Chasing the Dubai Dream

Is the “City of Gold” a Miracle or a Model for Development?

Step into an elevator inside the world’s tallest building, and watch the lights dim as the doors close. The elevator begins to climb, and the darkness is broken by a video of other famous buildings, each taller than the next. Eventually, only a projection of the Burj Khalifa itself remains. Soaring 2,717 feet, it is roughly three Eifel Towers tall. Your ears confirm this, and after the elevator doors open to the observation deck, so do your eyes.

The Burj Khalifa is remarkable not only for how tall it stands, but also where it stands. Half a century ago, less than 60,000 people called Dubai home. It is now among the fastest-growing metropolitan areas in the world and home to 2.6 million people. Incredibly, its population could double again by 2030. Viewed from above, Dubai’s transformation from a sleepy desert outpost to a leading global hub is breathtaking.

Today, Dubai is something bigger than a city. Its experience suggests that with the right mix of reforms and incentives, steady growth can be unlocked even in the most unlikely of places. Its success has not come without challenges, of course. But as a sort of triumph of free-will over fate, Dubai has become a brand. At its core, that brand is success through openness, competition, and innovation. In a sense, what Silicon Valley is to technology, Dubai is to connectivity-driven development.

Across Asia, many cities are now chasing the Dubai dream. In Azerbaijan, a former Soviet republic on the Caspian Sea, the growing port city of Baku has been dubbed “Dubai of the Caucus.” In Pakistan, the head of the Gwadar Port Authority declared earlier this year: “What Dubai can achieve, so can we.” The dream has stretched as far as landlocked Central Asia. As the director of Khorgos Gateway, an aspiring hub that straddles the border between China and Kazakhstan, put it: “The story of Khorgos today is the story of Dubai some twenty years ago.”

To be sure, embracing the Dubai brand is a savvy marketing move. Globally, the competition to attract foreign investment is fierce. By invoking Dubai’s success, local boosters are encouraging investors to look beyond the modest realities of today and imagine the possibilities for a more prosperous tomorrow. They are saying, in essence, dream with us. The bigger question is whether Dubai’s success can be replicated. Is the “City of Gold” a miracle, or does it offer a model for development?

At first glance, some of Dubai’s well-known features are being emulated. Like Dubai, all three examples above – Baku, Gwadar, and Khorgos – combine ports (a dry port in the case of Khorgos) and free trade zones. Dubai opened two ports in the 1970s, and a game-changing step was taken in 1985, when one of the ports, Jebel Ali, was made into the Middle East’s first free trade zone. The zone attracted foreign companies with lower tariffs, reduced taxes, and other incentives. This combination of infrastructure and economic incentives has helped make it the largest free zone in the world.

Yet there is much more to Dubai’s success. Equally important as the physical elements like ports and free trade zones are a number of “invisible” elements. One expert has outlined nine features of a Dubai model, including a nimble government that leads the development process, a flexible labor force, and a service-oriented economy. Creating investment opportunities, cooperating with world-class development partners, and branding are among the other features. Aspiring hubs will find some of these lessons easier to replicate than others.

Indeed, some of Dubai’s attributes are difficult to transfer. Geography assisted Dubai’s rise, with a natural creek and proximity to other markets helping spur maritime trade in the 19th and early 20th centuries. Resources mattered, too. The country’s development was catalyzed when oil was discovered in the 1960s. That wealth was put toward infrastructure and other investments, and oil now contributes less than two percent of Dubai’s GDP. Some countries aren’t so lucky, of course. But plenty are and have squandered their endowments rather than investing productively.

Relations between Dubai’s government and its society are also distinctive. Dubai provides health and education for UAE citizens, who number less than one in five of its residents, but avoids extensive subsidies to the poor. A World Bank study lists seven differences between Dubai and Pakistan, such as absolute monarchy and no personal or corporate taxes. These differences extend to many other countries, suggesting that if there is a Dubai model, it is a vision with general operating principals rather than specific instructions.

Those principals are perhaps best understood outside Dubai’s borders. That’s the intriguing conclusion of one study examining how Dubai is helping to develop Djibouti, a small country on the Horn of Africa. Key activities include, among others, making maritime and air transport facilities successful, coordinating investment in multiple sectors of an economy, and entering into long-term funding agreements. This is encouraging for Khorgos, which Dubai Ports World will manage for ten years, and Baku, which has hired the same company to help develop its free trade zone.

Even as it reaches beyond its borders, Dubai continues to innovate and reach upwards at home. In many ways, Dubai seems unfazed by its own success. It is expanding Jebel Ali Port, which by 2030, will become the world’s largest. It is experimenting with new technologies, like Hyperloop One, which could shuttle freight at over 700 miles per hour. It has even started construction on a new mega-skyscraper known as the “Tower.” When complete, it will eclipse the Burj Khalifa. If Dubai’s rise to the top offers lessons, so does its ability to stay there.

Jonathan E. Hillman is the Director of the Reconnecting Asia Project at the Center for Strategic and International Studies.