Oil Put the UAE in the Black, Diversifying Puts in the Green

Even for confirmed capitalists and students of Asia's charging "tiger" economies, the transformation of the United Arab Emirates (UAE) seems little short of a miracle.

History in this Gulf desert kingdom is divided two ways: before oil wealth transformed the featureless wasteland overnight into a modern nation and after.

Photographic images from "before" include fishermen and pearl divers climbing the masts of their dhows, small clusters of mud and palm-frond huts perched on the edge of the forbidding desert, and Bedouins and their camels in the interior.

But the old practices of the pre-oil days have not been entirely without use today, as the Emirates bankrolls its metamorphosis with the third-largest proven oil reserves in the world - a reservoir expected to last well beyond the next century.

"Men used to shimmying the masts of vessels thought nothing of climbing the tall, oil-drilling derricks," says Ibrahim al-Abed, a government spokesman.

But UAE leaders recognize that their black gold will not gush forever, and are diversifying. Their example could help other Gulf states that depend even more heavily on oil wealth, have smaller reserves, and are more subject to shocks from price changes.

As part of the UAE's diversification, the capital, Abu Dhabi, and business hub, Dubai, have put themselves on the map with lenient investment and reexport rules, improving banking facilities, and more recently for providing state-of-the-art venues for world-class sports competition.

Like most Gulf countries, the UAE economy is booming with a global rise of oil prices. In 1994 and 1995, it maintained a high growth rate of 6.6 percent.

Harnessing the country's oil wealth for modern development has occupied Sheikh Zayed bin Sultan al-Nahyan, UAE president, since the British withdrew in 1971. He united the seven impoverished Trucial States, as they were known, and is admired for having created an oasis of prosperity and political stability in an uneasy region.

More than $200 billion has been spent on infrastructure projects over the country's short history - turning the UAE into a perpetual building site - and on agricultural schemes that have made the sand dunes blossom. The UAE exports dates, strawberries, grapes, guavas, and flowers to Europe, and grows 43 percent of its own produce requirements.

Further greening the desolate landscape are some 130 million trees planted since independence from Britain. They are considered sacred, and - at an estimated cost of some $1,000 per tree - have altered the environment, slightly lowering the desert temperature.

Education and health care here are free, and plants and trees are given by the government as gifts to new homeowners to ease the fierce brightness of the Gulf sun. Sheikh Zayed was given a environment medal by the United Nations in 1995 for "greening the deserts." Last month, he also became the first head of state to win the Gold Panda Award, the top environmental award from the World Wide Fund for Nature.

Though the Emirates annually earns $9 billion from its oil, government officials say that accounts for only one-third of the country's gross domestic product.

"They no longer want to depend on the stuff bubbling out of the sand," says a Western diplomat. "There is a solid financial base, no foreign debt, and relative stability. There are few black clouds on the horizon."

The UAE is not beset with internal problems such as a restive Shiite Muslim minority that has used violence against monarchies in Bahrain and Saudi Arabia. The ruling family here, Emiraties say, ensures that its people are relatively satisfied.

Still, in this country of contrasts, foreigners make up more than 80 percent of the population, and most of the work force. As in most Gulf sheikhdoms, where small, native populations have huge cash resources, many Westerners hold managing and senior jobs. The bulk of manual workers comes from Asia.

Drastic moves to ease this dependency - and to encourage UAE nationals to fill top positions - came last year when work rules were tightened. Some 400,000 "guest" workers - 15 percent of the total population of 2.3 million - left in an unprecedented exodus.

Though diplomats and analysts say that Sheikh Zayed's rule has earned sincere respect nationwide, some note that the democratic impulse affecting other Gulf monarchies is also manifested here.

"If you talk about democracy and bicameral legislatures, people pull back," says another Western diplomat in the capital. "But if you talk about transparency, accountability, and openness, they are all in favor. It's only the small things that get people down. Many are just tired of someone else making decisions, because not everyone is a sheikh."

Still, natives of the former Trucial States have easily made the transformation from seaside huts and bedouin life to air-conditioned accommodation provided free by their nation's oil resources. Though the world of Lawrence of Arabia was still common here even as the Concorde supersonic plane was making hot-weather tests in nearby Muscat, Oman, that heritage is now only found in the fading images of books.

Early emphasis on greening the parched nation has paid off well, evidenced by immense respect for flourishing gardens, parks, and forests. When a 200-year-old tree was found to be in the way of a highway project, a detour was built to preserve the tree.

"That's the extreme," says Abdallah Mograby, an economic analyst. "But we have achieved a change in our environment, because there is an appreciation of what a tree does in the desert."