Preludes to XML 2008 - Dubai and Doha

In an otherwise scintillating exposition of the emerging geo-political balance, Parag Khanna, senior research fellow at the New America Foundation, manages to leave out of his calculations almost entirely one giant powerhouse of development: the Middle East or, more exactly, the states that make up the Gulf Co-operation Council.

The GCC comprises six states – Saudi Arabia, the United Arab Emirates, Oman, Kuwait, Bahrain, and Qatar. But they have untold energy resources and with energy prices at historic highs (and they ain’t going back down in our lifetime’s Buddy!), they are accumulating wealth of staggering proportions at ever-increasing speeds.

China’s levels of Foreign Direct Investment (FDI), now greater even than those going into the USA, and their levels of foreign reserves, plus the extraordinary levels of resources-based income gushing into the GCC and their neighbours, are having a profound but until now subterranean effect – something like the oil itself.

Make no mistake – a fundamental, irreversible change is happening … in fact, it’s happened already, and news of this shift is only now becoming almost daily news fare in the West. And these effects will become ever more magnified and permanent as these players become more confident in re-investing this income into Western securities and assets through their Sovereign Wealth Fund (SWF) vehicles.

And as well as this, the levels and scale of infrastructure development and industry diversification are startling – here is a summary of just a few of the gigantic projects underway, taken from the excellent “Business Intelligence Middle East” newsletter – highly recommended!

With all this in mind, and navigating by one of X|Media|Lab’s longest standing tenets (that “New Media = New Geographies”), we have been exploring and cultivating friendships in the region, and we place a very high priority on establishing a Middle East node in the XML international network.

When we say “Middle East”, we are referring to three relatively distinct regions: the Gulf States (including Saudi Arabia); the Levant (Syria, Lebanon, Jordan, and Palestine); and North Africa (Egypt, Libya, Morocco). Our progress so far has been concentrated on the Gulf States – and so far we have visited Dubai in the UAE, Doha in Qatar, and Muscat in Oman.

We’ll take a look at three emblematic initiatives from which we can learn something about the GCC: Dubai Media City; Al Jazeera; and the Burj Dubai; before looking at a few snapshots of economic life in the GCC.

Dubai Media City

The first thing to know about Dubai is the startling fact that income from “oil and energy resources” constitute less that 10% of Dubai’s GDP. Dubai is miles ahead of everyone else in the GCC in successfully diversifying its industries and revenues.

Dubai Media City (DMC) exemplifies a lot about this new Dubai. DMC is in the middle of a vibrant cluster that also includes Dubai Studio City, Dubai Internet City, Dubai Internet University, and Dubai Knowledge Village.

Companies that set up in this officially designated “free zone” pay no corporate tax; no income tax; have 100% company ownership; have no foreign exchange controls, trade barriers or quotas; and have no restrictions on capital repatriation. You can set up a business in the DMC Free Zone in 20 minutes. That’s pretty hard to beat.

These advantages are designed to promote media (and digital media) as part of the many economic diversification initiatives.

One striking factor of the GCC demographic is its relative youth. Roughly 50% of the population throughout the entire Middle East are under 24. Currently, broadband penetration is somewhere between 7-10% depending on the country. As the extensive world-class infrastructure gets rolled out now, this will mean an explosion of demand for media content and services from a vast young population who are born digital.

The best summary of the growth opportunities in media is the recently published report by the Dubai Press Club and pricewaterhousecoopers “Arab Media Outlook 2007-2011". The report can be downloaded here.

The staff at DMC are also emblematic of what is happening in Dubai – totally switch-on, results-oriented, multi-cultural, and multi-talented.

We are intensely excited to be in the throes of announcing X|Media|Lab Dubai for December 2008.

Al-Jazeera

What drew me to arrange the visit was having the opportunity in Dubai to take the time to sit and actually watch and experience the Al-Jazeera English channel. I was stunned! The quality of the reporting and journalism, the cutting edge use of viewer content and embedded mobile uploads, the use of user-generated documentaries, and the sheer freedom of speech was an awakening. It is so far ahead of the BBC and CNN on every level that, while I was watching it, I started emailing people from all over the world asking if they had ever seen Al-Jazeera. Their stories were all the same as mine – yes, of course we knew everything about Al-Jazeera; yes, of course we were media experts in touch with the latest trends and best practices … but, ah, no … actually none of us had ever watched it! It was mind-opening.

All I can say is that you must experience for yourself.

[Pic: In the central newsroom at the Al-Jazeera English Channel in Doha]

Before visiting the Al-Jazeera headquarters, I read Hugh Miles excellent history of the network. The three things that stood out in this book for me were: 1) how successful they have been building a global brand, which is also one of the most trusted media brands in the world, in a decade; 2) how brave they have been in face of acts of murder and sabotage; and 3) when you see it all retrospectively telescoped into a few chapters, how demonstrably immoral, illegal, and wholly without justification the Iraq war is. Unless, of course, the very basis of the GCC wealth we are covering here – energy resources and wealth – are the real “justifications”. Read it for yourself.

[Pic: with Safdar Mustafa, Head of Mobile, and Mohamed Nanabhay, Head of New Media, at Al-Jazeera]

If you don't have time to read the whole book, here's an excellent short paper that Miles wrote for "Foreign Policy" that summarises a few very important points.

By the way, the civil servants in the UK who leaked the minutes of the meeting between Blair and Bush where they discussed bombing Al-Jazeera headquarters, were sentenced to six months and three months in jail for leaking the minute.

Burj Dubai

In many ways, the story of the Burj Dubai encapsulates a good deal of the story of the GCC states, and Dubai in particular.

When it is completed the Burj Dubai at around 2,300 feet will be the tallest structure in the world of any type ever built. It already stands at 160 stories high and its exact final dimensions are strictly secret.

This is because the Burj is already subject to competition not from one but from three other buildings – and all of them are in the Gulf States: the Murjan Tower in Bahrain (200 floors); the Madinat Al-Hareer (“City of Silk”) complex in Kuwait; and, wait for it, the proposed 4,000 ft. Al Burj at the Dubai Marina just a few miles away from the Burj Dubai.

[Pic: The Burj Dubai in December 2007 - towering over a forest of skyscrapers]

The entire tenancy of the Burj Dubai has long ago completely sold out. The 700 private apartments on 60 floors were sold within 8 hours of going on market. The first 37 stories contain an Armani hotel (the entire building is furnished with Armani designs) and the corporate suites and floors are already full.

There have been many labour disputes in building the Burj Dubai, and this reflects a wider reality in the GCC. The populations of these states are comparatively sparse, by any standards. For example, native Bahraini’s may constitute less than 10% of the total population of Bahrain. The other states vary in the ratios but in all of them, it is immigrant labour, constituting an absolute majority of the population, who do this work, and effectively build the nation under the management of the indigenous people.

The nationals of Kuwait, Oman, and each of the seven Emirates are all in a minority. By far, the overwhelming employment of Gulf nationals is in the civil service, where economic, social, and cultural policy is developed and managed. In some Gulf city-states, 99% of the national labour force is in the public sector).

Citizenship and citizen rights are tightly controlled, and each day’s newspapers have extensive coverage of the latest benefits accruing to citizens in healthcare, education, housing assistance, marriage funds, child subsidies, land endowments, cheap loans, and other general welfare. It’s easy to forget that just a generation ago, the main sources of income for these thinly populated littoral tribal emirates were fishing, pearling, and other low-intensity maritime industries.

What is strikingly impressive is how intelligently and far-thinking the investments of the new-found wealth are being made within the framework of a very definite idea of commonwealth.

On a positive note, the UAE has recently allowed the foreign workers to organise themselves in Trade Unions.

Snapshots of Economic Life in the Gulf

The best intelligent introductions to all we have been exploring here, besides the honour and pleasure of meeting with the inspiring people at DMC and Al-Jazeera, are definitely two excellent books: “Globalization and The Gulf” and "Dubai and Co.".

The former book analyses the interplay of the ultramodern development of the Gulf States and the Gulf Co-operation Council (GCC) with the obviously entrenched tribal value systems that continue to organise and prioritise economic and social developments.

It’s important to understand that only a generation ago these were relatively poor regions, lightly populated (the UAE was all of 150,000 persons at independence in 1971), and foreigners were few and far between.

The principal organization of the common polity was built around kinship systems of local tribes and ruling families with intricate marriage practices that intertwined entire communities, bound by Islamic principles in which the profit motive is not the highest priority.

The presiding networks of ruling families are understood as caretakers at the top of a posited single, interrelated kinship web, and are considered the distributive dispensers of a wealth which is owned in common.

The Gulf cities’ pulsating multiculturalism is therefore embedded within a background of strong indigenous governance and control in which the everyday dealings with the culturally and religiously ‘other’ run parallel to a somewhat invisible (to outsiders) inner traditional logic of kinship and nativity.

The challenges of globalization to such a distinct and unique heritage are obvious. Free market capitalism seeks to order the world in utterly different ways, and the tensions are always in play. The centrality of local communitarian kinship networks is different from the priority of enforcing freedom and security for the movement of capital.

Their resources wealth has meant that the Gulf States have never been beholden to the tactics and priorities of the IMF and the World bank for their development. Nowadays, the states are increasingly investing their capital internally, and in sister states, rather than in Western stock markets and the associated financial gambling that passes for economic activity. This is leading to further intensification of competing priorities. Indeed, the USA has repeatedly refused to deal with the GCC as a trading bloc.

As the Gulf States move into the final decades of oil extraction and oil-generated wealth, they are firmly focussed on education, financial services, media and information industries, trade, and tourism.

It’s all exciting, complicated, overwhelming, and exuberant – all wrapped up in great material resources, and an infinitely civilized culture. Welcome to XML Middle East!