Myths and Realities of DevelopmentDubai and South Korea

Conventional Wisdom of Development

• IMF• World Bank– Neoliberalism• Structural Adjustment

Defining Development

• How do we measure development?– GDP– Inequality– Social indicators– Combination of Factors?

Structural Adjustment

• Guarantees of fiscal discipline – no more budget deficits

• Reduction of public expenditures• Financial liberalization• Trade liberalization• Promotion of foreign direct investment• Privatization of state-owned businesses• Deregulation of economy• Protection of property rights

East Asian Developmental State

• Peter Evans – Embedded Autonomy (1996)• Alice Amsden• Chalmers Johnson• In Taiwan, Japan, and S. Korea, government

intervention played a decisive role in promoting economic development.– Shielding Infant Industry– Subsidies

What do you know about the UAE?• Population: 5,432,746• Confederation made up of the following 7 Emirates:

Dubai, Abu Dhabi, Sharjah, Fujairah, Ras Al Khaimah, Ajman, Umm Al-Quwain

• Per Capita Income: $37, 941 • World Record Growth Rate of 13.4% between 2000-

2005• Independence: 1971• Largest Sov. Wealth Fund in the world: 875 Billion• Real GDP in 2006: 175 Billion• Ethnic Diversity: 19% Emirati, 23% Arab and Iranian, …

What did Dubai look like 50 years ago?

Population: 30,000

Population: 1.2 million

Dubai Model of Development

• Government led Development• Fast Decision Making• Flexible Labor Force• Leapfrog Industrialization• Internationalization of Service Provision• Supply Generated Demand (‘first mover’)• Market Positioning via Branding• Development in Cooperation with world class

partners

Government Led Development

• The Executive Office (TEO)– Five men including the ruler oversee development

initiatives (Sheikh Mohammed, Sheikh Hamdan, Mohammad Bin Ali Al Abbar, Ahmed Bin Sulayem, Mohammad Abdallah Al Qarwawi)

– Dubai World, Dubai Holding, Emaar, Dubai Municipality

– Centralized decision-making• Decisions are made quickly without the need for

consultation– Exemplified in the construction boom

Interview with CEO of Dubai Dry Dock

Geoff Taylor“If I want to spend 40 million dollars on an extension of

the repair facilities here at the Dry Dock, I will pass the request to the head of Dubai World, Mr. Sulayem who is right under Sheikh Mohammed. Usually I will get an answer within 30 minutes. In England I would have to wait 5-6 months for the request to go through various assessments and boards. Here they are much more forward thinking, dynamic, and a lot more trusty. They trust that the person who runs the businesses generally tends to understand the business, and as such are in the best position to see business opportunities.”

Flexible Labor Force

• The Dubai government can import specialized labor quickly-- without any bureaucratic or logistical hassle.– Construction workers– Consultants– Highly Skilled Workers

Bypass Industrialization

• EPZ• Development of a Service Economy

(knowledge economy)– Tourism• Health Tourism

– Film Industry– Financial Services Hub– Biotechnology

Internationalization of Service Provision

• Due to the small size of its domestic market, growth requires expansion overseas

• Active acquisition of businesses that fit Dubai’s strategic profile

• Dubai Ports World• Emaar (Gated Communities)• Emirates Airlines (Regional Logistics Hub)

Supply Generated DemandMartin Hvidt: “All businesses grapple with the question of when to

invest. There are two general answers to this question: Either wait until the demand for the good or service on wishes to sell is present, or simply to supply the goods or services and let it generate its own demand.”

Risky and would not be possible without public/private partnership

Dubai Internet CityMedia CityPalm IslandsThe WorldDubai Land

Market Positioning via Branding

• What makes Dubai such an attractive location for tourists?

• Construction of Iconic Buildings

Development with world class partners

• Dubai Health Care City – Mayo Clinic and Harvard Medical School

• Hotel Sector – Internationally respected partners collaborate such as Hilton, Sheraton, and Hyatt

Economic Logic of the Dubai Model

• Service Provision– Private Education for Expat Children– Electricity– Telecommunication– Visa Renewal– Licensing – Hospitalization– Real Estate

Alternative Explanations

The Dark Side

• How do you Institutionalize the Dubai Model?• Human Trafficking • Terrorism• International Mafia• Domestic Apathy and Disengagement• Expat Rights