What is Dubai's budget made up of? (6 photos)

Where does Dubai get its money? After all, glittering cities don't just appear in the middle of the desert. You can often hear that the money comes from oil. This is true, but not entirely. Dubai, like other emirates, was indeed made rich by oil.

But in Dubai's case, the advantage was that there was too little oil there.





Before oil

Back in the 19th century, Dubai made money from pearl diving. After the local industry was destroyed by the technology of artificial pearl farming and finished off by the Great Depression in the 1920s, Dubai managed to rebuild itself and became a major port. Former pearl traders turned into logisticians and administrators.

A significant role in this was played by Sheikh Said bin Maktoum, the son of the founder of the dynasty and grandfather of the current sheikh - he quickly appreciated the advantages of duty-free trade and created a kind of free economic zone in Dubai, which flourished due to trade through the Gulf with Persia. Sheikh Said's son, Rashid, continued to invest in the port's infrastructure: he began to deepen the Khor Dubai Bay with large sums of money, borrowed on credit against the first oil revenues. The project was a success, and ships of any size could moor in the bay. In combination with duty-free trade, British jurisdiction and a favorable geographical location, the harbor quickly turned Dubai into a major re-export point for international trade, in particular gold and diamonds were transported through Dubai.



Oil

since the 1930s, but attempts were always unsuccessful. In 1958, oil was discovered in neighboring Abu Dhabi. In 1963, Sheikh Rashid issued a concession to British Petroleum and Shell and American Conoco, the latter's specialists finally discovered oil in 1966 and began producing it in 1969. To leave no one in any doubt, Sheikh Rashid ceremoniously posed for a photo against the backdrop of black gold flowing from a pipe. Since the oil was actually being extracted on a drilling platform 15 miles from land and there was no pipe, a barge with freshly extracted raw materials was brought to the shore, and a fake oil pipeline was stretched from it for clarity.

In 1972, 1973 and 1982, new fields were found and developed, and in 1999, oil, previously exported as crude, was first refined on site by the state-owned ENOC. There was, however, a serious problem: there was little oil in Dubai, an order of magnitude less than in its neighbors. The main reserves are concentrated in Abu Dhabi. There, according to the latest estimates, up to 90 billion barrels have been declared, in Dubai, for comparison, only 4 billion.





After oil

The Dubai authorities realized early on that oil would not last long. Sheikh Rashid is known to have said on this matter (possibly apocryphal): "My grandfather rode a camel, my father rode a camel, I drive a Mercedes. My son drives a Land Rover, my grandson will drive a Land Rover, but my great-grandson will switch back to a camel." The problem was correctly assessed, but the prophecy did not come true thanks to decades of targeted investment policy.

Currently, oil and oil products account for about 30% of the GDP of the United Arab Emirates, but less than 1% of Dubai's GDP. The sheikhs invested in infrastructure (primarily the port) and created free economic zones, attracting Middle Eastern headquarters of international corporations operating in the region to the city. Tourism can also be included here - it is the desire to attract tourists, and not megalomania, that explains the penchant for grandiose architectural projects.



Port and Free Economic Zones

International corporations took a fancy to Dubai back in the late 1970s. They were attracted by tax exemptions, low customs duties and the absence of any business restrictions for foreign citizens. In addition, in 1975, a civil war broke out in Beirut, which foreign businesses preferred at the time, and they needed to evacuate somewhere, and Dubai came in handy. The first free economic zone, of course, appeared in and around the port, but in subsequent years, the Dubai government purposefully created such free economic zones throughout the city. There are now about twenty of them.

In Dubai Media City, for example, the regional Middle East headquarters of Microsoft, Oracle, IBM and major TV channels are registered - a total of 80 skyscrapers of various sizes and 1,300 companies. As for the port of Jebel Ali, opened in 1974 in the presence of Queen Elizabeth II and Sheikh Rashid, it has now become the ninth largest in terms of transportation volume and the first in terms of infrastructure scale on the planet. The port is located on the route from India and China to Europe and is considered the third largest re-export hub in the world - almost everything that is transported along the Maritime Silk Road passes through Dubai.

In addition to a pleasant business climate, favorable geography and good infrastructure, this also opens up political opportunities of various kinds: for example, sanctioned Iranian exports, passing through Jebel Ali, can turn into legal and duty-free Dubai ones. This applies to gold and diamonds separately: Dubai ranks third in the world in terms of gold turnover after London and Singapore. Sometimes this gold is of dubious origin (for example, from Africa or when Venezuela's gold reserves ended up in Dubai), but more often it is completely legal. The diamond trade, for which a separate economic zone was created in the city, shows double-digit growth in percentage terms year after year: last year, $37 billion worth of diamonds were sold and bought in Dubai.



Aviation and tourism

Dubai is lucky with its geography in another sense: it is practically an ideal aviation hub, from there the distance to everything is approximately equal, and two-thirds of the world's population lives within an eight-hour flight from Dubai. Six of the world's ten busiest air routes pass through the city. The first airport appeared in Dubai in 1959 - just one runway made of compacted sand. Now on this site is a gigantic complex, the first in the world in terms of passenger numbers - up to 30 million per year.

Emir Mohammed bin Rashid recalled in one interview that he first came to Heathrow when he was ten years old, and was shocked by the scale of the London airport. Now he has an airport no worse (Dubai International overtook Heathrow in passenger traffic in 2014 and has held first place ever since) and two airlines, Emirates and Flydubai. Many passengers stay in the city. Dubai's pre-pandemic tourism record for 2019 was 16.7 million tourists. But there is a more telling figure: tourists spend more in Dubai than anywhere else: in the same 2019, they left about $30 billion in the city. In terms of one person - about $500 per day.

Tourism is one of Dubai's official national projects: last year, the emir announced a national tourism strategy until 2031, according to which it is planned to double the number of hotel areas and increase the number of guests in hotels to 40 million annually.