Dubai Inc.

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"Dubai Inc." is a phrase used to describe a diverse portfolio of companies owned primarily by the government of Dubai. These State-Controlled investment entities grew from what was a vision of Sheikh Mohammed bin Rashid Al Maktoum's predecessors in the year 2000. Since then, the ruling family has selected leading figures to "take over what has proven to be one of the most extraordinary success stories in global investment and development." [1] Some examples of local companies under Dubai Inc. include Dubai World, Dubai Holding, the Emirates airline, and investment subsidiaries under Dubai World, such as Dubai Ports World, Jebel Ali Freezone, Nakheel, P&O Ferries, and others.

Contents

History

Map of Dubai Dubai new developments.png
Map of Dubai

Dubai, established in the early 19th century, is one of the seven emirates that form the United Arab Emirates.

Despite being along the eastern edge of the Arabian Peninsula, Dubai is located halfway between the financial capitals of London and Singapore, giving it access to a vast number of people within a short distance. [1] Due to its business environment, Dubai has become an attractive hub for multinational corporations helping it transform from a pit of sand along the Persian Gulf into the Singapore of the Middle East.

The start of Dubai Inc. dates back as early as 1985 when the Prince, having had his flight canceled at the last minute, called Maurice Flanagan demanding to know how much it would cost to start up his own airline. "Ten million dollars," replied the Brit. The first plane took off in the same year, and Emirates Airlines now has a fleet of over 230 aircraft, flies to over 140 destinations in 80 countries, and has over 1500 planes departing from Dubai Airport every day earning it the 5th spot on the list of the world's best airlines. [3]

The Prince behind this movement was one of the most, if not the most, influential visionaries behind the formation of Dubai Inc. Mohammed bin Rashid Al Maktoum known by his people as "The Boss" assumed practical control of Dubai in 1995. (Aside from Emirates, Sheik Mohammed has refashioned Dubai by increasing tourism, finance, and media related businesses along with Sultan Ahmed Bin Sulayem who was placed in charge of Dubai Ports (DP) and Mohammed Al Gergawi, who took over Dubai Holding. The three individuals worked hand in hand for the transformation of Dubai.

Dubai Inc Portfolio.

Dubai Inc. oversees a vast portfolio of local and state-owned companies with some of the biggest organizations including Dubai World, Dubai Holding, and the Investment Corporation of Dubai (ICD).

Logo for Dubai World Dubai World company logo.svg
Logo for Dubai World

Dubai World

Dubai World is a global holding company centered on strategic growth in areas such as transport and logistics; urban development; dry-dock and maritime; and investment and financial services.

Dubai World therefore is the parent company of several subsidiaries that include:

Dubai Holding

Dubai Holding was established in 2004 and is a global investment holding company with operations in 24 countries. Dubai Holding has 20,000 employees and is managed through the Dubai Holding Commercial Operations Group (DHCOG) and the Dubai Holding Investment Group (DHIG). [7] While DHCOG manages hospitality, real estate, and telecommunications, DHIG manages the financial assets of Dubai Holding company. These assets include investments and diversified financial services.

Investment Corporation of Dubai (ICD)

The Investment Corporation of Dubai (ICD) was formed in 2006 in order to consolidate and manage Dubai's investment portfolio with the aim of developing and implementing government policies and investment strategies to maximize shareholder value and benefit Dubai in the long term. [13] ICD has a portfolio that is representative of sectors that are deemed ‘strategic’ for the continued development of Dubai. Strategic sectors include Financial Industry Investment, Transportation, Energy Industries, Real Estate, Leisure, and other holdings

Problems and controversies

Open and Fair Skies

Being a subsidiary of Dubai Inc., there is a major controversy regarding the Partnership for Open and Fair Skies. More specifically the “big three” US airlines, Delta, United Airlines and American Airlines, [28] believe that Qatar Airways, Etihad Airways and Emirates , are receiving billions of dollars worth of government subsidies to aid them in the growing airline industry. In terms of Emirates specifically, the “coordination between Emirates and its government owner, the Emirate of Dubai, is particularly brazen.” [29]

US Airlines' argument

The ownership of Emirates by the Dubai government and the system of Dubai Inc. allows Emirates to operate in pursuit of its governments' own economic objectives, rather than by market forces like other commercial airlines.

A smaller example of this subsidy can be demonstrated through the recent TV commercial featuring Jennifer Aniston. This commercial, costing an estimated $20 million, [30] depicts Jennifer attempting to locate the shower on a generic U.S. airlines flight. The three flight attendants laugh and tell her there are no showers on board. The scene cuts to Jennifer waking on the Emirates A380, describing her “nightmare” to the bartender while sipping a martini.

American brands like American Airlines, Delta Airlines, and United Airlines must be careful with money since they can't use taxpayer money similar to the European carriers. The multimillion dollar ad was only the tip of the iceberg when it comes to the amount of subsidies Emirates is receiving from the government: “If you're Emirates, based in Dubai, you can install showers, butlers, and bars on your A380s because your government owners deliver wheelbarrows of subsidy cash”. [31] Whereas U.S. airlines, or their European counterparts, must take costs into consideration and spend prudently as they themselves do not have access to state treasuries. Emirates has spent over $11 billion in the purchase of goods and services, $2.4 billion from the government's assumption of fuel hedging losses, and $2.3 billion from subsidized airport infrastructure. [32] This mass subsidizing creates an increasingly tilted playing field for which airlines cannot compete. Not to mention, it violates the provisions of the two “Open Skies” agreements, which allowed the UAE open access to the U.S. aviation market in exchange for fair competition. This results in not only the violation of the agreement, but also harms American jobs. [31]

Emirates' argument

Emirates has since responded to allegations of subsidies and unfair competition, claiming that the allegations of these three airlines are incorrect and accusing them of having "launched an aggressive lobbying campaign in January, in a protectionist bid to restrict consumer choice, and restrict the growth of international flights to the USA operated by Emirates and other Gulf airlines." [33] Emirates denies that it has received subsidies, and the president of the airline Tim Clark stresses that the company has "been profitable for 27 years straight". [33] Therefore, all subsequent growth has been sourced from the company's own cash flow. Emirates says it's successful because of better business practices and a model that uses geography and long flights. [34] [ unreliable source? ] Emirates estimates that the total amount of government investment since its foundation has been $218 million, [35] an amount that pales in comparison to the $6 billion accusation made by the US airlines. This amount is also negligible for a business that earned $23.6 billion in revenue last year, and Emirates claims that the initial investment has been repaid many times over through dividends. [36]

Furthermore, Clark argues that the US airlines have built their argument on the wrong legal standards, stating that the World Trade Organization's anti-subsidy rules are not applicable to international aviation, nor are they incorporated in US Open Skies agreements, making their claims fundamentally wrong. [37] Clark argues that the US has "framed their complaint in terms of their own narrow interests" adding that their Open Skies agreements are favoured only when they "work to their financial advantage". [33]

President Tim Clark of Emirates concludes that "The [US airlines'] white paper is littered with self-serving rhetoric about fair trade, [a] level playing field, and saving jobs, but their mess of legal distortions and factual errors falls apart at the slightest scrutiny”. [33]

The full report published by Emirates in a rebuttal to the US airlines' accusation is a 400-page document, including detailed analysis and exhibits to support their case.

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References

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  2. ↑ "About DP World - DP World". DP World. Retrieved 2015-10-22.
  3. ↑ "About Us". www.istithmarworld.com. Retrieved 2015-10-22.
  4. ↑ "Leisurecorp - About Leisurecorp". careers.dubaiworld.ae. Retrieved 2015-10-22.
  5. ↑ "Dubai Maritime City". www.dubaimaritimecity.com. Retrieved 2015-10-22.
  6. ↑ "P&O Ferries Freight - home". www.poferriesfreight.com. Retrieved 2015-10-22.
  7. ↑ "About Dubai Holding". dubaiholding.com. Retrieved 2015-10-22.
  8. ↑ "About Us - Dubai Properties Group". www.dubaipropertiesgroup.ae. Retrieved 2015-10-22.
  9. ↑ "Jumeirah Group - An overview of the corporate structure". www.jumeirah.com. Retrieved 2015-10-22.
  10. ↑ "TECOM Group | Industry-focused ecosystems". TECOM Group. Retrieved 2015-10-22.
  11. ↑ "Dubai Group - Overview". www.dubaigroup.com. Archived from the original on 2015-10-18. Retrieved 2015-10-22.
  12. ↑ "Dubai International Capital". www.dubaiic.com. Retrieved 2015-10-22.
  13. ↑ "Investment Corporation of Dubai". Investment Corporation of Dubai. Archived from the original on 2015-10-26. Retrieved 2015-10-22.
  14. ↑ "Borse Dubai". www.borsedubai.ae. Retrieved 2015-10-22.
  15. ↑ "Uenxpected Error". www.dubaiinvestments.com. Retrieved 2015-10-22.
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  17. ↑ "Who we are" . Retrieved 22 October 2015.
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  21. ↑ "Cleveland Bridge & Engineering Middle East Private Ltd". www.clevelandbridge.co.ae. Archived from the original on 2017-10-26. Retrieved 2015-10-22.
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  28. ↑ "Emirates debunks subsidy and unfair competition allegations". www.prnewswire.com (Press release). Retrieved 2015-10-30.
  29. ↑ "Dubai Inc". Partnership for Open and Fair Skies. Retrieved 2015-10-24.
  30. ↑ "Emirates airlines is betting $20 million on Jennifer Aniston to help sell more flights". Business Insider. Retrieved 2015-10-24.
  31. 1 2 "Emirates Airline's One Percenters". The Huffington Post. 20 October 2015. Retrieved 2015-10-24.
  32. ↑ "Restoring Open Skies" (PDF). Partnership for Open and Fair Skies. Archived from the original (PDF) on 19 September 2015. Retrieved 24 October 2015.
  33. 1 2 3 4 "Emirates responds to subsidy claims". AIR CARGO WEEK. 2015-07-06. Retrieved 2015-10-30.
  34. ↑ "Emirates' response to US open skies claims – allegation by allegation | The National". www.thenational.ae. 30 June 2015. Retrieved 2015-10-30.
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