Dubai, at the vanguard of globalization and home to a monumental property bubble (relative to its tiny economy) has not taken the Great Deleveraging well (although at least we are in good company). There’s little doubt that there is more pain to come as we work through the aftermath of the era of excess (in which we partook with typical Dubai extravagance).
However the recent $20billion bond offering ($10billiion of which was subscribed to by the UAE‘s Central Bank i.e. Abu Dhabi) should allow the city-state to move from survival mode to strategizing mode.

There is plenty for Dubai to do in order to clean up the bubble’s fallout including introducing bankruptcy laws, recapitalizing its banks and updating its work permit laws.

Looking strategically beyond the bubble, I want to focus on what I believe is a huge opportunity and potentially an important pillar in building a sustainable recovery for the city: Entrepreneurship.

Entrepreneurship is a part of Dubai’s DNA.
It has been in frantic start-up, high-growth mode almost continuously since Sheikh Rashid’s audacious port investment in the 70s. The city’s business families had to look outside the emirate early on by virtue of the limited size of the local market and are now some of the region’s leading enterprises (MAF, Landmark, AlGhurair / Mashreq, Al Futtaim). The city-state itself has created some truly world-class companies including Emirates, Emaar and Jumeirah. It has also been home to many other smaller entrepreneurial successes over the decades (Flip Media, Byrne, GEMS, ITP).
The early entrepreneurial spirit continued with Sheikh Mohamed’s even more frantic rush to build Dubai into the region’s undisputed commercial and tourism hub. Both rulers acted more as businessmen than statesmen (whether or not you agree with that approach is a topic for another blog post) and worked hard to appeal to traders and businesses from around the world.
The strategy has been a success in terms of producing the region’s best business infrastructure, both hard and soft.

Dubai has succeeded at attracting globally competitive talent that puts the city far ahead of. Dubai’s talent pool is far deeper and wider than any other city in the Middle East. The key now is to capitalize on this talent rather than allowing outdated laws to drive it away (especially as Doha and Abu Dhabi are poised inevitably to draw away the cream regardless).

As a former serial entrepreneur in Dubai and a part of the team that developed the city’s first SME-based initiative I have a few ideas that Dubai could quickly implement:

Employment Visas
Update the employment visa laws such that out of work skilled workers can, at a price, remain in the emirate, perhaps even self-sponsoring themselves. At the minimum the city should extend the period that skilled expatriate workers can spend in between visas as they search for new opportunities.

Licensing
Introduce a new type of license at the Department of Economic Development that allows for start-ups with lower capital requirements than currently required, but with corresponding limitations on the businesses:
Specifically, different bank account types could be introduced that limit the amount or usage of checks (one of the main reasons for the current min. capital requirements I believe). Limitations on how many employees can be sponsored on these licenses. Upper limits on revenues (although how you control this may be difficult).
This would be especially helpful to those in the finance, media and service sectors – the capital-light, knowledge-heavy industries that Dubai needs to fulfill its knowledge-based economy aspirations.

Incubators
The flip-side of the stupendous over-building that just took place in the city should be the falling prices of in many cases world-class offices. This is terrible for developers and bankers but is great for budding entrepreneurs. The city happens to own a lot of the commercial and residential developments that will be flooding the market soon. Segments of these should be bundled and offered to entrepreneurs at attractive rates with basic business services and administrative support. Licensing and other government costs should also be included in the offerings which should be guaranteed for a three period.

PR
Leverage Dubai’s core competency – its PR machine (although the shine has come off this a little recently). Launch a campaign to entice other recently out of work talent from all over the world by highlighting the city’s advantages: Dubai is soon to have one of the best value-offerings in terms of infrastructure (office, roads, airport, residential) in the world (although we lag shamefully in telecoms), lets let the world know. The sooner local developers face the music and reduce their rent and sales rates (and book the associated losses I’m afraid) the sooner the city can start rebuilding, turning a current liability into a future asset).

And more

• Convince the UAE to start acting like one country. This would mean Dubai-based companies, particularly those in the real-estate and finance sectors, could serve the capital where growth should remain relatively resilient throughout the downturn – the capital’s economy is surprisingly unwelcoming to Dubai-based companies.
• Open up the Mohammed Bin Rashid Foundation to non-locals.
• Set up and Angel Investment Fund (pool some of Dubai’s leasing businesses to co-fund it).
• Encourage emerging markets’ companies to set up regional bases in Dubai (China, India et all will continue to grow through this mess).

It’s long been known that entrepreneurship is central to sustainable growth. Dubai has gone some way to creating the required conditions. It’s the opportune time now to go all the way. And best of all, it’s an affordable (part) solution to the city’s crisis.

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