Why Dubai? Anatomy of a business success story (page 1 of 2)

That Dubai is a business, economic and development success story is not difficult to establish.

In the 1990s the three fastest growing cities in the world were Dublin, Las Vegas and Dubai. This has accelerated in the 21st century with 23% population growth in Dubai in the past four years. The present real estate boom is obvious enough, particularly in the Jebel Ali-Dubai corridor.

Today Dubai is the trading, business and increasingly financial hub of the Middle East, and for parts of Africa, the CIS and even the Indian subcontinent. It's a vast hinterland for such a small place.

To step back in time a little, the success of Dubai has been very much a part of the success of the UAE. Under the leadership of Sheikh Zayed the development of the country since independence in 1971 has been peaceful, proactive and well administered.

Far from kicking out the British colonial administrators, Sheikh Zayed invited most of the key officials to stay on after independence. This avoided many of the problems of transfer of power which afflicted most newly independent nations.

Then came oil. In the 1970s oil wealth turned the UAE from a desert kingdom to a modern metropolis, and its rulers took a keen interest in this development. Not for them the idleness and corruption that afflicted some nations blest with oil wealth.

There also developed a symbiotic and friendly relationship between the local citizens and the expatriates. The labor law defined expatriate rights and created a system where both nationals and expatriates could prosper, although nationals retained majority ownership rights of companies and complete control of property.

In Dubai the late Sheikh Rashid developed his tiny emirate into a trading hub with the timely development of port infrastructure and a driving ambition to invest oil wealth back into the local economy. Again this was sharply at variance with the policy of investing oil wealth abroad pursued in many countries.

Now in the early 1990s Sheikh Rashid's legacy was passed to a triumvirate of his sons of whom the Crown Prince General Sheikh Mohammed bin Rashid Al Maktoum has emerged as the dominant figure.

A very clear policy emerged. Dubai was to become the business and commercial hub of the Middle East. The Dubai Government and the leading local families invested even more into the physical infrastructure of the emirate and pursued more and more ambitious plans.

Surprisingly, to many observers, most of them succeeded, usually better than expected. Perhaps it was because the Government could act decisively, eliminating red-tape and shortening the planning process to a simple 'build it there' decision by the CEO of Dubai Inc. as Sheikh Mohammed is often known.

One thing that was not true is the idea that Dubai borrowed money and never had to pay it back. All projects have been established on a commercial basis with their own business plans, and a quick return of capital for the next big project has always been an essential feature of Dubai's success.

Of course, funding on favorable terms has always been available. The Middle East is awash with cash from its oil wealth as the extraordinary capital ratios of its banks testify. But financially viable projects for investment have not always been available, except in Dubai.

In 1998 Dubai looked to be pausing for breath with the oil price at $10.