Top 10 Moments from GIP: Economic Growth in the UAE

It’s hard to believe our trip to the UAE has come and gone so quickly. Our whirlwind week brought us from soaring skyscrapers to desert safaris, sovereign wealth funds to night clubs, man-made islands to mosques.

Leaving the UAE, I’m left with a few most striking impressions. First, the country is a crazy case of development done right upon the discovery of oil. The UAE is second to none when it comes to the astute management of natural resources. The country’s leadership truly did an exceptional job diversifying the economy beyond oil and gas, allowing the relatively oil-poor Emirate of Dubai to become a global financial center and tourism destination to rival few others.

Second, the UAE is a country of stark contrasts. In a matter of minutes you can travel from beach resorts to an urban metropolis, and then drive off into the desert horizon. You can see a man trailed by his four wives in a mega-mall of retailers from Europe and North America. The UAE is home to the planet’s largest mosque, which was built in the past decade. And you’ll find groups of women in headscarf letting loose at pricey nightclubs. Put simply, the UAE is a very unique place, that feels like no where else I’ve ever been.

In an effort to sum up such a jam packed week, I’ll share 10 of the top moments from the trip:

  1. Cleveland Clinic Abu Dhabi. The massive and beautiful hospital — believe me I never thought I’d describe a hospital that way — that was built two years ago and offers free healthcare to Emirati citizens. In addition to an array of cafes, restaurants, and a salon, the hospital has VIP suites with adjacent hotel rooms for family members to stay.

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2. Shopping malls galore. After visiting so many of the world’s largest malls, it’s safe to say I’ll never view shopping malls the same way again. Dubai’s malls — which all seem to be connected by elevated walkways — don’t just feature some of the stores from back home, they’s feature all of the stores from back home, as well as from Europe, Asia, and a swath of local Middle Eastern retailers. What’s more, inside the malls you’ll find things like indoor skiing, pictured below.

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3. Enviable Office Buildings. Living in New York City, you never expect to return home and feel like your city is filled with old, modest buildings. But after a week in the UAE, that’s bound to be your feeling upon returning home. Pictured below, we attended a meeting at the Dubai International Financial Center, one of the “Free Zones” that allow foreign business ownership.

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4. Camel selfies. During our desert safari on our last day, we rode SUVs through sand dunes, rode camels, got henna tattoos, and watched fire and belly dancers. As nice as it was to be out in the desert, it was crazy to see just how many SUVs of tourists were out in the same part of the desert, suggesting that Dubai could be doing more to promote desert tourism.

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5. The Palm Islands. One of the most memorable company visits was to the real estate developer, Nakheel, responsible for developing the Palm Islands and The World. We toured the original palm-tree shaped, reclaimed land island by boat, seeing the expanse of the project that doubled Dubai’s coastline. I found touring the original Palm Island, Palm Jumeira, to be so fascinating I devoted an entire blog post to it.

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6. The Sheik Zayyed Mosque. The construction of the Sheik Zayyed Mosque was completed less than a decade ago, making it an unusually modern national landmark. Visiting the picturesque mosque was a special break from a week of company visits, as we got to see another side of the UAE, pertaining to the country’s cultural heritage.

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7. Music Hall. It’s rare to have high expectations for a place and to have them surpassed, but that was our experience at Music Hall, a night club in a hotel on the Palm Island that was a unanimous favorite experience from the trip. Featuring a variety show of musical guests from around the world, Music Hall delivered on its reputation set by our professor and TA. We’re proud to say we closed the club down.

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8. Emirates Training College. Touring Emirates Airlines, one of if not the top global airline according to many rankings, training facilities was a treat. During the super interactive visit, we tested life jackets in a lesson on flight safety, learned about flight attendant hair and makeup, and tested the different first and business class seats in an out of commission airplane.

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9. Burj Khalifa. Visiting the 125th floor of the world’s tallest building was exciting even for New Yorkers, used to being surrounded by tall buildings. From across Dubai, you can see “The Burj,” the super modern skyscrapper that is soon to be replaced by an even taller building in Dubai.

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10. Old Dubai. It’s hard to find remnants of the fishing village along the Dubai Creek that was the entire city of Dubai less than a half century ago, but if you look hard enough, you can find them. After touring the souks, frequented mostly by locals unlike in some other Middle Easterern countries, we stumbled across some non-modern boats used for transportation by foreign workers who flock to the UAE by the millions. That boat ride across the Dubai Creek was one of the most fascinating experiences of the trip, as one of the few glimpses into the village that was.

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The Disney-like Development of Dubai

Contrary to popular belief, the Emirate of Dubai doesn’t have much oil and it never has. Its leaders recognized early on that it would need to grow other sectors to develop economically, and turned to trade, aviation, tourism, and finance. The Sheik of Dubai set aggressive targets for tourism, and real estate developer Nakheel, one of the most fascinating companies that we met with this week, responded with a creative solution. To create more tourist attractions, beaches, and waterfront property, Dubai would need a longer coastline. The Emirate of Dubai only had 70 kilometers of coastline, and it was already nearly entirely built up.

Nakheel is the company responsible for literally reshaping the map of Dubai through the development of the reclaimed land Jumeira Palm Island (and the new reclaimed land Jebel Ali Palm Island) as well as the World, the archipelago of man-made islands off Dubai’s coast. During our fascinating visit Wednesday morning, we learned about the company’s unprecedented development projects and toured the original Palm Island by boat. We learned that the palm tree shape was chosen because of its local significance, beating out a falcon and an old boat, as well as for the tremendous surface length that would double Dubai’s coastline, adding 70 kilometers of beachfront real estate. We watched a handful of videos about the civil engineering that went into creating the Palm, from projecting sand in a “rainbow” shape from nearby parts of the ocean floor, to vibrating the new sand masses to speed up the compression of particles closer together. Nakheel even transplanted coral that was located closer to the Dubai Port and was in the path of larger ships to its newly created barrier islands.

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Put simply, this was a fascinating visit. But it also raised a tremendous amount of questions. Nakheel doesn’t share information about the costs or profitability of the Palm Islands development. The company’s prepared response about the environmental sustainability is a bit unsatisfying, reporting that the islands could survive a half meter change in sea level and that the region doesn’t suffer from hurricanes or tsunamis. And Nakheel doesn’t share a timeline for the development of its latest reclaimed land mass Palm Jebel Ali, which is twice the size of Palm Jumeira.

Following the boat tour of Palm Jumeira with Nakheel, I visited the island twice to spend time at two different hotels. Some 15 years after the project’s development commenced, there are still portions of the Palm that are yet to be developed. And driving along the outer road that surrounds the palm tree branches one has no choice but to wonder where so many five-star hotel travelers come from. Driving past five-star resort after five-star resort, and as in many other parts of Dubai seeing more construction equipment than people, I really wish there was public information about the occupancy of the hotels or condominium complexes. The supply and demand curves do not seem to meet at a point that will create value any time soon for Nakheel or the Emirate of Dubai.

Zoe Fox ’17

Global Immersion: Economic Development in the UAE

5 Takeaways From Abu Dhabi

Halfway through Global Immersion: Economic Growth in the UAE, I feel as though I’m still being surprised daily about the country, its rapid development story, and the people who do business here. During the first three days of the trip and the portion of the program in Abu Dhabi, we visited the state-owned investment fund Mubadala, a family oil and gas construction business Alsa, the Abu Dhabi Investment Authority, Cleveland Clinic Abu Dhabi, consulting firm Strategy&’s first Middle East office, the Ministry of Climate Change and the Environment, and the Sheikh Zayyed Mosque, the largest mosque in the world.

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Here are my five most significant takeaways from Abu Dhabi, as we move on to Dubai:

  1. It’s great to be a UAE national. Making up just 11% of the country’s 9 million population, Emiratis have it good. The country really takes care of them, having been population whose land oil wealth was discovered upon. As a local, the government provides free health care, housing, and education, including many opportunities to study abroad. In turn, the UAE does not suffer from the “brain drain” phenomenon — its highly unlikely for an Emirati educated abroad to stay abroad because their quality of life is so good at home.
  2. Despite being on the largest economies in the Gulf and Middle East, the UAE is not and has never been a regional super power. The Kingdom of Saudi Arabia is the most important regional player, despite having a much less wealthy population (per capita).
  3. The UAE’s development story is an anomaly. Many other countries, including regional neighbors Kuwait and Qatar, have tried to grow into economic powerhouses like the UAE, but they have not succeeded to the same extent.
  4. The secret to the UAE’s development success was diversification. When the country was founded 44 years ago, Sheikh Zayed famously said that the country could not rely on its oil wealth. Developing deep finance, real estate, aviation, and logistics industries, beyond the low hanging fruit of their natural resource wealth lying in oil and gas, is what has made the UAE the nation it is today.
  5. Abu Dhabi, however, felt somewhat like a ghost town. Many of the people we’ve met so far –especialy expats — have been commuters from Dubai an hour and a half away. Abu Dhabi is filled with skyscrappers and parking lots that appear to be empty. Some people have hinted to us that this is the result of the drop in oil prices over the past couple of years. But more than that there seems to be a “build it and they will come” feeling.

Zoe Fox ’17

Global Immersion: Economic Growth in the UAE

Arriving in Abu Dhabi   

We’ve all seen those side-by-side photo comparisons, laying photos of Dubai in the 1990s next to those from today. From the dusty dessert town on the gulf emerged a souring steal metropolis, whose modern skyscrapers are quite literally second to none other city on the planet. And just as the buildings grew into the clouds above the dessert, so did the land-filled islands off the city’s coast, most notably the infamous Palm Island resort, a global landmark visible from space. Before the semester began, I had a slanted perception of the UAE’s economic development story, assuming that the construction boom was a direct response to the oil boom. I’ve learned during the past six weeks taking Global Immersion: Economic Growth in the UAE that the story is a bit more complex. That the UAE’s darling development tale can also be attributed to astute decisions on behalf of the country’s leadership; most notably, to diversify beyond oil revenue.

 During the six weeks leading up to the trip we were introduced to the complexity, and at times simply incongruous business landscape and history of the United Arab Emirates. We heard from experts on the GCC oil countries, the burgeoning Islamic financial hub in Dubai, and migrant labor in the UAE. But perhaps most interestingly, it became clear that the narrative we’d hear in meetings would not necessarily be the one we’d witness, or have read about in the news. The UAE’s success can be attributed to its oil and its untold stories; its foreign workers who build its skyscrapers and amusement parks.

If I learned one thing in the six weeks leading up to the trip it’s that in this hub of business — where just 1 million of the country’s 9 million population are citizens — there will be the stories we’re told by businessmen and government representatives and the ones that we may not see. I’m excited to gain a deeper understanding of the country and its business landscape over the next week, as we visit Abu Dhabi and Dubai. We will visit local companies such as Emirates airlines, the Abu Dhabi Investment Authority, and Nahkeel, as well as meet with the Ministry of the Environment, tour the monumental Sheikh Zayed Grand Mosque and Emirates Palace, and visit some of Dubai’s world famous shopping malls. Stay tuned for what’s in store!

Zoe Fox ’17

Global Immersion: Economic Growth in the UAE

 

 

UAE Wrap Up

After 10 company talks, 4 major sightseeing activities, and numerous unforgettable deep talks with fellow classmates on this fascinating country that hosted us for 10 days, we got an unique look into a very complex country. This is what I have gathered so far: I thought UAE is a dichotomy of century old religion and practicalities of capitalism. In short, UAE felt like a religious Vegas and the oxymoronic title that’s associated.

The country tries very hard to hang on to its identity drawn from its relative recent desert heritage but look around, past the myriad of skyscrapers and one will see a transformed country. One will see Islamic law rooted into how business is done (ie. Out right debt is not allowed so there needs to be some creative financial engineering to take on leverage) yet one also sees multinational corporations from the likes of Google and bulge bracket banks choosing Dubai as their gulf region home base. It’s astounding to see what the country is now; it seems to have risen from the sand, literally.

One part I loved about this trip was the access we got to companies and key individuals who are close to the pulse of the country. Through them and our very own talks amongst the class, we got to develop a more in-depth, inner working viewpoint. I also thoroughly enjoyed our talk about whether there is a bubble or in fact, UAE has done it right and is a real oasis in the desert. What will be interesting to see for the future is how the next generation of rulers in the UAE will continue the current trajectory and how the introductory of a tax system will affect what citizens expect from their government. All in all, this trip was extremely insightful and we got a wonderful chance to not just learn about the UAE but really get to experience the ins and outs of an ever thrilling country.

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Signing out,

Corey Lian ’16

Dubai: Flying Beyond Oil

What a thrill it is to be in Dubai. As if an indoor ski resort (in the middle of the desert) doesn’t scream extravagance, how about the two palm island sequences? We might as well throw in the artificially made islands that look like the world. The conclusion I’ve gathered from visiting Dubai was that whatever extravagance you want, you can find it at Dubai. After all, Dubai is only second to London in terms of the most number of international brands represented. I’ve lived in Los Angeles and New York, but never have I seen so many luxury sports cars in a 3 day span. It’s easy to think Dubai is just a bubble that is living off the oil reserves of Abu Dhabi, however in our visit, we saw that Dubai has so much more than just oil (read: it actually doesn’t have that much oil left anyways.)

One such success can be seen through its diversification into the airline industry. What Emirates Airlines has been able to do since it started as a tiny 3 rented aircraft airline in 1985 is simply astounding. Story is Sheik Maktoum called Sir Flanagan, an aviation expert, to start an airline within 1 year and somehow, this little airline came took flight with just 3 leased aircrafts from Pakistan airlines going to 3 destination. Today, Emirates covers 150 routes and supports 50 million passengers a year! The only thing I wish they would do differently is to have more award partners so I can use my points more often!

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Standing over a quarter of a mile high at the Burj Khalifa observation deck, it’s amazing to see what this 44 year old country has been able to achieve. It’s hard to believe that this shinning city used to be a small town with just two high-rises and now, Dubai is an international icon for no longer just oil, but for finance, real estate, aviation, logistics, and tourism. I wonder what’s in store for tomorrow.

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-Corey Lian ’16

From Gazelle to Abu Dhabi

Abu Dhabi got its name meaning “Father of the Gazelle” based on legends that some wandering gazelles led a tribe to fresh water. Our group of 32 journeyed into a complex city that was rapidly modernizing yet also hanging on tight to its traditional cultural allures. The city houses the beautiful Ethiad Towers (popularized by Fast 7’s extremely realistic scene where UAE’s very own Lykan HyperSport jumped between the towers), the Sheikh Zayed Grand Mosque showing the country’s deep Islamic root, and numerous thought leaders with their own approaches to entrench Abu Dhabi from its oil reliance.

For our first company visit, we interacted with the Strategic Office of the Abu Dhabi Crown Prince, a think tank providing independent advisory to the Crown Prince. Abu Dhabi is currently the world’s 6th largest oil producer yet Abu Dhabi but is also trying to develop it’s other strong industries such as petrochemicals and aluminum smelting. As this was the first presentation of the trip, we got a perfectly timed overview of the entire UAE including lesser known emirates such as Sharjah (which we visited in later days) and Fujariah (a strategically important location due to its location east of the strait between UAE and Iran). It was incredibly interesting to see the office’s acknowledgement of challenges the country has other than diversification, such as its lower participation rate and low efficiency rate.

As we moved on to Alsa Engineering, which focuses on pipeline construction, we saw its growth that is directly fueled by the oil prices as well as challenges such as sustaining true competitive advantages especially with increasing competition. The company spoke about competitive advantages such as all matters of the company (team, facilities, and project experience) being in-house yet  the differentiation in the pipeline industry is largely sensitive to pricing so whether or not this competitive advantage will have a large effect will be seen in the coming days. At Abu Dhabi Investment Authority (ADIA), we got an extremely unique look into a sovereign wealth fund that invests its excess oil profits into low term wealth creation. In the last 40 years, ADIA has earned 8% annual return, helping ensure the longevity of the fund. What was extremely insightful is to see their investment decision process which was deigned to be very team oriented and investments never based on one person’s opinion. For a country that is already relatively reliant on one export, this strategy was well designed to limit the risk to any one particular bad exposure.

At Strategy&, we got an overview of the entire Middle East and North Africa (MENA) region, realizing the diverse economic dynamics of the region. One striking figure was the oil price breakeven point – UAE needs oil prices per barrel to be around $76 to break even while Kuwait, for example 64, and Oman and Bahrain having significantly higher break even prices at $109 and $132.  Our final visit in Abu Dhabi was the Mubadala Development Company where we got an inside look into how the organization acts as a catalyst for Abu Dhabi’s vision of being more economically diversified; the company makes long term domestic investments in Aerospace, Tech, Energy, Healthcare, Real Estate, and Capital.

To balance our trip, here are some pictures of the ever so good looking CBS group in front of famous Abu Dhabi landmarks:

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CBS in front of Ethiad Towers
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CBS at Emirates Palace
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CBS at Grand Mosque