If the rulers of Dubai cringe at the bad publicity the emirate city-state has copped since its go-go economy burst in 2008, they have only themselves to blame. After all, it was they who courted the media glare in the first place. Little more than empty desert a generation ago, Dubai had no logical reason to build a Manhattan-style skyline, let alone the world's tallest building. No reason, that is, except the kind of grandiose ambition that turned what was a backwater into one of the world's most dynamic cities.
When construction began on the Burj Dubai as the record-breaking tower was originally called Dubai was in the midst of an epic boom, fueled by foreign speculators and one luxury development project after another. By the time the tower opened on Jan. 4 with a lavish fireworks display, though, the showmanship had faded. Weeks earlier, Dubai's biggest state-owned development company had declared it was unable to pay its debts. Officially, Dubai owes its creditors $80 billion, though a recent report by regional investment bank EFG-Hermes estimates that the city may be in the hole for as much as $170 billion. After Sheik Khalifa al-Nahyan, the oil-rich ruler of neighboring Abu Dhabi, stepped in with $10 billion to stave off an embarrassing default, the skyscraper's owners changed the building's name to Burj Khalifa. For a city used to grand statements, it was a remarkable comedown.
In all the panic, finger-pointing and schadenfreude that has ensued, though, it's easy to forget that the gulf is more than just Dubai. Neighborhood rivals some of them much wealthier than Dubai thanks to much bigger oil and gas deposits have emerged from the financial crisis in better shape than their badly bruised neighbor. The gulf region is poised not only to recover from the global slump this year, but could become the second most important center of world economic growth after the economies of east and south Asia, according to John Sfakianakis, chief economist for Banque Saudi Fransi in Riyadh and Crédit Agricole in Paris. "The world has always been too focused on Dubai, but Dubai is not the GCC," he says, referring to the Gulf Cooperation Council, a loose political and economic union of gulf nations. "In the short term, Dubai's problems may impact how the world sees the region. But over the long term, the region has and will show a tremendous amount of growth."
Among those best placed to profit from the recovery and from Dubai's mistakes is Qatar. While Europe and the U.S. are still struggling for growth, it's almost business as usual in Doha, the capital. Just ask Kevin Lamb, assistant dean of Carnegie Mellon Qatar. Located in Education City, a gleaming new complex under construction on the outskirts of the capital, his school is one of six American universities that have set up shop in the country over the past few years. Thanks to the deep pockets of the Qatari government, Lamb has more space in the college's new building than he knows how to use. "It's an administrator's dream," he says. Or ask Oliver Watson, director of Doha's new Museum of Islamic Art. Unlike most museum heads around the world, Watson hasn't had to ask for a penny to build or run the magnificent I.M. Pei-designed museum on Doha's waterfront. "We haven't felt the financial crisis at all," he says.
It helps that Qatar sits on a massive natural gas field. The country is the world's third largest producer of natural gas, behind Russia and Iran and, with a population of just 1.5 million, has one of the highest per capita incomes in the world. That wealth has allowed Qatar's rulers to chart a pragmatic and flexible foreign policy that has them making friendly with Iran and Syria while hosting American military forces. Now the country wants to become a regional cultural and media hub. Last year Qatar hosted a version of the Tribeca Film Festival, while private investors put together a $200 million fund to jump-start the local film industry. While there have been some cutbacks on salaries and benefits at state-run news network al-Jazeera, according to disgruntled employees, the operation continues to set the news agenda across the Middle East.
Some of Qatar's development playbook eye-catching modern architecture, a well-run state-owned airline has clearly been copied from Dubai. Qatar also benefits from a pool of skilled foreign workers, many of whom moved there after first working in its glitzier rival.
Still, Qatar insists it is not trying to become the next Dubai. Emir Hamad bin Khalifa al-Thani, Qatar's ruler, doesn't want to make his country a global capital, so much as use his nation's gas resources to move what was once a tribal, Bedouin society into the modern world with Muslim culture and values intact. Qatar, say state officials, will never try to do the kind of high-volume business that put Dubai on the map but also made it so vulnerable to a speculative bubble. "Dubai is all about numbers and bringing in huge infrastructure projects," says Stuart Pearce, head of the Qatar Financial Centre. "When investors look at Qatar they see stability. Doha doesn't have a whole lot of office buildings that it needs to fill."