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Summary
The Gulf conflict has evoked a rash of obituaries to Dubai’s success. But this city’s economy was never reliant on tourism and real estate. It depends far more on trade and transport—and serves as one of the world’s most active hubs. It’s likely to bounce right back.
The doomsday drumbeat about Dubai’s imminent death began within days of American attacks on Iran and the latter’s retaliation against the UAE and other US allies in the Gulf.
Leading global media outlets ran roughly similar stories on the loss of Dubai’s “safe haven” identity, a scramble to leave by the uber-rich class that the city had attracted in the past two decades and its falling property market and decimated tourism economy. “Could this be the end of Dubai?” asked the New York Times. “The shine has been taken off: Dubai faces existential threat,” wrote the Guardian.
While there is no doubt that the Iran war has been a shock to the whole region—even the whole world in some ways, India very much part of it—these alarmist stories are a rush to judgement, possibly spiced with a pinch of schadenfreude. Dubai the upstart, Dubai the absurd, has been put in its place, and deservingly so. Once Western millionaires leave with their money, nothing will be left of Dubai because the city is nothing but a shell without them.
A closer look at what makes Dubai tick would lead to a rather different conclusion. And any reasonable sense of world history in which ruined cities like Tokyo, Berlin and Saigon have bounced back stronger than ever should make us think more seriously about cities and what makes them resilient, even indestructible. The rush to judgement is the outcome of a biased, perhaps racist, elevation of style over substance.
The dominant image of Dubai in the Western media is as the playground of a footloose global millionaire class that is attracted by its absence of personal income, capital gains and inheritance taxes and the prospect of living in fantasy settings like Palm Jumeirah or the world’s tallest building, Burj Khalifa.
Dubai does have millionaires, 81,000 of them, about the same number as Frankfurt, Houston, Zurich and Dallas. For context, New York City has 384,000 and Mumbai 51,000. I have not seen any claim that any of these cities is dependent on the presence of millionaires.
The belief that the real-estate sector and tourism form the foundation of Dubai’s economy is just as flimsy. The real estate sector makes up about 8% and hospitality another 3.4% of Dubai’s economy.
In the US, real estate generally accounts for 15-18% of total economic output in major metropolitan regions. In major tourist destinations like Rio de Janeiro, Las Vegas, and Orlando, tourism comprises over 15% of the local economy. Real estate and tourism are important to Dubai but hardly dominant.
The real foundation of Dubai’s economy is in trade (about 25%), transportation (about 13%), and financial services (about 12%). That’s half the Dubai economy. Oil, the mainstay of neighbour Abu Dhabi, makes up less than 1%.
Trade and transportation, Dubai’s top two sectors, have historically been the pillars of urban economies, their raison d’être, from the time cities have existed. Cities are transshipment points, places where goods are exchanged and moved onto different transportation modes (from ships to trucks or trains) and into different directions. Cities are, above all, the hubs or nodes of transport networks and that has been the primary reason for their existence for millennia.
Dubai is believed to be the world’s leading re-export hub; it links markets across West Asia, Africa, India, Southeast Asia and Europe. Goods processed through Dubai include precious metals and stones (gold and diamonds especially), electronics and telecom equipment, cars and vehicle parts, and apparel. These activities are undergirded by world class transport infrastructure, including port facilities that can handle very large container ships.
Perhaps even more important is Dubai’s role as an air transport hub. Its airport is the world’s second busiest for passenger traffic (after Atlanta) and eighth for freight traffic (a list led by Hong Kong). If air freight is added to the transport rather than trade sector, Dubai’s aviation sector makes up as much as 27% of its economy and 21% of its jobs.
Dubai is in the vanguard of a relatively new concept in urban economics called ‘aerotropolis.’ If ports were global hubs traditionally, airports are the modern version. In an aerotropolis, a major airport is the central node of a massive economic and infrastructural region. The airport, rather than the traditional downtown, is the business centre of metropolitan regions, like Dallas-Fort Worth, Atlanta and Amsterdam-Schiphol. Dubai is the leading edge of the form.
The business of Amsterdam is not in the charming old city with its cobbled streets, canals and museums (where tourists flock) but in Schiphol. The business of Dubai is not so much in its gleaming steel and glass skyscrapers or palm fronded mansions but in its ports and gigantic airport. Outsiders and visitors see what they have come to see, which is the cosmetic image. The structure of the city, its bones, muscles and organs (the messy parts) are mostly hidden from view.
The Iran conflict will end some day (when both parties can declare victory with a straight face) and then will begin the rejuvenation of the real Dubai economy, its trade and transport systems.
The important story of this conflict for Dubai is not in the panicky departure of expats or the fall in its real estate prices, but in the damage done to trade and transport.
Unless the conflict drags on for years, history suggests that this is a short-term effect. Dubai has become a vital node in global trade and transportation. If they are to be revived, Dubai will continue to play an outsize role.
The author is a professor of geography, environment and urban studies and director of global studies at Temple University.
English (US) ·