Dubainomics

Speeding along the roads of Dubai, looking at the tall skyscrapers, I couldn’t help but think: Is it really the heaven it is portrayed to be? Are people really as happy as they look? Or is there another side to this apparently blissful emirate?

Contrary to popular expectation, I will not be talking about burkha-clad women in this series…well, at least I don’t plan to. This particular post looks deeper into the economics of Dubai… what makes it thrive? What makes it survive?

The emirate has a constitutional monarchy with Sheikh Mohammed bin Rashid Al Maktoum as the King/ Monarch. Al Maktoum is the name of the ruling family. Dubai has an executive council which works independently of the Supreme council of the UAE. Have you ever wondered how people are happy in a monarchy? I mean these are modern times we are living in. Do they not realize the benefits of a democracy? What benefits are they getting under the present system?

Talking to the locals gave me some insight. But there was a world of difference in the opinions of a registered UAE national and the others. A UAE national is provided with various facilities. They are provided with free education and guaranteed jobs. Some even hinted that they are gifted a house and a car by the government when they marry (this last detail could not be verified).  They have to pay no taxes and in times of financial crunch, the government comes forward to help them. The world-class facilities provided are there for all to see. If you live in India and have never been abroad, your eyes will probably pop out when I tell you that there are absolutely no traffic jams there…the cars run at 120kmph…the roads are super-good and for a change, people obey the traffic rules (the life of a pedestrian is way easier there!).

The ‘others’ category primarily includes workers from the Asian subcontinent or the professionals who came to Dubai after they stopped awarding new citizenships. For these people, the state provides minimal benefits. The birth of a child is roughly a Dh 50,000 affair (1Dh=INR14). Then add to it the cost of his/her education, your daily expenditures, house rents and office rents. The costs rocket through the sky. For them it is often a struggle to make the ends meet. Yet they are still satisfied. Why? Because Dubai provides them with a safe society, safer than their home countries will ever be. This emirate has a crime rate of less than 1%. There are virtually no kidnappings and murders, petty thefts, if any, are reported and the culprits brought to book.

Even the economic policies are strictly pro-Emiratis. Like I said earlier, there is no Income Tax, no Customs Duties which needs to be paid. There are certain other provisions as well. Eg: if a non- emirate national has to setup a new business in Dubai, he needs to do it with local sponsorship. In effect, it means that they have to take up a local partner whose share will be 51% of the company stocks. Isn’t that really pro-citizen? Though the profits and losses can be divided unequally, but you will always have that one Arab voice on your board. For 100% ownership, you need to setup your company in the free zones. But then you are restricted from doing business with the local companies. Your access is limited to the international traders and businessmen because you cannot work outside the free zone. Compare and contrast this with our country. Can any such reform ever come up here? Even if it does, who will benefit from it?

So where does the government’s income come from? Does the Sheikh spend his own money?

As far as the printed word goes, Dubai’s income comes primarily from trade and tourism. They have some of the largest and the best malls in the world. They have developed amazing water parks and game arenas. Their airlines is at par with the best in the world. Every year, millions of tourists flock to the place. They use state-owned facilities like hotels, metro, hospitals thus, contributing to their revenue. Because Dubai is a free economy, even Indians have invested millions of rupees in its economy. If we were to pull out all our money, Dubai’s economy would probably crumble. True, India is a rich country, Indians are not.

Another source of income are the taxes the followers of Islam have to pay, namely, Zakat. It is a form of charity which every well-off Muslim is expected to do. The Ruling family has made some of the largest donations in the history of the world. The zakat collections go upwards of Dh 60 million. This fund is used for the welfare of the poor people. However, descendants of Muhammad cannot receive money from this fund.

All this has reduced the dependency on Oil as a source of income. It now accounts for less than 6% of the GDP. The efforts to diversify the economy have indeed paid off.

Dubai is a story of contradictions, a unique blend of the traditional and the modern. People do gossip about their rulers but they also worship him like God. The Sheikhs have indeed done a lot for the people. Else why isn’t there civil unrest? Why isn’t there any crime? They build the tallest buildings in the world, yet still preserve the homes of their ancestors. Like any other country in the world, Dubai also has its share of good and bad, pros and cons. Just that the pros seem to outweigh the cons.

It inspires others to achieve new heights…to break free from the conventional yet have your feet firmly planted on the ground... anyone heard of the Dubai-inspired ‘future’ city in Bihar?