A Real Change?

This past weekend, I made a whirlwind tour of the Arabian Gulf stopping first in Bahrain and then in Dubai, each for approximately one day. I was in Bahrain accepting an award on behalf of my company and aside from a small visit in 1998, I had never been there. It is a small island, Manama being only 10 miles long and 3 miles wide. The weather was beautiful and the first night I was there, I took a taxi to the Hard Rock Café. I had forgotten how small the island was so we were there in 5 – 10 minutes. Thus I decided to walk back to the hotel I was staying at near the Diplomatic Area.

Bahrain is also seeing the growth that the rest of the region, being the traditional banking capital of the area. New construction abound but compared to other cities in the region, it is a village. One interesting building that is being built was behind the hotel I was staying at and will be the Bahrain World Trade Center. It is a set of 2 buildings and in the middle of the two, they are building 3 wind mills. They will be able to generate enough power to supply the two, what looked like 50 story building. Very impressive and, alhamdulillah, it could serve as an example for eco-friendly buildings. The ironic thing is that a country awash in oil is building wind mills as a move to free itself from the dependence of oil.

Also, while arriving into Bahrain, the International Grand Prix was going to be held next week. Traditionally, the circuit series opens in Australia, but because of a conflict with the Commonwealth Games, the moved the Grand Prix and Bahrain one the opening for 2006. They have a built race track, but the uniqueness this time is that they are launching the tour with the inaugural event being in Bahrain.

The next day I flew to Dubai, which was only a 55 minute flight. It was a huge plane for such a small flight, but it was full. US airline companies should take note. Rather than operating 20 flights a day for convenience, but losing money doing it, the airlines in the region offer one flight a day, and they are full. I met up, in Dubai with an old friend from college who is working for a large bank there and we had lunch together. We talked about life in Dubai, since his family has been there for a long time. We talked about the real estate boom, the stock market, the behavior of Arabs and he seemed very positive that things are turning around for the better, especially in Dubai. Things that happened in the past to sew corruption in the land were being stopped. Case in point; it used to be that as long as you were an Emirati, you could get a job, and not really have to work, but still get a salary by showing up. My friend gave me an example of Emirates Airlines and how the Chairman, an Emirati, called in all the senior management, gave them targets to hit, and told them they had no choice but to meet them. If they thought they couldn’t, then they should quit now and avoid being fired later. In the same airline, Arabs were fired to be replaced by Pakistani nationals and because they were justified, they were commended for the move. In the past, the manager who did the replacing would have been fired.

I remember when I was in my teens and we used to go to Saudi Arabia for the summers to spend with my dad, one night we were at a restaurant waiting for our food outside. A Pakistani/Indian man began crossing the road (it was his right of way) and all of a sudden a Mercedes hits him and he fell to the ground. The car stopped, the man stepped out, put the unconscious man in the back of his car and drove away. I asked my dad what just happened and he said that the driver was a Saudi so he wouldn’t have been found guilty so he took the man to the jail. If he recovered or not, he would be sent back, either as soon as he was fit enough to go, or dead enough to be flown back. The was common throughout the Gulf and from stories of friends, UAE was no different. Now however, it is changing. My friend again told me a story of his manager who was pulling out of a parking spot after giving his indicator and a member of the Royal Family (designated by a 3 digit license plate) hit him. As both got out, the manager, being Pakistani, automatically admitted guilt to the police when they arrived. The police man grew suspicious and noticed that the blinkers were on and so knew it was the Arabs fault. He confronted the Arab with this and a shouting match ensued. Both were taken to the police station and to make a long story short, the Police Captain intervened and made the member of the Royal family apologize to the Pakistani National for wasting his time. Wow!!! Justice is something that when it is society, Allah blesses that society. In fact there is a hadith in which when one companion asked the Prophet Muhammed to intervene in favor of him cause he was a companion, the Prophet became red from anger and told the man that this is how the Jews treated Moses and that is why they were destroyed. So in this sense, things are looking better. On the other hand however, Dubai and Bahrain are both places where vice is everywhere. Both are known for the alcohol that is consumed, and Dubai is also famous for the Russian Prostitution that is everywhere.

One the way back home, I had a very interesting conversation with a Canadian photographer who has basically grown up in that part of the world. We talked quite a bit and he made me think about a lot of issues. Couple of things in particular. One thing that stands out, and I have mentioned this before, is the growth that is occurring in Dubai. To give an example of how much and how fast this is occurring, in most parts of the world, in any city, if you have one high rise building coming up, it is a big thing and the city, justifiably, feels proud of it after completion. In Dubai, currently, there are over 100 high rise buildings coming up, at the same time (it will be like Manhattan in a few years). This doesn't include Bahrain, that is also experiencing a boom, although not to the extent as Dubai. Building a sports Stadium; in the US it takes arguing, debating, voting, lobbying, etc and then maybe you will get one. In Dubai, the Amir says the word and funding is not an issue. Another example, after announcing that Dubai would like to hold the World Cricket Cup a few months ago, the money was raised, in cash, and the builders have promised, in a recent press release, that they guarantee completion of a 90k stadium in two years. This stadium will be in a "Sports City" that could within maybe 5 years, could host the Olympics. Maybe even the Winter ones, since Dubai has the money of building indoor ski slopes!!!! And the thing with Arab companies buying up old established Western companies, like the P&O/Dubai Ports deal, my Canadian friend was very quick to point out that Americans are becoming more and more xenophobic and the West is just jealous of the success of this part of the world. After all, the Arabs are making money off the oil appetite of the world, especially the West. Unlike the last time, they are using the money this time to diversify the economy in other sectors. For Bahrain and Dubai, it is tourism. They are trying to build a haven in the desert for the world to come to. However, it is going beyond that, and not slowly either. Dubai is building various cities as hubs for various industries, Internet City, Media City, Sports City, etc. Qatar has completed an Education city that already, within 1 year, houses approx 10 universities from around the world, including branches of Georgetown, Texas A&M, etc.

This growth is coming at a high price and everything is becoming expensive. There are increasing risks of a bubble, i.e. last year the Saudi stock market was up 100%. I just read a story in the Financial Times (www.ft.com) that because of the 10% decline in the Saudi stock market last week, admittance at hospitals for anxiety, chest pains is up dramatically since Saudis have put there life savings into the market. Looks like 1999 all over again. Only difference between what’s happening in the Arabian Gulf and the Nasdaq dotcom bubble is that in the US, there were other asset classes that were underperforming so diversification was possible. In the Arabian Gulf, everything is up and going up more because of the petro-dollars in play. As I was telling the same Canadian friend, and as was pointed out by various strategists, the biggest threat remains an act of terrorism in the region that is successful. Like 9/11 put America into a different paradigm, and 7/7 did the same for the Britain, a horrific act could cripple that “nothing can go wrong mentality” of the region. Because of the diversification I mentioned earlier, decline in oil prices is much less a threat. A terrorist act will keep foreigners away, crippling the huge tourism industry that they are trying to build, and within their own minds, the Arabs themselves could begin to crack down to such a point as business becomes crippled. The terrorists have every motivation to execute an attack there, very loose security and the fact that “vices” are prevalent everywhere, according to them. They, I am sure, could name many excuses for attacking these Muslim countries, from the alcohol, to the prostitution, to the fact that the vast majority of ex-patriots, especially in management positions are foreigners. I pray that no country goes through what the US, Britain, and Spain went through with the attacks that happened with the loss of innocent lives.

Till Next Time,
Babi