Dubai Puts Politics Aside, Aims To Be a Mideast 'Hong Kong'

One look at a map explains why tiny Dubai is looking 20 years into the future and preparing for booming business as the hub of the Gulf.

This already thriving trade center, one of seven states that make up the United Arab Emirates, is close to the mouth of the Persian Gulf and links big markets and oil producers like Iran, Iraq, and Saudi Arabia to the rest of the world.

Dubai Arabs have been traders for centuries, remaining so despite the oil wealth that now dominates the regional economy.

Now Dubai's rulers and economists are looking to carry that history forward and turn Dubai into an indispensible hub of Middle East business. New infrastructure is being built, and trading and banking rules loosened. A campaign stretching across a quarter of the globe is under way.

Merchants do much of their import-export work with Iran and Saudi Arabia. But when international sanctions on Iraq are lifted, they expect a windfall.

Even with the sanctions - which were imposed when Iraq invaded Kuwait in 1990 - Dubai merchants have been involved in smuggling everything from tires and car parts to computers.

Iraqi traders have been lining up to cash in on the oil-for-food deal approved for Iraq by the United Nations in December. Iraq would be able to sell $2 billion worth of oil for food and medicine. So far, 300,000 tons of wheat and rice have reached Iraq.

The number of Iraqi investors now in Dubai is 40 percent greater than last year, according to government statistics.

But Dubai is also casting its net much farther, often leaving politics aside in pursuit of business. A recently completed Dubai Strategic Development Plan - the first in Dubai's history - sets down a blueprint for coming decades and declares that Dubai is on the "threshold of a new era."

Among the most ambitious goals is a per capita, non-oil income of almost $20,000 by 2010. Since most the UAE's oil is found in the capital state of Abu Dhabi to the south, Dubai aims for its non-oil GDP to reach nearly 90 percent of the total.

"Everyone says that we will be like Hong Kong," said Ali Ibrahim, the director of economic planning for Dubai. "We are aiming to be the regional economic center. Already we're a trade hub, but we are looking to be a financial center."

The strategic plan calls for heavy domestic investment and less reliance on foreign workers. But to be successful, it will also have to continue working without political constraints that often limit growth elsewhere. Iran, for example, barely figures as a trading partner for most Gulf states, who fear its dominance. (Iran is again flaunting its might this week, having begun military exercises April 22 code-named "Road to Jerusalem" - and which involve 200,000 troops.) But even though it is locked in a war of words with Abu Dhabi, the UAE capital, over Iran's occupation of three offshore islands, Iran accounts for 20 percent to 30 percent of Dubai's business. Everything from cosmetics to electronic goods crisscross the Persian Gulf.

"Iran is a big neighbor, a big market, and the UAE is trying not to mix the issues of economics and politics," says Abdallah Mograby, the head of economics for The Emirates Center for Strategic Studies and Research.

"The UAE will presumably provide a bridge for Iraq [as] it does for Iran."

A push for Dubai came during the Gulf War, when businesses that had been in Kuwait fled to Bahrain and Dubai. Iraq's increased interest in doing its business here is also due to a souring with its traditional trading partner, Jordan, since late 1995.

The UAE has taken advantage of this change of heart in Baghdad, spearheading a high-profile effort to ease the suffering of Iraqis by lifting sanctions. The root of the policy is economic and infuriates Iraq's vulnerable neighbor, Kuwait.

"In the end, this is business," says Mr. Ibrahim of Dubai's openness to Iran and Iraq. "We are small and must look around, toward India and Pakistan and Southeast Asia. We form a natural triangle that way."

Dubai is looking for ways to make manufacture cheaper for companies in Dubai, he says, and is upgrading its communications networks with fiber-optic cable.

Speaking at a recent conference on the Emirates in Dubai, Jeffrey Sachs, the director of the Institute for International Development at Harvard University in Cambridge, Mass., said that Dubai needed a more sophisticated financial sector and a "detailed fiscal strategy" to reach its aims.

Dubai's popularity is already expanding. Russians spend more than $900 each day when they come, according to one report. Signs in Dubai markets now appear in Russian. More than 1 million people came to a shopping festival a year ago.

"This is a vision," says Ibrahim about Dubai's strategy. "Maybe we will run out of oil in 20 years, so then what will we do? We have to be ready for that day."