The United Arab Emirates, one of the world’s youngest players in the global economy, is intriguing both for its headlong plunge into opulence and its seemingly tenuous hold on it. Sixteen students traveled there on a Drew International Seminar to see business in the UAE come to life.
By Renée Olson
Photos by Nousha Salimi
The United Arab Emirates is home to the superlative.
It claims the world’s largest mall (Dubai Mall, with 1,200 stores), the tallest building (Dubai’s Burj Khalifa, at 160 stories), the furthest-leaning tower (Abu Dhabi’s Capital Gate tower, which leans more than four times further than the Leaning Tower of Pisa) and the only self-described seven-star hotel, the sailboat-shaped Burj Al Arab in Dubai. Before long, Abu Dhabi will even have its own Louvre and its own Guggenheim.
What fuels this?
Oil, certainly. “Black gold” is what launched the UAE onto the world stage two generations ago, and oil is what will keep the country flush for some time. That, and some strategic investment strategies.
What’s less certain is whether the UAE can sustain itself while ceding all control to its sheiks, a vestigial holdover from its nomadic tribal past, and its staggering dependence on foreign workers.
On the heels of the semester-long course “Global Business in the United Arab Emirates,” professors Nora Colton and Carlos Yordán piled 16 students on a plane in late May to learn what makes this nation tick, from the people who know best: Emiratis and Western expatriates, unveiled girls on the beach and cab drivers, falafel makers and free-zone executives—plus a world-renowned economist in Dubai.
I should know. The group allowed me, the editor of Drew Magazine, to tag along and sit in on a string of private boardroom meetings in Abu Dhabi and Dubai, as well as experience firsthand the national pastime of riding in taxis with drivers who believe they drive bumper cars. For those of you seated safely in your living room, here’s the takeaway on what the students experienced.
A country ruled by an emir or sheik, a male leader in a Muslim country. The United Arab Emirates is a federation of seven emirates, founded in 1971. The Drew DIS made stops in four emirates—Abu Dhabi (the capital, as well as the largest and wealthiest), Dubai, Sharjah and Fujairah. The others are Ajman, Umm al-Quwain and Ras al-Khaimah.
It’s a gusher
Originally a British endeavor, oil exploration finally began to pay off for Abu Dhabi and Dubai in the 1960s. The country ranks eighth in the world in terms of oil production, but the end is in sight. Executives at the Abu Dhabi Company for Onshore Oil Operations told us their proven oil reserves are projected to last another 90 years, close enough to push the nation to diversify its economy now.
Hello, where are all the Emiratis?
The Emiratis are not a populous people, and they’ve filled their land with the foreign-born. Fully 80 percent of the population consists of non-Emirati Arabs, Iranians, Indians, Pakistanis, Bangla-deshis, Filipinos, Ethiopians and others. Foreigners are not eligible for citizenship and may not own property. Population estimates vary wildly, but some six million people live in an area slightly smaller than the state of Maine.
How to make your population happy
What can Emiratis expect from the government? Free utilities, health care and education through college. A free house or free land and $19,000 for wedding costs. And for men, a $55,000 annual subsidy. The largesse, say historians, is a remnant of patronage practiced by Bedouin royalty.
What’s a rentier state?
Nations blessed with natural resources—for the UAE, that’s oil—can opt to use the proceeds, or “rent,” to support their populations, says Will Brackett C’11, who wrote a pre-departure paper on the UAE as a “rentier” state. “What happens is that the government provides its people with a high quality of life,” says Brackett, “but in turn people have to relinquish a lot of their political rights. There’s no democracy.”
When the oil runs out
The UAE is busy pursuing new sources of income, including sovereign wealth funds (SWFs). “The gains made by SWFs”—large investment funds owned by the government—“can offer income smoothing for public expenditures while helping diversify their wealth away from oil,” wrote Kyler Robin-son C’10 in his paper on the topic. Worldwide, SWFs are valued today at upwards of $3 trillion; the Abu Dhabi Investment Authority, estimated to be the largest in the world, has assets of more than $6 billion.
What sovereign wealth funds buy
“Whether you look at the Palm projects”—the man-made, palm tree–shaped islands off the shore of Dubai—“or all the amazing hotels, almost everything on a larger-than-life scale in this country seems to have a government hand in it,” says Robinson. “If you follow the trails of ownership and parent companies up the chain, you see that they’re owned either by the government itself, through some sort of authority or through a sovereign wealth fund.”
The plight of the migrant worker
Minami Hamamoto C’12 researched the UAE’s reliance on foreign workers. Her visit confirmed her previous findings: Migrants may find improved conditions in the UAE compared to their native countries, but at a cost. “After talking with taxi drivers and people who work in restaurants here, it’s [a choice] between the UAE, which they don’t really love, and back home, where things are worse. They get no rights [in the UAE], they live in bad conditions and living costs here are so expensive.”
Why worker rights are unlikely to improve
“There is absolutely no reason for internal change other than the people’s own moral compass,” says senior Michael Noonan, commenting on the lamentable treatment of foreign workers, which he researched for the course. “Even if they turn away, there’s always going to be new labor coming from places like North Africa. To get change you need groups like Human Rights Watch and international NGOs, but they’re often limited as to what they can do here by the government. When they release reports, the government makes promises. Rarely are the promises followed through on.”
The $30 potato chip
One student found that munching a chip on Dubai’s new metro makes for a very expensive snack. A security guard whisked him away to pay a $30 fine.
What women wear
An abaya, a traditional black outer robe that covers all but the face and hands, and a sheila, a black scarf that covers the head and part of the face, often trimmed with rhinestones or sequins. For Emiratis (male or female), dress is a definite cultural signifier: It communicates residential status in the UAE.
What men wear
A kandora, a long robe (white for the summer); a ghutra, a head scarf, often white; and an igal, a double circle of twisted black cord on top to keep the ghutra in place. Legend has it that the igal is evocative of the rope Emiratis would use to tie up camels to keep them from wandering off in the desert.
“This country has experimented with many development strategies,” says Associate Professor of Political Science Carlos Yordán. “Dubai has done a very good job positioning itself as a place to do business, and we wanted to explore whether it was hype or reality. The answer lies somewhere in between.” Although Dubai has hit a speed bump—“the real estate bubble has burst, and they’re having difficulty with their economy”—Abu Dhabi is “doing amazing, and its challenge is to not enter into the same bubble that Dubai did.”
When not in a boardroom, we …
got henna tattoos; went dunebashing in 4x4s; woke to the call of prayer before sunrise; rode camels in lieu of eating camel burgers; marveled at the ubiquity of second-tier U.S. fast-food chains like Popeye’s and Hardee’s.
Think again, Dubai
Jasmin Siegle C’10 sees flaws in Dubai’s development strategies. She believes its move to invest in the service sector, primarily tourism, is misguided since the UAE’s “relatively small national population and oil revenues are suited for a capital-intensive rather than a labor-intensive economy.” Instead, as she wrote in her paper, “Dubai needs to diversify its economy, specifically its exporting sector, in accordance with its resources.” Her recommendations? Capital-intensive technology and R&D sectors, such as solar technology.
A little shoptalk with a leading economist
“There was nothing here six years ago,” says Nasser Saidi, chief economist of the Dubai International Financial Centre (DIFC), the emirate’s answer to Wall Street, referring to the skyscrapers ringing DIFC headquarters. In a private, two-hour master class on the economy of Dubai and the region, Saidi, formerly Lebanon’s economic minister, told us about what he called “economic tectonics,” the shift over the last three decades of wealth and production away from “advanced economies,” such as the United States and Europe, and toward “emerging economies,” such as Asia and the Middle East. In a PowerPoint presentation, he explained that in 2009, the U.S. equity market dropped to an estimated 28 percent of the total global equity capitalization from 46 percent in 1999. For emerging economies, which include the UAE, the equity market rose to an estimated 32 percent of global equity capitalization in 2009, up from 8 percent in 1999. “Most of the growth in the world is in the emerging markets,” said Saidi.
A welcome mat for nuclear energy
“It takes a lot of energy to live in a harsh climate,” John Loy, director of radiation safety at Abu Dhabi’s Federal Authority for Nuclear Regulation (FANR), told us during a visit to the agency. For that reason, Abu Dhabi is pursuing nuclear energy at a breakneck pace. The emirate launched FANR and the Emirates Nuclear Energy Corporation (ENEC) in 2009 and expects to open the first of four nuclear reactors, built with Seoul-based Korea Electric Power Corporation, in 2017. Still up in the air? Plans for disposing the waste.
What students said they’ll remember …
The desert safari; going to the top of Dubai’s Burj Khalifa, the world’s tallest building; the rock-hard beds in Sharjah; learning about Islam.
How a trip like this changes a person
“I’ve had students tell me that Drew International Seminars make them much more sophisticated, more adaptable,” says Professor of Economics Nora Colton. “It makes them global citizens.”
Renée Olson is the editor of Drew Magazine.
- Watch video from the Drew International Seminar in the United Arab Emirates.
- Read the UAE blog.