Before the financial crisis of 2008-09, Dubai and its build-and-they-will-come philosophy was widely viewed as the model of choice for Gulf states hoping to move beyond oil dependence.
Today, as Dubai’s network of holding companies and real estate firms try to restructure tens of billions of dollars of debt, it is clear that the emirate’s rapid growth over the past decade was not sustainable.
Dubai’s problem, put simply, was that it did not have the money to see through the vision of its leaders. To build, it needed to borrow and when credit dried up, so did growth.
Yet the emirate can still serve as a useful model for its neighbours, who have one major advantage over Dubai. They have the cash.
In July, the emir of Kuwait, Sheikh Sabah al-Ahmed al-Jaber al-Sabah, passed an expansionary budget, which will see the emirate increase its spending in 2010-11 by 33 per cent. Kuwait’s government is just embarking on a four-year, $25bn-a-year development plan. After 12 consecutive multi-billion dollar budget surpluses, it can afford to pay for it up front.
If the past decade is any precedent, the government of Dubai would not have any problems spending this kind of money. New giant towers would sprout in to the skyline, real estate developments would blossom along the coast, metros would appear along a new network of highways. Things would get built.
Most of the projects budgeted for as part of Kuwait’s development plan have been around for a decade. Its rail network, metro system and $70bn-plus Silk City real estate scheme have all languished in the planning stage for years, stalled by bureaucracy, political infighting and a recalcitrant government.
If Kuwait wants to become the business hub its ruler dreams of, it needs to throw caution to the wind, take a leaf out of its prolifigate neighbour’s book, and start building.