Conclusion
Inexpensive nannies
Fadi Ghandour, the co-founder and vice chairman of Aramex PJSC, a Dubai-based transportation and logistics company, says Dubai has been a superb base not just for Aramex—which became the first Arab company to go public on the Nasdaq Stock Market, in 1997—but also for Ghandour’s current passion as an angel investor in tech start-ups throughout the Middle East.
He says the city offers international companies easy incorporation, freedom from taxation, a business-friendly visa regime and infrastructure that works.
Dubai’s lifestyle attracts expatriates: beaches, golf clubs, international schools, low crime and modern housing, plus an ample supply of inexpensive nannies, drivers, cooks and cleaners.
Those from countries with residency-based income tax, such as the UK, can live virtually tax-free.
The expatriate paradise has a dark side, though. Some female visitors who reported sexual assaults to police have wound up being charged—and, in some cases, convicted—under laws banning nonmarital sex.
Orwellian undercurrent
The ubiquitous posters and billboards depicting the ghutra-framed visage of Dubai’s ruler, Sheikh Mohammed bin Rashid Al Maktoum, lend the city an Orwellian undercurrent. So does the vast panopticon of surveillance cameras; civil rights and privacy advocates say the cameras, ostensibly for public safety, are used to track and intimidate political dissidents and labor-rights advocates.
In an October report, Human Rights Watch criticized Dubai for not doing enough to reform a system that enabled “forced labor” among immigrants, particularly female domestic workers.
Immigrants, many from the Indian subcontinent,Africa and the Philippines, make up 90 percent of the United Arab Emirate’s (UAE) 9.3 million residents. Visa restrictions tie migrants to their employers.
In response to the report, Amna Al Muhairy, director of the human- rights department of the UAE Foreign Ministry, said the report drew “sweeping conclusions based on a small, unrepresentative sample.”
She also said the UAE “is committed to the continuous strengthening of protections for foreign workers, including migrant domestic workers, as a national priority.”
Heroin trade
Over the years, Dubai has acquired a reputation for money laundering that it’s struggled to shake. The funds that paid for the September 11, 2001, attacks in New York and Washington were routed through Dubai banks, according to the 2004 report of the National Commission on Terrorist Attacks Upon the United States.
In 2009 Hazrat Omar Zakhilwal, Afghanistan’s finance minister, told a conference of US customs officials that a joint US-Afghan study had found that every day $10 million in cash, much of it from Afghanistan’s heroin trade, was smuggled in briefcases from Kabul to Dubai.
In August when the New York State Department of Financial Services reached a settlement with Standard Chartered for sanctions violations, it required the bank to sell or close the accounts of its small-business clients in Dubai.
That drew a sharp rebuke from the UAE’s central bank, which said Standard Chartered had committed “no significant violations.”
In April the central bank drew up new penalties, including possible imprisonment, for such offenses as money laundering and failing to report suspicious financial activity.
“We are so strict about these things,” Al Shaibani says.
Judicial framework
For Dubai, geography is destiny.
It sits within easy reach of three regions—the Gulf, the Indian subcontinent and Africa—each with a $2-trillion-a-year economy, Jeffrey Singer, the American former CEO of the Dubai International Financial Center (DIFC) Authority, said in a May interview. (In August Singer resigned from the authority, citing personal reasons; his replacement had not been named as of late October.)
Since 2004 the DIFC Authority has managed a special administrative zone that now boasts more than 1,100 businesses, including regional offices of many of the world’s largest banks, law firms, insurance companies and asset managers. The special zone offers a judicial framework that appeals to businesses, Singer said.
“We have established a legal and regulatory structure that allows international firms to do business safely and securely,” Singer said in his office atop the Gate, a building modeled on the Grande Arche de la Defense in Paris.
The DIFC has its own laws and common-law courts, run by international judges, where DIFC-based companies can bring commercial disputes arising anywhere in the world.
‘Significant risk’
In its quest to become a leading global crossroad, Dubai has to clear a few obstacles.
The government says it aims to double the number of visitors to 20 million by the time it hosts World Expo 2020, an international trade and tourism extravaganza. It will spend almost $9 billion building exhibition halls and additional infrastructure, including hotels, new metro rail links and yet more shopping malls. Fitch Ratings cautioned in a November 2013 report that the scale of construction “creates a significant risk that there will not be enough demand to support the new hotels, offices and retail space.”
‘Less speculation’
Swatting away concerns, Standard Chartered’s Maratheftis says real-estate constitutes only 8 percent of Dubai’s GDP now, compared with 14 percent before the crisis.
“There’s much less speculation this time,” he says, noting that the percentage of vacant properties in the market has come down to less than 15 percent from more than 20 percent in 2010.
Dubai faces increased competition from a crop of imitators.
Last year Oman opened a deep-water port at Duqm that will try to draw business away from Jebel Ali. Istanbul is marketing itself as an alternative logistics and financial hub, with Turkish Airlines now flying to more worldwide destinations than any other carrier.
Qatar Airways Ltd. is also challenging Emirates for business travelers, while Doha is promoting itself as a financial center. Al Shaibani says none of this worries him.
“It is not just about physical infrastructure,” he says.
Much of Dubai’s success, he says, is due to what he calls “software”—people and systems that, for example, ensure a ship at port can be turned around quickly or a legal dispute resolved fast and fairly.
In this regard, Al Shaibani says, Dubai has a decades-long head start.
So far, Dubai’s “if you build it, they will come” strategy seems to be working. The city is packed with tourists. More people visit the Dubai Mall each year than Niagara Falls, the Eiffel Tower and Disney World combined. The airport boasts the largest terminal in the world. At Jebel Ali, the cranes pirouette round-the-clock, and at the Dubai Fountain, the music plays on and on and on.
Jeremy Kahn / Bloomberg