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MAKING CENTS OUT OF THE NEWS
Blog #14
(April 9th, 2009)
CAPITALISM - ALIVE AND WELL IN DUBAI
By Tom McAllister, CFP™
Earlier this week I spent a delightful three days in Dubai , part of the United Arab Emirates. Enlightened leadership, a high-quality educational system, a dominant middle class, and a benevolent government combine to make this country of one million people a business paradise.
My high expectations of my visit to Dubai were greatly exceeded. TV had prepared me for the Palm Islands , a three by three mile housing, recreational, and hotel development built by filling in the sea, for the exotic architecture of the luxury hotel resembling a sail, even for the eight-lane expressway surrounded on both sides by skyscrapers. I was not prepared for the sheer scope of this city-state. The expressway goes 200 miles and those buildings go on for more than ten miles of that! Construction is taking place everywhere in Dubai , with the help of guest workers from India and world-class architects.
But it was the friendly people of Dubai who most impressed me. Nearly everyone speaks English (in addition to Arabic) and appears prosperous. Smiles are quickly returned. There is very little littering, and I saw no one homeless, drunk, or "high". While Islam is the state religion, all religions are tolerated; Christians, Hindus, Jews and Buddhists, all prosper there. The automobiles are virtually identical to those we see in the United States , with the Toyota Camry the #1 seller (as it is in the U.S. ). Ironically, nearly all the taxis are Camry’s. While there are many Mercedes, BMWs, Jags, and Audis, the Lexus’ outnumber all of them combined. Toyota has thoroughly conquered this place!
Dubai is not, as I had thought, predominantly an oil economy. Instead it is, and has been for centuries, a business and trading center. Oil represents only six percent of Dubai's Gross National Product. Oil does play an important part in the Dubai economy, as profits from their oil (slated to run low in just ten years) are reinvested in their already ultra-modern infrastructure. Recent oil revenues, which are still historically high despite the huge price drop of the past few months, have allowed Dubai to accelerate its ambitious plans for growth. I suspect that after the oil is gone, Dubai will continue to thrive, with capitalism and education the underlying drivers.
I ventured out to the other six Emirates during my three day stay, and all appear prosperous and healthy, although not as elaborate architecturally as Dubai . The exception is Abu Dhabi , where I was able to stay only a short while. I did manage to see the magnificent Abu Dhabi Mosque, the world’s largest and apparently most elaborate, although I arrived too late in the day to enter the building.
Abu Dhabi is the largest of the Emirates and, in contrast to Dubai , has forty to fifty years of oil supply remaining. Capital of the Emirates, Abu Dhabi is less spectacular but every bit as capitalistic as its sister state Dubai . The remaining five Emirates lie north of Dubai and have relatively little oil. They, too, appear prosperous. (The United Arab Emirates cover an area approximately as big as New England, if one counts only the bottom part of Maine .)
The amazing part, to me, is that this entire area is desert. Sand and rocks are all one sees outside the cities, but for some scattered shrubs near the ocean and a few trees closer to the mountains. The urban areas represent a triumph of man’s ingenuity and creativity. I am glad I got to experience this area of the world.
As a long-time observer of our own entrepreneurial system in the U.S. , I couldn’t help but muse on the factors behind the economic success I witnessed in Dubai and its neighbors. My visit served to reinforce several of my long held beliefs. Our problems in the U.S. are not as related to energy as pundits would have us believe. America must maintain a high-quality educational system. We must restore the dominance of our now shrinking middle class. Perhaps most important, the only type of government that can prove effective for us in the long run is one that creates fertile ground for capitalism and entrepreneurship.
With all the rapid changes in our economy and in the investment markets, there are many investors who would benefit from more consistent guidance. We are currently accepting new financial planning and investment clients, and would appreciate your referrals.
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