On December 18, 2008, less than a month after the Atlantis hotel in Nakheel’s Palm Jumeirah opened (an event many Dubai bashers called its last hurrah), The Economist wrote an article on booms and busts. It mainly referenced Miami beach’s legendary real estate boom in the first half of the 1920s and the equally epic bust in the decade’s second half.
The article went on to illustrate how Miami’s experience, like that of Dubai, of unprecedented real estate and infrastructure boom (e.g. off plan sales, 95 per cent financing) guaranteed its position as a key city in North America during an era when competition was at its height. The article closed with a reassurance that Dubai would survive its economic woes and eventually recover from them. What the article failed to note was that unlike Miami beach which was a ‘swampy strip of mangrove trees’, Dubai was a well-established regional commercial trading hub before the real estate boom of the last decade.
Dubai’s success is especially spectacular due to its dual lack of Khaliji oil and non-Khaliji Arab (read Iraqi/Syrian/Egyptian) historically well-educated bureaucracy. By the admission of many intellectuals, journalists and executives from the Gulf, Dubai’s success caused embarrassment for many of its neighbours.
Some would go even further and say that would-be revolutionaries from Tunisia to Syria found the socio-economic achievements of a less than 200-year-old city especially vexing.
After 2008, there were existential whispers of what the post real estate Dubai model would look like. Would it attempt to attract Arab entrepreneurs through incentives, infrastructure, access to capital and lifestyle? Would it attempt to develop its manufacturing base, i.e, Dubal and Ducab? Would it develop new strategic service sectors , i.e., oil services? Meanwhile, Dubai was focused on making debt payments and restructuring its various entities. Then came the Arab Spring.
Safe haven of choice
The Arab Spring has been good for Dubai. While most of the region underwent shockwaves of various forms and measures, Dubai became a safe haven of choice for everyone from wealthy Arabs to financial institutions — even those Saudi tourists who were more accustomed to vacationing in Egypt, Lebanon, Syria and Bahrain found themselves here.
This played a significant role in boosting its economy and ridding the global markets of their hesitance to refinance Dubai’s mostly short tenured debt. The effect this had on reorienting Dubai’s strategic outlook cannot be underestimated. To illustrate, consider the following:
1. The hospitality sector grew 15 per cent in 2011, the fastest pace since 2007.
2. The Majid Al Futtaim (MAF) group reported an 18 per cent increase in profits in 2011.
3. Airport traffic rose 14 per cent in the first half of 2012 to a record 27.9 million.
4. The value of property transactions in Dubai jumped 21 per cent to Dh63 billion in the first half of 2012.
5. Emaar reported a 45 per cent increase in second quarter of 2012.
6. The yield on Dubai’s 10-year bond is down to 4.4 per cent from 5.9 per cent at the beginning of the year.
The two flagship projects that Dubai has thrown its weight behind are the World Expo 2020 bid and the recently announced Mohammad Bin Rashid City (MBR City), a massive project that when finished will be 30 per cent bigger than Hyde Park. It is expected to take well over a decade to complete in its entirety.
Seasoned followers of Dubai’s real estate developments will appreciate that MBR City represents an incorporation of several previous projects into one, led by the partnership of Emaar and Dubai Holding. If there were questions four years ago about how the city would change after the crisis then those questions have been answered very clearly. Dubai will continue to do what it does best: Real estate and hospitality — with a lot more coordination and partnership of its various arms then before.
Now that ‘Dubai is back’ as some like to say, the effect on both, the Gulf Cooperation Council status quo and the, at least theoretically, nascent democratic Arab states will be even more multiplied than during past booms.
Emotions are high, expectations are higher and time is ever in short supply.
The Arab Spring dynamic got used to relegating Dubai to a quiet safe haven for funds and people. How its resurgence as the loud proactive Dubai Inc of pre-2008 will affect the regional revolutionary and counter-revolutionary sentiment remains to be seen. One thing is clear though: whatever affects Dubai 3.0, as others like to call it, won’t be partisan, but dual.
Socio-economic conditions of most revolutionary states will be compared by its restless electorate with those of Dubai and will likely add another jab into opposition playbooks. In the case of the Gulf, political gridlocks, security vacuums and generational transitions of rule will amplify the comparisons to Dubai.
Mishaal Al Gergawi is an Emirati current affairs commentator. You can follow him on Twitter at www.twitter.com/algergawi