Instant City: Success of Dubai, From Oil to Real Estate
With the discovery of oil in 1966, Dubai has been relying on the export of crude oil to different parts of the world. Revenues generated from oil were part of the factors for Dubai’s early success which can be seen with the rapid rise of developments in the city. However, Dubai’s current success is mainly based on its transition from concentrating on oil export to real estate development.
Volatility of World’s Oil Value
In 1998, world’s value of oil reaches an all-time low. With its volatility in value and limited oil reserve amount in comparison to other Middle Eastern countries, the government of Dubai was quick to realize that an economical change is essential in order to sustain Dubai in the future. Their dependence on oil revenue reduced from 25% of real GDP in 1990s to approximately 1.5% at present time. Throughout the transition period, small steps were taken in order to reach its current stage such as the development of road infrastructures and buildings.
Diagram Reference: Citibank. ‘Dubai Gross Domestic Product’. 2015. Accessed 18th December 2015. http://www.zawya.com/story/Dubai_GDP_growth_seen_at_61_in_2014-ZAWYA20140604041903/
Towards Dubai’s Success
Real estate development has always been seen as the image of Dubai’s success in the periods of post 2000s with huge developments like the Burj Khalifa and The Palm Jeremiah. However, it is also important to take note of important sectors that still are important present day economy in the city. These include:
- International Trade: Reports from the government shows 11% growth of international trade annually since 1998.
- Aviation and Ports: Emirates Airlines remains to be profitable while Dubai’s port is currently host to more than 120 shipping companies.
- Business Atmosphere: Political stability and pro-business environment of the city further drive international trade in the city.
- Open and Free Economic System: Low taxes with minimal government regulations become the main drive for foreign investment in the state.
- Booming Real Estate Market: Booming real estate price in Dubai became a source of real estate investment for foreigners.
- Diversified Global Trade Partners: Some of Dubai’s leading trade partners are India, Iran, Saudi Arabia, Switzerland, China and the USA that are part of the world’s largest trading market.
- Manufacturing and Exports: Manufacturing base of Dubai is diverse (gold, aluminium, textiles…)
- Diversifies Human Captial: Dubai has big amount of foreign workforce to accommodate its ever growing industry.
- External Factors: Political unrest in the region like the Arab Spring had driven more economy to the state.
Image Reference: Ben Curtis (AP Photo). Title Unknown. 2011. Accessed on 18th December 2015. http://i.huffpost.com/gen/440966/original.jpg.
Other sources: Seth, Shobhit. ‘Dubai: Growth Through Diversification’. Investopedia. http://www.investopedia.com/articles/investing/111014/dubai-growth-through-diversification.asp?header_alt=a.