Last week during my return to Canada I got the chance to stopover at Dubai and spend a couple of days. It was my first trip to the city and I had high hopes after hearing a lot of good things about the place. Despite my expectations being sky high, Dubai managed to surpass it. The enormous development taking place is mind boggling and astonishing since Dubai is hardly ever mentioned here in the West.
Actually, Dubai is the last place in the world where you would expect this to be taking place. It sits in one of the most inhospitable climates with little rainfall and summer temperatures climbing over 120 degrees. Dubai is one of the 7 states of the United Arab Emirates. The UAE is surrounded by radically conservative Islamic countries.
Dubai was built on trade. Decades ago Dubai served as a transit hub — a stopping point for merchants on trade routes connecting the Gulf, Africa and the Far East. Oil is an important component in the economy, though much less than the other emirates. In fact, it is widely believed that Dubai will run out of oil in the next decade.
Sheikh Rashid bin Said Al Maktoum, the ruler of Dubai from 1958 to 1990, became famous for the risky decisions he made in the name of business. Recognizing that trade, and not oil, would be the engine for future growth, he ordered to dredge the silted-up Dubai Creek during the 1950s to allow easier access for trading vessels. In the late 1970s he decided to build the largest man-made port in the world. Both projects required heavy borrowing but they proved extremely successful over time.
This aggressive commitment to business would be adhered to by Dubai’s subsequent rulers. They have created a liberal destination with minimal taxes and regulations that has helped attract foreign investment.
Another of Dubai’s advantages is the availability of cheap labor that predominantly comes from the Indian sub-continent. The laborers often work long hours doing grueling work for hardly $200-300 a month. But as someone who has lived in the Indian sub-continent, I can assure you that most of them are getting a better deal than they would get at their native places.
Dubai’s open-door policy with regards to foreigners has transformed it into a multicultural society with the local Emiratis composing only 10% of the population with the rest made up of expatriates of numerous nationalities, though the majority are from India. Expatriates have little hope of achieving citizenship though there is discussion taking place of granting citizenships to those who have made Dubai their residence for at least 20 years.
Dubai’s rapid growth has provided a windfall for local Emiratis and should ensure their support for the ruling family’s pro-business stance. With their support Dubai will enjoy social stability for the foreseeable future.
Along with its world-class maritime facilities, Dubai has nurtured a thriving tourism industry and a dynamic real estate sector. Some of the projects completed and under development that will enhance the growth in these sectors are:
- Palm Islands – To deal with running out of beaches, Dubai is building out more coastline. Palm trees, The World, and a crescent the size of Manhattan are taking shape off Dubai’s coast requiring the reclamation of 3.5 billion cu. meters of earth to create 1500 km of beach front where there once was only 67 km. The projects will be visible from space and house over 1.5 million people.
- Burj Al Arab – Opened in 1999 and labeled as the world’s only seven-star hotel, it symbolizes Dubai’s glitz and glamor.
- Burj Dubai – Slated to be world’s tallest building when completed in 2008. The final height is a closely guarded secret, though speculation is that it will be 800m high, out distancing the current record holder Taipei 101 by 300m. The world’s largest shopping mall is also being constructed next door.
- Dubai Land – The ultimate destination for entertainment, leisure and tourism. Expected to be three times the size of Disneyland and will be completed by the end of this decade.
- Dubai World Central International Airport – A second facility currently under construction that will have the capacity to rival Chicago’s O’Hare and London’s Heathrow.
With all these mega-projects the place is full of construction activity. In fact, 20% of the world’s industrial cranes and over 80% of the world’s dredgers are said to be in Dubai these days.
Although Dubai has already positioned itself as a major tourist destination, the emirate’s long-term goal is to increase the number of tourists from 6 million in 2005 to 15 million in 2010. During my visit I got to experience beautiful beaches, the Burj Al Arab, a cruise along the creek, a desert safari, an indoor ski slope and tax free shopping. In the coming years numerous other attractions will be available.
Being a gold bug, I should mention that Dubai is nicknamed “The City of Gold” because of its position as a huge retail market for gold. It is estimated that each year 20% of the world’s gold production passes through Dubai. The city’s popularity as a gold market is due to the fact that there are no taxes and easy import procedures. If you are planning to make a major jewelry purchase this is the best place to do it.
Having been impressed with the place, I inquired about buying an apartment which could include a residence visa. Unfortunately, property prices have sky rocketed in recent years with lots of speculators entering the market and my contrarian instincts prevent me from buying an asset when it is popular. Although currently demand is outstripping supply, it seems almost daily there is an announcement of a new property launch. I am no expert in real estate investing but I can see a significant risk of an inventory build up particularly if Dubai’s population does not grow as fast as expected.
Nonetheless Dubai is the place to be in and it will not stay off the radar screens for long. The emirate has managed to prove that a completely free society with protected property rights is the best way that a country can become prosperous. Other countries in the world better emulate the Dubai example or be left behind.