26 February 1979.
Queen Elizabeth the Second officially opens Dubai's first skyscraper.
It is the Sheikh Rashid Tower, later known as the Dubai World Trade Center.
VisualPolitik community, at the time, it was the tallest tower in the whole of the Middle
East.
The amazing thing?
That it was erected in the middle of the desert, in a place where, as you can see, there wasn't
much of anything.
So the operation didn't seem to make much sense.
Nevertheless, it was quite a statement of intent.
With 39 floors and at 184 meters, that’s over 600 feet high, this skyscraper made clear
the intentions of the new Dubai that was beginning to take shape: to become a key center for
business in the Middle East.
That was the goal.
Today, five decades later, that dream has come true.
Dubai has become one of the greatest examples of transformation, development and economic
success in history.
And no, these are not just words.
These days, this emirate-city is home to the world's tallest building, the largest shopping
mall on the planet, some of the most luxurious hotels, one of the largest international airports,
a world-scale mega-port and nearly 400 skyscrapers.
That means that since the Dubai World Trade Center opened, Dubai has built nearly 10 new
skyscrapers every year.
And that's not all.
Dubai also tops the list for having the most supertall skyscrapers in the world, that is,
towers over 300 meters, or 900 feet high.
No other city comes close.
And above all, it has become a real magnet for attracting tourists, companies and businesses
from all over the world.
And, if Dubai's history is dazzling...
Singapore's is not far behind.
This city-state is one of the richest, most prosperous and successful metropolises in
the world.
In the last six decades and despite having fewer than six million inhabitants, it has
gone from being a poor place to becoming an important financial, industrial and commercial
center.
As a result, Singapore has become one of the wealthiest and most developed countries in
the world.
In terms of GDP per capita, and excluding microstates, the IMF ranks it as the fourth
richest country on the planet.
We are talking about an estimated GDP per capita for 2023 of more than $90,000 dollars.
And, take note, because this city, despite its tiny size, has one of the best-equipped
armed forces on the planet.
For example, Singapore has more fighter planes than the air forces of countries such as Canada,
Sweden or the Netherlands.
Crazy!
Whichever way you look at it, the figures of these two metropolises are incredible.
In fact, the Globalization and World Cities Research Network ranks them as no less than
two of the nine most influential and economically significant cities in the world.
They are only one step behind New York and London, the two great world capitals.
Look at this.
And precisely for that reason, here on VisualPolitik we have already told you in several videos
how Dubai and Singapore managed to take off and become real economic, commercial and financial
rockets.
Basically, we are talking about two cities that became kind of company-cities.
In fact, it is no coincidence that the airports of these two cities rank among the busiest
worldwide.
For instance, in 2019, the last year before the pandemic, Dubai airport moved 97.3 million
passengers and Singapore airport moved 68.3 million.
You will see that this is no accident.
As it happens, we failed to notice one of the crucial elements of this whole process:
the conversion of the governments of these two cities into true entrepreneurs.
And the question is,
To what extent was government entrepreneurship important in the growth and development of
these two major economic hubs?
What exactly are we talking about when we say that the governments of these cities were
truly entrepreneurial?
Can the model that has been so successful in Dubai and Singapore be exported to other
less wealthy places?
VisualPolitik community, in this second video of the series we are preparing in collaboration
with Harvard International Review we answer all these questions.
We’ll leave you more information in the links in the description.
So without further ado, let's get started.
(PILLARS IN THE SAND: FROM THE DESERT TO THE WORLD)
In 1997, Mohamed Alabbar, former Director General of the Department of Economic Development
of Dubai, was given an assignment: to found Emaar properties, today one of the most recognized
and most visible brands in all of Dubai.
Its name is everywhere.
And that’s hardly surprising given that, it is the developer that has carried out the
largest projects in the city: the development of Downtown, the Burj Khalifa, the Dubai Mall,
Dubai Marina and many of the luxury hotels.
We are talking about a company that has developed most of the projects that have shaped the
current Dubai.
Practically everything that is characteristic of this city has been promoted by Emaar.
But who is behind this developer?
Well, as many of you can imagine, the commission to start up this company came from the government
of the Dubai emirate itself.
The same government that in 2000 listed the company on the local stock exchange and that
currently still controls almost 30% of a company that over the years has become a multinational.
Today Emaar has activities in a lot of different countries, thanks to which it had a net profit
of almost $7 billion in 2022.
But, of course, the company's crown jewel remains Dubai, a city where projects keep
coming.
One of its latest major projects is precisely the development of Dubai Creek Harbour, a
huge new district that in the coming years is sure to become one of the city's major
attractions.
Incidentally, most of the government's participation is channeled through ICB, the Investment Corporation
of Dubai, the investment muscle of the Dubai government, which in addition to Emaar, controls
or has investments in many, many other companies.
In fact, the Investment Corporation of Dubai has had a lot to do with the success of this
city.
So you see, we are talking about an investment arm of the government that controls assets
worth more than $300 billion dollars.
It owns or has stakes in many of the main local companies such as the Emirates NBD bank,
the Dubai Islamic Bank, the airlines Emirates and flyDubai along with the developer Emaar,
which we have already mentioned, as well as more than 60 companies in which it has total
or partial stakes.
So where does the money they invest come from?
Well, basically from issuing debt, reinvesting profits and public account surpluses.
But the most interesting thing is that over the years, the government of Dubai has used
this partnership to promote business in the city or to cover those areas that are important
for general development.
Yet it did so following a strict market policy.
The companies participating or promoted had to and have to be competitive not only in
Dubai, but they must be able to compete in the international market.
This would generate sufficient profits to enable this vehicle to continue investing
in new projects.
A good example is the case of Emirates.
It is clear that in 1979, when the Dubai World Trade Center was inaugurated, Dubai had a
clear problem: it was isolated from the world.
Who would want to make a long journey to reach such an inhospitable place?
However, if you want to become a financial, tourist and commercial center, you need one
thing: communications.
To solve this problem, in March 1985 the Emirate of Dubai created Emirates, an airline that
would revolutionize intercontinental air transport and make this city-emirate one of the best-connected
enclaves on the planet.
It doesn't matter if you want to fly to Tokyo, Sydney or London.
In Dubai, you always have connections.
To achieve this, in early 1985, the Dubai government gave British entrepreneur Maurice
Flanagan $10 million and as many administrative facilities as possible.
His goal?
To launch an airline in five months that had to perform well and make money.
There would be no subsidies or extra protection.
The company had to fly, excuse the pun, on its own.
And boy, did it deliver.
Today Emirates is one of the largest and most profitable airlines in the world.
It operates in 148 airports around the world and in 2022, despite the industry still reeling
from the effects of the pandemic, it earned almost $3 billion.
But above all, Emirates has made Dubai one of the best-connected places in the world.
This has made it easier for workers, entrepreneurs, investors and, of course, tourists to come
to this city.
Take a look.
(Aug 7, 2023: Dubai welcomes over 8.55mn visitors in 6 months surpassing pre-pandemic levels
- Arabian Business)
And so, along with special economic zones, low taxes and legal certainty, Dubai's success
has another key ingredient: the entrepreneurial spirit of its government.
The key word here is entrepreneurial, not to create inefficient and elephantine state-owned
companies, but to promote the creation of companies that, while promoting the local
economy, need to make money and be very competitive, whatever the cost.
But, that's not even all.
The idea of the entrepreneurial State goes much further.
In Dubai, the vast majority of projects go ahead if they are likely to be profitable.
And the government also supports private companies.
For example, one of its latest initiatives has been to launch a fund of almost $300 million
to encourage 1,000 technology start-ups to set up in Dubai.
So...
As you can see, we could almost say that this emirate-city functions more like a company
than a conventional government.
And certainly today its success is undeniable.
Of course, this is not a unique case.
Singapore's success also has a lot in common with Dubai’s.
Let’s check it out.
(THE CITY OF THE MERLION)
In 1942 the Japanese took control of the British enclave of Singapore.
It is a strategically located city, which the British Empire had turned into an important
naval base and which suffered greatly during the Second World War.
By the end of that war, the city was a disaster: the damage suffered was enormous, many if
not most infrastructure was destroyed, and mortality, violence and corruption rates were
sky high.
Singapore was a very poor city where virtually no one in their right mind would want to live.
And do you know what?
The future didn't look much better.
As it turned out, the Korean War and the global demand for tin and rubber made things better
and Singapore regained its role as a trading port.
But little else.
There was even the threat of a communist revolution in the city.
In 1958 the city achieved full autonomy, and in 1963, after declaring its definitive independence
from the British Empire, it was integrated into Malaysia.
However, things did not work out.
In 1965 the Malaysian federation threw Singapore out.
And so the country would begin its journey alone...
Which was not particularly optimistic.
Singapore was basically an impoverished island with no natural resources.
It did not even have enough drinking water to supply its population.
Water had to be imported from Malaysia.
These days, of course, things are totally different.
Over the following 60 years, Singapore experienced an unprecedented boom that has led it to become
the fourth richest country in the world.
A tremendously prosperous place with one of the highest standards of living on the planet.
Of course, as we have already told you on VisualPolitik, openness to foreign investment,
a high level of legal certainty, relatively low taxes and a clear vocation for savings
were key elements.
However, Singapore's success has also had another ingredient,
As we have seen in the case of Dubai, the government of Singapore also had a clear entrepreneurial
calling...
In 1974 the Singapore government founded TEMASEK, a kind of sovereign wealth fund or investment
arm that today manages assets worth almost $300 billion US dollars.
That is more than US$50,000 per citizen.
The most curious thing, however, is that the Singapore government created this financial
vehicle to bring together state-owned companies and to keep politicians and civil servants
away from them.
The idea at that time was that the 35 companies owned by or receiving participation from the
State would function as true private companies, even though they still belonged to the State.
That was the beginning, but then with reinvested profits they started investing in new businesses
to fuel their growth.
Up until 2002, TEMASEK concentrated the vast majority of its investments in Singapore,
but then they started investing in the rest of the world, particularly in Asia.
The idea is that these investments in foreign companies created or strengthened corporate
ties with Singapore itself.
For example, almost a quarter of all their investments are in China.
As it turned out, over the years, TEMASEK not only made it possible to professionalize
state-owned companies, but it has also become a huge piggy bank for the government and has
helped to propel a lot of new companies.
Especially in sectors considered strategic for the city.
Do you remember what we said about Emirates before?
Well, something similar happened in Singapore.
TEMASEK is the largest shareholder of Singapore Airlines, holding 55% of the shares.
With its help, this airline not only connected Singapore with the rest of the world, but
also became one of the most reputable airlines.
And what is even better, is that it also became one of the most valuable and profitable airlines
on the planet.
The estimated profit for 2023 is close to $2 billion US dollars.
And the same could be said of many other companies.
VisualPolitik viewers, with these kinds of strategies, both Dubai and Singapore achieved
several objectives:
Firstly, they filled some important gaps, such as communications.
Secondly, they contributed to the professionalization of state-owned companies.
("One of the tragic illusions that many countries of the Third World entertain is the notion
that politicians and civil servants can successfully perform entrepreneurial functions.
It is curious that, in the face of overwhelming evidence to the contrary, the belief persists."
– Dr Goh Keng Swee, the first Finance Minister of Singapore)
Thirdly, they helped boost and develop a lot of economic sectors, which in turn attracted
a lot of foreign companies and professionals.
In other words, by themselves, these investment arms have driven – and still drive – a
lot of foreign investment.
And lastly, they have created a huge piggy bank that generates billions of dollars in
profits each year.
And don't forget that we are talking about two relatively small territories.
Dubai has a population, including all foreign professionals, of only about 3.5 million people.
Singapore, in contrast, about 5.5 million.
And yet, the numbers we are looking at are formidable.
Not surprisingly, in addition to creating these investment arms, both governments opened
their doors wide to foreign companies and promoted entrepreneurship like there was no
tomorrow.
So, the question we can ask ourselves is, could this same model be replicated to help
develop much poorer regions?
Would it be possible to create similar cities in places in Africa or even Latin America?
And remember this is no trivial matter.
For instance, the lack of legal security, openness and connectivity currently make Miami
the headquarters for the Latin American activities of more than 1,400 multinationals.
If Latin America were as business-friendly as Dubai or Singapore, it is quite possible
that the vast majority of these multinationals would not be in Miami, but in that other city.
On the other hand, while Dubai and Singapore have built huge piggy banks that have also
promoted economic development, Latin American commodity-exporting countries have not been
so lucky.
Of course, Venezuela is a textbook example.
We are talking about tens of billions of dollars that were squandered instead of contributing
to national development.
Be that as it may, at this point it is over to you: What do you think of the entrepreneurial
governance model of Dubai and Singapore?
Do you think that formulas like these could be replicated in Latin America or Africa?
Leave us your answer in the comments.
I hope that you found this new partnership between VisualPolitik and Harvard International
Review as interesting as we did.
If so, don't forget to like and subscribe to the channel if you haven't already done
so.
Thank you very much for watching.
All the best and see you next time.