Dubai, Bahrain: Economic Models

About 360 financial institutions from the world are clustered in Manama, the capital of Bahrain. Nearby, travelers can enjoy golf at one of the country’s many “desert golf courses,” where yellow sand instead of green grass lines the fairways. This is a wonderful adaptation of a barren environment where grass hardly grows.

Bahrain and the United Arab Emirates have small land sizes and scarce natural resources, which are unusual for Middle Eastern countries. But pragmatic economic reform based on a market economy and trade liberalization is turning both countries into “little pearls of the Middle East.”

Dubai, the second largest city-state in the seven sheikdoms comprised of the UAE, has been pushing for totally pragmatic policies that are free from religion and ideology-concerned restrictions.

Dubai’s King Sheikh Mohammed, who has led economic reform since he was crown prince, declaring an economy-first policy, said, “Economy is a horse, and politics are like a coach. A horse should lead a coach. It should not be the other way around.” He also said, “Never say no to customers.”

Recently, Dubai has secured its status as a logistical center by tapping into its geopolitical advantage, located between Asia and Europe, and has made inroads into tourism, financial industries, and also the manufacturing industry. Now the country, with a population of 1.14 million, has emerged as the heart of the Middle East boasting 22 million airport users. In the meantime, Bahrain has shown strength in the financial sector by successfully attracting financial corporations from all over the world. The nation was also picked as the freest in terms of economic activities among 161 countries in 2004 and 2005, according to a co-survey by the Heritage Foundation and the Wall Street Journal.

Dubai enjoys a per capita income of $24,000, while its oil production counts for only six percent of its Gross Domestic Product. Bahrain’s oil production also amounts to one fifty-ninth that of Saudi Arabia, but its per capita income is as high as $15,000, higher than Saudi’s $11,000 and significantly greater than Iran’s $1,900.

Researcher Hwang Joo-sung of the Korea Institute for International Economic Policy said, “Dubai and Bahrain are making their way towards successful survival as they both quickly moved toward a practical economic development, compensating for their scarce oil resources.”

Hyo-Lim Son aryssong@donga.com