The Emirate of Dubai more than any other individual place in modern Muslim history has captivated the attention of many for almost a decade now. On the one hand, Dubai is increasingly seen as a booming metropolis a new land of opportunities of sorts - and on the other hand, many have long predicted the bursting of the bubble in Dubai. While Dubai has had its fair share of critics and some very vocal ones it had thus far defied all expectations and projections of gloom and doom. The current global economic recession, however, has exposed some serious vulnerabilities and imbalances in Dubai's economy that must be addressed by its leadership at the very earliest.
Recently, I had the opportunity to spend some time in Dubai and the first thing you notice is the tremendous amount of change that has taken place from just the last time you visited which, for me, was only two years ago. I remember visiting Dubai the first time in 1998 and coming out the airport to find myself almost at the edge of the city. That's not the case any more.
Today, you could probably travel for 30 minutes at top-speed at the Sheikh Zayed Road and won't even leave the city limits. Instead, you would see one new development after another as you whiz past a series of downtowns with dozens of skyscrappers speaking of the tremendous construction boom that has just happened here. Dubai, it seems, is expanding in all directions. In the first instance, the feeling can be almost overwhelming.
A Land of Promise?
This time around, as I came out of the airport, I too, like many others who visit this "land of promise" succumbed to the irresistable temptation of the place. At the immigration counters, I found myself talking to a American lady who having recently lost her job in the Silicon Valley had decided to come to Dubai for a few days on a much-deserved holiday but also possibly to look for a new job. As the conversation turned to what awaited us outside the terminal, I found myself describing Dubai as "a place where laws of economics don't hold and where miracles happenend". Or perhaps not. As we mortal humans have learnt during the last decade or so, giving in to our "irrational excuberance" doesn't necessarily mean that the fundamental laws of economics would change.
To be fair, though, there is little doubt that this place certainly seems to have a lot going for it. It is probably one of the most - if not "the" most - happening place in whole of the Muslim World today. One of the factors that give me hope - a strange kind of hope - is the manner in which East and West combines in Dubai.
While many have argued that there are negatives associated with the mixing of Eastern and Western cultures and ideas - and there well may be a dark side to this - what is most exciting about Dubai (and perhaps only a few other places in the Muslim World) is that there is a clear opportunity for flowering of new ideas and innovation out of this provided that there is a conscious and well-thought through effort to channel these energies towards a positive end.
It may be worth noting here that the Muslim Golden Age of Science and Innovation happened in eras and places where there was a mixing of several cultures - and dare I say religions - such as the Andulus, Baghdad, and Istanbul. In fact some scholars of history have argued that it is precisely this mixing of cultures and ideas that gave rise to these incredible epochs in Muslim history.
Generally speaking, while throwing money at a problem hardly ever solves it, sometimes money does "grease the wheels" and spending it prudently can open new possibilities and avenues. I was particularly awe struck by the power of imagery and ideas at the Ibn-e-Battuta Mall, for instance, where the accomplishments of Muslim scientists, philosophers, and explorers from across different historical, geographical, and social milleau are on display for all to see and be inspired. I wish I had something like that in my native Pakistan to give me the inspiration when I was growing up. But here it is, an artifact worth visiting and taking your kids along to that is not in Delhi, Instanbul, Cordoba, Baghdad, or Tehran, but in Dubai. And that might say something about the possibilities this place can potentially offer.
Indeed, over the years, Dubai has created a gigantic amount of infrastructure to support its aspirations of becoming "the" place to be and in the hope of jumpstarting a sustainable competitive advantage. With the Internet City, Dubai was the first in the Gulf to introduce the idea of a high technology cluster - a initiative that has since been replicated elsewhere and has almost become a fashion in the Gulf. Then came the Media City, the Knowledge Village, the Sports City, the Silicon Oasis, and the Aerospace Enterprise and a virtually endless number of other special zones and clusters.
The now planned Dubai Institute of Technology (DIT) promises an amazing vision to transform Dubai from a consumer to a developer of new technology and knowledge. We have so far said nothing of the mega real-estate developments such as the Palm(s), the Dubailand, the World, and the Dubai Waterfront etc. Dubai has never really been short on ambition.
While infrastructure does play a part in the emergence of creative places, it is not enough. One important factor that has often been identified among clusters that have reached prominence but then imploded and disappeared is the escalation in living and congestion costs. This may be an issue of particular concern for Dubai where the cost of living and congestion on the roads has reached very high levels. As places become clusters of economic (and social) activity and thus attract people from other locales, the congestion and living costs invariably rise and tend to act as a balancing force against further in-migration of businesses and people.
There are only a few exceptions to this rule and they too may have their limits. Take Silicon Valley, for instance. The cost of purchasing a median (not average!) home for a family of 4 in Silicon Valley before this current downturn was upwards of $750,000. A similar home in Los Angeles cost around $500,000 and in Texas under $200,000. Today it is so expensive to live and work in the Valley that there is a real crisis of attracting all sorts of professionals that make up a diversified and creative place - not the least important of which are the teachers who simply cannot afford to live in the Valley. While Silicon Valley, despite this exhorbitantly high living cost, continues to attract businesses, entrepreneurs, and professionals, there is probably a limit to which it would continue to do so. This limit is, in part, also determined by the unique value that Silicon Valley adds to the businesses that locate there. That unique value has to be much more than just "being where everyone is" and has to do with some very specific factors and forces the constitute the ecology of innovation in the Valley.
The Ecology of Innovation
Silicon Valley is, in many ways, an apt reference point as we think about reinventing Dubai for it probably is the only cluster in the world that has shown a remarkable tendency to reinvent itself over and over again. In the 1950s and 1960s, Silicon Valley took over the technology leadership from Boston's Route 128 as it became the place where the microcomputer revolution took off. In the early to mid 1990s, the Valley reinvented itself to become the front-runner in the Internet and eCommerce age. In late 1990s and early 2000s, Silicon Valley - especially San Francisco - was again at the forefront of the biotechnology boom. Today, the Valley has once again reinvented itself into a clean technology cluster. While technologies may come and go and nature of technological innovation may change, the Silicon Valley has managed to retain the leadership based on some sound fundamentals. It is these fundamentals that we need to understand and implement.
While part of the reason for this continual reinvention and renewal is the acquired advantage - for example in terms of talent, venture money, university systems etc. - that the Valley enjoys as it transitions from one generation of technology to the next, part of it must be the soft stuff such as innovation system and the social and cultural factors that exists in the Valley that are second to none. While leaders, authors, and researchers will continue to debate about the most critical ingredients - and their precise order - that make the Valley tick, there are a few that stand out as the most relevant to Dubai and other places that are trying to replicate its success. Simplistic as this advice may sound, these are really hard to implement when one begins to consider the minute details of the challenges at hand. It is important to develop a very fine grained understanding of Dubai's economy in order to arrive at the right prescription with respect to each of these. God, obviously, is in the details.
First, Silicon Valley is driven by a tradition of creativity, innovation and value-addition. Real estate and buildings are probably the least important of the things on the minds of business leaders and entrepreneurs locating in the Valley. Billions of dollars worth of value is created in university dorms and garrages. In order to be like the Silicon Valley, Dubai must focus on creating a place that delivers innovation. In the fast changing economic and technological landscape, only the places that can create - and master the art of creativity and innovation - will achieve sustainability in the long run. Places that fail to do so will ultimately lose out to competititon. While the first phase of the Dubai's development was about creating a critical mass for which it had to attract people and companies from around the world, the second phase must focus on creating value and innovation. It is perfectly legitimate to start small and do it in baby steps as Dubai learns to do this, and do it well, ultimately. There is, however, no excuse for not having a conscious strategy for doing this at all.
Second, the Silicon Valley thrives on the cuture of entreprenuership and risk-taking. While big companies such as Microsoft, Apple, Sun Microsystems, Google, Yahoo, and others make up an important part of the Valley's economic landscape, they're not the only ones that give the Valley its distinctiveness. In any case, every one of these large companies was once a start up created by a risk-taking entrepreneur. Consequently, Dubai's leadership must also focus on creating an entrepreneurial culture supported by appropriate socio-economic support structures. A sustainable cluster must be built upon companies and individuals who are deeply grounded in the place in that they must owe their success to something distinctive and unique about the place. This is best done by enhancing the linkages between actors within the economy and increasing the proportion of "locally created" companies that innovate something within the place rather than bring it from outside. Creating an entrepreneurial culture can be a tricky task and getting some of the soft ingredients right may take time. However, a beginning can be made by putting in place the right structural elements needed to get there.
Third, one critical ingredient of the Silicon Valley's continued vitality comes from its overall innovation system, most notably its universities (such as Stanford University around which the Valley initially came into being, and University of California campuses in Berkeley and San Francisco) together with a series of non-profit entities, research institutions, and a venture capital network at Sand Hill Road etc. It is most important that the various elements of the innovation system work together to create an advantage for the place. Dubai's own university system - which has grown considerably over the last few years, especially under the newly formed Dubai International Academic City - must upgrade itself from a set of "teaching-only" institutions to become more engaged with and responsive to the local needs. The Dubai Executive Office and the Knowledge and Human Development Authority that regulate these institutions must insist on greater engagement with and value for the local innovation eco-system. Programmes designed to spur this kind of innovation and collaboration between unversities, industry, and businesses - could go a long way towards creating a well-knit and diversified economy in Dubai. Dubai's leaders must think creatively about finding gaps within the innovation eco-system and acting decisively to fill them.
Dubai v2.0: A Cluster of Clusters?
Dubai v2.0 - the next phase in the economic and social evolution of the the Emirate must build upon the successes of v1.0. The objective of v1.0 may have been to lay the foundations of a what appears to be an economy that is quite diversified though somewhat disjointed and has now reached a critical mass in several important areas. Today, there are concentrations of technology, media, services, logistics, and tourism-related businesses in Dubai. There are quite a few universities many of these international campuses of British, American, and Australian universities - that provide a basis for building a human resource system, although this will take quite some time to evolve. However, difficult this may have been to achieve - and Dubai has done well to achieve this - it is only a start. Dubai's leadership must not let this hardwork go waste and build upon these as it transitions into the next phase of the Emirate's evolution.
There is clearly a need to carefully study and understand the intricate linkages between various elements of Dubai's economy; the Emirate's socio-economic, cultural, and entrepreneurial system and its gaps; and the various value-chains that may provide opportunties for upgrading and innovation. This will entail carrying out - in a painstaking manner - on-the-ground research to better understand and document Dubai's economy and chart the course for the future. The "Dubai Model" needs to be studied not only because it has inspired so many around the world in the recent years but also because Dubai needs to fully understand the various dimensions - and vulnerabilities - of its own economic miracle and to create an adaptive strategy that it can refine with time to match the changing needs and circumstances.
What is needed, perhaps, is for these disparate clusters of economic activity to become interlinked into an innovation eco-system a cluster of clusters, so to speak. A programme, for instance, to look for opportunities for innovation within Dubai's traditional economy - fashion, food, media, tourism, even retail may not be the most glamorous thing to do but it is probably the wisest investment in the future of the Emirate. Programmes that link the old Dubai with the new Dubai can - in due time - generate considerable value and deliver innovation.
The current downturn may spur fresh thinking and reflection on the course Dubai must take as it reinvents itself in these difficult economic times. It may also be an opportunity to make course corrections, if necessary, and to envision much farther into the future of what Dubai can and must be. As Stanford Economist Paul Romer once said "An economic recession is too precious an opportunity to waste." As the dust is settled on this recent economic recession, Dubai may find itself on a different - perhaps a surer - course altogether. It may find that the players have changed to match the changing needs and demands of a different phase of its evolution; that business attraction has given way to innovation; and that collaboration, devolution, and inclusion have become the new buzzwords on which a more permanent and sustainable economic advantage must be built.
It is critical that the leadership of Dubai must make the necessary investments in both financial, social, and cultural capital today to sow the seeds of a more sustainable and innovative future for the Emirate.
By Athar Osama, Expert Contributor
© Dinar Standard 2009
