Economist.com Cities Guide: Dubai Briefing - January 2006

News this month

Death of a ruler

Sheikh Maktoum bin Rashid al-Maktoum, the ruler of Dubai since 1990, died on January 4th, aged 62. Dubai's government declared a 40-day mourning period after the sheikh suffered a fatal heart attack. He was in Australia at the time.

A racing enthusiast and co-owner of Dubai’s prestigious Godolphin stables, Sheikh Maktoum was also vice president and prime minister of the United Arab Emirates (UAE). He took a back seat in politics, in 1994 appointing his younger brother, Sheikh Muhammed bin Rashid al-Maktoum, as crown prince of Dubai. Known affectionately as the “CEO of Dubai”, Sheikh Muhammad is the driving force behind Dubai’s current boom. He succeeded his brother as emir, and was appointed by UAE leaders as prime minister and vice president as well.

Driven to distraction

Taxi drivers in Dubai and neighbouring Sharjah staged a series of one-day strikes in the New Year, underlining a rise in demonstrations by disgruntled workers throughout the United Arab Emirates. Drivers from the Dubai Transport Corporation complained of large fines imposed by their employer, which sometimes exceed their monthly earnings, while their counterparts in Sharjah (a satellite town to Dubai) were aggrieved at increases in monthly revenue targets.

Exploitation of Asian immigrant workers is nothing new in Dubai, but public protest against their plight is an unfamiliar phenomenon in a country where unions are in effect banned. The federal labour ministry appears increasingly sympathetic, however. Last year, thousands of Dubai-based construction workers downed tools after their employers had failed to pay them for several months. Officials responded by insisting the companies pay up, and threatened to withhold state contracts from firms that did not pay wages on time. They also sided with Dubai’s taxi drivers in the recent dispute and have asked the Dubai Transport Corporation to suspend the fines while a review is undertaken.

Privatising Dubai

The Dubai government has announced plans to sell 20% of state-owned Dubai Financial Market, the city’s booming stock exchange, in early 2006. This will be the first time Dubai has sold shares in a state asset to the public. While the deal is relatively small, it could prove a milestone in the city’s economic development. If the government is willing to privatise the stock exchange, could it one day sell shares in Emirates Airline, the jewel in the Dubai crown? Airline officials have repeatedly said they have reviewed plans for a stockmarket listing, but this remains a distant possibility.

In January, the state-owned Dubai Ports Authority ended up raising $3.5 billion through a convertible Islamic bond. The bond can only be converted into shares in the event of an initial public offering (IPO) of Dubai Ports shares. But the fact that the IPO has even been mooted—coupled with private comments from leading Dubai-based financiers—suggests the trickle of privatisations could soon become a torrent.

Shady dealings

Dubai’s reputation for financial impropriety has worsened recently. In December, American regulators fined ABN Amro, a Dutch bank, $80m over transactions at its branches in Dubai, Chicago and New York, with the bank admitting liability. It turns out that ABN staff in the city tried to hide transactions between Libya, Iran and America that were otherwise banned under America's Iran-Libya Sanctions Act. Also in December, British diplomats told a UAE Central Bank conference in the emirate of Fujairah that the UAE was a significant centre for money laundering and tax evasion. “Although Dubai is a fantastic place for legitimate businesses to work, it is also a fantastic place for criminals to work,” said Robert Deane, deputy head of the British embassy in Abu Dhabi, the UAE capital.

The UAE in general, and Dubai in particular, are struggling to shed their image as a centre for dodgy financial deals. Some of the money for the September 11th attacks passed through Dubai’s banking sector, while in Britain a legal battle continues over the $14 billion collapse of the Bank of Credit and Commerce International, which had strong ties to Abu Dhabi. Lately, though, Dubai has enjoyed some success in cleaning up its image, attracting the likes of Merrill Lynch and Standard Chartered to the new Dubai International Financial Centre.

Too much

Some corners of Dubai’s business community have complained, in private, that the mourning period for the late ruler, Sheikh Maktoum bin Rashid al-Maktoum, was excessive and damaging. Sheikh Maktoum died on the morning that the Dubai Shopping Festival was due to start, and the month-long retail and entertainment jamboree was promptly cancelled. Organisers of the state-backed event claim that it generates revenues of up to $8 billion (or 7% of Dubai’s GDP), mainly through increased tourism from Arabia and Asia. The cancellation inevitably hurt those who had invested heavily in staging and promoting related events. Many had not objected to a similar mourning period after the death of Sheikh Zayed, the UAE president and a figure widely respected as the founder of the country, in 2004. But, the argument went, why should business grind to a halt over a ceremonial figurehead such as Sheikh Maktoum?

Dubai’s compliant local media would not voice such allegations, but the government showed it was listening to the international business community when it quickly back-tracked on plans to shut the city’s new gold futures exchange for over a week. Traders around the globe complained that it was irresponsible to close the exchange at short notice, leaving some of them dangerously exposed to fluctuations in the volatile gold market. Officials quickly agreed to a limited re-opening, to allow those playing the market to trade out of positions.

Catch if you can

January 2006

Bryan Adams

February 2nd 2006

It may be 15 years since “Everything I Do (I Do It For You)” hogged the global music charts, but we still envisage a sea of cigarette lighters when Bryan Adams performs the opening bars of this hit on February 2nd. After two decades in the business and a cacophony of hits, including “Run To You”, “Summer of 69” and “Have You Ever Loved a Woman”, the Canadian rocker must be used to such displays of affection. But he is clearly not yet jaded—this is his third Dubai gig and umpteenth world tour. Media City, Dubai’s outdoor concert venue of choice, once again plays host.

Dubai Media City, Dubai. For tickets call: +971 (0)4 391-3460 or use this website.

More from the Dubai cultural calendar