The author is the chairman of Rockefeller International
If you want to escape the global gloom, just go from the epicenter, London, to the capital of the Gulf, the only region in the world where economic growth forecasts are rising. As the host of the FIFA World Cup, Doha has been waiting, along with its neighbors, to welcome the overflow from Qatari hotels. Dubai is enjoying another real estate boom. Regional rivals such as Riyadh are racing to become the next Dubai, plowing oil profits into property mega-projects.
Many Gulf leaders recognize that the boom built on high oil and property prices is unlikely to last, but age-old problems can wait. Despite concerns in the west about human rights in the entire region, the party is happening today.
With 28 buildings 300 meters high, most built in the past 10 years, Dubai is easily the tallest city in the world, making even Manhattan and Shenzhen in China look flat by comparison. Now in its third and most effervescent real estate boom of the past decade, Dubai is setting records for the number and value of buildings sold, with sale prices rising fastest at the top end of the market. Dinner conversations in many of Dubai’s globally branded restaurants, from Armani to Zuma, revolve around the billionaire paying how much for the latest luxury villa.
Saudi Arabia and the United Arab Emirates, which include Dubai and Abu Dhabi, account for nearly 75 percent of the Gulf’s economy and are its financial center. Proceeds from initial public offerings have fallen in much of the world so far this year – collapsing by 95 percent in New York to more than $7bn – but they have more than tripled in Riyadh, fivefold in Abu Dhabi and have risen from zero to $7 billion in Dubai.
The Gulf boom started slowly, on the back of crisis-driven reforms of the past decade, and took off when oil prices began to rise in early 2020. After the global oil price crash of 2014, which caused a bust in Dubai property, the emirate made it easier to move there tax-free . Now the city is attracting more foreign buyers, from big hedge funds to Russian tycoons seeking refuge from sanctions related to the war in Ukraine.
Saudis responded to the 2014 oil price shock with even more sweeping reforms, streamlining the country, easing religious restrictions, making it easier for women to work and foreigners to invest. Public sector wage cuts have helped Saudi Arabia cover its budget with oil prices below $70 a barrel, down from less than $100 in 2015.
The share of Saudi women holding jobs has doubled in just five years to 35 percent. Long time visitors to the country are now astounded to be greeted by female border agents, and to find raves, dating coffee shops and Halloween parties in a country that banned all public intercourse of the sexes just a decade ago.
The ways of the past have not disappeared. The religious police no longer enforce the hijab but many women still wear it. Foreign visitors are asked not to show their knees. Still, the Saudis are moving toward openness at a time when many countries are moving inward. Riyadh seems serious about challenging Dubai as a commercial crossroads – if not quite freewheeling Las Vegas – of the Gulf.
To topple the Burj Khalifa in Dubai, the world’s tallest building, the Saudis began work last month on The Line, a 105-mile long “linear city” consisting of two parallel skyscrapers that would be the longest and largest buildings in the world, if the project actually goes ahead. will be finished. The idea came straight out of Dubai: build it spectacularly big and they – global celebrities, financiers – will come. Gulf officials are also talking endlessly now about drawing tech entrepreneurs to the party as well.
Technology is an important driver of productivity growth. No region has a worse record in this regard than the Gulf. On average, core productivity has shrunk by more than 2 percent a year in the six Gulf economies since data began in 1980, according to Citi Research, which attributes this failure to ineffective governments that have struggled, in particular, to manage well and provide. access to credit. Negative productivity growth helps explain why, in an oil-rich state like Saudi Arabia, per capita income rises to developed-world levels only when oil prices rise, then falls back when they fall.
Gulf leaders recognize the task they face: directing more investment into technology and manufacturing to free the economy from the cycle of oil and housing booms. Without such changes, fate will be periodic, not lasting progress.