Trip report - Dubai

Just to set the scene, Dubai is one of seven emirates comprising the United Arab Emirates, a sovereign state; the UAE is a federation of jurisdictions with some local laws and economic regulations, and some central ones.  As everyone I met stressed, the UAE is not Saudi Arabia is not Egypt is not Syria is not Iraq is not Iran…and so forth. Although they may look the same from a Western distance, they are very different places. They have some common problems – most notably a regional political situation that spills over everything – and quite different demographics and local politics internally. 

 
The overwhelming impression is not just cranes everywhere, but that most of what is being built is luxury apartments, hotels or shopping malls.  The Emirates have about 2.7 million residents…and 8 million tourists a year.  The tourists cycle through a modern airport that is itself a huge shopping mall.  (The airport has solved the duty-free liquor problem – i.e. that liquids are forbidden on board - by checking it in for you so you can pick it up at your destination’s baggage claim.) 

There’s a feeling of commercial ebullience in the air: Real estate prices are going up, stock prices are going up, building are going up… and it’s all paid for by oil prices that are going up.

Yet there’s unease, too. Dubai is not just a casino-less Las Vegas on the beach; it’s also a capitalist edifice plopped into a culture that considers interest payments immoral. 

What will happen when all the buildings under construction are finished and a couple of those hundreds of cranes stand idle?  People talk of “Dubai fatigue,” and to the west Qatar (capital city: Doha) is positioning itself as the “new Dubai.”

Then there’s all the political turmoil, visible most recently in the destruction of 14 years of progress in Lebanon, the region’s most liberal, open country (which I visited in 2004).

And when will the oil run out? That’s a good question, even though I believe that will take longer than people expect because it will stretch further, and generate more revenues per barrel, as it becomes scarcer.  (More troubling – or promising, if you’re an investor - is the discovery/development of alternate sources.)

Those tensions are ever-present, and they may account for a bit of the pervasive materialism and the get-rich-quick mentality, which contrast with traditional Islamic values and much of the official story about the place.  That story includes a determination that the Gulf does not want to fritter away its money the way it did during the last oil boom.  This time around, the leaders want to build economies that will be healthy and sustainable even when the oil wealth goes away.  Yes, Dubai Holding is building hotels, but it is also investing in schools and hospitals. Then there’s Media City and Internet City, economic zones devoted to the development of Dubai’s new economy, with special affordances for start-ups.

Yet I still felt that the Dubai establishment - like so many establishments around the world - pays way too much attention to money and official structures and not enough to people issues.  The population of the UAE – very different from most other Gulf and Middle Eastern countries – is mostly foreign.  There’s a thin upper crust – about 7 percent – of locals, or “Emiratis.”  The rest is foreigners – large numbers of migrant/immigrant workers, mostly in service and construction jobs, from India, Pakistan and other countries, many of whom send money “home.”  (None of the employees of the Royal Mirage where we stayed was a native, but they came from more than 20 different countries altogether.)  Higher up the scale are expats: managers and knowledge workers who ply their trades and live in booming housing complexes: They can rent but generally (until just recently?) cannot buy.  They are the brains of the new economy, while the Emiratis are the owners and foreigners provide capital.  Foreigners can invest, but in most cases they need a local partner with at least a 51-percent interest. Of course, over time things will change, and foreign ownership is permitted within the Free Economic Zones, but you can imagine the distortions these rules must engender…

And then there are the real people issues: In South Africa (see previous post), there is affirmative action for a large, underprivileged majority, and the result is that the few well-trained people are leaving government for business posts.  In Dubai, there's affirmative action for a small, overprivileged minority, who in the past simply played a role as owners or mostly silent partners.  Most of the locals who work, work in government… but the government now wants to push them into more productive private-sector jobs.  The challenges are well described in an excellent Financial Times article I read in the plane on the way home.

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And in case you were wondering about IT: It’s still early.  Businesses are using the Internet, as are higher-income people, but overall penetration is low.

[CORRECTION :  According to this study, Internet use in Dubai is higher than I realized, at 40 percent some years ago. (Thanks, Juri Kaljundi!)  That's much higher than in the surrounding region - but it's still not seen as a mass channel by advertisers.  Maybe they are missing something.  For a more recent view, see this article.]

It didn’t seem worth asking about reselling WiFi to one's neighbors.  As for VOIP, it’s banned in the Emirates, though it was available in Internet City. It is now banned even in Internet City, but the ban may be rescinded. Stay tuned.