Ostentatious, exaggerated, colossal.
It seems that Dubai always aspires to carry out the largest, most luxurious and most eccentric
projects in the world.
In this small territory we can find the tallest building, the most luxurious hotel, and even
the largest international airport on the planet.
Located in a strategic enclave at the mouth of the Persian Gulf, the growth process of
Dubai is one of the fastest in human history.
In just over 20 years it has gone from being a remote and lost enclave in the desert to
becoming one of the world's great capitals.
In this period of time the emirate of Dubai has multiplied by four its population, by
nine the number of visitors, and by eight the size of its economy,
But ... Having said that, the question is: how has all this development been achieved?
Has it all been just a matter of oil?
Well in this VisualPolitk video we’re going to talking all about Dubai.
Dubai is one of the seven emirates that make up the United Arab Emirates.
We could describe its government as an Islamic autocracy that restricts a large part of its
peoples civil liberties.
However, if we compare it with its neighboring countries, Dubai is by far the most open place
in the Middle East.
Want some examples?
Well, here women can drive, the veil is not mandatory, you can buy pork at the supermarket,
and even alcohol is not hard to come by.
Yes... things are starting to change, and in a way I think we could refer to this city
as a kind of oasis in the middle of the desert.
And, as you can imagine, all of this change has had its reward.
And, well, it might just suprise you…
Did you know that Dubai is already the fourth most visited city in the world (when it comes
to international visitors) and that it surpasses epicenters of tourism and global trade such
as New York, Hong Kong or Singapore?!
Well it totally is, and this is something that surprises a lot of people!
Of course, there’s one thing we have to be clear on here, Dubai does not aspire to
be the freest place on earth, but they do want to become the richest.
Examples of opulence in this place are so evident that it is not strange to see the
Dubais police patrol the streets in Ferraris or Lamborghinis...
Where else in the world could you possibly see something like this?!
Maybe at this moment some of you are thinking that all this exuberance has a very easy explanation:
oil.
Could it be that Dubai is nothing more than a dream of sheikhs that’s financed with
petrodollars?
Well, although we can not deny the influence of black gold, the truth is that the real
key is very different.
The great secret of Dubai is not oil, but its commitment to trade.
Don't believe me?
Well, let’s dive a little deeper…
NOT ENOUGH OIL At the end of the 1950s, important oil deposits
were discovered in the vicinity of Abu Dhabi, the capital of the Emirates.
Be careful here, because we are not talking about a small discovery, but an a about a
huge amount of oil.
To give you an idea, it is estimated that the oil wealth of the Emirates - their proven
reserves - is even greater than those of all Russia.
However, in the case of Dubai it was a bit different...
It is true that this territory was also graced with the fortune of black gold ... But its
authorities soon realized that their reserves were much smaller than those of their compatriots
in Abu Dhabi.
In fact, although it may surprise us, oil today accounts for less than 1 in every 100
dollars produced by Dubai’s economy...
You’ve probably heard about how important it is to diversify an economy, right?
Well, that is precisely what Dubai did: overcome dependence and addiction to oil.
Now this is very easy to say, but ... The question is:
How did they do it?
What did Dubai do to achieve such development and achieve a higher standard of living even
compared to its oil-rich neighbors?
Basically, what it did was attract multinationals and professionals from all around the world.
To achieve this, the first thing they did was to bet on a low tax policy.
Look, in Dubai they do not have income tax; the tax on profits is practically non-existent
and currently purchases are not taxed either - although the latter is about to change.
As a result of a joint agreement of all the member countries of the Persian Gulf Cooperation
Council, a tax on purchases will soon be launched.
However, the rate will be around 5%, far from the rates of more than 18% so common in developed
countries.
And, of course, in case you are wondering, in Dubai there are no taxes on gasoline either.
Yes I know.
It almost seems like we are talking about another planet…
But do not think that low taxes are the only strategy Dubai has followed, not at all…
Second, and perhaps even more important than taxes, Dubai has resorted to an instrument
known as "Special Economic Zones," although here they are somewhat different from what
we can find elsewhere.
In Dubai, these special areas, in addition to having tax benefits, even have their own
regulations - almost laws - which, as you can imagine, are always focused on promoting
business activity.
Precisely, thanks to having specific rules, companies can escape the rigidity of legal
systems that are inspired by sharia law; something that applies, of course in the rest of the
emirates…
We can find a good example of this model in the so-called "Dubai International Financial
Center", which is almost a state within another state.
Look, this Financial Center has its own judicial system - chaired by the way, by a British
judge; with its own official language, which is not Arabic but English; and has even replaced
the local currency with the US dollar…
In this way a financial institution, a bank for example, can do business as if it were
in Manhattan but benefiting from the tax advantages of Dubai.
Not a bad deal, right?
So, now we can understand how Dubai has managed to attract the most of the 25 largest banks
in the world.
But ... This is not all.
Along with low taxes and Special Economic Zones, Dubai also opted for a very high degree
of immigration freedom.
The result?
96% of its inhabitants have been born abroad.
But wait, because there's more...
To further boost foreign investment, at the beginning of this century the Dubai authorities
made an unprecedented decision for this corner of the world.
BREAKING MOLDS In 2002 the government of Dubai approved a
risky decree that allowed any foreigner, regardless of their religion, to make real estate investments.
At that moment the authentic boom began.
Dubai was full of buildings and large projects: hundreds of skyscrapers, gigantic shopping
centers and even the famous artificial islands.
Now the demand for Dubai become global.
It’s a fact that since 2002, Dubai has experienced real estate development comparable only to
that of Shanghai, a city with 13 times more inhabitants.
Because another one of the most surprising things about Dubai is that it has less than
3 million inhabitants…
Despite this, where before there were only a handful of skyscrapers, thanks to this decree
there are now hundreds and huge projects are announced one after the other... be it new
skyscrapers, ferris wheels or theme parks.
One of these latest projects, by the way, is known as "The Mall of the World", a gigantic
space destined to become the largest shopping center in the world, and which will even house
its own cultural district with dozens of theaters and cinemas, one hundred hotels, and the largest
indoor theme park in the world.
The project has been presented as the world’s first city with a temperature controlled environment!
Well, all these measures have made Dubai a place where it is easy to do business and
have turned this emirate into a commercial, touristic, financial, logistical, and even
industrial power.
Yes, anyone who thinks that all this Dubai thing is only about banks and hotels is very
wrong…
Nowadays, Dubai, thanks largely to its modern ports and special zones, is the third largest
re-exporting power in the world and its industrial production exceeds 50 billion dollars each
year..
This is what explains why its neighbors are uneasily watching any fall in the price of
oil, while the government of Dubai continues to carry out large projects.
It is true, from a strictly political point of view there are still many reprehensible
elements when it comes to its religious, social or human rights issues.
There are, for example, the painful conditions suffered by many construction workers from
countries such as India, Bangladesh or Pakistan.
Of course we can not ignore this reality, but we can not not paying attention to the
achievements of this emirate.
Among other things because thanks to this, Dubai has managed to influence the policies
its neighbors are implementing and encouraging them to reduce their dependence on oil.
Dubai is, quite simply, a great model.
There is, for example, the new Saudi Arabia of Mohammed Bin Salman, of which we have already
spoken about in a previous video.
Anyway, I think this case puts a very important question on the table: Is it possible to reconcile
the absence of civil rights with sustainable economic growth over time?
History and empirical evidence seem to show that it is not the situation, but in a world
increasingly pressured by very high taxes and regulations of all kinds, Dubai’s authorities
seem intent on demonstrating that this time it will be possible.
At the moment, its commitment to free trade and investment, and its policies aimed at
strengthening legal security, ease of doing business and keeping taxes low, have been
superlative.
If anything, Dubai shows us that competitiveness and trade tend to have better results in terms
of development than protectionism or subsidies.
Many rulers should pay attention to the successes of this oasis in the desert.
But having said that, now its your turn.
Do you think the Dubai model will make the Middle East a freer place?
Leave your answer in the comments below as well as in the survey.
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