Dubai is not China or India. Far from it. In fact, in terms of population, it is entirely at the other end of the scale. But, having just returned from a trip there, I came back with a growing sense that Dubai has an opportunity to become a much more significant player in the global economy.
What Dubai has in common with China and India is a sense of urgency. This urgency is deep and it is pervasive, starting at the top with Sheikh Mohammed bin Rashid al-Maktoum, Dubai’s crown prince and de facto leader of the country. Mohamed Ali Alabbar, the founder and chairman of Emaar, one of the leading real estate development companies in Dubai, provided an example of this urgency in a recent article:
This region is way behind all the regions of the world, except sub-Saharan Africa. There’s no time to stop, the world is so advanced compared to us, we’ve been sleeping for so long.
Unlike many of its Arab neighbors, Dubai’s oil is going to run out soon, some time in the next 5 to 15 years. From the outset, Dubai has been serious about using its oil revenue to bootstrap its way into a much more diversified economy. While Dubai can continue to prosper from the petroleum wealth of its neighbors, Dubai’s aspirations are much grander. As grand as these aspirations are, Dubai has even greater potential.
Dubai, along with Abu Dhabi, is one of the most significant participants in the United Arab Emirates, a federation of Arab states along the Arabian Gulf. The people of Dubai have historically been traders, successfully participating in both regional and global trade flows. Over the past 30 years, Dubai found innovative new ways to play the role of middleman. I spent quite a bit of time in Dubai almost 30 years ago and the transformation since then has been staggering.
The development of a vibrant tourist industry is the most apparent transformation. One source of urgency on this front involves the troubles further north in Beirut. Thirty years ago, Beirut was a key tourist center for the Middle East. Famed for its cosmopolitan atmosphere and wonderful climate, Beirut attracted affluent tourists from the rest of the Middle East as well as from Europe. After the civil war broke out in Lebanon in the 1970’s, Dubai saw an opportunity to step into the vacuum and launched an ambitious program to establish itself as a major tourist destination. But Dubai had a limited window – as the civil war subsided (even if random car bombings continue to scare away more risk averse tourists), entrepreneurs were scrambling to re-establish Beirut as a regional pleasure center. With a less accommodating climate (temperatures in the summer average 104 degrees Farenheit), Dubai sought to compete with Beirut in terms of physical facilities.
The building boom
The construction boom playing out is awe-inspiring as Dubai seeks to establish itself as a combination Miami/Orlando (another analogy would be Las Vegas, but Dubai lacks the gambling) for tourists from Europe, Asia and Africa. Extraordinary resort complexes continue to rise along the beaches of Dubai. Hotels compete for opulence – the winner so far is the Burj al Arab, the world’s tallest hotel built on an artificial island and boasting a distinctive and eye-catching shape like a spinnaker filled with wind. The Burj al Arab bills itself as the world’s only seven-star hotel, with Rolls Royces and helicopters ready to ferry its guests to and from Dubai’s airport. Among many other hotel projects, plans are under way to build the Hydropolis, a large five star hotel completely under water in the Arabian Gulf.
Since beach real estate was relatively limited, Dubai addressed that natural constraint by launching massive programs to fill in land in the Arabian Gulf, initially in the shape of massive palm trees (the first – and smallest – of these covers an area of several square miles) and then in the shape of the world itself (I kid you not, The World is a major real estate development three miles off Dubai’s coast consisting of over three hundred man-made islands designed to mirror a map of the world – interested investors can buy an island in the shape of France or India). These developments will create almost 400 miles of new waterfront property to augment the 40 miles of natural beachfront. Hotels will occupy some of this new land, but an increasing amount of the land is being set aside for posh villas and apartments. Residential developments sell out almost as quickly as they are announced.
Dubai lacks much in the way of natural attractions other than desert (covering over 90% of the 1,517 square mile country), so it is building massive recreational facilities to keep its tourists entertained. Ian Parker’s fascinating article on “The Mirage: The Architectural Insanity of Dubai” in the October 17, 2005 issue of the New Yorker (the article itself does not appear to be online, but an audio slide show based on the article is available here) provides some sense of the scope of Dubai’s ambitious construction projects.
Modern shopping malls sprout up almost overnight, each one out-doing the previous ones in terms of scope and amenities. One of the newest, the Mall of the Emirates, boasts over 400 retailers and an indoor skiing facility (no, I am not kidding, it produces over 6,000 tons of snow), including a choice of five ski and snowboard runs, with the longest measuring 1,300 feet long with a 200 foot vertical drop, a black diamond run of 900 feet and a ski jump.
Offices are going up even more rapidly, with the foundations of the world’s tallest new building, the Burj Dubai, already in place (the final height of the building is a closely guarded secret, but it is expected to be on the order of one hundred and sixty stories). This contender for the tallest building will have an Armani-run hotel on the lower floors, about one hundred floors of apartments and fifty or more floors of office space above that. As one further sign of the urgency in Dubai, the crews on many construction projects work 24 hours a day, seven days per week.
Dubailand – Dubai’s competition to Disney World is under construction. Dubailand, of course, will be bigger. Covering a one hundred square mile area, the five billion dollar Dubailand project will be three times the size of Manhattan. When it is built out, Dubailand will include Eco-Tourism World, Sports & Outdoor World, Auction World, Virtual Games World and Themed Leisure & Vacation World. It will include replicas of the Eiffel Tower (70 feet taller than the original), the Taj Mahal (150 percent bigger than the original) and other major attractions
A vibrant night club scene with hundreds of night clubs featuring a bewildering array of world music from reggae and salsa to hip hop and bhangra attracts some of the hottest DJ’s from around the world, keeping tourists entertained until late at night. In this context, the Las Vegas analogy becomes more appropriate – a vast entertainment complex is arising out of the desert.
Insourcing human capital
But the physical facilities, as impressive as they might be, aren’t the most interesting aspect of Dubai’s tourism play. It’s the human capital that Dubai has mobilized to support this initiative. Just the construction projects alone require more people than Dubai has (there are only about 120,000 citizens of Dubai), so Dubai imports construction workers by the hundreds of thousands from a broad range of countries, especially India and Pakistan. In fact, over 80% of Dubai’s population consists of expatriates from over 160 countries. About 200,000 of these expatriates provide a diversified managerial class for many of Dubai’s commercial enterprises. Unlike many other countries where immigrants are resented as potential competitors for jobs, Dubaians recognize that they cannot realize their ambitions without lots of foreign labor.
Richard Florida in his book The Flight of the Creative Class reports one study showing that Dubai leads global cities in the proportion of foreign born population to native born population. Even more significantly, Dubai ranks third in the world on Richard Florida’s Mosaic Index, measuring immigrant population diversity.
In staffing its hotels and entertainment facilities, Dubai has taken a very targeted approach to attracting appropriate talent. Tourists could spend weeks in Dubai without ever meeting a native of Dubai. The hotels are largely staffed by people imported from countries known for their hospitality, including Thailand, the Philippines and Indonesia. Tourists venturing out into the desert for a camel ride are apt to find that the “Bedouin tribesman” tending to the camel is actually an immigrant from Tunisia. In effect, Dubai has become a new kind of tourism middleman – it attracts tourists from around the world and serves them in great style with highly trained hospitality staff also imported from around the world. This strategy is paying off – the World Tourism Organization recently declared Dubai to be the fastest growing tourism destination on earth.
Expanding the role of middleman
In commercial activity, Dubai has also capitalized on its role as a middleman, spawning a growing financial services industry (it has created a free zone known as Dubai International Financial Centre) and trading industry (it built the world’s largest man-made harbor in 1976 to expand its role in the shipping industry). I wrote earlier this week about Dubai’s growing role as a global outsourcing provider of containerized port management services.
Building a global e-business hub in Dubai
Dubai also has aspirations in the e-commerce and Internet arena. It is building Dubai Internet City in the hope of attracting and incubating a growing set of e-businesses. It is in this area that Dubai’s aspirations fall short of its potential. Dubai’s government and business leaders tend to talk about its opportunities in this area in terms of becoming a center of e-business for the Middle East. Why stop here? Why not seek to become a center of e-business for the world by pursuing the same kind of human capital insourcing strategy that has driven its success in the tourism industry?
Given Dubai’s growing attraction as an entertainment and pleasure center, it could potentially attract techies from around the world to build entrepreneurial e-businesses targeting global markets. With enterprise zones offering modern telecommunications infrastructure and office facilities along with the lure of no corporate or personal income tax, many Internet entrepreneurs might be willing to brave the summer heat to build promising e-businesses headquartered in Dubai and staffed with skilled techies imported from Eastern Europe and Asia.
Of course, potential tech immigrants would have to forego the pleasures of pornography and drugs (Dubaians tend to be pretty unforgiving about such vices, even though they are in general much more liberal than their Saudi neighbors). Those with families might find it an attractive environment to raise their children and others might be enticed to come for a few years in search of interesting business and technology opportunities. Given the growing global shipping, trading, financial services and travel and leisure businesses being built in Dubai, there are ample opportunities to extend these business initiatives on the Internet.
Opportunities in global education
On a related note, Dubai has a similar opportunity to use its insourcing strategy to build out innovative educational businesses targeting faculty and students on a global scale. By creatively using the Internet to extend its reach, Dubai could establish itself as a major educational destination for students from Asia and Africa as well as the rest of the Middle East to come for technical and professional training. It could then provide continuing learning services over the Internet after the students return to their home countries. Once again, Dubai’s growing status as an entertainment and pleasure center might be helpful in attracting both faculty and students from around the world.
The bottom line
If they play their cards right, Dubai’s leaders could establish their country as much more than a tourism and trading center. Harnessing the capabilities of global technology networks and an innovative insourcing strategy attracting talent from around the world, Dubai could become a global e-business and educational center as well. Dubai’s leaders have the sense of urgency and the ability to think big in their construction projects.
The irony is that they just may not be thinking big enough. The formula driving the success of their tourist industry is much more robust than they realize. The tourism industry could serve as a powerful bootstrapping device to position Dubai as a global talent magnet. Sure, it is hot in Dubai but, with some creative promotion, business investment could get a lot hotter – and it is tax free.