1m people living in the United Arab Emirates, which includes Dubai. The population has been growing at about 8 per cent a year.
It is quite clear, I may add that the pace and conceptualisation has outstripped real planning capacity, but the image of success and even a real degree of actual success continues to be attactive.
"For Arabs, Dubai offers an alternative to going to the US or to the west, which has become more of an issue after September 11," says Mr Atallah.
"This place separated politics from business, and it has worked extremely well: people don't drink coffee and smoke during the day, talking about politics."
Alternatives to frustration. Dubai gives the sensation that one can get ahead. Reality may be something different, but in comparison to other MENA countries, well, it is a reality even.
The quality of life too has deteriorated over the past 12 months, say residents, as salary increases fail to keep up with rising inflation, largely driven by skyrocketing office and housing rents.
See supra re capacity.
They're not building affordable housing for the non-Euro expat class. The transport infrastructure has become nightmarishly bad.
"Dubai takes advantage of the troubles of the region but it doesn't pay enough attention to the clash between local businessmen and foreigner, to the issue of identity, and it's becoming very expensive."
Abdelaziz al-Ghurair, the head of Mashreqbank, says Arab professionals are willing to pay a price for the "Dubai brand" but he acknowledges that if inflationary pressures continue, the emirate could lose its comparative advantage.
Above all as ability to save goes down and as other countries take note of the Dubai example and liberalise to a degree (although some are clealry taking a Statist Dirigiste lesson, thinking they can spend like Dubai. A false lesson, but....)
But perhaps the key quote:
"People in the region aspire to live and be part of life and if there is a city or a country that puts the main building blocks to satisfy such a dream, it finds that people are waiting," says Mohammed Alabbar, Emaar's chairman and one of the Dubai ruler's top advisers.
This is very, very true.
Mr Alabbar says that is what Dubai aims to achieve. "We hope to become a platform to send talent out as well. A lot of people are coming to work in our organisation and hope that the term 'Dubai-trained' can help them go back to their countries and contribute," he says.
For all that I see problems with Dubai trained in terms of slip "alien setting."
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1. Inflationary pressures have already lost the emirate its competitive advantage. Certain internationals are already decamping to Bahrain and elsewhere, despite personal entreaties by the rulers. Such is the concern that "cheap" commercial real estate projects are under consideration - only who can really trust anything built cheap will stay cheap, given the situation with other rent "protected" developments? (Knowledge Village). Other emirates are also benefitting from Dubai's spiralling prices, in particular Ras Al Khaimah.
2. What this article doesn't touch on is the enormous, and growing, dissatifaction among locals with the (intrusive presence of) the expat population, and with their own rulers. The former can safely be expressed, and is frequently. The latter cannot of course be expressed publicly/mediawise. One of the few ways it can be expressed is by a return to Islamism, which is what is starting to show here. Small signs, but significant ones. We've seen the dramatic wahhabisation of Sharjah over the past decade, and the increasing islamicisation of Bahrain. Dubai has the same Shia/Iran issue (albeit to a lesser extent than Manama) but the sympathies and the pressures are also detectable here. This is not a stable region politically. There have been coups in other emirates in recent years, as well as elsewhere in the GCC (RAK, Oman, Qatar).
3. As for "Dubai-trained" - that's an absolute fucking joke. In terms of local universities, it's going to take at least another generation of reform in primary and secondary education to make them credible. In terms of international universities, think diploma mill.
Posted by: secretdubai at October 6, 2006 07:42 PM
Ahem, last item first: As for "Dubai-trained" - that's an absolute fucking joke. In terms of local universities, it's going to take at least another generation of reform in primary and secondary education to make them credible. In terms of international universities, think diploma mill.
Not educated, trained. As in business experience. Not training in the sense of education, but training in the sense of having worked there.
As for losing / lost its competitive advantage, certainly there are clear signs it is slipping, but for very network dependent kinds of business, e.g. finance, it clearly still is competitive. It has to take care, however.
Now certainly on the issue of backlash, obviously that is a real issue. However, it strikes me UAE is better situated than Bahrain, where a severe internal divide - Shi'a versus Sunni and within Sunni between neo-Wahhabite and traditionalism - represents a long-term threat to stability.
Which is not to say that massive amounts of cash can forever paper over tensions, but I am not pessimistic about Dubai near term from a political perspective. Still too much cash to oil the wheels.
Posted by: The Lounsbury at October 6, 2006 07:52 PM