It will be a while before Dubai's developers embark again on the vast city-building schemes that have defined the emirate for the past decade. For those who live in Dubai or have an interest in its future, one question seems particularly relevant: in the absence of such projects, what will drive the growth of Dubai in future? The legacy of the past decade will play a part. Building on an epic scale means that there is no city comparable to Dubai in the vast swathe of land between Frankfurt and Shanghai and there will not be for a long time.
Still, people and businesses need to occupy all those shiny new buildings, an increasing number of which will open in the coming year. The best chance at filling those towers and capitalising on Dubai's strengths is to make the city the best place in the world for entrepreneurs to start their companies. Dubai cannot compete with London or San Francisco when it comes to research universities, availability of venture capital or an ecosystem of innovators, key ingredients for a city friendly to start-ups. But it can compete and win in the race to attract entrepreneurs from across the world.
Dubai can win a global talent war because cities such as London and San Francisco are governed by politicians facing a set of challenges completely foreign to the system governing Dubai. In the US and Europe, hostility to immigration is a popular force that makes increasing the number of visas a political liability. Enormous budget deficits are mandating increased taxation, while an adversarial political climate means any major new government policy could take years from conception to implementation.
In Dubai, such decisions can be made quickly. An embrace of foreign residents from labourers to top management is taken for granted. Tax is not, and will not, be an issue. With this in mind, Dubai could make a compelling case to the geniuses and entrepreneurs of Europe, Asia, the Middle East and Africa: start your companies here and enjoy great office space and infrastructure, one of the largest concentrations of wealth on earth and no taxes.
While it sounds tempting, the reality is that major changes would be needed before the average entrepreneur in China, Turkey or Tunisia could be lured to Dubai over more developed business hubs in the West. Having to cede a controlling stake in your business to a silent local partner for nothing but the privilege of legally registering your company is anathema to an ambitious entrepreneur with a good idea. It may be worth it if you are trying to hawk your product, be it soft drinks or X-ray machines, to the rich local market. It is not worth it if you have an idea that you believe could change the world and make you a billionaire.
The alternative to a local partnership, being based within a free zone, comes with accepting the high costs that have made zones such as Dubai Internet City almost exclusively the domain of deep-pocketed multinationals. The lack of well-developed bankruptcy laws is also a deal-breaker. Failure is a core risk of entrepreneurship and the rapid birth and death of companies is what drives the world's most creative cities.
Recognising that an idea is not going to work out and being able to walk away from a company quickly and with little legal hassle is a necessity. A city that jails those who miss a rent payment is unlikely to attract the biggest risk-takers. Importantly, a class of visa devoted to entrepreneurs is needed. Current visa rules limit opportunities to being an employee in an established company or an investor in a new company, which must be either majority owned by a local partner or located in a free zone. Both are bad options for entrepreneurs.
To prevent abuse of such a system, it would make sense to create a careful definition of what kind of entrepreneur or start-up business would qualify for such a visa. A distinction would need to be made between start-ups that are developing valuable new intellectual property, which Dubai would benefit from attracting on an entrepreneur visa, and those doing a more basic franchise businesses, which could continue to be started the old-fashioned way with a local partner.
The idea for a start-up visa is already gaining traction in the US and Europe as a powerful opportunity for fast, cheap and long-lasting economic stimulus. Entrepreneurs create jobs for smart, ambitious young people and their businesses, when successful, create significant knock-on effects in the broader economy. They also diversify an economy and make it less prone to cyclical shocks. As anyone who has spent much time in London or San Francisco will tell you, a city filled with thriving start-ups is a fun place to be.
The argument for a start-up visa is approaching consensus in the US, where influential figures on both sides of the political divide have voiced their support. Similar ideas are being floated on the Continent. But Dubai could get there first, thanks to a political system that relies essentially on the will of a single man. He, like his father, has made the most of that system in the past, making bold decisions and doing in a relatively short time what western governments spend scores of years in attempting.
As Dubai returns to the mercantile roots that drove earlier periods of growth, it has the opportunity to lead the world yet again. After building the world's tallest tower, filling it with the world's smartest new companies is the challenge to be met. @Email:tgara@thenational.ae
