The Secret of Success Dubai: How Economic Growth Affected Living Standards

Many governments in the Middle East are striving to reduce their reliance on the export of natural resources and build diversified, sustainable economies. Dubai serves as a notable example, providing a compelling narrative.

Within a single generation, Dubai has evolved into a major hub for investment, trade, and contemporary culture. Although the global financial crisis of 2008 had a substantial impact on this city-state, primarily due to inflated property prices, Dubai demonstrated remarkable resilience, swiftly recovering. This resilience is evident in its successful bids to host significant events, such as the 2020 World Exposition.

Dubai’s ability not only to weather the crisis but also to flourish afterward merits careful examination. Over the summer, we embarked on a study of the so-called “Dubai model” of sustainable growth and its potential challenges in the future. This study involved over 40 in-depth interviews with government officials and business elites, complemented by additional statistical data.

The economic growth and stability of Dubai can be attributed to its adopted “ABS model” — Attractiveness, Brand, and State-led Development. Similar to the anti-lock braking system (ABS) in cars that aid drivers in maintaining control during hazardous situations, Dubai’s triple strategy helps it navigate economic crises effectively.

Regarding State-led development, Dubai’s approach aligns with the Gulf countries’ norms. The society retains tribal, paternalistic traditions, and the ruling elite, led by the royal family, holds absolute power in determining the direction and form of economic development. This structure allows Dubai, Inc. to adapt swiftly to changing economic conditions.

Dubai is often referred to as the “Singapore in the Desert” because, akin to Singapore, it has achieved substantial economic growth under state control. The country’s proactive and visionary leadership has transformed this small city-state, endowed with limited natural resources, into a vital international hub.

Moreover, Dubai excels in cultivating a positive image to attract the foreign investment and labor necessary for realizing its ambitious growth agenda. Similar to how cities like New York, Shanghai, and Las Vegas enhanced their images through architectural innovations, Dubai showcases its innovative spirit through a cityscape adorned with around 150 skyscrapers — a skyline surpassed only by New York and Hong Kong.

The Dubai brand is bolstered by political stability, security, tolerance, cultural diversity, and high living standards, attracting highly qualified individuals from around the globe. Additionally, the Emirate offers special economic zones for foreign investors with significantly better conditions than many other countries.

With two billion people residing within a four-hour radius of Dubai, it comes as no surprise that the city has emerged as an attractive destination for both tourists and investors. As one entrepreneur we interviewed highlighted, “Dubai possesses all the necessary ingredients to be a popular, attractive place for investors and tourists from all over the world,” adding, “Many young people in Arab countries dream of moving here to live the Dubai dream.”

Man walking down a street in Dubai Marina

Dubai’s competitive edge in attracting highly skilled workers and investments is complemented by labor policies that facilitate the influx of low-skilled workers, serving as a catalyst for economic growth. However, the reliance on foreign labor raises the potential for structural issues in the long run. During challenging periods, companies may swiftly lay off foreign workers, but when conditions improve, labor shortages may emerge. This vulnerability is especially pronounced for highly skilled workers, who require significant time and effort to attract.

There are additional risks to consider. Although the emirate currently enjoys a prolonged period of political and economic stability, significant adverse developments in the region could compel foreign workers, regardless of their qualifications, to leave the country, despite attractive salaries and lifestyles. Dubai’s dependency on foreign labor poses a threat to its long-term economic resilience against potential future shocks.

Acknowledging these potential risks, the leadership in Dubai has recently approved a comprehensive plan to restructure education, aiming to cultivate local human capital. As Sheikh Mohammed bin Rashid, the ruler of Dubai, has emphasized, “we strive to create a new generation of students who will be well-prepared to utilize the tools of the future.”

Realizing the benefits of these educational reforms will require a generation, or even more. Singapore provides a notable example, having successfully built a foundation of local, highly skilled, and talented individuals over time through substantial investments in education, prioritizing higher education on a national scale. This city-state currently demonstrates some of the best results in international tests in mathematics and science.

Women in Dubai Mall

The ABS model elucidates Dubai’s economic resilience and its swift rebound from the global financial crisis. Furthermore, it empowers the emirate to adapt its strategy to confront emerging challenges. Analogous to how ABS enables a driver to brake or change course to avert hazardous collisions, Dubai’s state-controlled development approach enables it to customize its initiatives, enhancing its brand and attractiveness in response to the evolving dynamics of economic growth and changing conditions, both within the Middle East and beyond.

Conversely, if the government neglects to address the fundamental structural issue—the lack of local human capital—it will be akin to navigating a perilous vehicle, challenging, if not impossible, to avoid a collision without the ability to engage the brakes effectively.

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