Dubai’s strategy to become rich and powerful.
Dubai is one of the great Nations of the 21st century. Despite just being 35 square kilometers in area, which is 19 times smaller than the city of Mumbai, this nation has evolved from being a Barren desert to the 12th wealthiest city in the World.
While most people would think that Dubai got rich only because of oil, today, oil makes barely one percent of its entire GDP. In fact, Dubai has lesser oil reserves than India and even Vietnam. Yet while today, many oil-rate nations are struggling to grow, this city has become such an important financial business hub that out of the 500 most prominent companies in the World, an astonishing 140 companies have their headquarters in this tiny city of Dubai.
In Global politics, it is more or less the epicenter of World Trade itself. The question is, in just 40 years, how did this little city of Dubai go from the Barren desert to becoming one of the wealthiest in the World? How did they manage to achieve this without banking on their oil Reserves ? And most importantly, India needs to learn lessons from the iconic rise of Dubai.
To understand this, you first must understand the Middle East’s basic structure because most people don’t know the difference between UAE, Dubai, and Abu Dhabi. So this is the middle East region wherein you have the United Arab Emirates or UAE.
What is UAE? UAE is nothing but a Federation of 7 Emirates which are Abu Dhabi, Dubai, Sharjah, Ajman, Umal Taiwan, Kuchera, and Russell Kemah. These Emirates are almost like states that work autonomously within the Federation. If this is very clear to you, let’s move to 1960 Dubai.
In 1960, the UAE had not been formed, and Dubai was just another fishing town that existed at the creek along the middle Easton trade routes. So let alone buildings, it was just another desert with nothing else but people riding on Camels.
This was when something crazy happened in 1960 the Middle East and regions discovered tons of oil Beneath them and suddenly, they realized that they were practically sitting on a cold mine. And as the oil prices started shooting up, billions of dollars began floating into the city.
Now, most people would ask what it means if you give something as crucial as oil reserves to any country or any leader, that country will become rich and Powerful. Well! Not really.
Because if you look at the oil reserves worldwide, you will see that UAE is only the 7th largest oil reserve in the World and if you notice something peculiar in this table, the largest oil reserve is actually in Venezuela. But Venezuela has the highest inflation in the World. The economy is going into a spiral of dysfunctionality.
Venezuela cannot eat. You see people eating from Garbage. The cycle of violence and street protest has become a part of it. So, Oil reserves do not mean you will prosper and be assertive. Even in the UAE, if you look at oil Reserves in the Emirates, we will see that while Abu Dhabi has 92.2 million barrels of oil, Dubai has only four billion barrels. So it’s not like they had infinite Wealth.
And you know what is the best part, when discovered oil, the ruler of Dubai was Sheikh Rashid Bin Sahid Maktoum. He said a very important statement that Echoes through the tunnels of time. Eeven today, he said, “I have good news and bad news; we have found oil but not much.”
Now you see for a ruler who has lived in a remote, barren desert all his life, and this statement was nothing short of Extraordinary. Because he clearly realizes that they must do something before all the oil runs out. Not so surprisingly, that is exactly what he did.
While on one side, they started making a lot of money selling oil, on the other side, he started identifying the important strength of Dubai that could be loved to build a diversified economy. The first thing that he first spotted
was the strategic location of Dubai and, more importantly, this place, 35 km southwest of Dubai, was a very important location for World Trade. Why? Because it was in close proximity to Iran and the entrance to the Persian Gulf. So, obviously very important for the middle east trade.
Secondly, it was a very strategic connecting point to the Arabian Gulf, the Indian subcontinent, the Commonwealth Nations like Kazakhstan, Kyrgyzstan, Russia, Ukraine, and Uzbekistan, and then immediately down south, it was close to Africa. So, practically Dubai was so strategically located that it could give unparalleled access to some of the most critical regions in the World, both through sea and air, and it provided access to a market of 1 billion people during that time.
This is the reason why Sheik took up a super Bowl project with something called the Jebel Ali Port that started operating in the late 1970s. He took up hefty loans to first take deep into the shallow waters and carried out dredging, as in what sand is taken out from the Dubai creek to create a deep water port.
This port was then used both for shipping Dubai oil and, more importantly, to build cutting-edge shipping facilities so that Dubai code offers world-class shipping service to the most valuable ships in the World. Today the Jebel Ali Port provides many necessary logistical services in many areas of general Maritime Freeze.
Along with that, the port also provides cooling services with advanced storage and cooling facilities, which cover an area of 10000 square km. These facilities help store all the shipments containing perishable products and products that need special storage conditions.
These products include pharmaceutical products, chocolates, and cosmetics. And today, the Jebel Ali Port is the 9th busiest port in the World and handles roughly 10% of the entire World’s container traffic, with over 14 million containers dealt with every single year.As a result, while oil contributes to one percent of Dubai’s GDP l, as of 2018, the maritime industry alone contributed 7% of Dubai’s GDP.
Along with the Maritime industry, the Sheikh went ahead to build a second important asset for the economy of Dubai, which was something called a Free Zone.
Dubai freeze zone, in simple words, was a specially allocated area wherein Companies from all across the World could set up their business with special privileges. These special privileges included four mind Blogging incentives that were not being offered anywhere in the World, which were;
1)100% for an foreign ownership, as in you don’t have to collaborate with a local company to set up your business.
2) 100% repatriation of capital and profits, as in you can send 100% of your earnings to your home country.
3) 100% import and export tax exemption
4) 100% exemption from local and corporate taxes both.
They said just set up your business here and keep all your profits with yourself. Now, the question over here is; how does Dubai make money in spite of giving so many privileges?
Well ! As it turns out, Dubai does not make a lot of money from the free zones. So the question is then, what is Dubai getting out of all of this? The shake of Dubai is bringing these benefits for three important reasons: derisking, diversification, and creating of an irreplaceable, irreversible Global Business ecosystem. So that Dubai can make money not today, not tomorrow, but ten years or 20 years down the line.
To understand this, you need to know that every business needs a conducive ecosystem and important supporting entities to function as a business. Without these entities, a company or a business alone cannot function at all. A simple example of the same is Ola.
For Ola to function as a service, we first Need internet providers like Jio and Airtel, who can provide 4G access at Deutsche Prime. That is when we will be able to book a cab from the road itself. Then it would be best if you had android and iPhone manufacturers who could make phones with the processing ability to run these apps while making them affordable enough for the exact driver and passengers to use them.
After that, you need automobile manufacturers and banks who could make it a four table for drivers to buy these cars, and lastly, you need Google Maps API that could be used for tracking and navigation. And all of these entities put together an Ecosystem for ola and uber to actually operate. Once they establish this ecosystem, they never ever leave the market until they die. Even if they do, someone else will come and take their place.
Because the authentic accents over here are not Ola. The ecosystem of cabs that ola and Uber have managed to build they are business on. Let alone operating in the ecosystem, Jio, Zomato, Airtel, and Ola have spent billions of dollars to create an Ecosystem in India for which they are suffering thousands of crores of losses, except, of course, Jio.
Similarly, because Regulation and taxation are so lenient in Dubai, some of the most incredible tech companies have set up their bases. As it is mentioned earlier, In the little city of Dubai, which is almost 118, the size of Mumbai, has more than 1 lakh organizations, including fintech, food tech, and MedTech companies from all across the World, which is an incredible number for a city. This is so freaking small.
This is why Dubai has become one of the best business ecosystems in the World, with world-class talent, world-class companies, and, more importantly, a cutting-edge start-up that are making an irreplaceable business ecosystem.
So after ten years, even if buying imposes a 5 to 10% tax, these companies will be more than happy to pay that tax and will never ever leave Dubai. As a result, after oil, Dubai can Bank all the taxes from these insanely prosperous businesses in the city. Therefore, the Emirate of Dubai is laying a foundation to de-risk itself from oil and diversify into business ecosystems, bringing us to the most important and perhaps the most well-known aspect of Dubai, Tourism.
Long story short, Dubai is by far one of the most strategic locations in the World for air transportation. If we look at Dubai on the world map, we will see that Dubai is barely a four are flights away from a population of two billion people and eight are a flight away from 5 billion people, which is literally two-thirds of the world population.
These lights came from some of the most essential destinations in the World, including Europe, Singapore, India, China, and Africa. On the other hand, for the goals that are not close by, like Canada, US, and Australia, Dubai acts as the perfect labor spot for the Planes going from these places and to these places. But the big hurdle for Dubai was its image of Dubai.
Now obviously, if I show you a bear in Sandy land with swings between 28 degrees to 50 degrees, that doesn’t look lucrative. So guess what? They just took all the money they made from oil and changed that. For a city that is 42 times smaller than Delhi, Dubai has done such an incense job with its tourism Industry that while the entire country of India had 17.91 million tourist arrivals in 2019, Dubai, which is one lifetime smaller than India, has 16.73 million tourist arrivals. They built many avenues of spending like Hotel, amusement parks, Aqua venture Park, underwater zoos, and even ski slopes.
They built a Ski slope with 6000 tons of Snow inside a freaking desert. As a result, the total international overnight visitor spend in Dubai in 2018 was 30.8 to billion dollars which is way ahead of Bangkok, Singapore, and even London. As a result, the tourism industry of Dubai, as of 2019, contributed 11.5% to the GDP of Dubai.
This is how to diversify its economy from oil into tourism, business ecosystem, and Maritime trade. Today, it is using its business ecosystem and maritime trade to create an irreversible, irreplaceable scenario for the World’s most prominent and powerful companies trading countries.
This brings us to the essential part: the lessons we need to learn from the incredible rise.
No matter how many resources you have at your disposal, unless you use it properly. It will never ever create wealth for you. In the case of oil, as we saw on one side, we have Venezuela, which collapsed despite having the largest oil reserves in the World. At the same time, Dubai used it very judiciously to achieve sustainable growth instead of recklessly depleting.
In the case of India, you must have seen those people in the past 5 to 10 years who often say that India has so much population that is why we are underdeveloped. China also has a population, but they use it to their advantage. So this advantage or disadvantage is entirely upon us. In fact, Japan is now in words of crisis due to lack of population.
This brings us to lesson number 2; diversification of resources is highly critical to the growth of any country, and a single asset cannot help us with sustainable development.
And lastly, can you imagine if Dubai being such a small city, could become a tourism hub with artificial or man-made Marvels, India is 50 rich in terms of natural beauty and destinations that are far beyond man-made structures, so if we calculate every use these resources to create an industry in India, we could be the most significant tourism hub in the World.