Ostentatious, exaggerated, colossal.
It seems that Dubai always aspires to carry out the largest, most luxurious and most eccentric projects in the world.
In this small territory, we can find the tallest building, the most luxurious hotel, and even the largest international airport on the planet.
Located in a strategic enclave at the mouth of the Persian Gulf, the growth process of Dubai is one of the fastest in human history.
In just over 20 years it has gone from being a remote and lost enclave in the desert to become one of the world’s great capitals. In this period of time the emirate of Dubai has multiplied by four its population, by nine the number of visitors, and by eight the size of its economy, But, Having said that, the question is: how has all this development been achieved?
Has it all been just a matter of oil?
Dubai is one of the seven emirates that make up the United Arab Emirates. We could describe its government as an Islamic autocracy that restricts a large part of its people’s civil liberties.
However, if we compare it with its neighboring countries, Dubai is by far the most open place in the Middle East. Want some examples? Well, here women can drive, the veil is not mandatory, you can buy pork at the supermarket,
and even alcohol is not hard to come by.
Yes, things are starting to change, and in a way, I think we could refer to this city as a kind of oasis in the middle of the desert. And, as you can imagine, all of this change has had its reward.
And, well, it might just surprise you…
Did you know that Dubai is already the fourth most visited city in the world (when it comes to international visitors) and that it surpasses epicenters of tourism and global trade such as New York, Hong Kong or Singapore?!
Well, it totally is, and this is something that surprises a lot of people!
Of course, there’s one thing we have to be clear on here, Dubai does not aspire to be the freest place on earth, but they do want to become the richest.
Examples of opulence in this place are so evident that it is not strange to see the Dubai’s police patrol the streets in Ferraris or Lamborghinis. Where else in the world could you possibly see something like this? Maybe at this moment some of you are thinking that all this exuberance has a very easy explanation: oil.
Could it be that Dubai is nothing more than a dream of sheiks that are financed with petrodollars? Well, although we can not deny the influence of black gold, the truth is that the real the key is very different.
The great secret of Dubai is not oil, but its commitment to trade.
Don’t believe me?
Well, let’s dive a little deeper…
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Lets go Deeper
At the end of the 1950s, important oil deposits were discovered in the vicinity of Abu Dhabi, the capital of the Emirates. Be careful here, because we are not talking about a small discovery, but an about a huge amount of oil. To give you an idea, it is estimated that the oil wealth of the Emirates – their proven reserves – is even greater than those of all Russia. However, in the case of Dubai, it was a bit different.
It is true that this territory was also graced with the fortune of black gold … But its authorities soon realized that their reserves were much smaller than those of their compatriots in Abu Dhabi.
In fact, although it may surprise us, oil today accounts for less than 1 in every 100 dollars produced by Dubai’s economy…
You’ve probably heard about how important it is to diversify an economy, right?
Well, that is precisely what Dubai did: overcome dependence and addiction to oil.
Now, this is very easy to say, but, The question is: How did they do it?
What did Dubai do to achieve such development and achieve a higher standard of living even compared to its oil-rich neighbors?
Basically, what it did was attract multinationals and professionals from all around the world. To achieve this, the first thing they did was to bet on a low tax policy. Look, in Dubai, they do not have the income tax, the tax on profits is practically non-existent and currently, purchases are not taxed either – although the latter is about to change.
As a result of a joint agreement of all the member countries of the Persian Gulf Cooperation Council, a tax on purchases will soon be launched. However, the rate will be around 5%, far from the rates of more than 18% so common in developed
And, of course, in case you are wondering, in Dubai there are no taxes on gasoline either. Yes, I know. It almost seems like we are talking about another planet. But do not think that low taxes are the only strategy Dubai has followed, not at all.
Second, and perhaps even more important than taxes, Dubai has resorted to an instrument known as “Special Economic Zones,” although here they are somewhat different from what we can find elsewhere. In Dubai, these special areas, in addition to having tax benefits, even have their own regulations – almost laws – which, as you can imagine, are always focused on promoting business activity.
Precisely, thanks to having specific rules, companies can escape the rigidity of legal systems that are inspired by sharia law, something that applies, of course in the rest of the Emirates.
We can find a good example of this model in the so-called “Dubai International Financial Center”, which is almost a state within another state. Look, this Financial Center has its own judicial system – chaired by the way, by a British
judge, with its own official language, which is not Arabic but English, and has even replaced the local currency with the US dollar.
In this way, a financial institution, a bank, for example, can do business as if it were in Manhattan but benefiting from the tax advantages of Dubai. Not a bad deal, right? So, now we can understand how Dubai has managed to attract the most of the 25 largest banks in the world.
But … This is not all.
Along with low taxes and Special Economic Zones, Dubai also opted for a very high degree of immigration freedom.
The result? 96% of its inhabitants have been born abroad. But wait, because there’s more…
To further boost foreign investment, at the beginning of this century the Dubai authorities made an unprecedented decision for this corner of the world.
In 2002 the government of Dubai approved a risky decree that allowed any foreigner, regardless of their religion, to make real estate investments. At that moment the authentic boom began. Dubai was full of buildings and large projects: hundreds of skyscrapers, gigantic shopping centers, and even the famous artificial islands.
Now the demand for Dubai become global.
It’s a fact that since 2002, Dubai has experienced real estate development comparable only to that of Shanghai, a city with 13 times more inhabitants. Because another one of the most surprising things about Dubai is that it has less than
3 million inhabitants…
Despite this, where before there were only a handful of skyscrapers, thanks to this decree there are now hundreds and huge projects are announced one after the other… be its new skyscrapers, Ferris wheels or theme parks.
One of these latest projects, by the way, is known as “The Mall of the World”, a gigantic space destined to become the largest shopping center in the world, and which will even house its own cultural district with dozens of theaters and cinemas, one hundred hotels, and the largest indoor theme park in the world.
The project has been presented as the world’s first city with a temperature controlled environment! Well, all these measures have made Dubai a place where it is easy to do business and have turned this emirate into a commercial, touristic, financial, logistical, and even industrial power. Yes, anyone who thinks that all this Dubai thing is only about banks and hotels is very
Nowadays, Dubai, thanks largely to its modern ports and special zones, is the third largest re-exporting power in the world and its industrial production exceeds 50 billion dollars each year. This is what explains why its neighbors are uneasily watching any fall in the price of oil, while the government of Dubai continues to carry out large projects.
It is true, from a strictly political point of view there are still many reprehensible elements when it comes to its religious, social or human rights issues. There are, for example, the painful conditions suffered by many construction workers from
countries such as India, Bangladesh or Pakistan. Of course, we can not ignore this reality, but we can not paying attention to the achievements of this emirate.
Among other things because thanks to this, Dubai has managed to influence the policies its neighbors are implementing and encouraging them to reduce their dependence on oil. Dubai is, quite simply, a great model.
There is, for example, the new Saudi Arabia of Mohammed Bin Salman, of which we have already spoken about in a previous video. Anyway, I think this case puts a very important question on the table: Is it possible to reconcile the absence of civil rights with sustainable economic growth over time? History and empirical evidence seem to show that it is not the situation, but in a world increasingly pressured by very high taxes and regulations of all kinds, Dubai’s authorities seem intent on demonstrating that this time it will be possible.
At the moment, its commitment to free trade and investment, and its policies aimed at strengthening legal security, ease of doing business and keeping taxes low, have been superlative. If anything, Dubai shows us that competitiveness and trade tend to have better results in terms of development than protectionism or subsidies.
Many rulers should pay attention to the successes of this oasis in the desert. But having said that, now it’s your turn.
Do you think the Dubai model will make the Middle East a freer place? Leave your answer in the comments below.
I really hope you enjoyed reading this Article.
Source: VisualPolitik EN
Why Windows Phone Failed
Why is Norway Richer than UK (United Kingdom)?
Great Britain and Norway: the two countries with the biggest reserves of oil in the North Sea. This key strategic resource has been a blessing for Norway, but its impact on the UK has been much more questionable.
In this article, we’re gonna look at how the discovery and exploitation of the same resource resulted in drastically different effects on these two European countries.
Up until the Second World War, digging for oil on the coasts of Western Europe was a futile endeavor. Pretty much every country had tried it, of course, but the numerous wells that had been dug produced less than a hundred barrels per day on average: completely insignificant compared to the vast oil fields of the Middle East.
The North Sea’s oil wasn’t discovered until the 1960s, and unsurprisingly before that Norway wasn’t nearly as wealthy as it is today.
Before the Second World War, the backbone of the Norwegian economy was fishing and shipping, which of course they were very good at having had centuries of experience.
The British, meanwhile, were busy doing their whole empire thing. As the leading naval power in the world, they relied heavily on oil, but one of the major problems with that was the fact that Britain didn’t have a lot of reserves itself.
Instead, it had to rely on imports, which is why it supported the global expansion of Shell and BP, especially in the Middle East.
During the first half of the 20th century, no one thought the North Sea would be a worthwhile place to extract oil. It was a dangerous and difficult task to even try to search for it there, which is why the extent of its reserves was largely unknown.
In 1958 the Norwegian government itself rejected the possibility of finding oil, but just one year later a monumental discovery changed the outlook of the entire industry.
In the northern part of the Netherlands, Shell had been looking for oil. They didn’t find any, but in one of their wells, they found natural gas at large quantities. Nothing groundbreaking so far, but when they dug a few more wells in the area they discovered more gas at the same depth; in other words, they had stumbled upon a giant gas field.
As it turns out, the one they found was the largest one in Europe, but what made it truly significant was its implication for the North Sea.
You see, the geologies of both areas were very similar so finding gas in the Netherlands meant that there might be oil under the North Sea.
The oil companies scrambled and began their first explorations in 1962.
Norway didn’t start giving out licenses until 1965, but they were in no rush.
The stormy weather and still developing technology meant that whatever oil could be found was going to be very difficult to extract. The drilling rigs had to withstand 15-meter waves and winds of up to 110 km/h, so unsurprisingly it took a few years and several deadly accidents before the oil could start flowing.
The first major oil discovery was made in 1969 on the Norwegian side.
Then, in a mad streak of luck, the British discovered the largest field in the entire sea on their first try just a year later.
In 1975 Queen Elizabeth herself would inaugurate the flow of oil from that field and this gesture symbolized a new opportunity for both Great Britain and Norway to benefit from this new resource.
But the way both countries approached their newfound wealth was radically different. The Norwegians could afford the luxury of being patient. Their political situation was one of stability: their leading Labor party had been the largest one since 1927 and is the one responsible for the welfare state and their high taxes.
In other words, they had no pressure to immediately spend the oil profits to stimulate the economy in the hopes of ensuring their reelection.
On top of that, the government’s attitude towards private companies was aggressive: they only allowed a 50% ownership stake in any given well, with the rest being owned by the state itself.
In 1972 the Norwegians went a step further, creating an oil company (STATOIL) entirely owned by the state, which would then compete directly with foreign companies.
Norway was effectively double dipping: not only did it tax the oil industry excessively, but it also owned a big chunk of it. But what’s really smart is what the Norwegians did with all that money: they not only saved it but also started investing it.
In 1990 they created a special fund for exactly this purpose whose growth rate ever since has been nothing short of exceptional.
They put most of their money in stocks and bonds, with a dash of real estate sprinkled on top, and the results speak for themselves.
The Norwegian fund is the largest sovereign wealth fund in the world and it even passed a trillion dollars in market value in September 2017.
And keep in mind, that’s a trillion dollars spread out over just 5 million people. So by all accounts, the Norwegians handled their oil boom perfectly. But the same cannot be said for the British.
The surge of oil profits for Britain coincided with the rise of Margaret Thatcher.
She came into power in 1979 and instead of setting up a fund to invest these new profits, she used that extra money to make radical reforms to the British economy.
She started a wave of mass privatization of companies that were otherwise profitable and made large cuts to income taxes in order to revitalize an otherwise stagnating economy.
Her policies were successful in that regard and resulted in large economic growth, but these benefits were temporary.
Unsurprisingly, when the revenues from oil started declining, Margaret Thatcher’s house of cards came crumbling down.
In essence, the UK and Norway took opposite approaches to their oil money. The British blew it on tax cuts, while the Norwegians invested it and grew it to the point where this tiny nation of 5 million people is the largest shareholder in Europe.
Norway is a perfect example of why investing is smart and that’s a lesson we can all use.
Stay tuned with us. We keep bringing this kind of content for you.
Source: Business Casual
SoftBank to acquire majority stake in WeWork.
SoftBank a Japanese telecoms and Internet Company, which is very intimate and well known for funding and acquiring stakes in various Multi National Companies. SoftBank is about to take over around 50 percent of the company WeWork.
WeWork is an American company founded in 2010 by Adam Neumann and Miguel McKelvey that provides shared Workspaces and Offices to Technology Startups and services for entrepreneurs, freelancers, and startups, small and large Businesses.
SoftBank shares fell 5.4 % and suffered their biggest one-day drop in nearly two years on Wednesday (10 Oct 18′) partly on concerns about the prospects of eight-year-old WeWork whose outlook is tied closely to the ups and downs of the real estate market. Recent technology sector weakness also weighed on SoftBank’s shares, traders said.
One of the sources told that the pricing and other details of WeWork investment are yet to be firmed up and the second source said Softbank is in talks to take a major investment in WeWork.
SoftBank and its giant Vision Fund invested about $4.4 Billion August 2017 on WeWork and hold 2 board Seats in the Company. And Owns about 20 percent of the company.
Earlier the Wall Street Journal reported Softbank’s investment would be between around $15 billion to $20 billion and is most likely to come from the Softbank’s giant Vision Fund. Earlier June Journal says that the smaller Softbank investment discussion valued WeWork at up to $40 Billion.
SoftBank’s other real estate-related investments include Compass, an online real estate marketplace, Katerra, a construction startup, and Indian hotel chain OYO Hotels.
SoftBank had earlier invested Billions of Dollars in U.S. ride-services firm UBER Technologies but owns a minority stack in the firm.
The Chinese unit of WeWork raised about $500 million in July from the investors including Hony Capital, SoftBank, Trustbridge Partners, to drive and expand its existence in the nation.
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