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Dubai's Economic Miracle - 2004-06-07

The calls of mosques fill the air as the day ends. From your armchair in a cocktail lounge in a luxury hotel, you see what locals call The Creek, a waterway lined with striking buildings and highways filled with expensive cars. Not far away, massive port facilities are packed with cargo from everywhere. Yet farm animals can be heard and seen on some downtown rooftops.

You're in Dubai, a Persian Gulf place of startling contrasts between the Middle East and other cultures. In just a few decades, it has become the dominant business and shipping center in the region, and striving to become a world-class financial center. Dubai is Arab and Islamic but in some ways decidedly not, deliberately melding the dissimilar to create a climate for success. The formula has worked remarkably.

The creation of modern Dubai was the vision of the al-Maktoum family which has ruled since the 1830's. Simon Henderson of the Washington Institute of Near East Policy says the al-Maktoums have built a modern society in the past 30 years without the financial benefit of a common regional resource. "Since Dubai doesn't have the oil and gas that many other places in the Persian Gulf have," he says, "Dubai has to develop in the way it did before oil and gas when it was always a port where foreigners pass through and some of them settled."

The statistics for Dubai are impressive: About one point one million people live in this second-largest United Arab Emirate of just under 39-hundred square kilometers. The 2003 Gross Domestic Product is estimated at 20 billion dollars, derived overwhelmingly from commerce, shipping, and tourism. Ian Carson, Middle East writer for the Economist, says the al-Maktoum family's ambitious visions have consistently confounded the skeptics. "Over the last 30 years, every new development was greeted as a white elephant, Carson says, adding "People said "this will never work." Well, by and large, they all did."

Essential as well is a political environment that champions free trade over protectionism, encourages outside capital investment, and allows those who invest to take their money out of the country. Tom Everett-Heath, a writer with Middle East Economic Digest in London, says this formula has been key to Dubai's success. He comments "You're creating in essence critical mass. You're allowing the development of an economy far more rapidly than a closed environment would allow."

With Dubai located at a relative midpoint between Europe and Asia, it first became a stopping-off place between flights and then a destination in itself. That spurred the construction of huge luxury hotels and also residential housing that foreigners are allowed to own outright and not just lease as is typical in other Gulf countries. The latest such project is a series of man-made islands arranged in the shape of a palm tree on which the wealthy and celebrities such as football star David Beckham are building luxury villas as getaways from northern winters.

Europeans aren't the only ones Dubai developers are luring. Presently about half of Dubai's population came from India and Pakistan.

Such a large population of outsiders has prompted the importation of tastes not common to the Gulf region as Simon Henderson notes. "It's possible" he says "to buy alcohol there fairly freely and extraordinarily, to my mind, it's a place where you can get bacon and eggs for breakfast."

Dubai has made this possible by discreetly limiting access. Cocktails can be purchased in a hotel, but there are no pubs on street corners. Foods banned by Islam are also found in hotels, but not openly in supermarkets. Music and dance nightspots largely limit their clientele to expatriates. Dubai has succeeded in providing what some persons want without overtly offending others.

Economist writer Ian Carson says Dubai's energy and openness have an influence on other Gulf countries. "Dubai," he says "is very much seen as the lodestar, the example. And young Arabs are very hopeful that there will be a beneficial spillover to the rest of the region."

If there is a downside to Dubai's freedom, it is the ability by those outside the law to take advantage of a huge, open port where sheer volume makes minute inspections often difficult. The Pakistani nuclear scientist Abdul Qadeer Khan used Dubai as a transit point for the proliferation of nuclear materials and technology. The huge volume of financial transactions has also made Dubai attractive to terrorists, prompting the government to institute strict regulations on money transfers and other funding schemes. Another issue watched carefully is militant Islam's absolute intolerance of the behavior many Dubians accept, if not embrace. So far, the violence seen elsewhere has not reached Dubai, but some analysts wonder if it can remain as calm as it is today.