Dubai Grows As Trade Center

Emirate banks on geography, free-trade zone

DUBAI, the second-largest of the seven United Arab Emirates (UAE), is facing the novel prospect of peace in the Persian Gulf with some trepidation.From Sept. 22, 1980, when Iran and Iraq initiated hostilities until Feb. 27, 1991, when a cease-fire was declared in Kuwait, the almost continuous existence of armed conflicts in the region has played an important role in Dubai's economy. Mohammed Ahli, director of operations with Dubai's Department of Civil Aviation, acknowledges that the Iran-Iraq war and, to some extent, the hostilities in Lebanon resulted in greater air cargo movements through Dubai. On the other hand, he says that Iraq's invasion of Kuwait and the Allied counter-offensive reduced air cargo shipments. In the absence of the stimulus of hostilities, Dubai hopes that its strategic geographic position between Europe and the Far East, combined with one of the most modern shipping infrastructures in the region and a free-trade zone, will continue to make it attractive to shippers. Dubai officials claim that 7 percent of the world's total cargo currently passes through Dubai by air, sea, or land. In 1990, more than 11.3 million metric tons of cargo were processed through the emirate. In 1990, Iran continued in its role as the major destination of Dubai's sizable re-export trade. Of Dubai's 1990 re-export total of $2.1 billion, Iran accounted for $520 million, followed by Saudi Arabia, Qatar, Germany, and Singapore. One of Dubai's major inducements to business is the Jebel Ali Free Zone, the largest industrial free-trade zone in the world. Between 1980 - the year of its establishment - and 1990, $409 million has been invested by 350 companies located within its 22,500-acre area. In addition, the government of Dubai has invested $1.5 billion in facilities at the zone. Companies situated in the free zone are allowed to operate tax-free for a period of 15 years, an option which is renewable for a second 15 years. Most shipping in the region, including ship repair activity at Dubai Drydocks, suffered during the recent Gulf war from higher insurance costs, which in some cases increased 1,000 percent. Despite this perceived threat to shipping in the Gulf, however, the war between US-led coalition forces and Iraq did not produce significant damage to commercial shipping or its cargo. In a bid to increase its share of tourism to the region, a "Tourist Village" is under construction 40 miles from Dubai. Conceived as a sort of Arabic theme park, the complex will contain restaurants, hotels, and touristic diversions. Visitors will be able to take part in such traditional Arab pastimes as camel riding, horseback riding, and falconry. While officials say they are confident that the emirate can survive and even thrive under prolonged conditions of peace in the region, the adjustment may prove to be unsettling to Dubai's economy in the short term.

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