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
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TATA Business Journey – India’s one of Most Successful Company
Tata: the industrial conglomerate that lies at the heart of India’s success on the global business stage. For almost two centuries, the Tata Group has pioneered multiple industries in India and remains a market leader in most of them.
You’ve probably heard of Tata Motors, their car division, but as you’ll soon find out, their reach extends far beyond that one subsidiary.
In this article, we’ll go through three generations of Tata businessmen to see how they built one of India’s most successful companies.
TATA Journey Begins
The story of Tata begins during the reign of the British Empire. India back then was a huge exporter of cotton, but the brutal regime of the British East India Company left little room for local entrepreneurs to develop.
The poor treatment by the British eventually resulted in a rebellion against them, in 1857, which ended the power of the British East India Company and replaced it with the British Raj.
Now, compared to its ruthless predecessor, the Raj was much more focused on keeping the peace. The Raj didn’t exploit the Indian population quite as harshly and it also invested a lot of money in building India’s first railways for example.
Of course, at the end of the day, the British Raj was still an oppressive colonial power, but at least it finally gave the local population the economic opportunity to develop themselves.
Because India was an exporting country, the first Indian entrepreneurs came from exactly that sector and one of them was Jamsetji Tata.
He was the son of an exporter in Mumbai and he graduated in 1858, exactly the perfect time to take advantage of the economic reforms of the British Raj. Because his father’s export business was growing, in 1859 Jamsetji went to Hong Kong to develop a subsidiary there and upon seeing the sheer scale of British commerce there, he realized that the Tata export business had truly global potential.
Over the course of the next decade, he would travel to Japan, China, and Great Britain, establishing a network of distribution for his father’s business. He’d eventually create his own exporting company in 1868 and using the money he made, he started building textile mills of his own, effectively creating a vertically-integrated business.
From the very start, Jamsetji’s philosophy was to find the best practices used across the world and to bring them back to India. In his textile mills, he enacted policies that were virtually unknown to most of India, like offering sickness benefits and pensions to his employees.
But Jamsetji wasn’t content with just the textile industry, he saw the wonders the Industrial Revolution had created in Europe and he wanted to recreate them back home. He began working on a steel production plant in 1901, modeled after the ones he had seen in Germany.
Even more ambitious was his hydroelectric project, inspired by his visit to the Niagara Falls power plant in 1903.
Jamsetji realized the incredible power of tourism and so he also created a chain of hotels, starting with the Taj Mahal Palace Hotel, which even today is one of the most recognizable buildings in Mumbai.
Jamsetji was truly a man dedicated to business and to help people through it. He valued education to the point where he donated land and buildings towards the creation of the Indian Institute of Science, the eminent University of India.
He would not, however, live to see most of his projects realized, because he died while on a business trip in Germany in 1904, leaving the already sizable Tata company to his two sons.
Together they consolidated their ownership into a single holding company, which in turn is owned by the charitable trusts they created for future generations.
Jamsetji’s sons fulfilled many of their father’s ambitions, they oversaw the creation of India’s first steelworks in 1907, India’s first cement plant in 1912 and the first indigenous the insurance company in 1919.
By the time the leadership mantle passed onto the next generation in 1938, Tata Sons were comprised of 14 different companies. This time, however, instead of it going to one of Jamsetji’s grandsons, leadership instead went into the hands of a distant cousin with a very interesting background.
Jehangir Tata, better known as JRD, had been in the company since 1925, but he had been raised in France and was a close friend to the man who made the first flight across the English Channel.
In other words, JRD was a passionate aviator and in 1929 he obtained India’s first pilot license, so unsurprisingly his first big project at Tata was to develop an airline. In 1932 he created the Tata Air Service, which originally only carried mail, but then in 1938 started doing passenger flights as well, even helping out the British in the Second World War.
Now, you’d imagine India’s independence in 1947 would’ve been beneficial to the Tatas, but in reality, the socialist policies of the newly-created government were at odds with private business.
India’s first prime minister saw just how successful JRD had been with his airline and in 1953 he unilaterally decided to nationalize it.
He kept JRD as the airline’s chairman until 1977 and as you can imagine, the company only went downhill from there, drowning in ever-increasing debt.
Of course, JRD would not let politics get in the way of business and so he did his best to grow Tata while avoiding the wrath of the socialists.
He created Tata Motors in 1945, originally with the idea of building locomotives, but in 1954 he branched out into commercial vehicles through a partnership with the German car company Daimler.
Over the course of his 52 years of leadership, JRD expanded the Tata Group from 14 companies to 95, but to do that he had dramatically lower the ownership Tata Sons had in each one in order to appease the socialists.
In 1969 the Indian government introduced the Monopolies and Restrictive Trade Practices Act, which was essentially targeted at Tata even though they were very far from a monopoly by western standards.
But as JRD expanded the group and lowered its ownership in the individual subsidiaries, he started losing control. Some of his companies just weren’t performing and the man he sent to fix them was this guy: Ratan Tata.
He is one of Jamsetji’s great-grandchildren and he joined the Tata Group in 1962. His first major project came in 1971 and it was pretty difficult: Ratan was given charge of a struggling Tata company known as NELCO, which in the 1950s was India’s biggest producer of radios, but just twenty years later it had fallen to a 3% market share.
Ratan’s focus was on technology and the future, so instead of trying to salvage the radio, he instead funded the development of new products like satellite communications, which restored NELCO in the 1980s and made Ratan the apparent successor of JRD.
Ratan claimed leadership of the Tata Group in 1991, right as a wave of economic liberalization swept across India.
The Socialists lost power and India finally joined the global capital market, but this presented a big threat to Tata. Up until now, it had operated in a very protected economy, which was suddenly open to competition from foreign companies.
Worse yet, JRD had let Tata become extremely decentralized, so it would be very slow to adapt to new competitors.
Ratan had no choice but to re-establish ownership over all the Tata subsidiaries and that didn’t come cheap. He sold 20% of Tata Sons, the holding company, and used that money to buy shares in the Tata subsidiaries, especially Tata Steel and Tata Motors.
He then reorganized all hundred subsidiaries into seven sectors, establishing a framework along which he could actually control them. But just wielding power isn’t enough to turn around a struggling business and in the 1990s pretty much every Tata company was losing ground to international competitors.
Ratan’s answer, however, was brilliant: he started acquiring foreign competitors and absorbing them into the Tata Group, effectively buying all their talent and supply chains and experience in order to strengthen his business back home in India while also expanding internationally.
Ratan’s buying spree began in the year 2000 when his beverage company, Tata Tea, acquired the Tetley company from Great Britain.
Over the next decade, Ratan ended up acquiring hundreds of companies for pretty much every subsidiary in the Tata Group.
Most notably, he purchased the European steel titan Corus for $12 billion in 2007 and then Jaguar Land Rover for $2 billion in 2008.
As you can imagine, the international buying spree has been paying dividends for Tata and today the majority of their revenues actually come from outside of India.
What’s even more beautiful is that the majority of Tata subsidiaries are actually public companies whose shares you can purchase on the stock market in India.
Stay tuned with us. We keep bringing this kind of content for you.
Source: Business Casual
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