In the 1800s, Dubai was an essential gateway for the British rulers to reach the Indian subcontinent. Today, it’s an important trading and financial hub for the entire world.
Dubai is an impressive megapolis with plenty of skyscrapers and millionaires by the dozen. It’s where the police cruise the streets in Maseratis, Lamborghinis, and Ferraris and the world’s ultra-rich flock to buy properties.
So how did Dubai become so rich? Let’s take a closer look.
The early days
Did you know that Dubai’s been enjoying its good fortunes for just a few decades? Before that, it went through numerous struggles, from political unrest to economic hardships, mainly triggered by a declining pearl industry. It also struggled to keep up with its wealthier neighbor Abu Dhabi. In fact, they even had armed conflict over border issues for several years.
Then, in 1958, Sheikh Rashid bin Saeed Al Maktoum came into power. Having traveled the world, particularly the Western cities, he was consumed with a lofty vision for his own city-state.
So, he devised a grand plan to develop Dubai into a modern metropolis. To fund it, Sheikh Rashid borrowed billions of dollars. He also invested heavily to build modern infrastructure.
Meanwhile, in 1971, Dubai gained independence from Britain and became one of the seven emirates of the United Arab Emirates. But with significant autonomy over its economy, the city pressed forward with its development projects.
Of course, during the early years, many failed to grasp what Sheikh Rashid envisioned for Dubai. But it wasn’t long before the results of his efforts started to materialize. His vision for Dubai was carried forward later by his sons Sheikh Maktoum bin Rashid Al Maktoum (1990-2006) and Sheikh Mohammed bin Rashid Al Maktoum (2006-present).
How Dubai got so rich: The grand plan
So, what are the cornerstones of the grand plan that transformed Dubai’s economy into a millionaire magnet? And how did Dubai grow so fast? Let’s look at some of the secrets behind its phenomenal growth.
Investing in infrastructure
Infrastructure development was a turning point in Dubai’s success story. For example, in 1963, it dredged the Dubai Creek to allow bigger ships into its port. This sparked the gold re-export market and significantly boosted trading activities.
In 1960, Dubai unveiled its first international airport. Today, it tops the chart for the highest international passenger traffic in the world. It’s also one of the busiest airports in the world for international freight.
Apart from key projects like the Dubai World Trade Center and the Dubai Drydocks, Sheikh Rashid invested in building road systems, electricity, telecommunications, healthcare, and more.
His sons have expanded Dubai’s infrastructure even further, on a much larger scale, mostly through public-private partnerships (PPPs). Today, key projects include a massive solar park, air-conditioned bus shelters, multi-story parking buildings, and a giant waste management center that’s earmarked to be one of the largest waste-to-energy plants in the world.
Apart from improving the living standards of Dubai’s citizens, these mass-scale development activities had another major advantage: they drew in more and more overseas businesses, investors, and a large swath of international professionals to the burgeoning city-state.
Thinking beyond oil
So, is Dubai rich due to oil? Not at all. Today, oil represents just 1% of Dubai’s GDP. Here’s why.
In 1966, Dubai discovered its oil reserves. But even then, Sheikh Rashid knew it wasn’t much—hardly enough to sustain an economy for more than a few decades.
“My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel,” quipped Sheikh Rashid about the future of an oil-dependent Dubai.
So, he focused on other industries to lead Dubai’s economic growth: more specifically, trade, real estate, tourism, and finance. This diversification strategy allowed him to expand the Dubai economy quickly and secure stability in a renewable energy-led future.
Trading
Dubai’s port has been one of the busiest since 1900 and was famous for its transshipment activities. It was an important gateway between the west and the east. But Sheikh Rashid’s aggressive expansion plans for Dubai’s economy took trading to a new level.
In 1985, Dubai set up its first free trade zone—Jebel Ali Free Zone. It was a critical step to win international investor interest. Today, the emirate has 30 free trade zones offering attractive incentives, from tax breaks and 100% ownership policies to generous rules on foreign labor and repatriation of profits.
These trade zones have played a major role in targeting foreign businesses from specific industries. The Dubai Gold and Diamond Park, for instance, was set up to boost gold and diamond trades. And it paid off with both industries achieving phenomenal growth within the space of 10-15 years.
Today, Dubai accounts for 25% of the global gold trade, with a focus on the entire value chain, including research and development, refining, and trading. It has also become the world’s third-largest diamond trading center. This is an amazing feat for an industry that was negligible at best in the early 2000s.
Evidently, Dubai’s rulers have cleverly engineered its business environment with the right infrastructure, services, and regulatory systems to position the city-state as a global commercial hub.
Real estate
Real estate has been a key driver of Dubai’s economy, especially since Sheikh Mohammed came into power. With an influx of expatriate residents, Dubai needed more residential properties. And with more overseas businesses setting up shop on its land, demand grew for more commercial properties.
It has given rise to massive projects like Dubai’s Business Bay, a new business district with skyscrapers housing commercial and residential properties.
The emirate has also focused on purpose-built commercial real estate. The Dubai Science Park is a good example of this. Positioned as an R&D, innovation, and science hub, it’s equipped to serve biotech companies with a range of facilities like high-tech commercial spaces and purpose-built laboratories.
But it doesn’t stop there. Dubai’s real estate boom was fueled further by another key ambition of the emirate: to become a major global tourist destination. This has given rise to massive projects, including Burj Khalifa, the world’s tallest building, and the iconic Burj Al Arab, dubbed the first 7-star hotel in the world.
Tourism
Dubai’s megapolis attracts millions of leisure and business travelers, making tourism a key income-generating sector for the emirate. And over the years, it has devised various strategies to make this happen.
Take, for instance, Dubai’s countless luxury hotels. They are among the most expensive in the world and ensure an inflow of wealthy travelers. And the city-state’s attractions are awe-inspiring and second to none. The artificial island destinations like the palm tree-shaped Palm Islands and the world map-shaped The World Islands archipelago are some of the popular stopovers for any ultra-rich traveler to the emirate.
But Dubai’s not just about landmarks. It’s a major shopping destination with events like the Dubai Shopping Festival and expensive shopping malls, including the Dubai Mall, one of the biggest in the world.
Of course, the city-state also counts on various other events like the Dubai World Expo and Dubai Airshow to attract global visitors. And sporting events like the Dubai Rugby 7s, Dubai Duty-Free Tennis Championships, DP World Tour Championship, and the Dubai World Cup are highly sought-after annual fixtures and bring in millions of visitors from across the world.
Financial services
Financial and insurance services contribute to 11% of Dubai’s economy. Today, the emirate is one of the leading financial centers in the world.
The Dubai International Finance Centre (DIFC) is perhaps the most significant initiative behind the city-state’s epic rise as a global financial elite. DIFC is a special economic zone with independent and robust judicial, regulatory, and operational systems. It currently houses 2,900 companies with over 25,000 professionals and serves as a financial center for the Middle East, Africa, and South Asia (MEASA) region.
However, the biggest attraction for international financial sector businesses has been the incentives, like the 50-year zero-tax policy for corporate income and profits. DIFC also houses an international financial exchange—the NASDAQ Dubai—and actively promotes innovation and financial technology with programs like its Fintech startup accelerator program.
Diversity and global connectivity
Surprisingly, you can draw many parallels between the populations of Dubai and Singapore—another economic powerhouse that has risen to fame from extreme poverty within a short space of time.
Both have astonishingly small populations: Singapore 5.7 million and Dubai even less at 3.4 million. And both are highly diverse: in Singapore, non-residents account for around 40% of the population. In Dubai, this figure is a staggering 85%.
So, is there a link between these population facts and their remarkable economic growth? A closer look certainly indicates so.
The fact is, the small populations of these city-states have made them rely on foreign professionals to help drive economic growth. But thanks to their strategic locations in key trading routes, their citizens had already experienced diversity for centuries.
Take, for example, Dubai. Mainly due to trading activities, a significant part of its population consisted of non-Emiratis, even during the early 1900s. So, diversity was nothing new for the city-state’s residents.
And during the modern-day economic transformations, it’s rulers have actively taken steps to invite expatriates and fuel capital inflow. Today, the city-state offers five and ten-year visas for professionals from specialized fields, academics, and investors. It even has a Remote Work Visa that allows foreign professionals to work remotely from Dubai.
All these, coupled with factors like low crime rates and the extensive use of the English language, have sparked an influx of skilled expats into the emirate.
So, similar to countries like Singapore, Dubai has counted on global connectivity to bring in much-needed investment and grow its economy. It has opened up its doors with plenty of incentives to welcome international businesses, investors, educated professionals, as well as travelers. This certainly stands out from the protective economic approaches often seen in developing nations.
In conclusion
Dubai’s economic success is no small feat, considering its unskilled workforce and waning economy back in 1958. The ambitious dreams Sheikh Rashid had for his city-state and the dedication of his sons Sheikh Maktoum and Sheikh Mohammed to make it a reality tell a powerful story about how Dubai developed so fast.
They’ve made the traditionally authoritarian rule of the emirate a weapon for growth by outlining centrally planned policies and setting the direction to become a global city. When many nations looked inwards, Dubai has looked outwards, defying the protective conventional wisdom.
How the emirate operates might certainly seem eccentric to some. But Dubai’s economic success serves as an inspiring case study about the epic rise of a nation against the odds.
