Economist.com Cities Guide: Dubai Briefing - May 2005

News this month

Anonymous offenders

The UAE Central Bank has penalised four national banks for breaking rules on lending to stockmarket investors. In a rare crackdown, the banks will be fined for exceeding limits on loans to investors in the UAE’s buoyant market for initial public offerings. The most recent, big IPO—a $135m offering of Aabar Petroleum Investments—was 800 times over-subscribed, fuelled mainly by bank lending.

A similar incident occurred in late 2004, when Aldar Real Estate's IPO was some 450 times over-subscribed. Then, the Central Bank let the offending banks off with a slap on the wrist. But this time the Bank has promised to strip the four unnamed banks of interest earned on some $60 billion of loans, which officials say exceeded the banks' authorised lending levels. Most banks in the Emirates have welcomed the move, which critics say is long overdue.

Nurturing in a vacuum

Dubai’s booming economy grew by 17% last year, mainly on the back of expanding trade and tourism, and a thriving property market. But while the Emirate has succeeded in luring the world’s leading technology companies such as Microsoft and Oracle, which now have their regional bases in Dubai, it has failed to stimulate local innovation. To inject some much-needed creativity into the city’s business community, plans have been unveiled for a $400m business incubator.

Dubbed “Business Village”, this will provide support and services to entrepreneurs with inventive new firms. However, with only a handful of patents coming out of the Arab world in recent years, and few useful relationships between business and universities in the region, the venture faces more than a few structural challenges.

Protecting their own

Many of the UAE's hard-labour jobs are performed by cheap expatriate workers. But their presence is becoming controversial. The UAE's Minister of Labour and Social Affairs, Dr Ali bin Abdallah Al Kaabi, recently warned that rapid growth in this labour pool may cause social problems in years ahead. He said that UAE nationals could make up just 4% of the population by 2020, and that low-paid foreign labourers could cause problems—such as homelessness and crime—if they lose their jobs and remain in the UAE.

To improve the lot of unemployed UAE nationals (10-11% of the UAE-national workforce), Dr Al Kaabi argued for better housing, education and job training. He also wants better enforcement of the UAE-national job quota, which stands at 2% for private firms. Yet the doling out of benefits is tricky: while the quota system is popular among some government agencies, it could harm efficiency in the private sector, and make the UAE less appealing to multinational firms seeking headquarters in the Middle East.

Breaking up the benign

The UAE’s telecommunications regulator is planning to award a license for a second operator and thus break the monopoly held by Etisalat, the country's legacy telecoms firm. But the new, and as yet unnamed, company will be partially owned by the state—dashing the hopes of foreign operators such as Britain’s Vodafone and Egypt’s Orascom, both of which have aggressively sought Arab mobile licences in recent years. The move also disappointed telecoms users in the Emirates, many of whom were hoping that genuine deregulation would lower prices and raise service-levels.

Despite the limits to the deregulation process, regional telecoms analysts were optimistic. Some said Etisalat, which is 60% government-owned and is publicly traded, already provides the best and cheapest telecoms services in the region. They credit it with acting as if it lost its monopoly years ago. As such, analysts said the new operator would have a tough task competing against Etisalat, which is itself expanding overseas.

Free to go

Dubai's marketing machine suffered a rare embarrassment when a British tourist was arrested in Dubai International Airport. Traces of codeine, a drug banned in the UAE, were found in the urine of Tracy Wilkinson, a 44-year-old sports osteopath who was arrested over a separate, minor incident in March. The unfortunate Ms Wilkinson languished in jail for eight weeks before she could convince a Dubai court that the drug had been prescribed legally by her doctor in Britain. She was acquitted of the charges against her on May 7th. The British media followed the story with gusto—if convicted, Ms Wilkinson could have faced a four-year jail term under the UAE’s zero-tolerance drugs policy.

Catch if you can

June 2005

“The Woman In Black”

June 21st-23rd 2005

Bring your cushion along to “The Woman in Black”, because you may well want to hide behind it in fear. The West End's second-longest-running play (after “The Mousetrap”), Stephen Mallatratt's adaptation from the novel by Susan Hill, has held court at London's Fortune Theatre for 15 years. The scary two-hander takes the traditional English ghost story and creates a genuinely chilling evening's entertainment, following a young solicitor sent to a haunted house to wind up the affairs of its recently-dead resident. This production marks the start of the Madinat's theatre season alongside “Abigail’s Party” and “Private Lives”.

Madinat Theatre, Souk Madinat, Madinat Jumeirah, Jumeirah Beach, Dubai. Tel: +971 (0)4 3666550. Doors open 7.30pm, tickets Dhs 125. The Madiant has information about the season. See also the official site for “The Woman In Black”.

More from the Dubai cultural calendar