The Dubai economic miracle, can it last?

That Dubai is undergoing a massive boom is not hard to demonstrate. This small emirate on the Persian Gulf witnessed a 17% expansion of GDP last year. New figures from HSBC point to $42.5 billion in projects under construction in Dubai which compares with $20 billion for the whole of the rest of the neighboring GCC oil states.

To scoop up the lion's share of construction investment during the oil boom of the early 21st century is an amazing achievement.

Reasons are not difficult to find. Dubai Crown Prince General Sheikh Mohammed bin Rashid is a business visionary of enormous drive and energy; Dubai is possibly the only place in the world with freedom of movement of capital, goods and services - and labour in a tax-free environment.

Freedom of movement of labour is something the rest of the world has yet to address, and the World Trade Organization prefers to emphasize the first two economic freedoms. But in a globalised knowledge economy it will be the ability to deliver the lowest costs of skilled labour that mark out the winners - and Dubai is already there.

People who point to the current investment in Dubai, and claim it is too much rather miss the point. So long as the Dubai Inc. business model stands up, so will its massive expansion plans.

If we return to the economic miracles seen in Germany and Japan then we note that such periods tend to be long - two decades in these two cases, and China looks to be on the same upward track. Eventually the cost advantages fade, and wealthy bureaucratic lethargy sets in, and the former star economies look tired and jaded and begin to decline.

But on this analysis Dubai Inc. may still have its best decade ahead. The pessimists usually base their argument on the likelihood of a fall in the oil price which will undermine the excess liquidity of the region - the ultimate source of the flow of investment funds.

However, there is a growing view among commodity analysts that suggests that the current oil price is becoming the new standard. And an increasingly vocal lobby of independent analysts reckons that the oil supply position is not nearly as strong as the official statistics show. High demand and lower supply mean higher prices.

Of course, there is always a sting in the tail. Those looking for a factor to knock the Dubai economic miracle off track should be focusing on international rather than regional economics.

The serious condition of the US economy and the outlook for the US dollar give reason to doubt the sustainability of the current global recovery.

Fed Chairman Alan Greenspan is treated like some financial Houdini who can always come up with a new trick to keep the show on the road. But even the great magician Houdini died after a fatal accident.

Whether the US economy can really absorb its twin deficits without a major recession and asset price collapse is a far more worrying scenario. But even that might not be enough to derail the Dubai economic miracle which has a dynamic of its own.