Economist John Maynard Keynes said, “When my information changes, I alter my conclusions.” A more familiar version of that quote is: “When the facts change, I change my mind.” Well, the facts about Dubai have changed enough for me to reconsider my scepticism about its future.
Like many of the city’s detractors, I regarded it as an autocracy composed of a mollycoddled native population, an itinerant professional stratum, and an exploited migrant working class; a relentlessly mercantile society lacking deep culture, where gold was cheap and books expensive; a place that was statistically cosmopolitan but not experientially so; a land of grandiose projects planned with scant attention to environmental costs, growing at an unsustainable pace; a towering metropolis built literally and figuratively on sand.
The 2008 financial meltdown, which left Dubai needing a bailout from its oil-rich sibling Abu Dhabi, appeared to substantiate my doubts. While elements of the familiar critique remain valid, the Emirate’s confident recovery from the 2008 crisis, its adoption of a more measured pace of development in the years since, and its sure-footed handling of the Covid-19 pandemic have impelled a steady shift in my perspective, as has the rise of authoritarianism in the rest of the globe.
The United Arab Emirates had begun easing regulations before Covid-19 struck, but the reform drive accelerated as the pandemic led to a mass exodus. Dubai rejected harsh lockdowns after May 2020, though it shut malls, schools and religious places for certain periods when cases peaked.
Fatalities stayed low thanks to its young population and, once vaccines became available, the United Arab Emirates set a faster pace of vaccination than any nation aside from Israel. Thousands of Europeans and Australians flew to Dubai from their locked down hometowns as soon as they could, taking advantage of a newly established remote work visa programme.
The reforms assisted the economy during the pandemic but their main benefits will play out in the longer term. Foreigners are better off in three ways as a consequence of the changes. First, it has become easier to visit Dubai as a tourist, to work there without company sponsorship and to gain long-term residency.
Second, foreigners can now own a 100% stake in businesses in many sectors, where previously they needed Emirati partners, most of whom did little beyond taking their cut.
Third, and most surprising, expatriates can now marry, divorce and inherit according to their own nations’ laws; couples can cohabit without marrying; and adult Muslims as well as non-Muslims can purchase and drink alcohol without a license.
This is possibly the most substantial liberalisation of civil laws in a historically Muslim nation since a wave of conservatism swept the Islamic world in the late 1970s, and even more impressive in the context of India’s slide into majoritarianism and the retreat of democratic rights in a number of other countries.
The Iran connection
Dubai’s leveraging of the coronavirus crisis to its own advantage revealed something about its DNA: for 120 years, the tiny, resource-poor region has flourished by exploiting chinks in the armour of the world at large and especially the giant civilisations in its neighbourhood.
It began in the early years of the twentieth century when the Qajar king, weighed down by debt and seeking to stem the erasure of local manufacturing by imports from Britain and Russia, raised import levies in Iran’s ports.
Sheikh Maktoum bin Hasher Al Maktoum, then head of the clan that took control of Dubai in 1833 and continues to rule it, eliminated duties from his port in response, luring Iranian traders across the narrow Persian Gulf.
Colonel Reza Khan, who led a coup against the Qajars in the 1920s, raised customs levies further soon after taking over. This time, Dubai’s rulers offered parcels of land to Iranians to get them to settle permanently with their families instead of using Dubai merely as a trading post.
The offer was especially attractive to Sunni Iranians who had withstood the drive inaugurated by the Safavi kings in the 16th century to convert Iran to the Shi’a faith. To this day, a large percentage of Dubai’s citizens trace their lineage to Iran rather than Arab lands.
Because of those close historical ties, Dubai has retained trade links with Iran through that nation’s long-drawn conflict with the United States. Dhows plying the gulf have circumvented sanctions from the earliest days, transporting electronic goods to Iranian ports and bringing back everything from toothpaste to sheep.
When I visited Iran, I had to pay in cash for everything because the nation was cut off from the world’s financial network. Cash worked fine for my budget, but tourists tempted by gorgeous, highly-priced handicrafts in places like Isfahan’s Grand Bazaar usually found themselves short of banknotes. For a surcharge, vendors would route Visa and Mastercard transactions through a Dubai front company.
As Dubai became an attractive travel and tourism destination, billions of dollars of Iranian wealth was invested in its real estate, giving birth to a joke that Dubai is the best city in Iran.
The India connection
The Maktoums, like their neighbouring rulers, signed agreements with Britain in the 19th century accepting vassal hood in return for autonomy. Since the Trucial states, as the United Arab Emirates was then called, along with Kuwait, Bahrain, and Qatar, were too insignificant to warrant much attention, Britain made the Indian rupee the official currency of the entire region.
After 1947, notes printed by the Reserve Bank of India continued to be legal tender throughout the Gulf region. The arrangement broke down because of gold smuggling, which was born during the Second World War and boomed after India’s independence.
Indians would pay for Dubai gold in rupees which were redeemed for pounds sterling through Dubai’s banks, creating a foreign reserves crisis in India. To stop this cycle, the Reserve Bank created the Gulf Rupee, which was only superseded by the Dirham after the United Arab Emirates gained independence at the start of the 1970s.
Already thriving thanks to arbitrage profits offered by high Indian gold duties, smuggling jumped many notches after former Prime Minister Morarji Desai prohibited the ownership of gold bars and coins through the Gold Control Act of 1968. With much of the gold trade in India driven underground, Bombay’s biggest smugglers grew so powerful that they became household names. The Act was finally repealed in 1990, leading gangsters to shift to straightforward extortion, and ending the era of the smuggler-villain in Hindi films.
Through all this, India’s pain was Dubai’s gain. Gold sales being legal within the Emirate’s jurisdiction, its administrators ignored what happened to the bullion once it moved into international waters. Dubai became one of the world’s largest gold hubs thanks to the obsession Indians have for the precious metal.
It built a network of roads and a deeper port through gold-related revenues before oil was struck in the late 1960s. Although petroleum sales grew to constitute 50% of Dubai’s Gross Domestic Product, or GDP, for a short period in the 1970s, that figure rapidly declined and is now around 1%.
The city’s infrastructural development attracted hordes of working class labourers from South Asia, particularly Kerala where a governmental model had been put in place that delivered a high level of literacy without a concomitant level of job creation. With extraordinary speed, Dubai went from a smuggler’s den to a rich metropolis hosting a range of sophisticated service industries from retail to media to finance to tourism.
Chinks in the armour
Last month, Lebanese citizens turned out in strength and stood in line for hours to vote in their national election at their country’s consulate in Dubai. It was the only consequential voting to take place in the city, since the United Arab Emirates’ own quasi-parliament has only advisory powers, is half composed of nominated members, and does not permit party identification for its directly elected cohort.
Lebanon is a nation that ought to do well for itself. It has large tracts of fertile land, a pleasant Mediterranean climate, a rich history spanning nine millennia, a well-educated population, a legendary capital city, and a functioning democracy.
Yet, thanks mainly to sectarian tensions, it lurches from crisis to crisis such that thousands of its best and brightest head east to a blazing desert city that has no business even existing leave alone being rich and stable.
It isn’t only people from around the world that find reasons to move to Dubai, it is also money. The latest inflow comes from Russians who suddenly find themselves locked out of financial systems that welcomed and flattered them for decades. With barely a pretence of due process, Europe has shut the doors on Russian civilians, most of whom have no connection with President Vladimir Putin’s catastrophic invasion of Ukraine.
The collective punishment will not easily be forgotten, and I suspect that, for decades to come, Russians will trust Dubai more than London or Zurich as a place to park their funds.
My confidence in Dubai’s future stems primarily from a conviction that nations will continue to screw things up and Dubai will continue to benefit from those screw-ups as it has done for over a century.
Consider the way cryptocurrency rules have swung in India. The Reserve Bank of India banned trading in 2018, a decision overturned by the Supreme Court in 2020. In the 2022 budget Finance Minister Nirmala Sitharaman introduced a tax of 30% on crypto transactions with no option to offset losses, a formula that makes it impossible to be a profitable trader.
Banks have unilaterally withdrawn facilities to transfer funds to crypto exchanges, hammering another nail in the coffin. Dubai, meanwhile, is fashioning itself into a crypto hub, and will doubtless draw plenty of talent and capital from India.
Even for Indian promoters of startups in less fraught sectors, Dubai represents an ever greater temptation as a base of operations. I have visited the city several times over the years, though never for more than a week at a stretch, and with each visit the place has felt a little more Indian, or South Asian to take a broader view.
I have a number of relatives and friends living there, and the three closest migrated at different times in the past thirty years with little money to their name. Each has built a successful business, raised children, and calls Dubai home without compunction.
Like most people, they are uninterested in politics and therefore untroubled by the lack of avenues for dissent. They just want to live in a safe place where rules are followed, hard work and ingenuity rewarded, and material comforts easily accessible. They have a few grouses such as the price of education and of course the heat, but are extremely happy with their lot and location and cannot imagine returning to live in India.
In the Covid-19 months, several friends and acquaintances made the move across the Arabian Sea, among them Tushar Jiwarajka, who has relocated his innovative gallery Volte Art Projects to Alserkal Avenue, Dubai’s emergent art hub. Volte now sits close to Malini Gulrajani’s 1X1 Art Gallery, an early standard bearer of Indian modern and contemporary art in the region. The Ishara Foundation, a non-profit dedicated to South Asian art, opened in 2019 within the same complex.
Developments such as Alserkal Avenue point to the expansion of arts, culture, and sports programming in a city where an evening out once seemed a choice between this mall and that one.
As the number of long-term residents continues to rise, as they build full lives instead of considering themselves temporary inhabitants, as their children grow to maturity having known no other home, the culture of the city will grow more defined and more profound.
In time, Dubai may well come to be known not only as the best city in Iran, but also the best city in Pakistan, and the best city in India.