Economist.com Cities Guide: Dubai Briefing - December 2005

News this month

Anchors away

Dubai, in its quest to become a global business leader, enjoyed a big victory in late November, when P&O, a British port operator, accepted a $5.7 billion takeover bid by Dubai’s state-owned ports company, Dubai Ports World. But news of the deal was dampened in early December, when Temasek, Singapore’s investment firm, bought shares to raise its stake in P&O to over 4%. The move gives Singapore a small but potentially nagging hand in P&O’s future, and fuelled rumours that Temasek might yet launch a bid for the operator.

If the rumours are empty speculation, and if Dubai’s deal is approved by shareholders and the relevant courts, the P&O transaction will make Dubai the world’s third-largest ports operator, behind Temasek and Hong Kong's Hutchison Whampoa. The deal, Dubai's biggest to date, is the latest in a well-planned acquisition strategy by the ruling royal Maktoum family. P&O fits with Dubai’s domestic businesses—Dubai is already one of the world’s leading container terminals—and is a “trophy” investment, giving Dubai ample coverage in international newspapers. This year Dubai has bought large stakes in Madame Tussauds and the London Eye tourist attraction, as well as DaimlerChrysler, a German carmaker.

Wall Street comes to Dubai

Morgan Stanley announced in late November that it would create an investment-banking unit in Dubai, moving up to 25 bankers to the new Dubai International Financial Centre (DIFC). This is a triumph for the DIFC, which opened last year with the hope of attracting the cream of the world’s banking and insurance industry. Merrill Lynch already has private bankers in Dubai, but the DIFC has tried to lure investment bankers, who are more likely to structure deals that recycle Arab capital rather than siphon it from the region to London and Geneva. The Morgan Stanley announcement came just days after HSBC, another financial giant, said it would move up to 250 bankers (including staff in investment banking and Islamic banking) to the DIFC, though most of them will move from the firm’s existing office in Dubai.

While Dubai is moving towards its goal to become the region’s financial hub, the recent good news is offset by the DIFC's lacklustre new stock exchange. The Dubai International Financial Exchange (DIFX) has been a damp squib since its launch in September, with only one stock listed in the first two months. Investcom, an Arabs telecoms firm, has a depository receipt listed on the DIFX, but trading volumes have been negligible.

Democracy by appointment

Sheikh Khalifa, president of the United Arab Emirates (UAE), has promised to introduce democracy, but some reforms unveiled in early December were little more than gestures. Under the changes announced on December 2nd, UAE national day, voters will be able to elect half the deputies on the UAE Federal National Council, a body that has been entirely appointed by a committee of senior sheikhs. But the reforms will have little impact on decision-making: not only is this council almost powerless, but the UAE does not have universal suffrage; those who “elect” the deputies will be some 2,000 people appointed by the sheiks.

None of this seems to worry UAE nationals. There has never been much appetite for democracy among Emiratis, who are by and large very fond of their sheikhs, particularly the ruling Maktoums in Dubai and Nahyans in Abu Dhabi. They have presided over 30 years of relative peace and prosperity, sharing enough of the nation’s oil wealth to curb resentment of their opulence. Perhaps more importantly, UAE nationals say that while they lack democracy, they still enjoy representative government. In Dubai, the ratio of citizens to lawmakers is roughly the same as a British parliamentary constituency. All citizens are entitled to request an audience with the ruling sheikhs, including the crown prince, Sheikh Mohammed.

Lager louts

Dubai’s annual Rugby Sevens tournament, which ended in early December, was a commercial success. Some 30,000 spectators, many of them foreigners, packed the stands on the tournament’s final day, to the delight of Dubai’s tourism industry. Dubai’s cultural conservatives were less thrilled.

Some worry that the event’s raucous fans could be a harbinger of trouble ahead. The government’s grand tourism ambitions—the city wants to attract 15m visitors in 2010, up from just over 5m in 2004—has long been criticised by those who think visitors will taint Dubai’s Muslim culture. They argue that mass tourism will attract droves of young, male British and German sun-seekers for whom drinking, fighting and womanising are the stuff of a good holiday. The rugby tournament gave sceptics ample ammunition, with drunken fans trading blows and shouting abusive chants at female cheerleaders. None of the incidents were particularly serious, but many in Dubai fear they were just the beginning.

An ill breeze

Local columnists called for stricter regulation of water sports in Dubai after a ten-year-old British boy died while parasailing. Tony Loyden, who lived in Dubai with his parents, was killed on November 27th when the rope tying him to a speedboat snapped in high winds off the popular Jumeirah beach. The gust carried him inland where he hit a mosque.

The incident comes after a string of kite-surfing accidents off Jumeirah beach. Until now, the small outfits offering water sports to tourists and residents have for the most part operated with impunity, but this is set to change. Dubai police arrested the two men operating the boat at the time of Tony Loyden’s death.

Catch if you can

December 2005

Alexander Charriol at Artspace Dubai

November 22nd–December 21st 2005

Alexander Charriol, a painter based in New York, launches his first Dubai exhibition with 18 works at the Artspace gallery. Mr Charriol, whose father Philippe was a famous watchmaker, will show works ranging from large paintings in vibrant colours, to a selection of more modest sketches. All the works will be on sale, with prices ranging from $2,000 to $10,000.

Artspace Dubai, Fairmont building, Sheikh Zayed Rd, Dubai. Open: Sat-Thurs, 10am-8.30pm. Free admission. For more information, visit the gallery's website.

More from the Dubai cultural calendar