Dubai after Crisis: What Next?

Dominic Wanders

Dubai will host the World Expo 2020. It is the first time that the World Expo will be staged in an Arab country. Ever since this decision was announced in November 2013, the small emirate has again been undergoing an economic boom after years of crisis.
Dubai’s economy sustained a singularly remarkable period of economic growth during the first decade of the new millennium. Founded on oil wealth, the emirate developed into the extravagant trade and financial center of the Arab world and the Near East’s glitzy tourism metropolis. This rapid development from a simple Bedouin settlement into a cosmopolitan global metropolis within a generation can only be comprehended against the backdrop of the fact that Dubai’s oil deposits are limited. Approximately 95 percent of the oil reserves of the United Arab Emirates are located on the territory of the neighboring emirate of Abu Dhabi, and the production fields there will be able to extract increasingly large amounts of oil for decades to come. Dubai, on the other hand, has had to speedily and audaciously diversify its economy through investments in other sectors in order to end its dependence on oil at the soonest possible date.
Dubai had already experienced the implications of being dependent on a mono-economy: the entire region owed its economic expansion and relative prosperity in the nineteenth and early twentieth centuries to pearl diving, which, however, came to an abrupt end almost overnight in the nineteenth-thirties with the introduction of cultured pearls from Japan. In 1950, Dubai’s population still only numbered around 20,000 inhabitants; a centralized water and power supply was only introduced in 1961. Oil was finally discovered in 1966, but a number of years would have to pass until the economic valorization set in and the political groundwork could be laid.
After centuries of colonial rule in the Middle East and Asia, Great Britain granted sovereignty to its protectorates in the Persian Gulf in the late nineteen-sixties. The so-called “Trucial States” attempted between 1968 and 1971 to establish the Federation of Arab Emirates, consisting of nine emirates plus Bahrain and Qatar. In the end, only six emirates—Abu Dhabi, Dubai, Ajman, Fujairah, Sharjah, and Umm al-Quwain—came together under the leadership of Sheikh Zayid (Abu Dhabi) and Sheikh Rashid (Dubai) to form the United Arab Emirates (UAE) on December 2, 1971. Ras al-Khaimah became the seventh emirate to join the federation in February 1972, while Qatar and Bahrain decided to take an independent national path.
Covering an area of approximately 4,100 square kilometers, Dubai is the second largest emirate in the UAE after Abu Dhabi, but it is nevertheless only slightly larger than the Spanish island of Mallorca. Because of the unequal distribution of oil and natural gas reserves in the individual emirates, their original economic circumstances varied greatly; only three of the seven emirates were in a position to extract oil.
Sheikh Rashid, the founder of modern Dubai, is often quoted as saying “What’s good for the merchants is good for Dubai,” remaining faithful in this statement to Dubai’s ancient tradition as a commercial center. Early in the emirate’s young history, Dubai had proven that it was in a position to accommodate and integrate foreign cultures.
When duties were imposed on Persian merchants in their native harbors in 1902, Dubai made its natural harbor, the Dubai Creek, available as a free port. Al Bastakiya, one of Dubai’s old historic urban districts named after the city of Bastak in Iran, can consequently be described as the world’s first free-trade zone. While money borrowed from Kuwait had to be used in the nineteen-fifties and sixties to finance the dredging of Dubai Creek to make it passable for larger ships, revenues from the oil industry later generously flowed into the construction of a wide-ranging modern infrastructure. The airport was enlarged; Port Rashid, the Dubai Drydocks, Port Jebel Ali, and the Dubai World Trade Center were constructed along with a modern road system based on the master plan designed by John R. Harris.
The political leadership around Sheikh Rashid, the father of Dubai’s present-day ruler, Mohammed bin Rashid Al Maktoum, determinately took advantage of the financial blessings that had fallen upon Dubai in the guise of “black gold” to improve the living conditions of his people and develop the emirate’s economy. After the construction of schools, hospitals, and apartment buildings, investments were largely made in upgrading the land’s commercial infrastructure.
The founding of the national airline company Emirates in 1985 and its breathtaking growth into one of the world’s largest air carriers is emblematic of Dubai’s rapid upturn. A look at the air routes served by Emirates makes the geostrategic advantages of the region’s location overwhelmingly evident. Dubai is the ideal connecting hub between the “old” national economies of the West and the “new” growth markets in Asia, Africa, and South America. Emirates is the only airline in the world to fly non-stop to all five continents. Numerous passengers and goods that previously passed through Europe’s largest airports now fly via Dubai.
Meeting business partners in Dubai is simple because visa and entry formalities are unbureaucratic. Almost all internationally operating business have founded branches in one of the city’s diverse free-trade zones in order to service markets in the Near East, Asia, and Africa from here.
The construction of the Burj Al Arab luxury hotel, which opened in December 1999, marked the first salvo of Dubai’s ambitions in the upscale international tourism sector. With spectacular feats of international architecture that are no less iconic in nature than such buildings as the Sydney Opera House, Dubai sounded the thunderous start of a ten-year construction boom. Ever since, the entire world has known that Dubai in fact exists, that the sun shines 360 days a years there, and that it is suited for going on vacation or doing business.
Fueled by September 11, 2001, massive amounts of capital were drawn from the Western world that would be managed from Arab territory in the future. In May 2002, it became permissible for citizens of all nations to acquire residential properties and real estate in Dubai. The so-called “freehold” properties were initially only offered for a number of prestigious projects such as Palm Jumeirah, Emirates Hills, and the Dubai Marina, but the system was later expanded to include other areas as well because of its rapid success. Thanks to the possibility of multiplying one’s investments within only a few months through the rapid divestiture of real estate—the market simply could not catch up with the demand for residential and commercial space resulting from the exploding influx into the city during Dubai’s extreme boom years—the growth potential seemed unlimited.
Numerous state-owned development companies were now competing against each other at the annual real-estate trade fairs, vying for the favors of buyers and speculators with volleyball-court-sized models of their megaprojects. The emirate’s seventy-kilometer-long coastline was to be expanded by one thousand kilometers of highly lucrative beachfront properties through the construction of approximately three hundred islands resembling a map of the world and three likewise artificial palm-shaped islands, while new urban districts encompassing twice the size of Hong Kong were heralded for Dubai’s inland areas. With the words “Walt Disney meets Albert Speer on the shores of Araby,”1 the American urbanist Mike Davis has cautioned against Dubai’s potentially ominous megalomaniac future, while the architect Rem Koolhaas, harbinger of the “Generic City,” has posed with a cool analytical glance the question as to whether Dubai will grasp this last chance for urbanism.
On November 25, 2009, Dubai World, a government-owned investment company, requested a six-month restructuring process and proposed to delay repayment of its debt encompassing a two-figure billion dollar sum. The global recession of 2009 reached Dubai’s shores at precisely the moment when the country’s own oil reserves were beginning to dwindle. The government of Dubai tersely declared that it would not pay the debts of the government-owned enterprise.
Almost immediately, all of the city’s cranes stood still; the completely overheated real-estate market collapsed; the foolhardy construction boom reached its provisional climax with the completion of Burj Dubai, a skyscraper that rises to a height of 828 meters and was renamed Burj Khalifa on the occasion of its opening in January 2010. Sheikh Khalifa, the ruler of Abu Dhabi and president of the United Arab Emirates, made a billion dollar transfer beforehand, enabling Dubai to meet the most urgent of its financial obligations.
The world that had previously followed Dubai’s breathtakingly swift success with a mixture of amazement, admiration, and envy now reacted with malice and spitefulness. But those who think that everything will now disintegrate back into sand and dust because nonsensical, totally over-sized, and unsustainable projects like artificial islands and kilometer-high towers were built in the desert had better think again. Dubai has been extremely successful in diversifying its economy over the past two decades. In 2013, the oil and gas industry made up less than 3 percent of Dubai’s gross domestic product.
There is no city within a flight time of four hours offering a comparable infrastructure, featuring similarly modern and professionally managed facilities where trade, logistics, finance, and tourism have grown so successfully. The goal of attaining oil independence has been realized. Dubai now stands on the winning side of the financial crisis with a renewed faith in the global economy. Dubai has developed into the undisputed business and trade metropolis of the Arab world, and people in the countries of the Indian subcontinent are sooner dreaming about a life in Dubai than in cities like London or New York.
Around 90 percent of those living and working in the emirate are foreign-born, harking from over 150 nations, making Dubai the world’s first truly polyglot metropolis. In Dubai one becomes acquainted with the world—meeting people from all over the globe, working, doing business, and making friends with them. Dubai offers a very special lifestyle with a great deal of positive energy that fosters contact and relationships between Arabs, Europeans, Asians, Americans, Australians, and Africans. The local population, which has become a minority in its own country, is often more interested in long-term collaboration, on which it indeed depends, as opposed to short-term opportunities. Problems in this pronouncedly multicultural society are by all means openly discussed; Dubai’s future essentially relies on the extent to which it remains open-minded, inclusive, and flexible.
Dubai will spare no expense in putting on Expo 2020 and will surely be a gracious and proud host presenting a brilliant world exposition. It is been resolved that solar energy will provide 50 percent of the energy needs at the Expo, which approximately twenty-five million visitors are expected to visit. “Connecting Minds, Creating Future”: this is not only the motto of the EXPO but also Dubai’s basic principle since the country has been in existence. Whoever has not been there yet should plan on doing so in 2020 at the latest.


Notes
1 Mike Davis, “Sinister Paradise: Does the Road to the Future End at Dubai?,” www.tomdispatch.com/post/5807/ (accessed July 17, 2014).

Dominic Wanders, Architect, Dubai