MIDDLE EAST: Diversification Follows The 'Copycat' Route

Dubai, the most famous of the seven-member UAE, is the best example of the post-oil age in the Gulf -- oil contributes only four percent of the emirate’s gross domestic product, down from 50 percent in 1975. Though Bahrain started diversifying earlier, Dubai became a trendsetter by liberalising and expanding its economy faster than others. Transforming the oil-rich capital of the UAE, ‘Plan Abu Dhabi 2030’ has declared projects and those under development worth about 400 billion US dollars, of which about 175 billion dollars have been earmarked for diversification. Apart from the manufacturing sector, large investments have been made in real estate and tourism projects, especially the 27-billion-dollar Saadiyat Island plan with the Guggenheim Museum. Qatar has earmarked 130 billion dollars for investments in the next six years, with about 50 percent of it going into the non-oil sectors. And, the Saudi government has charted plans to privatise 20 state-owned corporations and institutions. The new economic cities in Rabigh, Hail, Madinah and Jizan, as well as the new industrial city in Jubail, are expected attract investments worth hundreds of billions of dollars. Explaining the Dubai case, Eckart Woertz of the Gulf Research Centre told IPS: "It has successfully positioned itself as a trade and services hub in an oil-rich region. But as the term hub already indicates, there needs to be countries and regions between which the hub intermediates -- not everybody can be a hub. Bahrain, for example, has had a long experience in the banking sector, but it now faces stiff competition from Dubai." The aviation industry exemplifies the ‘copycat’ culture with new airlines, airport expansions, as well as buying of new aircraft. Currently, the Emirates of Dubai, Etihad of Abu Dhabi, Air Arabia of Sharjah (all UAE), Qatar Airways, Bahrain’s Gulf Air, Oman Air, Saudia, Kuwait Airways and Jazeera Airways (also of Kuwait) make up most of the GCC airlines industry. According to estimates, nearly a third of the airport development projects across the Middle East, Africa and South Asia by value – 65 billion dollars – are being carried out in the UAE. Further, the 5.5-billion-dollar New Doha International Airport in Qatar and the 11.3 billion dollar upgrading effort of King Abdulaziz, Madinah and Tabuk airports in Saudi Arabia increases the value of ongoing projects in the Gulf to 37 billion dollars. The competition also led Gulf carriers to place orders for 140 planes worth about 40 billion dollars from both Airbus and Boeing Co. during the Dubai airshow few weeks ago. While Emirates Airline ordered 93 commercial aircraft, Qatar Airways ordered 27 planes as part its plan to double its 58-strong fleet to 110 aircraft by 2010. Citing the aviation industry as an example, Woertz said that the GCC population is not enough to feed the ongoing expansion plans. "It remains to be seen if there is enough space for so many airlines," the Dubai-based researcher told IPS. The regional players are also investing in similar portfolios abroad. While Dubai negotiated buying into Nordic exchange operator OMX, the Qatar Investment Authority considered buying Nasdaq’s stake in the London Stock Exchange. Recent estimates suggest that Saudi Arabia’s foreign assets are worth at least 250 billion dollars, Kuwait’s about 200 billion dollars, and the UAE’s well over 500 billion dollars. While Dubai had to diversify because of lack of oil resources, Qatar’s story is intriguing, as is the case with Abu Dhabi. With modest oil reserves, Qatar gambled by investing heavily in the gas industry, and currently boasts of one of the highest per capita incomes in the world. According to Steven Wright, assistant professor at Qatar University, "Copycat developments are visible in some sectors. It is a product of some of the GCC countries’ desire to create lucrative regional hubs in the financial, services and industrial sectors. Competition is the next logical step." Explaining Qatar’s strengths, Wright said that the gas-rich country of less than a million people is "increasingly being seen as an attractive alternative to Dubai. It has a greater potential than Dubai in the long term given its investment potential owing to its huge energy reserves." In 2004, Qatar took a leaf out of tourist promotion plans in Dubai and Oman and launched its own worth 15 billion dollars. In 2005, Qatar followed Dubai in partially opening its stock market to foreign investors, and has unveiled plans to develop into a regional centre for financial services, like in Bahrain and Dubai. "Continuation of copycat projects," Wright told IPS, "will depend on availability of finances and an ability to outspend others, which Qatar has." Others feel that blind replication of developmental plans will backfire in the long run. For example, they feel Qatar is at least 15 years late and it may not be really possible for it to catch up with Dubai. ... http://www.ipsnews.net/news.asp?idnews=40249

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