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Dubai booms again on back of the Arab Spring

Walloped by global recession, investors and tourists flock back to Dubai fleeing instability in neighbouring countries.

Last Modified: 01 Jun 2013 16:31
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Tourism grew 18.7 percent last year and Dubai is set host the world's busiest airport by 2015 [Reuters]

Dubai, UAE - Following the financial crisis, many experts believed Dubai - a city that rose from scorching desert sand to the heart of international property and financial markets - was little more than a mirage.

The 2008-09 economic crash led to a fifty percent drop in real-estate prices in the city and hundreds of thousands of expatriate workers simply left, sometimes abandoning their Land Rovers and Porsches at the airport to escape from debtors' prison, after they couldn't afford to pay for their lavish, credit-fuelled lifestyles.

Outlandish construction projects, including a series of man-made islands to look like "the world" were put on hold, and the city's ruler had to go cap in hand to Abu Dhabi to ask for a bailout to protect the government-backed property developer responsible for the world's tallest building.

How times have changed. Economic and political turmoil in Egypt, the continuing bloodshed in Syria, instability in Bahrain and violence in Lebanon have benefited Dubai, as investors and tourists search for an oasis of stability.

"There are no exact numbers, but there is little doubt that there has been a lot of movement of firms from Arab Spring countries to Dubai," Nicholas Bortman, head of Middle East research for GPW, a business intelligence consultancy, told Al Jazeera. "Particularly for regional investors, Dubai is a safe haven."

New growth

Economic growth in the UAE, the country made up of seven quasi-independent emirates including Dubai, hit 4.4 percent in 2012, its highest rate since 2006 - and far better than other advanced economies in Europe or the US. That is nowhere close to the 263 percent GDP growth seen between 1990 and 2003, as tracked by property developer P&O Homes, but analysts say the new mini-boom is more sustainable than the wild years.

As the 21st century began, 24 percent of the world's construction cranes were hauling loads in the city, according to organisers of the Conmex construction machinery exhibition in 2006. Other studies have pegged lower figures, but there is no debate that the pace of development was breathtaking.

In Depth

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  Dubai workers in their own words

Experiments with the tallest, gaudiest and most expensive forms of modernist architecture continue as the city is planning on building a new Taj Mahal - four times bigger than the famed Indian mausoleum - and several massive new shopping and hotel complexes.

Supporters of Dubai's economic model say the new mini-boom is more sustainable, despite exaggerated construction projects, especially due to the Emirate's growing tourism trade.

"I think, in a sense, Dubai was one of the biggest victors [of the Arab Spring]," Ahmed Kanna, professor of anthropology at the University of the Pacific, told Al Jazeera. "It's well known in the Middle East that the Gulf in general, and especially Dubai, is a place to go for people when things get hot in their own countries."

Passenger arrivals into Dubai, crucial for the tourism industry, jumped 18.7 percent in April 2013, compared with the same month in the previous year, and the airport is now the third busiest in the world. Passenger numbers are projected to reach 65.4 million in 2013 and 98 million by 2020, according to figures from Dubai Airports.

Dubai airport is expected to overtake London's Heathrow to become the world's busiest by 2015, the head of British Airways has said.

The city is also expected to become a more popular tourism destination than New York or Paris by 2017, according to a MasterCard survey. It is already the seventh most popular tourist destination on the planet, the credit card company reported.

Conditions for capitalism

Run by a hereditary monarchy led by Mohamed bin Rashid Al Maktoum, or "Sheik Mo" as he is known in expat circles, Dubai has mixed capitalism-on-speed with a corporate style of governance, where there are strict limits on free speech and independent social organisations. Bosses don't need to worry about pesky unions, as anyone who goes on strike can simply be deported.

About 2.1 million foreigners make up more than 85 percent of Dubai's population. Like other expat-majority cities in the Gulf region, where construction and petroleum drive growth with a frontier mentality, three quarters of Dubai's population are men. If Dubai was a democracy, the president would likely be from South Asia, as Indians, Pakistanis and Bangladeshis represent the largest population groups.

Unlike other multicultural global business hubs, such as London or New York, gaining citizenship is virtually impossible. When a person is no longer useful to the city's economy, it's time to leave.

"You can work there for 40 years and as soon as your job ends, your residency ends," Raymond Barrett, author of Dubai Dreams: Inside the Kingdom of Bling told Al Jazeera. "Never mind being a citizen, being a permanent resident isn't even possible."

Partially because of these rules, "migrants aren't invested in the political structures of Gulf economies," Barrett said. Despite critics who believe the city's "seven star" hotels and vast yacht marinas are built by indentured workers toiling in terrible conditions, the city's economic model seems to be working again - if the goal is building ever-taller towers and importing newer Bentleys.

Not all residents, however, are happy with the new economic conditions. "Rents are going up a lot, so are the costs of airline tickets," Saif, a salesman from India who has lived in Dubai for four years and didn't want his last name published told Al Jazeera. "Despite rising costs of everything, I am only seeing maybe 10 percent more jobs advertised on the internet and salaries for the middle class aren't keeping pace."

Unlike Egypt and Tunisia, where rebellions were fostered by large numbers of unemployed youths, Emirati citizens generally lead a cushy lifestyle and most work in well-paying government jobs. 

"The Tunisians and Egyptians wanted to reform and change their state," Kanna said. "In the UAE, protests tend to come from people who aren't citizens, who aren't trying to change the state and just want higher wages [or better living conditions]."

The threat of deportation

Dozens of labourers, some earning less than $200 per month to build skyscrapers in the sweltering heat, were recently fired by Arabtech - a construction giant  - then deported, all for going on strike.

The situation for workers in Dubai is arguably better than in neighbouring Gulf countries, as the city hosts more international reporters and rights groups have easier access.

Foreigners are tied to their employers through the Kefala system. Most companies are at least 51 percent owned by a citizen - and foreigners cannot quit their jobs and stay in the country. It is, according to critics, the ultimate expression of 21st century inequality, where labour is completely expendible and capital is mobile.

Workers are [legally] bonded to their employers... It's brilliant from a capitalist point of view.

Syed Ali, professor

"From a purely capitalist point of view, it works great: you don’t have to respect rights and can deport people," Syed Ali, the author of Dubai: Gilded Cage, told Al Jazeera.

Professor Ali has first-hand experience with the situation faced by workers in the city; he was deported from Dubai while researching his book. "Workers are [legally] bonded to their employers, which is great for the employers because there is no real reason to change wages because the basic laws of supply and demand don't apply anymore.

"Employers can pay slightly better than third world wages for workers and top dollar for western talent," Ali said. "It's brilliant from a capitalist point of view."

Companies operating in certain sectors of Dubai's economy can repatriate 100 percent of their profits and, for most transactions, there is no tax. With the drive for democracy causing economic instability in the more populous countries of the Arab World, and economic growth in China outpacing its US rival, some economists believe that dictatorships can be more conducive to growth - at least in the short-term.

With unrest set to continue across the region, the view from the world's tallest building looks brighter now than it has for years.

"Dubai has done really well from the Arab Spring and the war in Afghanistan," Ali said. "Anytime there is unrest, capital and labour will flow towards the UAE."

Follow Chris Arsenault on Twitter: @AJEchris

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Source:
Al Jazeera
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