Why Is Dubai So Rich? Know History and Other Reasons

Flamboyant, Larger than Life and Global!!!

These are the terms best describe the city of Dubai, which is a home to the most luxurious, eccentric and largest marvels in the world.

This small paradise houses the world’s largest international airport, tallest skyscraper, and most luxurious hotel. The growth process of the city is considered to be fastest in the history of mankind, also because of its strategic location at the entrance of Persian Gulf.

From being the forgotten and remote enclave of the desert to one of the greatest capitals of the world, Dubai has come a long way in just two decades. There has been a four-time rise in the population of Dubai in this time period, along with 9x visitors and 8 times the economy. But the question is still the same – how has Dubai become so rich and developed?

Is it just because of oil production?

The United Arab Emirates has a total of seven emirates and Dubai is one of them. Most of the civil liberties of its citizens are restricted by its Islamic autocracy as the government. But Dubai is comparatively the most liberal place in the Middle East than other neighboring countries. For example, women are allowed to drive here, you can go to the supermarket and find pork, covering is not compulsory, and even alcohol is allowed here.

However, things started to change and this city is considered to be an oasis in the heart of the desert. All such changes had been rewarding to this city. In terms of international travelers, Dubai is ranked 4^th among the most visited cities in the world. It even surpasses the hubs of global tourism and trade like Singapore, New York and Hong Kong.

Its opulence is so evident that it goes without saying that police here patrols the streets in Lamborghinis, Ferraris or Bugattis. It is something you cannot find anywhere else in the world. Dubai is not all about the dreams of sheiks financed by oils. But the influence of black gold is truly undeniable but reality is quite different. Its commitment to trade is the best-kept secret behind the growth of Dubai.

Shocked? Let’s dig deeper…

Major oil deposits were found in the capital of Emirates, Abu Dhabi by the end of 1950s. It was not a little discovery. Keep in mind that it was a huge deposit of oil. Their proven reserve is even more than that of all over Russia. But it was quite different in the case of Dubai. The authorities found that the reserves of oil were a lot smaller than the ones of their compatriots.

It may shock you but oil accounts for just 1% of every 100 dollars generated in the economy of Dubai. You may have heard about its importance in diversifying the economy. It is something Dubai did to deal with addiction and dependence on oil.

But what did Dubai do to achieve such a higher living standard and development as compared to its neighbors which are rich in oil? To attract professionals and multinationals from different parts of the world, they first started low tax policy.

Tax on profits is almost none and they don’t have income tax. Even purchases are not taxed. A tax on purchases will be launched soon according to a joint agreement of Persian Gulf Cooperation Council. But the rate will be just 5%, which is far less from over 18% in developed nations.

Of course, there is no tax on gasoline in Dubai. But Dubai hasn’t just followed a low tax strategy. Dubai has resorted to “Special Economic Zones”, an instrument more important as compared to taxes. They are quite different from the SEZs in other countries. These special zones have tax benefits with their own regulations to promote business activity.

Companies can easily skip the strict legal systems influenced by Sharia Law, thanks to special rules. Dubai International Financial Center is one of the good examples of this model. It is like a state in another state. It has its separate judicial system chaired by an English-speaking British judge and also uses US Dollar instead of local currency.

Even a bank can benefit from its tax advantages while doing business here. This is how Dubai attracted over 25 leading banks in the world. Apart from Special Economic Zones and low tax rates, Dubai has also got great immigration freedom. Hence, over 96% of its residents have their origin in foreign countries.

Breaking the Barriers

The government of Dubai took a risky decision in 2002 to allow any foreigner to invest in real estate business here, despite their religion. The authentic boom started here. As a result, Dubai was full of leading projects and buildings, giant shopping centers, hundreds of skyscrapers, and even the leading artificial islands. Dubai now enjoys great international demand.

Since 2002, Dubai has witnessed a great real estate boom which can easily give a tough competition to the same Shanghai, which has a 13 times higher population. Dubai has only 3 million residents. Thanks to this decision, Dubai has hundreds of mega structural projects, including Ferris wheels, new towers, and theme parks.

The Mall of the World is one such project which includes a huge space to make it the world’s largest shopping mall. It will have dozens of cinemas and theatres, world’s largest indoor theme park, and over 100 hotels in its cultural district.

It is going to be the first temperature controlled city in the world. Dubai has become a landmark where one can easily do business with all such measures. This emirate has become a touristic, commercial, financial, logical and industrial power. If you think Dubai is all about hotels and banks, you are wrong.

Thanks to its special economic zones and modern ports, Dubai has become the world’s third largest re-exporting country with industrial production exceeding over $50 billion every year. The government here is not going to stop conducting large projects, while its neighbors are desperately looking for any decline in oil prices.

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