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The Inevitable Rebound

In hindsight, that could have been a tipping point for the emirate that was trying to rise above its environment and become a pace-setter not just for the region, but a premier city for business and pleasure across the world. Firing on several cylinders simultaneously—exhibition centre, tourism destination, world-class airline, entrepôt to the Middle East and East Asia, and regional business centre—Saddam Hussein might well have upended Dubai’s applecart.

In fact, many experts couldn’t quite foresee a regional financial and business hub in such an “unstable” part of the world hobbled by war, geopolitical fault lines and a tough neighbourhood. One often heard whispers of “overreach”. 
Nearly two decades on, yet another crisis of confidence washes over this tiny emirate with virtually no natural resources to speak of other than the ingenuity of its rulers and the mercantile economy that has made the city much more than a dot on the map. Make no mistake, money talks in Dubai like nowhere else in the world, and when money is in short supply, you tend to panic. But, Dubai has been built over the last quarter century on its ability to inspire confidence and deliver returns on investment that are the envy of neighbours and other competing economies. It has also learned to be nimble and 
correct mistakes.

One of the early lessons Dubai adopted was that while politics makes both friends and enemies, trade makes everybody a bedfellow. Dubai has kept its ports humming during the bleakest of times, even when war in the Gulf threatened to choke off traffic through the Straits of Hormuz and foreign navies sent mine hunters to protect maritime traffic. To put it nicely, “trade sanctions” against this nation or that ruler has been anathema to the folks who run Dubai’s container terminals and free ports. In fact, they have thrived in precisely such circumstances.

Unconventional wisdom notwithstanding, it came as a surprise to me that Dubai sent Shaikh Ahmed bin Saeed Al Maktoum to meet US Treasury Secretary Tim Geithner to discuss the emirate’s debt crisis. But, it then occurred to me that he had something on his résumé that made him an ideal choice: the enviable track record of running what is arguably the world’s best airline starting with just two leased planes in 1985. Those planes came from Pakistan International Airlines (PIA) and let’s just say they were a little more than airworthy.

Anybody who has studied the inner workings of the airline, as I have, would know that Shaikh Ahmed has not just been a nice shaikh to have at the top of the corporate pyramid, but somebody who knows the nuts and bolts of the airline’s worldwide operations, beginning from negotiating new landing rights to multi-billion dollar aircraft purchases. He brings credibility and a quiet assurance, exactly what Dubai needs at the moment. To think that Dubai has sustained its growth and continued to be a magnet for capital from around the world, with virtually no underlying collateral to offer as guarantee other than the multiplier effect of money generating more money, is an astounding 
story in itself.

Many other cities in the Gulf region have gone down the same path with start-up airlines, tourism promotion, theme parks, campuses for Ivy League colleges and liberal tax regimes, but all of them have the underpinning of oil or gas, or both, underneath the sand. One can literally take these deposits 
to the bank.

Dubai, though, has built its economy on the power of ideas and its ability to attract talent from every part of the world, irrespective of the ups and downs that it periodically goes through. In my travels across the region, I often heard Gulf Arab officials talk of Dubai as the benchmark, the upstart that could easily be beaten at its own game.

There has been no dearth of detractors and naysayers who see the current downturn as the ultimate comeuppance of a city whose hubris came in the way of sound judgement. Rather than rest on its laurels and better manage what it has already achieved, Dubai pushed itself to go farther, build higher and get richer. Call it “irrational exuberance” or the brashness of a Donald Trump, when sentiment went south, so did the investments. I hear there are lots of people who have lost fortunes, but that’s only to be expected in a highly leveraged, 
speculative environment.

To my mind, Dubai has lost none of its underlying cachet. It still fosters the best entrepreneurial spirit in the region and will inevitably rebound from its current funk. But some things will have to change, with “transparency” being a big part of it. Dubai cannot hope to compete with global financial centres such as New York and London without providing investors with the same level of scrutiny. I don’t think that alone will prevent Dubai hitting the skids the next time around, but at least it will level the playing field. I can see the business climate is already adapting to the new reality.

So, I think Dubai will soon be back in the global race for human and financial capital. That’s not the Pollyanna in me, but rather my belief in Dubai’s unmatched proposition. No other city can claim what Dubai does: built on nothing but sand and human imagination.

George Abraham is an Ottawa-based commentator. For feedback, write to opinion@khaleejtimes.com