Dubai’s Political and Economic Development: Assignment

Dubai’s Political and Economic Development: Assignment Words: 9915

DUBAI’S POLITICAL AND ECONOMIC DEVELOPMENT: AN OASIS TN THE DESERT? by CHRISTOPHER DeNICOLA A thesis submitted in partial fulfillment of the requirements for the Degree of Bachelor of Arts with Honors in Political Science WILLIAMS COLLEGE Williamstown, Massachusetts MAY 10,2005 Table of Contents I Persian Gulf Development Literature Oil Curse Literature Arab and Islamic Factors Regional Ovemiew and Historical Background Dubai’s Development History I1 PI1 Explaining Dubai9sDevelopment Outcome Why Not Other Gulf States? Dubai versus the Development Literature

IV Dubai in a Cornparatbe Corntext Saudi Arabia Qatar Brunei Conclusion Appendix Bibliography Introduction Dubai, a tiny, oil-exporting city-state located in the Persian Gulf, has recently undergone a remarkable transformation. As a member of a federation of small Arab, Islamic monarchies known as the United Arab Emirates (U. A. E. ), its leaders have implemented a bold development strategy. In the space of four decades, they have managed to shift the city’s economic focus from fishing and gold trading to tourism, mass communications, shipping, and finance.

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Unlike many of its regional peers which have developed unstable regimes and stagnant, oil-dependent economies, Dubai has diversified its economy to become a politically stable center for commerce and tourism. Consequently, Dubai has resisted the expectations of regional analysts and is a clear outlier from development trends in the Gulf. This observation leads to the central puzzle of this thesis: why is it that Dubai has defied the expectations of conventional wisdom and become so economically dynamic and politically stable?

The answer to this question has implications for evaluating the efficacy of both development theories and policy options that emerging states may choose to pursue in their own development strategies. Walking the streets of Dubai, most visitors are struck by the fact that instead of Arabic, the most common languages overheard are English and south Asian dialects. Furthermore, most of the people that they encounter on the street are south Asians, not Arabs. This kind of experience points to one of Dubai’s most surprising characteristics the fact that its nationals are only a tiny minority of the city’s overall population.

Compared to Dubai’s official population of 1,112,000, most independent analysts estimate its national population to be under 90,000, or only about eight percent of the total. ‘ This situation reflects the city’s growing reliance on foreign labor. South Asians are the largest expatriate group and make up $4. 5 percent of the private sector according to official statistic^. ^ ~ o sof these people perform menial jobs in the service and t construction industriese3Expatriate Arabs form another 9. 4 percent of the city’s s. ~ workforce and the remaining 1. percent are ~ u r o ~ e a nThe reason that so many foreign workers have flocked to Dubai is quite simple – to make money. Although lowpaying jobs hammering steel and cleaning floors may not sound very appealing, they attract numerous Indian and Pakistani workers because they can make more money performing these tasks in Dubai than they can in their home countries, where jobs of any kind are often ~ c a r c e Similarly, Westerners who work in management positions for . ~ multinationals corporations located in Dubai s free trade zones are lured by financial incentives such as high wages and tax breaks.

As one expatriate in Dubai has recently stated, “We are all mercenaries here. “6 Another aspect of Dubai that most visitors marvel at is the emirate’s multitude of ambitious development projects. Perhaps the most well known is the Burj A1 Arab, a self-described “seven star” luxury hotel completed in 1999. Shaped like a massive sail, this waterfront hotel offers guests such amenities as bedroom suites with mirrors on the 9 Ministry of Information and Culture, United Arab Emirates, UnitedArab Emirates Yearbook 2004 (London: Trident Press Ltd. , 2004) 6 ; Personal interviews January 2005. Ashfaq Ahmed, “UAE Nationals in Private Sector Miniscule – Study,” GulfNews (June 7,2004). Harrison; Nick Meo, “How Dubai, the Playground of Businessmen and Warlords, Is Built by Asian Wage Slaves,” The Independent (March 1,2005). Ahmed. 5 Meo. 6 Personal Interviews January 2005. ceilings, marble bathrooms outfitted with Jacuzzis, and personal butlers. ‘ In addition to serving as a popular tourist attraction, this hotel has given the city its own unique icon. The image of the Burj Al Arab is ubiquitous in Dubai and can be found everywhere from souvenir key-chains to license plates.

Dubai s other projects are perhaps even more audacious. The Palm Island real 9 estate developments consist of two man-made islands shaped like palm trees. 8 When finished, both palms will contain about 3,000 homes and 40 luxury hotels, as well as amusement parks and other tourist attraction^. ^ In addition, construction has begun on “The World,” a series of 300 islets laid out to resemble a map of the world. These manmade islands will also offer tourists beach real estate and extensive opportunities for leisure. ?? Finally, the emirate has begun work on a structure that is set to become the world’s tallest building, the Burj Dubai. The exact height of this edifice is a closelyguarded secret. ” Another facet of Dubai that visitors quickly take note of is the city’s shoppingoriented culture. The city contains numerous malls, many of which offer stand-alone outlets for upscale brands such as Prada, Versace, and Dolce & Gabbana. 12 In addition to the city’s plethora of malls – including the world’s biggest, which is currently under The construction – the city annually hosts the Dubai Shopping ~estiva1. ~ festival, which has been running for the last ten years, has used intricate marketing schemes, promotions, Scott Macleod, “Dubai’s Oasis,” Time (January 26,2004). For images of the hotel see the Appendix. Jefkey Sampler and Saeb Eigner , Sand to Silicon (London: Profile Books, Ltd. , 2003) 15-17. For an image of one of the Palms, see the Appendix. 9 Sampler and Eigner 20. 10 Jim Krane, “Latest Luxury Trend: Man-Made Persian Gulf Islands,” The Associated Press (February 27, 2005). 11 Sampler and Eigner 1; Jim Krane, “Dubai Tower to Bring World’s Tallest Structure to Middle East,” The Associated Press (March 30,2005). 2 Tarek Atia, “Everybody’s a winner,” Yale Global Online (February 9,2005). l3 Ibid. 8 7 and sales to attract over two million people per year since 2 ~ 2 . This aggressive ‘ ~ ~ celebration of international consumerism has come to define Dubai s c u l t ~ r e . ‘Indeed, the festival’s slogan, “One World, One Family, One Festival” suggests a ruling ethos that is enthusiastically willing to embrace the more materialistic aspects of globalization. ‘6 Although Dubai’s gaudy development projects and commercial spirit may be a uriosity for visitors, this embrace of Western-style entertainment and lifestyles has irritated some citizens. 17 VVhile Dubai’s rulers have clearly demonstrated a willingness to introduce globalizing forces into their society, some nationals in the emirate are less liberal and feel that the pace of change has been too fast. ” Indeed, only 40 years ago the emirate’s economy was based predominmtly on gold hradirrg and fishing. lg During this period, people lived much more simply, with a greater emphasis on tradition and Islam.

Some nationals are concerned about the loss of this way of life that the shift toward greater globalization has caused. 20 For example, commentators have observed that calling Ramadan in Dubai “commercialized” is to “”politely but grossly understate the case ‘ due to the proliferation of marketing and promotions during this traditional, Islamic holiday. 21Furthermore, some nationals feel that the government has gone too far in its desire to cater to the demands of Westerner tourists and expatriates. This sentiment is not 9 9

Ibid; Sampler and Eigner, 17-18. Atia. 16 Christopher M. Davidson, The UnitedArab Emirates: A Study in Survival (Boulder: Lynne Rienner Publishers, Inc. , 2005) 252. 17 Harrison. 18 Personal Interviews January 2005. l9 Sampler and Eigner 7-8. 20 Davidson 262-263. 21 Harrison. l4 15 hard to imagine given the fact that the government has prohibited calls to prayer at the Jumeirah Mosque because of complaints from Europeans living nearby. 22 Another issue is that many expatriate, south Asian laborers in Dubai are unhappy with life in the emirate.

Although they have voluntarily come to Dubai in the hopes of making money, they often experience grave difficulties upon arrival. Once they sign work agreements, they lose nearly all of their rights. 23 Predominantly male, these workers toil long hours, six days a week. They live in cramped dormitories in work . ~ camps on the outskirts of the city or in the neighboring emirate of ~ h a r j a h If~they try to protest about their living conditions or unpaid wages, they are branded as ‘troublemakers’ and are summarily deported. 5 As a result of this dynamic, workers earn enough to send money home to their families, but most are not happy with life in ~ u b a i . ~ ~ Even though they have been responsible for building up the city, they are reportedly banned from its fancy shopping malls and r e s t a ~ a n t s Combined with the sentiment of . ~~ many citizens described above, it is evident that there is a layer of discontent beneath Dubai’s glitzy, cheerful exterior. Despite this undercurrent, it is clear that Dubai’s leaders have fostered a general sense of calm among both nationals and expatriates within the emirate.

Nationals are typically satisfied with their rulers because the government has provided them with a generous welfare system that includes free or subsidized education and healthcare, as Personal Interviews January 2005. Meo. 24 Ibid; Prerna Suri, “Over 400 Labourers Living in Inhuman Conditions in Camp,” Khaleej Times (April 5, 2005). 25 Ibid. ” Personal Interviews January 2005. 27 Meo. 23 22 well as a high likelihood of government As a result, there is no domestic opposition movement, despite lingering resentment in some quarters over globalization’s spread. 9 Furthermore, many analysts argue that the expatriate workforce is typically docile because these workers have come to Dubai to make money. As long as they continue to do so, they will not become a threat. Furthermore, although blue-collar workers may be unhappy with their conditions, they will likely remain tranquil because they know that the consequences of dissent are deportation and income losses. 30 Although the authoritmian nature of Dubai’s regime has clearly led to a lack of political space for the grievances described above, Dubai’s leaders have still created a development outcome that is quite unusual for the Persian Gulf.

It stands out because of its liberal social attitudes, its sustained political stability, and its economic dynamism. Inside Dubai, expatriates can openly wear western styles of dress, and the consumption of alcohol is widely permitted, in contrast with Saudi Arabia, a different regional extreme. There, religious police enforce rigid social laws, even among expatriate^. ^’ Unlike neighboring countries, there are no violent domestic opposition movements in ~ u b a i . ~ ~ Furthermore, power transitions have been smooth within the U. A. E. government at both Davidson 294.

William A. Rugh, “The United Arab Emirates: What Are the Sources of lts Stability? ” Middle East Policy (September 1997). 30 Anh Nga Longva, ‘Keeping Migrant Workers in Check: The Kafala System in the Gulf,” Middle East Report (Summer, 1999). 31 “Arabia’s Field of Dreams,” The Economist (June 29, 2004); Fareed Zakaria, “The Saudi Trap,” Newsweek (June 28,2004). 32 In Bahrain, Kuwait, and Saudi Arabia there are significant domestic, Islamist opposition movements. In Saudi Arabia Islamist opposition is so strong that the government regularly suffers from armed terror attacks.

For more information see Michael Herb, All in the Family: Absolutism, Revolution, and Democracy in the Middle Eastern Monarchies (Albany: State University of New York Press, 1999) 173175; Mohammed Almezel, “Bahrain Court Postpones Trial of Islamists,” GuZfNews (December 7,2004); “Kuwait Detains 32 Suspects Lirrked to Gun-Battles,” Khaleej Times (March 10, 2005); Wlaled Al-Awadh, “Most Wanted Terrorists Killed,” Arab News (April 6,2005). 29 28 the emirate and federal level, in contrast with regional neighbors. 33 Finally, Dubai’s economy has in general outperformed its peers in terms of both sustained growth and

An examination of this development outcome is important because it is one which has defied conventional wisdom. Given regional trends, analysts would not have predicted that Dubai’s development plan would have yielded such a high degree of economic diversification and political stability. For this reason, understanding why Dubai has succeeded in achieving its development outcome while other states have failed to do so has important implications for both political theory and policy. Understanding what Dubai did to achieve its particular outcome can shed light on the strengths and weaknesses of the relevant theories.

A thorough study of Dubai’s approach to development can also illuminate specific policies that emerging states should or should not emulate in the course of their own development schemes. As a foundation for the present analysis, the first chapter will examine the regional literature that would have failed to foresee Dubai’s development outcome. The first body of literature is ‘oil curse theory. ‘ The central claim of this theory is that states that earn their incomes from the external sale of non-renewable, hydrocarbon resources 33 The other members of the U. A. E. ederation are Abu Dhabi (the political capital), Sharjah, Ajman, Umm al-Qaiwain, R’as al-Kaimah, and Fujairah. While the ruling families of each state maintain absolute within their territories, the U. A. E. federal government has authority over foreign policy and defense issues for all seven emirates. For a recent example of a calm and orderly power transition in the U. A. E. see “Supreme Council Elects New President,” GulfNews (November 4,2004); Shireena Al-Nowais, “Zayed Secured a Lasting Unity,” GuIfNews (November 9,2004); “Bypassed Brother Pledges Loyalty to New UAE President,” Arab News (November 7,2004).

For examples of coups in Qatar and Oman see Herb 116-126, 150. 34 For Dubai, see Afshin Molavi, “‘City on a Hill,” The New Republic (February 9,2004). For regional examples see Energy Information Administration, Saudi Arabia Country Analysis Brief http://www. eia. doe. gov/emeu/cabslsaudi. html;Yahoo International Finance Center, Oman Country Fact Yahoo International Finance Center, Qatar Country Fact Sheet, 2005, h~://biz. yahoo. com/ifc/om. html; Sheet, 2005, http://biz. yahoo. corn/ifc/qa. html ypically experience poor GDP growth, political instability, and political repression. The second principal school of thought that seeks to explain poor development in the Persian Gulf region emphasizes cultural factors, more specifically the region’s Arab ethnicity and its Muslim religious identity. Although there is debate within this literature, these authors typically claim that cultural characteristics have led to the region’s internal political unrest, its repressive atmosphere, and its economic malaise.

Following this literature review, the second chapter will present an overview of regional development trends and a brief history of Dubai’s development trajectory. The regional overview will examine the social, political, and economic forces that characterize the region’s regimes. The general observation will be that regional regimes are oil-dependent, economically stagnant, repressive, and politically unstable, although nearly all of them have improved their citizens’ living standards through extensive welfare systems.

The section dealing with Dubai’s history will review the state’s experience with British colonialism, the founding of the United Arab Emirates, and the details of its subsequent development path. These results will demonstrate that the state has experienced sustained political stability, economic growth, and diversification, despite several shortcomings. The third chapter will build on this empirical understanding of regional trends, as well as the previously discussed literature, by presenting a comprehensive argument capable of explaining Dubai’s particular development outcome.

Above all, it will emphasize that the willingness of Dubai’s rulers to pursue greater integration with the international economy, thereby taking advantage of structural changes that have occurred in the last twenty years, has contributed to the state’s particular development outcome. This analysis will emphasize the agency of a state’s rulers in determining its development path. Subsequently, this thesis will argue that there are several other contributing factors that have led to Dubai’s development results.

The first is that Dubai’s limited oil supply has played a significant role in spurring its leaders toward a serious diversification strategy. The second significant factor is that Dubai’s elites have consistently demonstrated sustained unity in carrying out their development strategy. In addition, Dubai’s relationship to the U. A. E. within the political structure of the federation has also contributed to this cohesion. The final noteworthy component is the government of Dubai’s ability to deliver high living standards to its citizens, which is strongly associated with its leaders distinctive development strategy and political cohesion.

In the fourth chapter, three comparative cases will be introduced for the purpose of further drawing out the factors which have led to Dubai’s development outcome. The first such case will be Saudi Arabia. It is appropriate because while it shares many of Dubai’s characteristics, such as its Arab ethnicity, its Islamic religion, its monarchic, authoritarian political system, and its oil rents, it has had much higher degrees of politically instability and a comparatively weak economy. To control for this state’s large size in relation to Dubai and the U.

A. E. , an examination of Qatar will follow. Although it has not been as unstable as Saudi Arabia, and in fact has begun serious steps toward diversification in the last ten years, it has not yet reached Dubai s level of development. The final case that will be studied is Brunei. As a small state sharing Dubai’s Islamic religious identity, its authoritarian and monarchic political structure, as well as its oil rents, it will be relevant because its government has had substantial difficulties in diversifying its economy away from hydrocarbon exports. 9 9

Following the four chapters described above, this thesis will conclude with a section that examines the strengths and weaknesses of Dubai’s development outcome. This analysis will provide the foundation for an assessment of whether or not Dubai can be viewed as a development model. Ultimately, this thesis will assert that although ruling elites in Dubai have fostered a dynamic economy and prolonged political stability, their strategy c m o t be considered a model for sustainable development in the long term because its political structures are defined by authoritarimism.

This fundamental aspect of Dubai’s development is not one that should be emulated given autocracy’s inherent lack of safeguards against a shift from benevolence to tyranny on the part of its rulers. Still, there are many short-term lessons that can be learned from Dubai’s development such as its leaders’ recognition of the opporhunities that can stem from greater integration with the global economy, as well as the proper role of government for states seeking rapid development. These conclusions will hopefully be relevant to policy makers n other emerging states who seek to learn more about what policies they should consider in the pursuit of their own development objectives. Persian Gulf Development Literature As noted in the Introduction, most of the Gulf monarchies have generally exhibited much weaker macroeconomic records and substantially more political instability than Dubai. To explain the region’s comparatively shaky development, political scientists offer several theories. Oil curse theory places the blame for development deficiencies on the Gulf states’ reliance on unearned oil rents.

Proponents of this theory argue that these rents negatively distort economies and produce political insecurity. Another popular school of thought emphasizes cultural factors to account for regional development patterns. This body of literature uses the Gulfs Islamic religious character and its Arab ethnicity to explain regional setbacks. h examination of these theories will be useful because they will provide the necessary context for a study of Dubai’s development, which has so far diverged significantly from most predictions based on this literature.

The Oil Curse The principal argument of oil curse theory is that government oil revenues harm the development of a state’s economy and political system. 35These negative ramifications stem from the fact that oil revenues arrive in the form of economic rent. Defined as “the difference between the market price of a good or factor of production and its opportunity cost,” rents can distort economies when their owners reap tremendous 35 Terry Lynn Karl, The Paradox of Plenty (London:University of California Press, 1997) 17. enefits without any concurrent increases in efficiency or investment. 36 In the case of oil producing states, governments can receive substantial increases in revenue simply based on favorable price fluctuations in world markets. Hazem Beblawi and Giacomo Luciani claim that this situation typically has a negative impact on GDP growth over the long term because many of the incentives to productivity are removed as the state begins to distribute its oil wealth to its citizens. 37 These funds are frequently allocated as public goods such as infrastructure and healthcm-e. 8Since citizens do not have to pay for these goods with taxes, they learn that they will receive them whether or not they work hard. 39 As a result, when oil revenues swell state coffers, the state shifts from being a “production state ‘ to an “allocation state,” thus creating a national mentality characterized by a break in the work-reward causation. 40 9 In addition to negative economic effects, proponents of oil curse theory argue that there are also dangerous political consequences when state budgets are dominated by oil rents. These outcomes can manifest themselves in two ways. The first is political instability. Although oil money can initially pacify a rentier state’s population, price fluctuations can dramatically decrease a state’s oil revenues, thus leading it to subsequently diminish state spending. ” Regardless of price changes, such high levels of government spending are usually untenable in the long term anyway, due to the depletable nature of the resource. As a rentier state’s oil reserves sun out, it typically Alan Richards and John Waterbury, A Political Economy of the Middle East (Boulder: Westview Press, 1996) 16-17. 37 Hazem Beblawi and Giacomo Luciani, eds, The Rentier State (New York: Croom Helm Ltd. 1987) 9-10, 52. 38 Jill Crystal, Oil and Politics in the GuIJ. ‘ Rulers and Merchants in Kuwait and Qatar (Cambridge: Cambridge University Press, 1990) 10-11. Beblawi and Luciani 52-53. 40 Ibid. 41 Karl 17. 42 Karl 182-183. 36 ” raises taxes on its citizens in order to maintain expenditures. ” This shift to taxation can cause instability because the institution of taxes on a population unaccustomed to paying them can be quite difficult. 44People often react violently to such changes as is evidenced by the political turmoil in Venezuela that followed its declining oil revenues in the 1980s. ‘ According to oil curse analysts such as Michael Ross, the other harmful political consequence of oil revenues is repression. ” This effect can occur for a variety of reasons. Initially, it can take place when a rentier state’s external oil sales are sufficient for fulfilling its budgetary needs. At this point, the state becomes free from any obligations to create a social contract with its citizens in which political rights are exchanged for taxes. ” Instead, rentier states frequently create a new bargain in which access to the states’ goods and services is exchanged for the political submission of its citizenry. As the state’s revenues continue to grow, it can also increase its military spending, thereby ensuring its monopoly on the use of coercive force and further strengthening its grip over its people. 49 Furthermore, once oil revenues begin to dry up, the loss of free or subsidized public goods may prompt citizen unrest, causing the state to respond by utilizing its powers of coercion to quell dissent. 50 The oil curse literature provides a useful context for the present study of Dubai because although scholars classifj7 Dubai as a rentier state, it has not experienced many of Ibid. Ibid. Karl 182-183. 6 Michael L. Ross, “Does Oil Hinder Democracy? ” World Politics: 53. 3 (2001); Marina Ottaway, “Tyranny’s Full Tank,” The New York Times (March 31,2005). 47 Beblawi and Luciani 73. 48 Davidson 294. 49 Ross. 50 Karl 128. 43 44 45 the above trends. This outcome is surprising because some scholars view the U. A. E. , and by extension, Dubai, as “the world’s purest example of a rentier state. ” This evaluation stems from the country’s substantial oil rents, the presence of an enormous welfare state, and its currently pacified national populace. 51 In spite of this assessment, Dubai’s GDP has been steadily rising. 2 1n addition, oil as a percentage of GDP has been decreasing as Dubai has diversified into other industries such as tourism, mass communications, business, and finance. 53 Furthermore, Dubai appears to be politically stable as a result of this economic growth and diversification. While Dubai is by no means democratic, the atmosphere inside the country is not extraordinarily repressive, especially when cornpaxed to other regimes in the region. 54 Indeed, there are signs that Dubai has become more liberal socially given its tolerance for Western lifestyles within its borders.

Despite these potentially liberalizing developments, it is unlikely that the emirate’s rulers will grant their citizens more of a political voice in the short term, given that the state does not yet need their taxes. Still, Dubai’s development stands out because it has not displayed economic stagnation and political instability as supporters of the oil curse theory would have predicted, though it may still be a rentier state. Arab and Islamic Cultural Factors Dubai’s outcome has also defied the expectations of analysts who use cultural factors to explain regional development trends.

In particular, these scholars pinpoint the Gulfs Islamic religious identity and/or its Arab ethnicity as the source of its weak Davidson 294. Dubai Municipality Statistics Center, Statistical Yearbook – Enairate of Dubai (2003) 434. 53 Davidson 159. 54 Davidson 69; Rugh. For more detail see the second chapter. 52 development. Some of these analysts argue that Muslim attitudes and Arab traditions are simply not conducive to economic growth. Others claim that Islam as a religion and the overall Arab ‘mind’ are inherently bellicose, thus causing their people to be violence prone.

They also contend that these cultural aspects have led Muslims and Arabs toward political repression. An example of the argument that Muslims do not have economic attitudes favorable for growth can be found in a recent working paper published by the National Bureau of Economic Research. This study focused on the relationship between different religions and economic perspectives. They found that “Christian religions are more positively associated with attitudes conducive to economic growth, while religious Muslims are the most a n t i m ~ k e t . “The authors of the study reached this conclusion by ~~ nalyzing responses to statements and questions such as “Competition is good”; “Private ownership should be increased? ” and “Is it justified to accept a bribe? “56 Their results point to a negative correlation between Islam and economic attitudes that are propitious for sustained growth. 57 These scholars often place the blame for poor economic development in the Islamic and Arab world on the traditions and practices of the cultures t h e m s e l v e ~ . ~ ~ Supporters of this position contend that Muslim societies do not foster creative thought since Islam prohibits doubt and the challenging of traditions among its believers. 9 This sentiment is reinforced by analysts who argue that Islamic “fatalism ‘ endows its 9 55 GU~SO, Luigi, Paola Sapienza, and Luigi Zingales, “People’s Opium? Religion and Economic Attitudes,” National Bureau ofEconomic Research Working Paper Series (2002). ” Ibid. j7 Ibid. 58 John L. Perkins, “Human Development in the Arab World: Islam Is Blocking Progress,” Free Inquiry (April-May 2004). 59 Ibid; “Self-Doomed to Failure – Arab Development,” The Economist (July 6,2002). adherents with a distaste for risks and entrepreneurialism which in turn decreases Muslims proclivity for innovation. Similarly, scholars such as Raphael Patai argue that 9 Arab culture has developed a mindset that is not open to change because of its traditi~nalism. ~’ e argues that this contempt for change has hindered development by W fostering a widespread reluctance to embrace Western technology in the Arab Many of these scholars also argue that the region’s practice of subordinating women has contributed to its dismal economic situation. 63 For these analysts, the overall result of these factors is that Islamic and Arab traditions have been detrimental to economic development. 4 Beyond economic growth, many analysts claim that Islamic and Arab societies are also prone to higher degrees of political violence than other cultures, both externally and internally. Samuel Huntington for example has reached this conclusion about Islam by examining data on ethnopolitical conflicts during the early 1990s. He found that during this period there was a higher degree of intercivilizational wars as well as internal violence within the Islamic bloody, and so are its His contention therefore is that ”Islam’s borders are To explain this alleged propensity for violence, Huntington offers several ideas.

He argues that Islamic societies are more militaristic than other civilizations because Islam is a more violent religion. 67He points out that Perkins. Raphael Patai, The Arab Mind (Long Island City: Ratherleigh Press, 1976) 294-296. 62 Ibid. 63 Perkins; United Nations Development Programme, The Arab Human Development Report 2002: Creating Opportunities for Future Generations (New York: United Nations Publications, 2002) 27-28. 64 Ibid. 65 Samuel P. Huntington, The Clash of Civilizations and the Remaking of World Order (New York: Simon and Schuster, 1996) 257-258. 66 Ibid. 67 Huntington 263. 60

Mohammed himself was a fierce warrior, in contrast with Jesus Christ and ~uddha. ” He also claims that Islamic countries are less able to assimilate minorities into their societies as a result of the absolutist nature of their religion. 69 The consequence is that there is a higher degree of internecine conflict in Islamic states. ” He also argues that the lack of a central, core state in the Islamic world has contributed to the violent nature of the region because no one state can successfully arbitrate conflicts, whether between Muslims and non-Muslims or among Muslims t h e m ~ e l v e s .

Furthermore, he states that the nature of ~~ the present demographic shift in the Islamic world, in which rising birthrates have created a large, frequently unemployed youth population, has contributed to the region’s political instability and violence. 72 Scholars such as Raphael Patai make a similar argument regarding Arab culture. His claim is that since Arab culture places a large amount of emphasis on the family, Arabs have a very keen sense of honor. 73 As a result, any slight to a family member is taken very seriously and proportional retaliation is often considered appropriate in order to defend a family’s honor. 4 Disputes between individuals can thus rapidly expand into larger conflicts by drawing in other family member~. ~”n this way, Patai claims that Arab culture has contributed to a high proclivity for violence. Many scholars who hold Islamic and Arab cultural factors responsible for the region’s development deficiencies also contend that these societies typically exhibit large amounts of political repression. Bernard,Lewisargues that the autocratic political ibid. Huntington 264-265. 70 Ibid. 71 Ibid. 72 Ibid. 73 Patai 222-224. 4 Ibid. 75 Ibid. 68 69 structure of states in the Islamic world has been strengthened in the modem era rather than weakened as it has in the To explain this phenomenon he points to the comparatively lower degree of secularism in Muslim states. 77 Lewis states that while there has been a separation between religious authority and political power in the West since the time of Christian Rome, there has been no corresponding separation within slam. ^^ This sentiment is echoed by Hutington who notes that “In Islam, God is

Nevertheless, there is disagreement among scholars who perceive a correlation between Islam and the region’s authoritariaism. Steven Fish for example agrees that there is a link between Islam and autboriwianism but unlike Lewis and Huntington, he W does not identilji Islam as a causal mechani~m. ~’ e breaks down this line of reasoning by arguing that the distinction between church and state is not as deep in majority Christian countries as many believe. He points out that as recently as 1995 many European democracies with a sizable Lutheran majority had long-standing state ch~rches. ‘ Furthermore, he contends that the lack of a dual religious and political structure in the Islamic world has been exaggerated given that regimes such as Iran and Afghanistan under the Taliban are not character is ti^. ‘^ Instead, he argues that the predominant subordination of women in Muslim societies explains the connection In his between Islam and a~thoritarianism. ~~ view the oppression of women contributes Bernard Lewis, “Islam and Liberal Democracy: A Historical Overview,” Journal of Democracy (April 1996). 77 1bih. 7x bid. 79 Huntington 70. 0 Steven Fish, “Islam and Authoritarianism,” World Politics (55. 1 2002). ” Ibid. Ibid. ‘”bid. 76 *’ to authoritarianism because “oppression as a habit of life blocks the oppressor’s own However, he does not blame Islam itself for this situation advancement and freed~m. “‘~ but instead argues that it is a question of interpretation since female subordination does not have a strong scriptural f ~ u n d a t i o n . ~ ~ Other scholars focus on Arab political culture to explain the region’s authoritarianism. Alfred Stepan and Graeme B.

Robertson find that in contrast to nonArab Muslim countries, which perform well in terms of competitive elections, Arab countries exhibit a substantially greater amount of political repression. 86 They conclude therefore that rather than Islam, Arab political culture explains the region’s authoritarian bent. 87 In particular, they pinpoint the relatively recent and arbitrary borders of Arab states. ” These borders, drawn haphazardly by colonial powers, have created weak nation-state identities that have brought about internal instability and repressive responses. 9 In addition, they hold pan-Arabism responsible for repression since it has destabilized internal politics within Arab states by further weakening nation-state id en ti tie^. ^’ This movement, which is strongly linked to the Arab-Israeli conflict, can hinder political development because when Arabs focus their energies on Arab nationalism, they become distracted from their own states7 concern^. ^’ Although this regional Arab-Islamic cultural literature would have predicted economic stagnation and political instability for Dubai, given the Islamic and Arab

Ibid. Ibid. 86 Alfred Stepan with Graeme B. Robertson, “An ‘Arab’ more than ‘Muslim’ Electoral Gap,” Journal of Democracy (14. 3 2003). 87 Ibid. Ibid. 89 Ibid. Ibid. 91 “Self-Doomed to Failure – Arab Development. ” g4 s5 identities of its rulers and citizens, the emirate has not had this experience. In terms of its economy, it has displayed instead consistent growth and movement toward greater modernization. While it is true that a significant percent of Dubai’s workforce is nonMuslim, the city-state of Dubai and the U. A. E. s a whole are both governed by Thus its economy, which is by no means fully free market, is in part guided by Muslim economic attitudes . 93 Furthermore, although Dubai’s rulers are conscious of the need to preserve traditional culture, they have not been closed to new ideas and have instead embraced many aspects of Western culture and technology wholeheartedly. Indeed, the Maktourn family supported the selection of Shaykh Mohammed A1 Maktoum as Dubai’s Crown Prince in 1995 precisely because of his demonstrated willingness to aggressively lead’s Dubai’s modernization and development program forward. 4 As a result, Dubai’s economic performance does not conform to the expectations of the ArabIslamic literature which would have predicted that the traditions and psychologies of these cultures would hinder growth. In addition, Dubai has not experienced much political violence since joining the U. A. E. in 1971. The country has not fought in any major conflicts and has only ever been seriously threatened during Iraq’s invasion of Kuwait in 1991 . 95 Internally, there has been persistent calm in the emirate of Dubai and a very low level of domestic unrest 92 Given that over 84. percent of the workforce is Asian, it is difficult to determine what percentage of the workforce is Muslim since they could be Hindu, Sikh, etc. Still, it is very plausible that a significant plurality of these Asians are Muslim given that pro-Muslim riots started by Asian workers occurred in A1 Ain, an enclave of Abu Dhabi, following a Hindu mob’s destruction of a mosque in the Indian city of Ayodhya in 1992. See Davidson 269 for more information. 93 On a scale of 1 to 5, with 1 being the most free, the U. A. E. ‘s economy was only rated 2. 68 on the 2005 Index of Economic Freedom published by the Heritage FoundationlWall Street Journal.

For more information see Marc A. Miles, Edwin J. Fuelner, and Maria Anastasia O’Grady, 2005 Index of Economic Freedom (Wall Street JournallHeritage Foundation: 2005). http:l/www. heritage. orglresearch/featureslindex/index. cfm 94 Davidson 101, Personal interviews January 2005. 95 Joseph A. Kechichian, ed. , A Century in Thirty Years: Shaykh Zayed and the United Arab Emirates. (Washington: The Middle East Policy Council, 2000) 192-193. in the other emirates compared with the region in general. 96 This result is a clear outlier to the trend of Muslim and Arab violence described by analysts such as Huntington and Patai.

Furthermore, while Dubai’s government is clearly authoritarian, it has not fostered a repressive internal atmosphere, and social liberalism is permitted. Beyond allowing expatriates to drink alcohol and wear bikinis, small steps have been taken to promote the role of national women in the emirate as well. For example, Shaykha Lubna, a University of California graduate and a niece of the ruler of Sharjah, served under Shaykh Mohammed for several years as senior manager at the Dubai Ports Authority and later, as the managing director of Tejari. com, a local e-government initiati~e. ? 2004, In she was appointed as the first woman minister to the President of the U. A. E. ‘s ~ a b i n e t . ~ ‘ In this way, although Emirati women are in general still expected to maintain traditional, Islamic customs in Dubai7s society,99the state has taken small steps to encourage the participation of women in public life. Since the state has only begun this process very recently, it is too soon to say whether this trend proves or disproves the cultural scholars7 assertion of a clear causal link between the status of women and authoritarianism.

The primary purpose of the preceding discussion of oil curse and Arab-Islamic cultural literature has been to describe some of the major schools of thought that seek to explain development trends in the Gulf. Since these theories are designed to decipher the 96 There have been no violent, opposition movements as in Bahrain, Kuwait, or Saudi Arabia. There has only been one reported coup attempt, which failed in Sharjah in 1997. For more information on the coup in Sharjah see Davidson 99-100 and the second chapter for more information on regional political violence. 97 Vijaya George, “Shaikha Lubna A1 Qasimi,” Womenone. rg, a Khaleej Times community initiative (200 1). http://www. womenone. org/faceslubna04. htm 98 Samir Salama, “Restructuing of Sixth Cabinet Sees First Woman Minister,” GulfNews (November 3 , 2004). 99 Gina L. Crocetti, Culture Shock! United Arab Emirates (Portland: Graphic Arts Center Publishing Company, 2001) 144-155. region’s general political instability and economic weaknesses, Dubai’s development results do not fit into their conceptual frameworks. As the second chapter will demonstrate, Dubai has instead experienced a high degree of political stability and a dynamic economy.

Ultimately, a thorough understanding of Dubai’s development history will provide the background necessary for establishing an explanation of why its particular outcome has occurred. Regional Ovewiew and Development Histoly To fully understand Dubai’s development, it will be necessary to examine the regional and historical contexts within which it occurred. In the Persian Gulf, there are many similarities among the Arab states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the U. A. E. These common trends manifest themselves politically, economically, and socially.

In terms of political structures, all of the regimes are authoritarian monarchies with substantial bureaucracies. Fiscally they are predominantly dependent on oil rents. In addition, many of these states exhibit high degrees of political repression and instability. Economically, these Arab monarchies have all pursued state-led growth strategies based on oil and natural gas exports. Neariy all of these states have failed to significantly diversify their economies and have not achieved substantial integration into the global economy outside of the hydrocarbon sector.

Socially, these states offer a wide range of services to their citizens, such as free or heavily subsidized healthcare and education. Despite these benefits, there are significant social problems in the region, such as rapid population growth, widespread unemployment, and an influx of foreign labor. After describing these regional political, economic, and social trends, a look at Dubai s recent history will demonstrate that its development stands out. It has exhibited sustained political stability, consistent growth, and a comparatively large amount of economic diversification.

Understanding the ways in which Dubai’s modern history diverges from regional development trends will be a precondition for developing an explanation of why this process has occurred. 9 The Arab monarchies of the Gulf are all authoritarian in nature. Gove the region typically impose their will through large, coercive apparatuses. loo For example, in Oman, the sultan maintains absolute power and rules by decree. “‘ When confronted with a domestic insurgency in 1970 to 1975, he used the state’s military might to crush it. o2 In Saudi Arabia, the government argues that it derives political legitimacy from the fact that citizens can confer with government officials in a rnajbis, or Direct political participation is extremly limited. ’04 Not only is consultative ~ouncil. “~ there very little political participation available to citizens in Saudi Arabia, but there is also a high degree of social repression. The goverment has established mles barring women from being shown on television, as well as the use of any form of music in the media. lo5 Furthermore, these strict rules are enforced by religious police. 6 While none of the other Arab states in the Gulf are as repressive as Saudi Arabia, they nevertheless do not allow their citizens many political rights or civil liberties. This pattern is clear when one examines Freedom House’s ratings of these countries. From 1994 to 2002 all of these countries except Kuwait were rated as “not free. “lo7 In addition to repression, another widespread feature of regimes in the region is political instability. Coups, rocky succession struggles, and Islamist opposition movements are common, Saudi Arabia is by far the most turbulent regime, having loo Cause 68-69,Abbas, Abdelkarim, ed. Change and Development in the Gulf(London, MacMillan Press, Ltd. , 1999) 238-240. 101 Freedom House, 2003 Country and Territory Reports: Oman. http://www. freedomhouse. orglresearch/fi-eewor1d/2003/countryrat~m 102 Cause 68-69. ‘Ohl-~asheed 80-86. 104 Freedom House, 2003 Country and Territory Reports: Saudi Arabia. http://www. freedomhouse. org/research/~eeworld/2003/countryrat~ 105 Fareed Zakaria, “The Saudi Trap,” Newsweek (June 28,2004). ’06 Ibid. ’07 Freedom House, 2003 Country and Territory Reports: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates. ttp://www. freedomhouse. org/research/freewor1c8/2003/countries. htm suffered a dramatic increase in bloody opposition attacks in recent years. 108In addition, many analysts foresee a violent power struggle following the death of King Fahd, whose health has been deteriorating in recent years. 109The other Gulf states have also experienced serious political instability. For example, Qabus, the current ruler of Oman, overthrew his own father in a coup in 1970, while another coup attempt against him was thwarted in 1994. ” Similarly, Qatar experienced a coup in 1995 in which the ruler, Khalifa, was also overthrown by his own son. ‘ll Furthermore, nearly all of these states have experienced problems with Islamist terrorist movements as is evidenced by the numerous attacks that have been peqetrated and foiled during the last two decades. ’12 Economically, the Arab Gulf states have all pursued hydrocarbon-export-led growth strategies. The goal of these top-down development schemes has been “to acquire revenue from mineral exports to create an industrial base for sustained development after the natural resource is e~hausted. “~ short, all of these states have In sought to use their resource wealth to build an economy that will ultimately no longer be overwhelmingly concentrated in the hydrocarbon sector. However, unlike in Dubai, most of these states have failed to reach this diversification goal. For example, in Oman oil sales for 2003 still represented more than one third of GDP and 80 percent of export earnings. 114 In Qatar, oil and gas revenues comprised one half of its GDP and about 90 ‘ 8 Daryl Champion, The Paradoxical Kingdom: Saudi Arabia and the Momentum of

Reform (New York, 0 Columbia University Press, 2003) 142-143,278-286; Peterson, Saudi Arabia and the Illusion of Security (New York: Oxford University Press, 2002) 6; Stanley Reed, “Shaking the Timbers of the House of Saud,” Business Week (May 17,2004). lo9 Al-Rasheed 186-187. “O Herb 150, 173-1 75, 178-179. 111 Herb 116-126. ll%lerb 173-175, 178-179, Gause 68-69. 113 Alan Richards and John Waterbury, A Political Economy of fhe Middle East (Boulder: Westview Press, 1998) 23-24. ‘ I 4 Yahoo International Finance Center, Oman Country Fact Sheet, 2005, http://biz. yahoo. com/ifc/om. html ercent of export receipts in 2003. “~ Indeed, even Kuwait, which has had a significant amount of success diversifying away from oil exportation, has only managed to diversify While Kuwait Petroleum International owns oil refineries in within the oil ind~stry. “~ Western Europe and is a direct supplier for a large number of European retail outlets, oil still makes up about 40 percent of the country’s GDP. In this manner, although Kuwait’s government now controls more downstream operations and distribution networks, its economy is still heavily geared toward the petroleum industry.

The result of this lack of international competitiveness in the non-hykocabon sector is that Gulf exports have been unstable while real incomes in many countries have remained low or decreased markedly horn 1980 to the present. “7 Furthermore, the Gulf economies suffer from a lack of foreign direct investment (FDI). As Table A. of the Appendix indicates, FDI as a percentage of GDP is very low in the Arab world compared with other regions. This factor has hurt the Gulf economies because they have not been able to take advantages of the benefits that accompany F D I . ‘Typically, high FDI enhances efficiency as a result of the technology transfers ~ and increases in competition that accompany it. ”’ All of these statistics demonstrate that although the Arab Gulf states still receive significant earnings fiom oil sales, in general their economies suffer from a lack of diversification, international competitiveness, and broad-based integration with the global economy. Yahoo International Finance Center, Qatar Country Fact Sheet, 2005, http://biz. yahoo. com/ifc/qa. html Crystal 96; Energy Information Agency, United States Government, Country Analysis Briefs: Kuwait (March 2004). ttp://www. eia. doe. gov/emeu~cabsikuwait. html 117 Toby Dodge and Richard Higgott, eds. , Globalization and the Middle East: Islam, Economy, Society and Politics (London: Royal Institute of International Affairs, 2002) 109. For more information see Table C. in the Appendix. 118 Dodge and Higgot 98-100. ‘I9 Ibid. 116 115 Despite the economic troubles that plague the region, the Arab Gulf monarchies have all maintained large social welfare systems. Paid for by oil rents, these systems are largely free or heavily subsidized. 20They include a range of healthcare services from simple procedures to costly, experimental practices performed abroad. 12’ These programs have produced substantial results as infant mortality rates have decreased while life expectancy rates have increased. 122In addition, Gulf states have used oil money to As a improve e d ~ c a t i 0 n . l ~ ~ result, they have boosted educational enrollment at the primary, secondary, and university levels. 124 1n this way, rulers in the Gulf have used government bureaucracies to concretely improve the lives of their citizens.

Although state welfare programs have had many positive effects for Gulf citizens, there are nevertheless significant social problems throughout the region. To begin with, there has been a tremendous amount of population growth which has produced a particularly large youth population. 12′ This trend has contributed to high youth unemployment in many countries by increasing the supply of labor relative to capital. ’26 While statistics are often not officially published, the government of Qatar reported that 44. 6 percent of citizens, male and female, between the ages of 15 to 24 were unemployed in 1997. 27Surprisingly, there has also been a simultaneous influx of foreign labor into Gulf states. Although it might seem logical for companies to hire some of the unemployed youth in these countries when there are labor shortages, in fact, companies 120 Gause 65-67. Ibid. Ibid. Gause 64-65. 124 Ibid. 125 Richards and Waterbury 77, Gause 150. Richards and Waterbury 94. 127 United Nations Development Programme. 12′ ’22 123 prefer to hire foreign labor. 12′ This tendency stems from the lower salaries and benefits that these workers require.

In addition, they are often willing to work in positions that citizens typically look down upon. 12gThe result of this shift to foreign labor has been that approximately three quarters of the Gulf labor force are expatriates, with Dubai’s percentage being even higher. 130 This trend has sometimes produced conflict between Gulf rulers and their citizens. This uneasiness with a large foreign labor force manifested itself during the first Gulf War when leaders of Kuwait and Saudi Arabia used the crisis as a pretext to expel Palestinian and Yemeni workers, respectively.

Ruling elites in these states felt threatened by the fact that these two groups, from countries supporting the Iraqi side in the war, had linguistic and cultural ties with their own citizens. They feared that they might use these bonds to influence domestic politics. Since then, both countries have welcomed an influx of south Asian laborers who do not share the same cultural links with their citizens. l3l The above political, economic, and social trends demonstrate that the Arab Gulf monarchies have experienced substantial development problems.

Although there have been limited successes, such as improvements in healthcare and education, in general the region has experienced poor development. Governments in these states are typically repressive and unstable while their economies suffer from a lack of diversification and integration into the global economy. Since Dubai is also an authoritxian, oil-exporting, Arab monarchy, these regional trends would lead one to predict that it would exhibit a Gause 150. Ibid. Abdelkarirn 15 1; Personal Interviews January 2005. 131 Gause 161-162. ‘ 2 1 130 128 imilar development outcome. Nevertheless, Dubai9sdevelopment performance has been markedly different from that of its peers in the Gulf. Dlabai9sDevelopment Wistsv Due to the increasing importance of Persian Gulf shipping routes in the 1 9th century, from 1820 to 1892 the British signed a series of agreements with Gulf rulers to guarantee their regional supremacy. These treaties, which designated the local Arab shaykdoms as ‘Trucial States,’ resulted in the signatories9agreement not to enter into any treaties with other foreign powers without British consent.

In addition, these documents allowed Britain to control their foreign policies, although local rule still governed internal affairs. Ultimately, the treaties were simultaneously beneficial and disadvantageous for the Gulf monarchies because while they afforded them a high degree of protection, British hegemony also isolated them. ’32 As one of these Trucial States, Dubai resisted the economic introversion which characterized most of its peers. Instead, it developed a reputation as a regional entrepot. 133During this period, Dubai’s economy flourished as a result of extensive fishing, pearl-diving, and gold-crafting.

Its exports of pearls and gold brought in significant quantities of Persian traders as well as many others from around the region. 134 As a result, Dubai developed a reputation for international commerce long before its first free trade zone was established in the 1980s. As British power declined on a global scale following the Second World War, it began to decrease its military presence in the Persian Gulf, especially during the late 132 Davidson 33-35; Sampler and Eigner 8. and Eigner 8. 134 Ibid. 133 Sampler 1960s. ” Although the Trucial agreements were still in effect, by January 1968 the British government had signaled its intention to terminate its treaty relations with these co~ntries. “~ maintain collective security, the British strongly encouraged the seven To emirates, along with Qatar and Bahrain, to fonn a political u n j ~ n . ‘Many British and ~~ Arab administrators during this period considered such a federation to be a logical step for the Trucial States. 13’ In the four years preceding British withdrawal in 1971, the Gulf monarchies held a series of negotiations to discuss the form that their federation would take.

At the same time, British advisors assisted Arab administrators in the creation of state infrastructure through the Tmcial States Development Office and Development ~ u n d . ‘ ~Although Qatar and Bahrain opted not to join the federation, out of a hesitancy ‘ to sacrifice their sovereignty, six of the seven remaining emirates attained independence as a federal state on December 2, 1971, with R’as al-Mhaimah joining the following year. The federation’s provisional Constitution, adopted in 1971, became the foundation for this new state – the United Arab Emirates.

In addition to designating Abu Dhabi as the country’s capital, it describes the separation of powers between individual emirates and the country’s federal government. It stipulates that while the national government has jurisdiction over foreign policy and defense, the rulers of each emirate retain absolute authority within their states. In addition, the Constitution outlines the organs of the federal system and the role of the country’s President. The Supreme Council of the Federation (FSC) is the state’s highest authority and is comprised of the rulers of each emirate. According to the Constitution, the FSC has executive powers, 135

Davidson 45. bed 12 1. 137 Ibid; Davidson 45-47. 1. 38 Davidson 45-47. ‘””1 Abed 127. ‘” 6 1 powers of legislation, and the ability to select the country’s President. As the state’s chief executive, the President is responsible for signing laws and decisions endorsed by the FSC and is also the Commander-in-Chief of the Armed Forces. Below the President and the FSC is the Council of Ministers, an organ charged with drafting federal laws and overseeing their implementation. In addition, there is a 40-member Federal National Council (FNC) whose members are selected on a fixed basis by each emirate’s r ~ 1 e r s . ~ ~ Although designed to resemble a parliament, this body does not possess any significant authority. Its primary function is to provide consultation on legislative issues. Finally, the U. A. E. has a Federal Judiciary with a Supreme Court that delivers judgments on inter-emirate disputes and the constitutionality of federal laws. This provisional Constitution was made permanent by the FSC in 1996. l4’ Shortly before Dubai’s accession to the federation, the state’s rulers had begun an economic program designed to build on their tradition of international trade described above.

They decided to focus on developing a base for future economic growth and diversification by investing in macro-infrastructureprojects. ’42 Since oil revenues had not yet begun to flow into the emirate, Dubai’s ruler, Shaykh Rashid A1 Maktoum, borrowed substantial sums of money from Kuwait in 1960, in order to fund the dredging of the Dubai Creek. The result of this risky venture was a dramatic improvement in trading capacity as larger ships could now dock in Dubai. Simultaneously, he authorized the construction of an airport to further modernize Dubai’s business ~ a ~ a b i 1 i t i e s . l ~ ~

Article 68 of the Constitution states that for the FNC, Dubai and Abu Dhabi will each maintain eight seats each, R’as al-Khaimah and Sharjah will have six seats each, and Umm al-Qaiwain, Ajman, and Fujairah will have four seats each. For inore information see A1 Abed 134-141. 141 Ibid. ’42 Sampler and Eigner 22-23. 143 Sampler and Eigner 9-14. 140 After the influx of oil rents that began in 1969, Shaykh Rashid continued this strategy of infrastructure development by greatly expanding Dubai’s Port Rashid in the 1970s. He also used oil money to invest in the development of heavy industries such as aluminum ansl desalination plants.

These projects constituted a base from which Dubai could attract foreign investment and fuel its economy. They also allowed Dubai to position itself for an expansion into a wider variety of indu~tries. ‘~~ Rashid’s diversification process continued with Dubai’s dramatic growth in tourism in the 1980s. During this period, hotel capacity began to greatly increase. ‘” At the same time, Rashid developed and promoted Emirates Airlines, a luxury airline W also used available oil wealth to encourage e designed to attract additional ~ i s i t 0 r s . l ~ ~ diversification by uthorizing the constmction of Dubai’s first fi-ee trade zone, the Jebel Ali Free Zone. Within this zone, firms could hraction in a liberal economic environment where they could fully own businesses and could operate fi-ee from currency restrictions. They also had the opportunity to take advantage of the zone’s close proximity to Dubai’s recently completed Jebel Ali PO&. ‘” These projects, built on the foundation provided by the industries and infrastructure that Rashid fostered in the 1 960s, allowed Dubai to continue its modernization and diversification effort.

After Shaykh Rashid’s death in 1990, his son Shaykh Mohammed continued Dubai’s aggressive development strategy. He contributed to tourism promotion by establishing sporting events such as the Dubai Summer Classic, an annual golf Ibid. Sampler and Eigner 15. ’46 Ibid. 147 J. E. Peterson, “The United Arab Emirates: Economic Vibrancy and US Interests,” Asian Affairs (July 2003). 145 tournament, and annual festivals such as the Dubai Shopping ~ e s t i v a 1 . lAdditionally, ~~ he initiated construction on the sail-shaped Burj A1 Arab hotel, which quickly became Dubai’s most recognizable and widely disseminated symbol.

He also authorized the creation of new tourist attractions such as Dubailand, a theme park, and the Palm Islands, the two man-made islands designed to resemble palm trees. 149 As a result of these projects, Dubai’s biggest growth sector today is its tourism industry. Dubai went from having under 50 hotels in 1985 to more than 250 in 2 0 0 2 . l ~ ~ Demand for rooms has increased dramatically, as is evidenced by Dubai’s relatively constant occupancy rates of about 60 percent despite its increase from 4,601 rooms in 1985 to 21,428 rooms by 2001. ‘I ~ourists enticed by Dubai’s warm climate in the are winter, its beaches, and its tolerance for many aspects of Western lifestyles among its In visitors, including the consumption of alcoh01. l~~ addition, the attractions that Dubai’s leaders have developed have contributed to its viability as a tourist de~tinati0n. l~~ Shaykh Mohammed has also directed an expansion of the free trade zone concept that began with the Jebel Ali zone in the 1980s. To encourage mass communications, his administration has created a free trade zone known as Media City.

Inside this zone, corporations can take advantage of an extremely liberal trade regime that mimics the initial Jebel Ali zone. Dubai’s leaders have used the conditions within this zone to create a regional media hub that hosts many of the biggest companies such as Reuters and Sampler and Eigner 15-16. Scott Macleod. “Dubai’s Oasis,” Time (January 26, 2004); Seth Sherwood, “The Oz of the Middle East,” The New York Times (May 8,2005). 150 Sampler and Eigner 191. 151 Sampler and Eigner 192. 1 “Arabia’s Field of Dreams,” The Economist (June 29,2004). 5 ‘ lS3 Ibid. 149 148 CNN. ~~ Similarly, Dubai’s rulers have developed an emerging high-technology sector by creating a free zone known as Internet City. This zone contains all of the same liberal elements as Jebel Ali and Media City. In addition, the government provides a range of benefits such as its ‘corporate concierge’ service which assists companies with many administrative burdens such as incorporation, real estate management, and visa^. ‘”^ The added incentive that Internet City offers firms is that since all of the companies are located on one campus, their shared proximity allows them to establish contacts and increase communication flows.

These enticements have allowed Dubai to attract industry leaders such as Hewlett Packard, Dell, IBM, and Sony, many of which have established their regional headquarters inside Internet City. There, these multinational corporations take advantage of the zone’s tax free status to re-export their information and communications technology around the w0r1d. l~~ Dubai has also begun to position itself as a regional center for finance. In contrast to many merchant banks in the Arab world, Dubai’s banks lend capital equally to state and private entities.

Furthermore, these banks supply open credit markets and strong lending structures. Beyond capital lending, Dubai also offers other banks in the region attractive investment opportunities given its liberal economic opportunities. Construction is currently underway on the Dubai International Financial Center, which its leaders hope will allow Dubai to expand its role as a regional banking hub. ’57 These efforts demonstrate that Dubai’s rulers have succeeded in establishing an economy which is significantly more diversified than its peers in the Gulf. In contrast

Sampler and Eigner 108-109. Ibid. 156 Pranay Gupte, “Dubai’s New Export: the Internet City,” The Straits Tim

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