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Some lessons from Dubai

One, Dubai might not have been blessed with huge oil reserves but it is blessed with something even more valuable - a ruling family that recognised the value of international trade as an engine for wealth creation decades before the petrodollar era. Dubai encouraged Indian, Yemeni, Persian, Lebanese traders and merchants to settle in Dubai and bring invaluable capital (both financial and intellectual) into the emirate. At a time when socialism, command economies and hostility to multinational corporations was fashionable in the chancelleries of Europe and the Third World, the emirate of Dubai was unique in its preference for laissez-faire capitalism, open economies, regional trade and a welcoming, not hostile, attitude to foreign capital in the Arab world.

President Nasser nationalised the Suez Canal. The Baathists in Syria and Iraq destroyed the ancient trading entrepots of the Ottoman Empire (Damascus, Aleppo, Basra). The FLN's choice of Soviet style economic models impoverished Algeria. But Dubai built the Dry Docks, Jebel Ali Free Zone and the airport to ensure economic progress for its people.

Two, Dubai knew that political stability was an invaluable asset in a region where coups, tribal warfare, revolutions, and strife were common. It created the infrastructure to attract the business elite of Lebanon when civil war devastated Beirut, of Pakistan when Zulfikhar Ali Bhutto nationalised the banking system, of Iran under both the Shah and the Ayatullahs, of Russia in the chaos and violence of the Yeltsin era. This is a lesson Arab governments must learn: foreign money will only come if it feels welcome and safe from political threats.

Three, Dubai's black gold was foreign trade. Egypt used to be one of the world's major trading nations - exports were half GDP on the eve of World War One, almost in the same league as the British Empire. Yet a century of wars, revolutions, currency crises, terrorist violence, socialism and Cold War politics has turned Egypt into a minor trading power, its economy dependent on cotton, worker remittance and the Suez Canal. Dubai can teach the Arab world about trade - after all, it wrote the book on regional trade.

Four, Dubai never allowed itself to become hostage to the vagaries of any one industry or economic model. Dubai is both Singapore and Hong Kong. It combines the best of Singaporean state capitalism and free market Hong Kong style go-go capitalism dominated by foreign merchants. In 1999, Dubai leaped into the pinnacle of Cyberspace with the creation of DIC, the Media and Health Care City. Dubai plugged into the global virtual souk with a vengeance yet Internet usage in the Arab world is among the lowest in the world. The DIC is the Arab Bangalore but we desperately need more technology hubs in the Islamic world.

Five, Dubai has never compromised on excellence or global benchmarks. From Jebel Ali to Emirates airline to Duty Free to DXB Airport, if it carried the Dubai brand it was going to be world class, period. This has allowed the government to build valuable credibility capital with the wealthiest businessmen in the Middle East. The frenzy with which luxury villas and apartments in New Dubai are booked by foreign traders is a testament to credibility of the young emirate built over three generations.

Six, Dubai understood the power of the first mover advantage a generation before Net geeks made the concept popular in Silicon Valley. From container shipping to a diamond exchange to an ice skating rink to an Internet village to foreign ownership of real estate to free trade zones to even shopping festivals, Dubai acted as a catalyst for innovation, introduced revolutionary new realities into the Middle East. No wonder when Dubai talks, the world listens - because it knows action will soon follow. This is sadly not the case elsewhere in the Arab world where reform momentum proceeds at such a glacial pace that foreign investors simply lose interest.

Think about privatisation in Saudi Arabia, private banking in Syria, tourism in Oman, capital markets reform in Egypt, telecom GSMs in Lebanon. What is the common denominator? No obsessive commitment to act quickly, to secure the first mover advantage, to capture the imagination of the world.

Seven, Dubai's economic blueprint has borrowed from the world's most successful models. Singapore inspired the shopping festivals, the free zones, the real estate development innovation; Silicon Valley is the inspiration of Dubai Internet City. Monaco is the model for glitz, glamour, tourism and sport. New York and the City of London are the models for DIFC.

Eight, there is zero tolerance for public sector corruption in Dubai. Elsewhere in the Arab world, corruption, 'wastaa', ruling elites living in their remote cocoons, ethnics schisms, ego and not economic driven projects wrecks havoc. Ever wondered why seven centuries ago Baghdad and Damascus were world financial centres, the Manhattan and City of London of their time? Now the entire Arab world exports less than Nokia, its collective GDP is less than Spain. The Arab world, under the Abbasid caliphs, had trade relations with all major nations from China to Venice. However, Arab financial markets today are trapped in the Stone Age of finance. Something went tragically wrong. The Dubai model can change the destiny of the Arab world. It is anchored in the noblest traditions of the Arab - Islamic past but also is a beacon for a globalised networked future.

Matein Khalid is a Dubai-based investment banker and Khaleej Times columnist