5. Dubai’s Model of Economic Diversification

We examine the economic diversification model of Dubai. We argue that the uniqueness of Dubai’s model lies in its business openness and integration into the global economy, rather than oil dependency. In line with the common perception that there is a significant negative relationship between resource rents and economic diversification, we find that the decline of oil contribution to Dubai GDP from 5.48 per cent in 2000 to 1.4 per cent in 2013 could have been a facilitator rather than a hindrance to the city’s economic growth and development. In contrast with the prevalent views on various inefficiencies associated with resource rich economies, we also find that Dubai’s model of development rests on government leadership with specific governance and state entrepreneurship models, inward investment orientation, unhindered access to capital and labour markets, protectionism and legal dichotomy and policy of systematic diversification. This model offers a promising future for Dubai and provides some key lessons to be considered by other GCC countries with similar economic systems and conditions.