Preliminary Economic Concepts and Principles:
United Arab Emirates and Dubai:
United Arab Emirates (UAE) – a federation of 7 states (or emirates) in the southeastern portion of the Arabian Peninsula, along the Persian Gulf.
• large deposits of oil and natural gas
• has attracted a substantial amount of foreign direct investment, starting in the 1970’s
[pic]
United Arab Emirates:
Area = 32,278 sq. miles (just larger than South Carolina)
Pop. = 4,621,399 (just less than Alabama)
Annual GDP Growth Rate = 8.5%
Unemployment Rate = 2.4%
Inflation Rate = 12.0%
GDP per capita (PPP) = $55,200
Life Expectancy at Birth = 75.89
Dubai:
Dubai – one of the 7 emirates of the UAE
Area = 1,588 square miles (about the size of Rhode Island)
Pop. = 2,262,000 (between New Mexico and Nevada)
Oil and Natural Gas:
• Historically, much of Dubai’s wealth initially came from production of oil and natural gas
• However, these goods currently account for less than 6% of Dubai’s GDP
• Further, Dubai’s oil reserves are expected to be exhausted within 20 years
In recent decades, Dubai has very rapidly transformed from an “oil dependent economy” into a transportation hub, a business center, and a tourist destination.
Projects recently completed or currently under construction in Dubai:
• Ski Dubai – one of the World’s largest indoor ski resorts
• Dubai Mall – the world’s largest shopping mall
• Burj Al Arab – the “world’s most luxurious and expensive hotel,” built on an artificial island 919 feet out from the beach
• Burj Dubai – a supertall skyscraper currently under construction (expected to be completed in 2009), which is already the tallest manmade structure of any kind in the world by a wide margin (height of 2,320 feet as of 9/26/2008)
• “The World” real estate development – a man made archipelago of 300 islands constructed off the coast of Dubai in the shape of the world (one in a series of “Artificial Island Projects” in Dubai)
Burj Dubai
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Burj Al Arab
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Dubai's Sheikh Zayed Road
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Dubai is desirable business environment for international corporations, in part because of its geographic location:
• Halfway between the financial centers of London and Singapore
• 1.5 billion people within a 3 hour plane flight
• The perfect jumping off point to tap into the emerging markets of Southeast Asia
Mohammed bin Rashid Al Maktoum – current ruler of Dubai, since January 2006; a member of the Al Maktoum dynasty, the family which has ruled Dubai since 1833; estimated wealth of $18 billion (making him the world’s 5th richest royal).
Economic development and investment taking place in Dubai at an astonishing rate => Mohammed bin Rashid Al Maktoum: “I want my people to live a better life now – the highest schools…and good healthcare now – not after twenty years.”
Reasons for Economic Development/Growth:
• “Industry Specific Free Trade Zones,” with no taxes, minimal regulation, and other special incentives => helped make Dubai an international center for finance and media (e.g., “Dubai Internet City” which has attracted firms such as Microsoft, IBM, Oracle, Sun Microsystems, Cisco, HP, and Nokia)
• The Maktoum family “articulated a strong case for investing in Dubai” and “jump started the development with their own investment.”
Recent experience of Dubai illustrates what can be done if a family with a tremendous amount of oil wealth bankrolls development, but the big question is “will it stick?” (i.e., “will it be self-sustaining?”)
Why can’t other Arab countries and other Middle Eastern countries “copy Dubai”?
• A “lack of vision, heavy bureaucracy, lousy governments, and corruption.”
Issues of Concern for Dubai:
• Conflict between traditional, middle eastern culture and modern, western culture
• Many immigrants coming from democracies, although Dubai still lacks complete political freedom and has restrictions on freedom of expression
• Labor relations and exploitation of workers – much of the development is being built by contract workers brought in from Southeast Asia, who work 12 hour shifts, 6 days per week, for $4 or $5 per day (it’s better than what they could make in their home countries, but…)
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