As Dubai thrives, an eye on political reform

The city-state's leader died Wednesday, leaving a legacy of economic growth but political inflexibility.

When Sheikh Maktoum Bin Rashid al-Maktoum was born in 1943, it was in a small coral and mud-built house with fishing boats pulled ashore on the beach outside.

But when the sheikh, Dubai's ruler since 1990, died on Wednesday in an Australian beach resort, his old childhood home was already a museum. And the nearby pearl-fishing town of Dubai had grown into a dynamic trading city, boasting an indoor ski resort, giant manmade residential islands and, soon, the world's tallest building.

Maktoum's death will probably mean little radical political or economic change for this small, Western-facing city-state of about 1 million peoplewithin the United Arab Emirates. The ruler long ago handed most power and responsibility to his younger brother Sheikh Mohammad.

However, his sudden death shows how oil-poor but ideas-rich Dubai, second city in the UAE after Abu Dhabi, has progressed since gaining independence from Britain in 1971. It also raises questions about the future stability of this peaceful but largely undemocratic country.

Now jammed with gleaming skyscrapers, modern roads, and international corporations, Dubai, almost uniquely among Arab states, has created a modern, diverse economy. It is proof that political liberalization and natural resources are not pre-requisites for development, analysts say.

"Dubai has created a vibrant service sector and a growing industrial base through clever tax incentives and impressive, almost daring, investment in infrastructure," says Mark Gordon-James, an emerging-markets investment manager at Aberdeen Asset Managers.

"Dubai's expanding tax-free industrial and trading zones, popular beach resorts, and world-class container port and international airline are testament to this," Mr. Gordon-James continues. "The Emirates' cultural openness and tolerance has also been vital in attracting foreign investment and foreign skilled workers."

Yet despite its material success, due largely to the foreign workers who make up more than 80 percent of the population, the UAE remains politically medieval. Political power is based on family and wealth alone. With no significant directly elected public body, it is arguably less democratic than even neighboring Saudi Arabia.

In December, the UAE's president promised to create a democratically elected parliament. Political analysts say that concrete action will be needed as an increasingly educated populace demands greater political participation and accountability.

"The Emirates will need to reform in the near future, "says Omar al-Hassan, director of the Gulf Centre for Strategic Studies. "They should do this as soon as possible or sooner or later the people will demand their rights - and this would give extremists the opportunity to act, just as they have done in Saudi Arabia, Kuwait, and recently in Oman."

Continuing high oil prices may buy the Emirates' political elite some time, says Mr. Hassan, by allowing increased investment in poorer areas and an acceleration of the UAE's "Emiratization" program of replacing key foreign workers with local citizens.

So far, however, the UAE has avoided the attacks on Western targets by Islamic radicals that have taken place in other Gulf states - to the annoyance of some Islamic militants who use the anonymity of the Internet to vent their rage.

"What I've seen on the Internet forums is some impatience as to why they're not targeting the Emirates on the grounds of it being a fairly Western society," says Stephen Ulph, a senior fellow at the Jamestown Foundation, citing Internet postings from Spring 2005.

"They accused the rulers of permitting the construction of churches, of actions contradicting sharia, and of allowing women to wear jewelry," says Mr. Ulph. The Islamists also posted a photograph of the aircraft carrier USS Kittyhawk refueling in the city's Jebel Ali port.

"One reason the Emirates have been left untouched is that Dubai is still a useful place for the illicit transfer of funds - for example through the hawala system," says Ulph, referring to the traditional paperless money-transfer system believed to play a key role in terrorist financing.

But while the UAE has been quiet and few Emiratis are believed to have signed up to fight coalition forces in Iraq or Afghanistan, there are signs of growing tensions beneath the city's futuristic surface.

Although traditional pastimes such as camel-racing and falconry still survive, young locals who aspire to be 'Western' are increasingly turning to drinking, drug- taking, and prostitution - although even kissing in public is technically illegal.

Recent articles in The Gulf News, the country's leading English-language paper, report other societal woes.

Last week, the paper reported that the divorce rate is now 48 percent - one of the world's highest - while the letters page is full of complaints against rising crime, endless traffic jams, and spiraling house prices.

Western expatriates complain that the city's rapid urbanization is bringing new problems to a town that once seemed to offer a seamless blend of old and new.

"It's becoming just like any other big city," says one long-time European expatriate. "They didn't plan things properly and they didn't look ahead and expect to get all the problems that go with a big population - traffic, drugs, and crime."