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Hey guys i found this excellent article which is a tad long,but answers many of the fundamental questions about Dubai,enjoy :) :

Ten years ago, many in the Gulf Cooperation Council (GCC) and indeed other parts of the Arab world likened Dubai's economy to a bubble, believing that the emirate's rapid economic growth and mega projects were bound to, sooner or later, strongly hit the 'land of reality.'

These fears were not totally unfounded the sheer size of the projects the emirate was announcing and undertaking was so huge that they seemingly exceeded the needs of the emirate itself, and indeed that of the entire region, while their declared goals seemed to be extremely over-ambitious.

As time went by, though, those fears receded when the jigsaw puzzle pieces started to fall into their right slots and the overall picture became clearer. Year after year, Dubai has been able to outdo itself, startling its neighbours and becoming a model many countries and cities are striving to emulate. The emirate's ambitions still seem much bigger than what has so far been achieved.

HH Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE, and Ruler of Dubai, does not conceal his ambitions for the emirate. His Highness has maintained that the progress so far is a mere 10 per cent fraction of what he envisages to achieve, and that the new growth phase will be much larger and much more profound than the previous ones.

So far, a substantial part of Dubai's success has depended on the government's success in establishing a strong partnership with the private sector, and winning the trust of businesses in the administration's initiatives and projects. This has been a result of the government's commitment to provide an environment capable of promoting the prosperity of the private sector and developing suitable infrastructure and legal framework.

The tremendous pressure witnessed by the physical infrastructure of Dubai due to the rapid growth of the emirate tested business' trust in the government, which has dealt with those pressures by launching multi-billion dollar projects to upgrade and expand road networks, airports, electricity and water stations and other infrastructure projects.

HH Sheikh Mohammed personally follows up the implementation of those projects and pays surprise visits to government departments in order to assess their real performance on the ground. His Highness on several instances dismissed heads of those departments whose services were found to fall short of expectations.

The development of infrastructure and legal framework complements the launch of new mega projects and intensive promotional and marketing initiatives all over the world, in order to showcase Dubai's emerging status as an international tourism, trade, business and services centre.

The immense success of those projects and initiatives was highlighted by the increasing number of multinational companies making Dubai their regional base, to service their clients in a vast geographic area extending between the Indian subcontinent to the east and North Africa to the west.

While the decision of Halliburton, the world's largest oil services company, to shift its corporate headquarters to Dubai, highlights the emirate's success in consolidating its international status, anyone who has had the chance to hear HH Sheikh Mohammed bin Rashid Al Maktoum explaining his vision about the future of Dubai can conclusively say that whatever the emirate has achieved so far is truly the mere tip of the iceberg.

With its vibrant economy, an emerging class of home-grown multinational corporations which are as able as they are eager to participate in the global growth party through a spate of multi-billion dollar acquisitions and a growing population of entrepreneurs, Dubai is reshaping business as we know it and redefining the global economy. Not a single day passes without international press devoting reams of newsprint eulogizing Dubai's strategy and vision. But no one has the complete story. For, it has just begun. A Gulf Business special report.

Unlike the mirage in the middle of a desert, Dubai's growth is substantial and has allowed the emirate to emerge from oil dependency and transform itself into a global economic powerhouse. With infrastructure and construction projects worth over $200 billion moving at a rapid pace in the emirate, Dubai remains a huge construction zone designed to create a diversified economy. Dubai is indeed a city 'under construction' in more ways than one.

Epitomising Dubai's lofty ambitions is the Burj DubaiBurj Dubai, the world's tallest tower in the making and the centrepiece of the Gulf region's most prestigious urban development to date. But that isn't just it - the emirate in fact is optimising the use of the vast pools of its human talent, initiative, ingenuity and not least of all, vision to shape its future.

That vision is not necessarily about building the world's tallest tower or engineering the deepest hotel, or about creating the largest shopping mall or even the grandest theme park in the world. All these and more are mere by-products of that vision a vision that aims at transforming not just the landscape or the economy, but society. It is this vision that is redefining the way the world conducts business.

Personifying that vision is HH Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE, and Ruler of Dubai, the man who is responsible for the magnificent transformation of the emirate from a tiny desert outpost into a truly world-class city. A city where the best of the world's entrepreneurial and management brains are collaborating to create a masterpiece so unique that it perhaps is unimaginable for even the wealthiest of nations in the world to even try to match up to it.

A city that has no dearth of capital, culture or confidence, Dubai today plays a strategic role in regional and global logistics and financial transactions. To add to the party, it has also attracted a cluster of innovative, technology-intensive international companies in a variety of sectors that have helped ranking the UAE the 14th most innovative country (out of 107 countries surveyed), well ahead of the emerging Asian tigers India (23rd) and China (29th), according to the World Business/INSEAD Global Innovation Index.

"It is tempting to dismiss Dubai's success as a mere by-product of petrodollars, but the story is far more complicated. Even though petrodollars have certainly played an important role in financing the development of non-oil sectors, no other oil-rich country has so far come close to Dubai's unique status in the region and beyond," says a recent commentary by Morgan Stanley.

Very distinctive, very Dubai
Most analysts believe that what Dubai has achieved is not only unique in that it has managed to do so in such a short period, but also that it won't be easy for any other city or country in the Middle East or beyond to replicate Dubai's model. One of the key factors setting Dubai apart is the leadership's willingness to take the risk of pursuing the vision of a diversified economic structure that would hold the emirate in good stead whatever the regional or global economic climate might be.

"Dubai, with its minimal capital, led the way through the construction of a few iconic buildings that have boosted domestic and international confidence in what Dubai was and could yet become. Dubai then used foreign capital and the debt markets to create a new city based around the growth of a few sectors and many small businesses, creating a spiral of investment that then attracted other investment, stimulating economic growth," maintains Angus Blair, Head of Research, Beltone Financial.

According to a recent report by the International Institute of Finance, Gulf-based investors acquired foreign assets worth more than $50 billion last year. Merrill Lynch recently predicted that petrodollars from the Middle East would help finance a wave of asset buying worth about $500 billion over the next two years. Of that number, Dubai's share should be one of the largest if not the largest.

Thanks to its status as an investment powerhouse, Dubai has emerged as one of the brightest spots on the world tourism map. With its investments in the tourism, leisure, entertainment and real estate sectors expected to touch Dhs1.335 trillion ($365 billion) within the next few years, Dubai will soon be offering a stunning range of services and tourist facilities, thereby creating standards which only a handful, if any, will be able to match up to.

Owing to the oil windfall and the recycling of petrodollars, other countries in the region have also channelled more funds into a wide spectrum of projects to diversify their economies, as well as to increase the value-added in hydrocarbon sectors. "Elsewhere in the region, many governments have been learning from Dubai's lesson and adapting it for their own economies," adds Blair.

"Today, governments are both privatising formerly state-owned assets and building badly needed physical and intangible infrastructure that enable maximum economic growth." However, it is still not clear whether larger countries could easily replicate the development model of Dubai on an economical basis.

Making geography history, Dubai's investment arms have worked their way around the globe to make strategic investments in a wide gamut of sectors and segments. There have in fact been a large number of big-ticket international acquisitions and transactions involving the various investment arms of the Dubai government in the last few years, all part of the larger strategy of the Dubai government to further diversify its revenue sources and therefore continue to maintain the rapid-fire growth rate of its economy.

Eggs in every basket
Banking, real estate, construction, hospitality, infrastructure, infotech, engineering... you name it, and Dubai government or one of its investment arms would have a proverbial finger in each pie. The acquisition spree has gained such momentum that, one Sunday morning last month, it convinced a business presenter at a local radio station in Dubai to throw open the lines for listeners to text in their choice of a company that they'd like to see Dubai take over next.

While that exercise may have been done in half-jest, Dubai definitely isn't joking when it announces billion-dollar headline-grabbing acquisitions at a staggering frequency. Last month, for instance, IstithmarIstithmar, the Dubai-based private equity and alternative investment holding company, made public its $825 million bid for acquiring Barneys New York, the luxury specialty retailer, from Jones Apparel Group Inc.

Dubai also announced last month that it would be the next host of the world's most famous luxury liner, the historic QEII. The liner, which boasts of a glorious past, will be converted into a gigantic floating hotel and it will be a veritable tourist draw in its own right. Earlier in May, DIFC InvestmentsDIFC Investments, the investment arm of the Dubai International Financial Centre (DIFC), acquired a 2.2 per cent stake in Deutsche BankDeutsche Bank for an undisclosed amount, making it the single-largest foreign investor in the Germany-based global banking giant. Deutsche BankDeutsche Bank boasts of a market capitalisation of close to €58 billion ($77.7 billion), which translates into a stake of over $2.8 billion for the DIFC arm.

In the same month, Dubai International CapitalDubai International Capital (DICDICDubai International Capital
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), one of the investment arms of Dubai HoldingDubai Holding, acquired a 'substantial' stake in HSBC HoldingsHSBC Holdings after the bank's shares fell 8.4 per cent. The investment represents the first of a number of planned investments by the DICDICDubai International Capital
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's $2 billion Global Strategic Equities Fund (GSEF) in Fortune-500 companies following the recent closing of its first round of fundraising efforts at $1 billion in February 2007.

In 2006, DICDICDubai International Capital
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completed its $1.3 billion acquisition of British engineering group Doncasters from the Royal Bank of Scotland. DICDICDubai International Capital
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had previously invested $1 billion in DaimlerChryslerDaimlerChryslerDaimlerChrysler Middle East
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(since divested), bought Britain's Madame Tussauds Group for $1.48 billion, put $272 million into JD Capital, an investment company in Jordan, and $150 million into Ishraq, a company formed to develop a hotel chain in the Middle East.

Then again, in May this year, Dubai Ventures, the private equity arm of Dubai Investment GroupDubai Investment Group (DIGDIG), picked up a 5 per cent stake in Delhi-based Bharat Hotels for Rs160 crore ($39.26 million). Last month, Dubai FinancialDubai Financial, the financial holding company for Dubai Group, signed a stock purchase agreement (SPA) to acquire, subject to regulatory approval, a 60 per cent stake in TAIB BankTAIB Bank, the Bahrain-based investment bank engaged in private banking and wealth management services.

Perhaps the most publicised of Dubai acquisitions so far, Dubai Ports WorldDubai Ports World cut a $7 billion deal last year for the acquisition of British ports operator P&O, hogging global headlines for well over a month thanks in no small part to the subsequent brouhaha in the US Congress over a Middle Eastern company managing the operations at some of the most strategic American ports.

DP WorldDP WorldDP World
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also bought the port operations of Florida's CSX Corp. for $1.2 billion. Since then, Dubai Ports has invested over $2 billion in the US alone even though DP WorldDP WorldDP World
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, its subsidiary, was forced to sell its US port operations. IstithmarIstithmar paid about $1 billion for a 2.7 per cent stake in Standard Chartered.

Through IstithmarIstithmar, Dubai WorldDubai World paid $340 million for a string of six well-known buildings in New York, including the Knickerbocker and W Hotels, as well as the Mandarin Oriental, a five-star hotel in Manhattan. IstithmarIstithmar also holds 2.4 per cent of Time Warner shares, which it bought in January 2006 for $2 billion. In July last year, it acquired the New York specialty retailer Loehmann's for $300 million. Currently, IstithmarIstithmar's real estate portfolio is worth an estimated $8 billion. Also in 2006, Tecom InvestmentsTecom InvestmentsTECOM Investments
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and DIGDIG, both members of Dubai HoldingDubai Holding, acquired a 60 per cent controlling stake in the Maltese telecom company Maltacom for Dhs1.04 billion ($283.4 million). The deals are indeed too numerous to enlist in a short feature, but the point is that Dubai is working hard real hard at acquiring and managing prime global organisations in a variety of economic sectors.

Return of investment
Putting the large number of pieces of the jigsaw of Dubai's growth strategy together is no mean task. Even trying to comprehend the size and scope is difficult in itself. Nevertheless, after studying even just what's available in the public domain, it becomes more than clear that Dubai's game plan aims at global, not just regional dominance.

After growing at an annual rate of 13 per cent in the last six years, Dubai's economy is showing no signs of a slowdown no matter what the cynics claim. Dubai has done well not to fall into the trap of thinking cross-border expansion isn't necessary because of rapid growth in its home markets.

A recent report from the Dubai Chamber of Commerce & Industry maintains that Dubai's economy is well diversified and continuing to grow at an astonishing rate. The economy looks to be moving seamlessly into the tertiary stages of development, creating itself as a business hub and services centre. The distinguished performance observed across all non-oil economic sectors not only makes credible the objectives set by 2015 in the recently declared Dubai Strategic Plan, but also one will not be surprised if economic targets are achieved even before the projected time horizon.

On another level, Dubai has been busy accelerating the growth of its acquisitions and leveraging the experience of its executive-entrepreneurs to boost returns. Whether all or most of its investments will return handsome returns is something that we'll have to wait and see, but the signs are definitely promising.

For instance, DICDICDubai International Capital
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managed to turn around its $1.5 billion investment in Madame Tussauds, made a couple of years ago, into a $2 billion receipt earlier this year, while still managing to retain a 20 per cent stake in the company. In the case of DaimlerChryslerDaimlerChryslerDaimlerChrysler Middle East
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, DICDICDubai International Capital
News | Profile | Officers
sold its share at a neat premium and cashed out of the company when its share prices were surging about 20 per cent above the prices at which DICDICDubai International Capital
News | Profile | Officers
would have bought them.

Clearly, the emirate has widened its scope in terms of diversifying its economy, which now seems insulated to not only any future oil-shocks, but also to any geographic or sector-specific vagaries. The socio-economic growth that Dubai has achieved and continues to so assiduously build on is something that the current generation can only look at in awe and the future ones will, hopefully, learn from it and achieve greater heights.

© Gulf Business 2007
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