The writer is president of Rockefeller International
If you want to escape the global gloom, just fly from its epicenter, London, to any capital in the Gulf, the only region in the world where economic growth forecasts are on the rise. As host of the FIFA World Cup, Doha is bubbling with anticipation, as are its neighbors, who welcome the overflow of Qatari hotels. Dubai is experiencing a new real estate boom. Regional rivals like Riyadh are racing to become the next Dubai, funneling oil profits into real estate megaprojects.
Many Gulf leaders recognize that a boom built on high oil and property prices is unlikely to last, but this age-old problem can wait. Despite Western concerns about human rights across the region, the party is happening now.
With 28 buildings over 300 meters tall, most built in the last 10 years, Dubai is by far the most vertical city in the world, even Manhattan and Shenzhen in China look flat in comparison. Now in its third and most effervescent property boom of the past decade, Dubai is setting records for the number and value of properties sold, with sales prices rising fastest at the high end of the market. Dinner conversations at Dubai’s many world-brand restaurants, from Armani to Zuma, revolve around which billionaire paid how much for the latest luxury villa.
Saudi Arabia and the United Arab Emirates, which include Dubai and Abu Dhabi, account for nearly 75% of the Gulf’s economy and host its financial centers. Proceeds from initial public offerings have shrunk to a trickle in much of the world so far this year – collapsing 95% in New York to just over $7 billion – but they have more than tripled in Riyadh, quintupled in Abu Dhabi and went from zero to 7 billion dollars in Dubai.
The Gulf boom started slowly, amid crisis-driven reforms over the past decade, then took off when oil prices began to climb in early 2020. Following the collapse of global oil prices in 2014, which sparked a property crisis in Dubai, the emirate made it even easier to move there tax-free. Today, the city attracts an ever-widening array of foreign buyers, from big hedge funds to Russian tycoons seeking sanctuary from war-related sanctions in Ukraine.
The Saudis responded to the oil price shock of 2014 with even more sweeping reforms, streamlining the state, easing religious restrictions, making it easier for women to work and for foreigners to invest. Public sector wage cuts have helped Saudi Arabia cover its budget with oil prices below $70 a barrel, down from just under $100 in 2015.
The share of Saudi women in employment has doubled in just five years to 35%. Long-time visitors to the country are now stunned to be greeted by female border guards and find raves, coffeehouse meet-ups and Halloween parties in a country that banned public mixing of the sexes only a few years ago. a decade.
However, the old ways have not entirely disappeared. The religious police no longer impose the hijab but most women still wear it. Foreign visitors are asked not to show their knees. Yet the Saudis are moving towards openness at a time when many countries are turning inward. Riyadh appears to be seriously challenging Dubai as the trading hub – if not quite the freewheeling Las Vegas – of the Gulf.
To surpass Dubai’s Burj Khalifa, by far the world’s tallest building, the Saudis last month began work on The Line, a 105-mile-long “linear city” comprising two parallel skyscrapers that would the longest and tallest buildings in the world, if the project is indeed completed. The idea comes straight from Dubai: build it spectacularly and they – world celebrities, financiers – will come. Gulf officials also talk endlessly about bringing tech entrepreneurs to the party as well.
Technology is an important driver of productivity growth. No region has a worse record in this regard than the Gulf. On average, core productivity has fallen more than 2% a year across the six Gulf economies since data began in 1980, according to Citi Research, which links that failure to inefficient governments that have struggled, especially , to regulate soundly and to provide ready information. access to credit. Negative productivity growth helps explain why, in an oil state like Saudi Arabia, per capita income rises toward developed world levels only when oil prices rise, then falls when they fall.
Gulf leaders recognize the task they face: to invest more in technology and manufacturing to free their economies from the boom and bust cycles of oil and real estate. Without such changes, their fate will be periodic feasts, not lasting progress.