Dubai, the Veneer of the Gulf

Whenever there is commerce occurring there is money to be made, it is the concept of vibrant, market driven economy that the United States is seeking  to regenerate through low interest rates to promote lending, and a focus on developing small business growth. However, the recovery is too slow for many Millennial’s, and as such more people are willing to examine economic migration from the US to emerging markets in order to tap into these reservoirs of wealth and benefit from the flourishing economies of the world.

I noticed some stark differences in this area when I explored the GCC countries earlier this year for a business project, meeting with clients in Abu Dhabi and Dubai, and discussing in depth both these two locations, along with areas like Baharain and Saudi Arabia.

The Gulf region has developed at an alarming rate in the past 55 years, since oil was finally struck in the Abu Dhabi Marine Areas (ADMA) prior to this many of the Emirati where farmers and landowners.  When it was discovered that their land sat atop vast wealth in the form of oil these back country folk became overnight millionaires and billionaires.  And when that monetization occurred it happened with the influx of Bankers and Lawyers to facilitate the exchange of oil for cash, and a proliferation of luxury goods and lifestyle options in order to turn that cash into objects of pleasure.

People frequently cast all of the GCC into the same bracket, but that is far from accurate.  Baharain was long the leader in the region for international business, because at that time it was more open to receiving the international firms, however as time has progressed it has been the Emirates of Abu Dhabi and Dubai that have now emerged as the most attractive targets.

When one visits both Dubai and Abu Dhabi it is clear that there is a stark difference in these cities, it is tangible in terms of the immigration ratios and the general demeanor towards the foreigner.  Dubai is a city that has grown rapidly based upon the initiatives driven by Sheikh Mohammed bin Rashid Al Maktoum; an inspirational leader who has done great things to turn this piece of desert into a thriving hub of commerce.

Abu Dhabi on the other hand offers different value and opportunities to the migrant, and this again is felt very clearly even as a visitor to the city as things are focused very much on the locals rather than an international community. The driving factor behind these dichotomous personalities is Oil.  Abu Dhabi has it and Dubai does not.  Estimates are that there are 98 Billion Barrels of Oil in the UAE, of which 92 Billion are located in Abu Dhab, whereas Dubai only has 4 Billion Barrels in its reserve.

In order to bring prosperity to the Emirate Sheikh Mohammed created the DIFC, which is a gate like structure within Dubai that allows for trade to occur in the same manner as an off-shore tax haven.  This offshore/onshore device was a godsend for the region and has allowed massive revenues to enter this otherwise relatively impoverished state.  Revenues are generated in the form of Business License fees that are required from the occupants of the building, and commerce is encourage from the introduction of an international Law system based upon a mix of English and Egyptian law.

Sharia, which is the Islamic Law is still in effect in the Emirate, but business can be conducted in more favorable international terms that then interface with Sharia to allow smooth business processes. Transactional Law being facilitated free of tax not only means that international firms are able to access GCC business, but that they are also able to shift business to that office and by routing through the DIFC reduce overall tax liabilities.  Money is being generated, big money.

Tax is also a very favorable and attractive thing to the individual, since the Emirates themselves do not demand personal income tax, earnings are free and clear. This is of particular appeal to British workers since unlike the Americans, they do not have a reciprocal tax policy in place, and therefore do not need to report earnings to the UK for taxes.

What you have therefore is a large number of people with large amounts of money, being encouraged to make even more through favorable business environments.  Service industries pop up to support the needs of this wealthy generation, and suddenly you have a hedonistic playground for the rich and famous.

Despite the powerful nature of the DIFC infrastructure, and that it creates a ‘Freezone’ where business can happen smoothly, it is critical to remember that this structure is simply a veneer placed upon a country with strong Islamic belief.  When people are earning good money and living a lifestyle that is beyond their previous expectations they can quickly forget this and find themselves in dangerous situations.

Now, taking the extremes of the GCC further we have places like Saudi Arabia. My clients in Dubai told me that they would be very excited to hire in Saudi, and are having a hard time filling roles there, as such they would pay 50% above market rate, plus the earnings would be tax free.  What you have is a very lucrative proposition for a young family.  However with Saudi comes living on ‘Compounds’ and regular beheading’s and stoning’s in the town squares.  People here are wisely cautious in their actions and very conscious of the vigilance of the religious police. It is a get in, get rich and get out mindset.

Dubai does not offer that same fear, which is why it can lull people into a false sense of security.  Indeed many people who live in Saudi Arabia will fly every weekend to Dubai to party it up and live the western lifestyle.

However, the veneer in Dubai is very thin indeed.  And as an immigrant you are a second class citizen, their approach to a car crash is one that there is always one person to blame and one person innocent, decided upon by the police officer on scene.  One driver is given a Green Slip, and one a Pink slip, the latter is deemed to be to blame for the incident.  If you are the foreigner and the other car is an Emirati, then you are immediately the loser.  Too many violations like this can lead to revocation of your work permit.  This is not about equality of justice, it is about understanding how the rules of engagement are as a guest within a foreign country.

Furthermore, whilst there is that pocket where you can feel that you are living in an international environment, the laws are not there to support it.  Consumption of alcohol is illegal in Dubai, though it is ‘permitted’ within 5 Star International Hotels.

This can lead to cases where immigrant workers are arrested for consumption of alcohol even when they are the victim of a crime, and appearing drunk and disorderly in public is a very serious offence.  The trouble is exacerbated by the environment: a potent mix of wealth, a feeling of superiority and youthful enthusiasm can create a very dangerous cocktail for the young economic migrant.  And the belief that the international nature of their job; or the international feeling that comes with a town like Dubai can trump the underlying Islamic law in place has been a lesson that too many people have had to learn the hard way.

The most recent case of a reported rape by a woman was by Norwegian Marte Deborah Dalelv who thankfully was pardoned by Sheikh Mohammed, though not before being arrested, having her passport confiscated and being held on charges of consuming alcohol and sex outside of marriage.  Other less fortunate victims of this barbaric legal system include:

• In December 2012, a British woman reported being raped by three men in Dubai. She was found guilty of drinking alcohol without a license and fined.
• In January 2010, a British woman told authorities she was raped by an employee at a Dubai hotel. She was charged with public intoxication and having sex outside of marriage.
• An Australian woman reported in 2008 that she was drugged and gang-raped. She was convicted of having sex outside marriage and drinking alcohol, and she was sentenced to 11 months in prison.

(Source CNN)

I am also very concerned about the latest trends to emerge from within the region regarding their views to homosexuality, with Kuwait announcing here that they plan to commence screening for the ‘disease’ to prevent entry to the countries, if ineacted this would take effect in the UAE also. Homosexuality between men is illegal in 76 countries and the punishments for it are severe.  A very serious twist on the concept of a moment on the lips and a lifetime on the hips… and whilst it may seem obvious to some, people come from very gay friendly cities such as New York or San Francisco might slip into habits that can get themselves into serious trouble here, such as innocent public displays of affection.

There is a real gold rush still happening in the GCC, but remember, the Wild West is where fortunes were made, and lives were lost.  Whenever there is increased reward there is frequently increased risk.  Having visited these places myself I would say that other than going in to take their money I would have no desire to visit again, until such time as they are able to move beyond draconian laws that are dichotomous with the international image that they seek to project.