July 3, 2009
Dubai, one of the seven tiny countries of the United Arab Republic (UAE), has been more profoundly affected than other Arab countries by the ongoing financial and economic crisis.
Disposing only of limited oil and gas reserves that might be depleted in 20 years, it had wisely started engaging in transforming its economy to the post-oil age as early as the 1970s.
The development, in the 1970s, of Jebel Ali port and Free zone, one of the 10 busiest container ports on earth, and the construction of its international airport, the 20th busiest on earth, have laid the basis for moving into the global transport service industry. Trade and entrepot services, especially towards Iran and Africa, account for 30 percent of its national product, five times as much as oil and gas.
In the wake of the political instability in the region during the 1990s Dubai has been able to attract foreign capital and financial institutions. The government further encourage this trend by the establishment of the Dubai Financial Market in 2001, which has helped turning financial services into a major economic sector, with a share of more than 10 percent of GDP.
After these successful moves into a post-oil service society the government started focusing on luxury tourism and real estate as the driving forces for a next stage of diversification away from fossil fuels.
Consequently, Dubai entered into a surreal construction boom after 2002, which turned into a real estate bubble after the global financial crisis in 2008.
Over the years Dubai has become renowned for ever new world records: the tallest office and hotel buildings, nerve-racking traffic jams, sky-rocketing real estate prices, the ultra-fast GDP rise, glaring social inequalities between disenfranchised “working slaves” from Asia and local elites etc.
Today Dubai has become one of the richest countries in the world, with a per-capita income far beyond $ 50.000, an ostentatious life style, with glittering shopping malls, ski /bob runs on artificial snow, golf courses irrigated by desalinated water etc.
But the fast pace of development had its price: At the height of the boom in 2008, the country faced temporary breakdowns of its traffic and water sanitation systems and, more scaring, every Dubai citizen got used to emitting six times as much C02 as the average French or Italian citizen!
Two big question marks hang over Dubai’s future: its high level of external debt and the need to restore a better balance between high living standards and the conservation of nature.
To finance the huge investments in infrastructure and buildings Dubai has accumulated rising amounts of foreign debt, as much as $ 100 billion according to unofficial estimates. This figure represents a debt burden of $ 400 000 for each of the 240 000 Dubai citizens, in early 2009, Abu Dhabi had to bail out its neighbour with a credit of $ 10 billion to prevent it from foreclosure.
The even more crucial question concerns the ecological sustainability. Can a densely populated country in an austere desert climate survive with buildings and insulation technologies developed in the late 20th century for moderate climate zones? How long can it afford to waste fossil energy the way it does, due to ridiculously low oil prices? When will it start the transition to ecological sustainability? Is this still possible with its brand-new infrastructure that is far from meeting strict ecological criteria?
All the new shining multi-billion buildings like Emirates Towers, Burj Dubai, and Burj Ali Arab are meant to remain in place for at least 50 years. How will they be air-conditioned when the era of cheap oil and gas will have come to and end?
30.06.09 Eberhard Rhein
Author : Eberhard Rhein