New California

Roger St. Pierre

Orlando for grown-ups or the world's next great business centre? Roger St Pierre charts the literal rise and rise of Dubai

Bigger in style, bolder and more ambitious than Texas, Dubai is a true 21st Century creation. What was a mere fishing village and airplane fuelling stopover just 30 years ago has become the biggest real-estate project in history. Amid a sea of working cranes has arisen Burj al Arab – currently being topped out as the world’s tallest building at a heady 555.3 metres (more than 150 floors) – and a veritable forest of skyscrapers that are set to dwarf Manhattan.

The whole thing has been driven by the vision of Dubai’s ruler, His Highness Sheikh Mohammed Bin Rashid Al Maktoum, who astutely realised back in the 1980s that, not possessing the vast oil and gas reserves that have brought continued wealth to so many of Dubai’s neighbours, his tiny sheikhdom could carve a different route to prosperity by developing itself as a major business and tourism centre.

It’s often been said that ‘location, location, location’ are the three key elements to commercial success and while at first a sandy strip of land edged by vast deserts might not seem too promising, truth is that Dubai could not wish for a more strategically well-placed site, standing at the crossroads of Europe, Africa, the Middle East and Asia, with vast markets located within easy flying distances.

Nor has Dubai neglected wider flung opportunities. At present, its two greatest trading partners are China and India but the US and Japan are up there in third and fourth places. Other nations are aggressively vying for business too, with some 14 of them having trading figures with the country in excess of $1bn a year and growing.

An oasis of political stability
Besides being at the heart of a regional import market of 1.4 billion people and serving as gateway for £74bn of business, Dubai is a big market in its own right, with more than £8.4bn of domestic imports annually. Those imports have more than doubled since 1989 and, despite global problems, there at present seems no sign of a slow-down. China’s economic performance might be impressive but Dubai’s economy is growing more than twice as quickly.

An oasis of political stability, it’s a highly accessible market, served by 113 airlines – flying to 194 destinations – and 125 shipping lines and, with no exchange controls, quotas or trade barriers, it’s a truly open market. The world’s fastest growing airport, with predictions of more than 60 million passengers annually by 2010, is no longer merely a stop-over point on the way between Europe and the Far East but has become a destination in its own right and a hub for Middle East traffic. Currently, there are more than 140 inbound flights a week from the UK alone while an even bigger second airport is under construction.

Dubai’s vision is, multi-dimensional. While tourism is key – and the place now resembles Las Vegas, without the gambling but with much more sense of style – manufacturing and trade are also important elements and the place seems set fair to soon challenge London and New York as a great financial centre.

Manufacturing has a place too. Great Britain’s world-leading Industrial Revolution was a century in the making but in less than a single generation Dubai has grown from a place that simply small-time traded into a major manufacturing centre in its own right.

Heavy industry, such as steel fabrication and construction supplies reflects the needs of the region’s oil industry and Dubai’s own mushrooming building industry while such light industries as food processing and packaging have developed as a means of import substitution. Created by the government, Dubai Aluminium Company (DUBAL) – the seventh largest producer in the world in its sector, with annual production of 861,000 tonnes expected to grow to a million tonnes by 2010 – is by far the emirate’s largest manufacturing operation. The British invested Dubai Cable Company is another major international player, while the establishment of free trade zones offering the possibility of 100 percent foreign ownership and control have encouraged an inflow of Asian garment manufacturers and other enterprises.

Growth and diversification have been spectacular, with the manufacturing sector currently expanding by an impressive 20 percent year on year.

The free zones, of which there are now five in all, have provided a major fillip to Dubai’s business environment.

Significant benefits
While any business operation outside the zones is required to have at least 51 percent UAE corporate or individual ownership, those in the zones are not only open to 100 percent foreign ownership but gain other significant benefits including 100 percent repatriation of capital and profits, access to a regional market of more than two billion customers; a renewable 50 year guarantee of freedom from any corporate or personal income tax; freedom from import duties; flexible investment options with properties for either outright purchase or rent and either pre-built or custom-made; full administrative support and staff recruitment assistance and ultra-modern port and transport facilities.

No wonder the Jebel Ali Free Zone Authority (JAFZA) – located on a massive 135 square kilometre site beside the world’s largest man-made port – on its own plays host to some 5,500 different companies from more than 120 countries. Their activities run from heavy industry to light industry and manufacturing by small and medium size enterprises. Today, Dubai accounts for 82 percent of the UAE’s entire non-oil manufacturing output.
Set to eventually cover 750 acres, JAFZA initially encompassed 70,000 square metres of warehousing and 850,000 square metres of covered areas.

The twin terminal’s of Jebel Ali and Port Rashid maintain the emirate’s position as one of the world’s largest transhipment centres, serving some 125 major container shipping lines and handling some 8.92 million twenty-foot equivalent containers last year, a 17 percent increase over 2006.
Dubai Airport Free Zone Authority (DAFZA) takes full advantage of fabulous communications links which include the currently under construction new airport that is set to become far and away the largest in the world.

Opened in January 1996, DAFZA, which is wholly owned by the government of Dubai, is now base for more than a thousand international companies – 34 percent of them European – including such prestigious hi-tech and luxury goods names as Porsche, Samsonite, Rolls Royce, Airbus, Dell, Rolex and Chanel.
Its airport location makes this zone particularly attractive to businesses trading in high-value, low-volume products suitable for airfreight.

Continued growth
Established in 1991 at a cost of £35m, Dubai Cargo Village, set adjacent to Dubai International Airport, is today the 18th busiest air cargo facility in the world, handling some 800,000 tonnes a year. In anticipation of continued growth, the first phase of the Cargo Mega Terminal project opened last year, adding 1.2 million tonnes to DCV’s capacity, which is now more than two-million tonnes. Projections are that this figure will climb to some four-million tonnes by 2018.

Set to be the world’s largest airport when it is completed, Dubai World Central International – located 40kms from the existing Dubai International Airport and next to Jebel Ali’s port and free zone – will cover some 140,000 square kilometres and incorporate six parallel runways, a large cargo area and a yearly capacity of 120 million passengers and 12 million tonnes of cargo. A veritable city, the site will incorporate various trading areas to serve the financial, industrial, service and tourism industry needs of a first-class airport.
The first runway is set to open this summer, with completion of the entire facility projected for 2017.

The other three free-trade zones are Dubai Technology and Media Free Zone, encompassing Dubai Media City and Dubai Internet City (the world’s first free zone for e-business); Knowledge Village and Healthcare City – each designed to make Dubai a world player in its sphere.

The establishment of the Dubai International Financial Centre (DIFC) in 1972 marked the start of the emirate’s ambitious bid, backed by world-class standards and regulations and the advantages of those free zone facilities, to take on the world’s major financial centres with a fresh new, vibrant and business friendly banking, investment and financial services marketplace. DIFC has a declared ambition to play host to 20 percent of the world’s investment funds.

“As the region’s financial hub, Dubai now has the combined strength and role of a Hong Kong and Shanghai. The infrastructure development taking place will boost the entire region’s economy in the way Shanghai has done it for China,” comments David Darst, managing director and chief investment strategist at Morgan Stanley.

Adds Dr Omar Bin Sulaiman, governor of Dubai International Financial Centre: “Up till five years ago, employers had to pay hardship money to get their staff to relocate here from the UK or the US. Today they are even willing to take a pay cut. The lifestyle is comfortable, safe and progressive and the values of transparency, integrity and efficiency that we have created make for a great business environment.”

Banking arena
The financial sector is crucial to the Dubai vision and banking is subject to strict government oversight. The number of banks has remained stable in recent years because of a ban on new foreign entrants and the government’s desire to discourage mergers. Currently there are 21 local banks and 25 foreign ones, with the big five controlling 44 percent of the banking system’s total assets.

Built on a 21 million square metre site and set to house 60,000 permanent residents and employ more than 130,000 people, TechnoPark is an exciting project that will focus on the Middle East’s core economic sectors, concentrating on such things as water resource management, the development of alternative and efficient energy sources and environmental resource management.

It will function as a hub that provides research partners with access to the resources of academic and research institutions and international associations worldwide. Comments Mark Fletcher, CEO of Bovis Lend Lease International’s Europe, Middle East and Africa operations: “This is an aggressive market in terms of expectations, making the pace here far quicker than anywhere else in the world.”

While some analysts are cautious about UAE stocks, they are convinced that the economy is not only strong but likely to remain so. But visitors are not just drawn by doing business, they enjoy themselves too. Today, Dubai presents arguably the greatest shopping experience of any city in the world – and at affordable prices. There are great beaches, lots of sports – on water and ashore – and you can even go skiing indoors on man-made snow at the Kempinski while some of the world’s best dining, features all the cuisines from traditional Arab food, oriental delights and fast foods to French, Italian and Japanese fine dining. The later is mostly found in the big hotels, many of which are stunning properties, to say the least. Typical is the strikingly styled Shangri-La whose menu of restaurant choices include Vietnamese with a French twist in Hoi Han and stupendous Chinese banquets in Shang Palace.

“Dubai is strongly orientated to both business and leisure,” avers Hamad Buamin, director general of the Dubai Chamber, an organisation that is committed to becoming the best chamber in the world and already boasts more than 108,000 members. “The future is bright and it’s here in Dubai.”