Editor’s Note: In this series we are exploring the new urban hubs, economic corridors and metropolis that will shape the future of the 21st century. We start with the emerging corridor, Abu-Dubai, that will potentially connect two cities of the UAE: Abu Dhabi and Dubai. This series is of an analytical nature.
Out of all the turbulence and volatility in the Middle East, one city has managed to stand out as a role model for outstanding vision, innovation and prosperity: Dubai. While the port city has been inhabited for over 2 millennia, little is known about it, aside from being a transit point for merchants—particularly Persians, from which one quarter of the population can trace its origins. The true transformation of Dubai took place under the rule of Sheikh Rashid Ben Said Al Maktoum, who had the vision for creating a global hub and model city-state. In the 1970s, Dubai began wisely leveraging its limited oil reserves to implement Skeikh Rashid’s dream, investing in strategic infrastructure projects. Some of the earliest large-scale initiatives for Dubai’s makeover included an airport, harbor and airport hotel.
With the oil revenue, Dubai didn’t reinvent itself but rather invested in its identity as an old trade hub. And this is what smart cities and states do—they build upon their own DNA and improve. Through a series of strategic projects, the city kept adding to its building blocks—Port Rashid, Emirates Airlines, Jebel Ali Free Zone, 20 SEZs (special economic zones), Dubai Mall, and Dubai Shopping Festival—to become a world class logistics hub. The last of these strategic initiatives is the new airport city, Dubai South, which is projected to host more than 1 million people via Dubai Al Maktoum Airport and Expo 2020 Dubai.
A Global Aviation Hub in Dubai
Aviation has been an important driver of Dubai’s economy, bringing more than 70 million visitors a year to the city for business or tourism. Oxford Economics estimates that aviation accounts for 250,000 jobs and 27% of Dubai’s gross domestic product. Currently, Dubai Airport is ranked 3rd busiest in the world, behind only Beijing Capital International and Hartsfield-Jackson Atlanta.
The new airport, Al Maktoum International, is estimated to increase the current 70 million passengers served to 130 million by 2025, making it the largest airport in the world and beating the current leader, Hartfield-Jackson Atlanta, by a 30% margin (based on 2016 numbers). It will also operate with a cargo capacity of 12 million tons—3 times bigger than the reigning #1 in Hong Kong—and have 2 runways. One runway will host the Airbus 380, the largest passenger aircraft in use (as of November 2016, Emirates Airlines had ordered more than 40% of the A380 fleets in the entire world). On top of that, the airport will reap the benefits of Dubai’s strategic location, able to reach two-thirds of the world’s population within an 8-hour flight.
Dubai National Air Travel Agency (DNATA) is one of the largest providers of airport services in the world, operating in more than 131 airports. Once the new airport is open, DNATA will manage the largest freight services in the world.
Dubai also owns Emirates Airlines, one of the fastest-growing airlines in the world. Both Emirates Airlines and Turkish Airlines are famous for their remote, non-stop flights and are currently in fierce competition to connect east and west. Emirates Airlines, for example, is set to operate the longest non-stop flight ever to Panama City with a staggering 17.5-hour route. Istanbul is also working on a new airport that will reach a full capacity of 150 million by 2030. Ironically, the disconnected Middle East is on its way to becoming a connecting hub for the world.
One of the key geopolitical benefits of Dubai South’s location is its proximity to Jebel Ali Port and Jebel Ali Free Zone. As of 2016, the port is the 9th largest in the world and responsible for 50% of Dubai exports, 20% of UAE FDI. Dubai South will be connected to Jebel Ali Port with a logistic corridor.
Port capacity is currently 13 million TEU (twenty-foot equivalent unit) with plans to be upgraded to 20 million TEU. Currently the global shipping industry is going through a trend of consolidation after years of oversupply. The trend is toward bigger shipping carriers that would require fewer and more sophisticated ports. The expansion of Jebel Ali—in addition to the proximity of Al Maktoum International Airport—will solidify its position as a global hub and place it ahead of future rivals in the region. In addition, it operates as the main port for the entire Arabian/Persian Gulf area, from which 20 to 30% of the world’s oil passes. It’s currently being operated by DP World, utilizing a world class digital infrastructure to operate the port, in addition to 77 other marine terminals around the world.
Dubai doesn’t stand alone. One hundred kilometers southwest of the city is its longtime rival and friend, Abu Dhabi, the capital of UAE, which sits on 6% of the world’s oil reserves. Dubai South, as a strategic logistic hub, is one more extension toward Abu Dhabi. Despite the rivalry, both cities have so much to offer each other that the urban expansion has always been in both directions—Abu Dhabi expands to the north, while Dubai expands to the south. The announcement of the 1st Hyperloop in the world—potentially shortening the 120-km trip to only 12 minutes—is only one example of the strategic expansion and growth of connectivity between both cities.
While Dubai, forced by its limited oil reserves, has historically focused on logistics, tourism and trade, Abu Dhabi has been very active in politics and sustainability.
Its oil reserves have given it a very healthy source of income as well. Abu Dhabi produces 3 million barrels per day while the rest of the Emirates combined produce 30,000 to 50,000 barrels per day—in addition, of course, to its global influence. Two of Abu Dhabi’s key wealth funds, Mubadala and International Petroleum Investment Company (IPIC), announced their merger in 2016, which will lead to combined assets of $135 billion. Bigger than Mubadala and IPIC combined, Abu Dhabi Investment Authority (ADIA) is the 3rd largest sovereign wealth fund in the world, owned by the city, with estimated assets totaling $800 billion. Combined, the three companies manage assets close to an estimated $1 trillion.
One of Mubadala’s subsidies, Masdar, is investing in a world class, zero-carbon metropolis—Masdar City—that will serve as a global hub for cleantech and sustainability. The International Renewable Energy Agency (IRENA) and Siemens Middle East are already headquartered there, in addition to the Masdar Institute for Science and Technology, a research university focused on alternative energy and sustainability. While the city hasn’t fulfilled its original dream of zero emissions and completion target, the project reflects Abu Dhabi’s vision to create a prototype for the city of the future.
The Future: Abu-Dubai
Both cities have much to gain from more connectivity between each other, not only for their own prosperity but also in maintaining power while facing competition from emerging economic zones in the area.
Economically speaking, Dubai has had the lead in attracting investments, talent and building a global brand. Abu Dhabi, although a bit late, is applying some of the lessons learned from Dubai and has started its own investment center, Abu Dhabi Global Market (ADGM), to compete with Dubai Financial Center (DFIC). This is in addition to Etihad Airways, a competitor with Emirates Airlines. The new Al Maktoum Airport, to which Emirates Airlines will relocate, will be only 70 kilometers away from Abu Dhabi Airport, home of Etihad Airways.
Relying too heavily on financial markets and real estate, the 2008 recession hit Dubai hard, almost putting Dubai World—owned by one of its key sovereign wealth fund, Dubai Investment Corporation—at risk of defaulting. Abu Dhabi, with its healthy cash from oil reserves, stepped in to support Dubai World, a favor that was appreciated by Dubai, by naming its largest real estate project Burj Khaklifa, after Khalifa Al Nahyan, the Emir of Abu Dhabi and president of the UAE.
Dubai has inspired the entire region to follow its model; Oman, Saudi Arabia and even Iran & Pakistan are working on new economic zones and ports
that will open their markets to the world and act as logistic hubs. Success in any of these initiatives could potentially rival the strategic and economic importance of Dubai and Abu Dhabi, who might find themselves competing with much larger economies, especially from Saudi Arabia’s move to diversify its economy. The potential IPO of Aramco and King Abdullah City at the other side of the Arabian Peninsula will potentially provide an alternative port for goods in and out of Saudi Arabia—constituting more than 60% of the buying power of the GCC (Gulf Cooperation Council)—and with sanctions being lifted off of Iran, there will be a window to the world through Dubai and Abu Dhabi.
Along with the physical and social merger happening between both cities, market and geopolitical forces will probably give them more reason to expand this merger (to a certain degree) and connect the physical infrastructure of Abu-Dubai to ease the flow of data, goods, people, capital, and knowledge to create a powerful regional metropolis that can place them ahead of the competition. The 2009 support of Dubai by Abu Dhabi is a sign that the mindset has changed and that the competitive vibe between both cities during the previous generations will transform into a collaborative one in which markets and geopolitics define the rules. The wave of investment to expand the aviation industry and its affiliates—in addition to an existing shipping industry—will certainly play a prominent role in a world class business corridor connecting Abu-Dubai to the rest of the world.
Our next stop is the Rhine-Muse-Scheldt river delta. Home of the ARA cities : Amsterdam, Rotterdam and Antwerp. Stay tuned.