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Look up to Hong Kong? Dubai is carving out its own impressive path

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It may not match Hong Kong in size, or as an entrepot for China, but it has realised it does not need to. It continues to diversify firmly from oil and gas, but its hub roles have become distinct in their own right, driven by forces different from Hong Kong’s.

Perhaps most important and deep-rooted are Dubai’s ethnic diversity in a nomadic region with trade and migration flowing in its bones. Oil and gas may have dramatically enriched the region, but they are a more recent economic force than the centuries-old trade along the Silk Road, which has embedded pragmatism and a remarkably tolerant iteration of Islam.

Hong Kong Financial Secretary Paul Chan at a breakfast seminar jointly organised by the Hong Kong Economic and Trade Office in Dubai and the Hong Kong Exchanges and Clearing Limited, in Riyadh, Saudi Arabia, on October 26. Photo: Information Services Department handout

Hong Kong Financial Secretary Paul Chan at a breakfast seminar jointly organised by the Hong Kong Economic and Trade Office in Dubai and the Hong Kong Exchanges and Clearing Limited, in Riyadh, Saudi Arabia, on October 26. Photo: Information Services Department handout

Global warming has augmented the imperative to diversify from oil and gas, not only in terms of new activities such as tourism and financial services, but also in terms of innovation in solar and hydrogen power, desalination and water-resource management.

The force that Dubai feels in common with Hong Kong is, of course, China. But rather than competing with Hong Kong, Dubai has risen in parallel and largely unnoticed. We may talk much in Hong Kong about China’s Belt and Road Initiative but the infrastructure plan has much more to do with Central Asia and bringing trade to a region isolated and rived by radical Islam. In this, Dubai plays a distinct and pivotal role.

Impetus has strengthened steadily since the implosion of the Soviet empire in the early 1990s, making former vassal states easy prey for radical Islamist groups, and a source of deep diplomatic concern for China and its western borders.

As China doubles down on the Belt and Road Initiative, so Dubai and the wider United Arab Emirates have grown in importance as the integrating hub, not just across the Central Asian “stans” and the Gulf region, but on into Africa.

China-built clean coal-fired power plant in Dubai completed

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China-built clean coal-fired power plant in Dubai completed

China’s trade with Africa – much of it managed through Dubai – jumped to US$254 billion last year, despite Covid-19 disruptions and setbacks. China has been Dubai’s leading trading partner since 2014 on the back of this Africa trade, and investments continue to surge with steroidally giant malls such as Dragon Mart, which is home to more than 6,000 outlets and attracts 40 million customers a year, mostly from Africa.

Dubai has also managed the Covid-19 outbreak well. The UAE suffered just 2,348 Covid-19 deaths against more than 10,500 in Hong Kong. It has been faster than most to reopen and recover.

As Hong Kong still flounders, with an expected economic contraction of 3.2 per cent this year, while Dubai is expected to report growth of more than 5 per cent. Air passenger traffic is still far from the 86 million reported in 2019, but recovered tentatively last year to 29 million.

Two new migrant influxes are also having a significant economic impact. First, Dubai is a perverse beneficiary of Russia’s war on Ukraine, as thousands of wealthy Russians seek refuge from sanctions. The Economist reports that twice as many homes were bought by Russians in the first half of this year than in the whole of last year, and Goldman Sachs and Bank of America have shifted employees from Moscow.

Perhaps more importantly, Dubai has benefited powerfully from the Abraham Accords signed with Israel in 2020. Since the signing, more than half a million Israelis have visited Dubai and bilateral trade has exploded from US$11.2 million to US$1.2 billion last year. A Jewish school is doubling its intake every six months, and a Jewish community has “taken seed”, the Economist says.

Students practice Hebrew vows at the Jewish Hebrew School on September 24, 2021 in Dubai. The school operated unofficially for five years until the signing of the Abraham Accords, after which it officially opened as the first Hebrew-speaking school in the UAE. Photo: Getty Images

Students practice Hebrew vows at the Jewish Hebrew School on September 24, 2021 in Dubai. The school operated unofficially for five years until the signing of the Abraham Accords, after which it officially opened as the first Hebrew-speaking school in the UAE. Photo: Getty Images

Most important for Dubai, this has brought expertise in irrigation and hydroponic technologies as well as defence and cybersecurity technologies. It has brought hopes that trade can encourage a regional peace elusive for seven decades.

Dubai’s vulnerabilities remain obvious: nearby conflict in Ukraine, Saudi Arabia’s unresolved conflict with Iran being fought out in Yemen, and radical Islam still roiling many of the “stans”, and accelerating climate change, which remains a deep threat to the Emirates’ physical sustainability. It has succeeded in developing a powerful regional hub with its own distinct and substantial drivers.

With Hong Kong cauterised from the global economy by Covid-19 and its poor management, and London upturned by Brexit, Dubai’s ambitions have grown. This upstart can no longer be dismissed.

David Dodwell is CEO of the trade policy and international relations consultancy Strategic Access, focused on developments and challenges facing the Asia-Pacific over the past four decades

The news is published by EMEA Tribune & SCMP210520-twitter-verified-cs-70cdee.jpg (1500×750)

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