How Dubai’s Shopping Festival Marks a Liberalized Economy

Introduction

The Dubai Shopping Festival (DSF) celebrated its 20th anniversary during its month-long run in January 2015. The festival, led by the Dubai Festivals and Retail Sector Promotions Establishment (DFRSPE), welcomed over 4.4 million visitors from all over the world and included a full calendar of more than 150 entertainment events complemented by fireworks, live music from regional stars, and widespread, tax-free sales.[1] Over the course of two decades, the festival has drawn over $39 billion in revenues for the travel, retail, hospitality, and entertainment sectors.[2]

In the face of the DSF’s opulent success, it is hard to comprehend that, forty years ago, Dubai was considered one of the least-developed regions in the world.[3] The explosion of Dubai as one of the world’s top tourist attractions highlights its ability to leave behind its developing nation status for that of an internationally renowned economic center in just a short few decades. The DSF serves as an exemplary case study in which the previously oil-centric, authoritarian emirate diversified its economy by capitalizing on the intersection of retail and tourism — creating the profitable tool of “shopping tourism.” Dubai can thereby serve as a model for other oil-dependent countries that are currently struggling to diversify and to achieve long-term, sustainable prosperity.

In the early 1980s, oil production in Dubai accounted for two-thirds of the country’s gross domestic product, effectively carrying the emirate’s economy.[4] However, the volatility of oil resources spurred Dubai to take significant steps to increase non-oil sectors’ economic contributions by the year 2030.[5] Dubai’s Department of Tourism and Commerce Marketing (DTCM) now reports that tourism accounts for 22.6% of the emirate’s gross domestic product (GDP), leaving oil to account for only 7%.[6] This shift places tourist-centric events like the DSF at the forefront of Dubai’s economic stage.

Dubai’s Rise to International Port and Commercial Hub

In the 1940s, the Second World War allowed Dubai to prosper as a trading post at the expense of poorer Gulf countries, like Qatar and Bahrain, by opening a black market for colonial food rations from Britain. At this point, Dubai’s energetic business community and British Political Agent status gave Dubai a leg up in international trade into the 1950s.[7] This merchant community set the groundwork for Dubai’s diversification of its economy by improving the ports and waterways. The modern rise of Dubai’s economic success was then spearheaded by the trade-minded Sheikh Rashid bin Saeed Al Maktoum, the Vice-President and Prime Minister of the UAE and Ruler of Dubai (1958-90),[8] who is famously known for transforming Dubai from a modest settlement to an international commercial hub. A quote popularly attributed to him is, “My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel.” [9] The quote emblematizes the Sheikh’s intention to break Dubai’s dependency on oil before the fossil fuel runs out and forces the emirate to lose all its hard-fought prosperity. It reveals his determination, in other words, to avert the return to the camel.

For this purpose, Sheikh Rashid continued to focus on improving liberal trade even as oil concessions grew. The Sheikh allowed for the privatization of many community services and utilities by merchants, namely electric and telecommunications.[10] In the 1970s, oil extraction in the Arabian Gulf exploded, and oil wealth was used in Dubai to develop infrastructure, such as further improvement of the port, and to raise the standard of living for its citizens.[11] Sheikh Rashid continued to pursue sustainable economic and administrative reforms that aided the success of business such as the city’s low tax system; customs duties in Dubai have never exceeded 2 percent.[12] In the 1990s, Dubai fine-tuned its diversification efforts, positioning itself to abandon all oil dependency by 2010. [13] In this way, through shrewd and responsible investments in its own future, Dubai developed new, sustainable sources of income and sectors such as retail and tourism.

Taking the Initiative for Retail Tourism

Dubai’s first innovations to welcome robust tourism began in the early 1980s under Sheikh Rashid. He delineated a strategic vision for the emirate in which tourism would encourage direct foreign investment and wider business development rather than simply function as an independent sector. [14] Some of these efforts included infrastructural and transportation developments, such as the establishment in 1985 of the state-owned Emirates Airlines, which offers cut-rate flights during the DSF and is the official transporter of the event. The government also set up the Dubai Commerce and Tourism Promotion Board (DCTPB) — a government body in charge of promotional, tourism-centered events

By 1996, tourist arrivals reached 1.9 million a year, which marked the success of the Sheikh’s primary strategies.[15] The government also legislated several successful pro-tourism polices, such as more liberal trade policies and the elimination of its traditional dress code and restrictions on alcohol consumption.[16] The government began to take specific steps towards the birth of tourism attractions such as the DSF by primarily investing in facilities and products revolving around leisure. Specifically, large investments from state-owned international hotel chain brands such as Jumeirah have aided the development of several lavish hotels.

Dubai made a strong effort to encourage strategic partnerships between the government and private sector to guarantee the success of these massive projects. That open relationship between wealthy public and private firms helped attractions and events like the DSF thrive and evolve over time from public sector to tradable, private sector entities.[17] In this way, Dubai has been able to lead the region in business innovation through its willingness to implement more open economic policies. On top of progressive economic policies, Dubai liberalized visa restrictions in 2001, which led to an immediate 30 percent uptick in the annual growth rate of tourist arrivals, accommodating a total of 4.7 million tourists that year. In 2006, within ten years after the creation of the DTCM and the DSF, Dubai welcomed over 6.4 million tourists.[18]

Inside the DSF’s Formation

The DSF was therefore established to expand tourism in the region: a shopping extravaganza intended to reduce the seasonality of tourism travel to Dubai. The original idea of the festival was to utilize the existing fifteen shopping malls in Dubai to create a festival that would offer a combination of experiences other than just shopping — namely family entertainment and sweepstakes.[19] The DSF then quickly became one of the world’s leading unique and creative event offerings due to a well-researched and systematically-planned package.[20]

Government backing aided the DSF by facilitating waivers for event implementers to ease government regulations surrounding the production of the festival. The Dubai International Airport also accommodates visas designated to aid tourist travel for the DSF, and state officials arranged the mooring of Greek cruise ships in the emirate’s harbor to allow for more accommodations in the early years of the festival.[21] These efforts, along with mass investment from government-sponsored public and private firms, allow the DSF to flourish internationally under the auspices of an authoritarian government. Dubai’s prioritization of the success of international events like the DSF over more nationalistic economic efforts allows the entire emirate to benefit annually from the month-long event.

Conclusion

The DSF has an undeniable, distinct effect on Dubai’s economy as a whole despite the challenges of integrating a public and private sector. The retail industry in Dubai contributes to 29 percent of the country’s total GDP, and the DSF is the single largest retail event of the year.[22] According to the DFRSPE, the DSF contributed approximately $4 billion to the Dubai economy from retail, hospitality, and travel expenditures in 2012.[23] In this way, the DSF has helped to brand Dubai in the world market; Dubai as a whole has seen major growth in tourism from non-Arab countries, with Europe and Asia leading the pack. Through these bonds outside of the Arab world, Dubai now holds a permanent place in the international skyline. The DSF is the embodiment of these strides, and of the lucrative intersection of retail and tourism.

This case study is especially relevant given that the economic diversification of oil-dependent countries today is crucial to developing economies. Since the Organization of the Petroleum Exporting Countries (OPEC) cut oil production this year due to the economic languishing of oil-dependent nations such as Nigeria, Iran, Saudi Arabia, and Venezuela, economic diversification has been at the forefront of development discussions. The success of Dubai as an economic center can impart some important lessons to these struggling markets. First, the liberal economic polices that Sheikh Rasheed implemented in Dubai function as evidence that protectionism is perhaps not the best option to shelter a weak economy. Secondly, Dubai has proven the ability of a budding state sector to support and work with the private sector. In this way, the two arms can work together, with the impetus emerging from state-held funds to grow an open private sector. Lastly, retail and tourism industries can function as major development spaces within the public or private sector of a dependent economy.

Bibliography

[1] International Festivals and Events Association. 2015. IFEA World Festival and Event City Winner 2015: Dubai. 57.

[2] Parag Deulgaonkar, “DSF Visitors Spend Dh2,590 per Person; Total Spend Crosses Dh145bn,” Emirates 24/7, January 30, 2015.

[3] Richard Sharpley, “Planning for Tourism: The Case of Dubai,” Tourism and Hospitality Planning and Development 5, no. 1 (2008): 14.

[4] C. Ellson, “Oil Change,” Conference and Incentive Travel, December 1999, 62.

[5] Sharpley, “Planning for Tourism: The Case of Dubai,” 25.

[6] Dubai Economic Council and Secretariat General, Dubai Economic Outlook Q1-2013, report (Dubai: Dubai Economic Council, 2013).

[7] Ibid., 97.

[8] Ibid., 98.

[9] Yaw Nyarko, “The United Arab Emirates: Some Lessons in Economic Development,” in Achieving Development Success: Strategies and Lessons from the Developing World, ed. Augustin K. Fosu (Oxford: Oxford University Press, 2013), 492.

[10] Al-Sayegh, “Merchants’ Role in a Changing Society: The Case of Dubai, 1900-90,” 98.

[11] Mike Davis, “Fear and Money in Dubai,” New Left Review 41 (October 2006): 51.  Europe and East om East e ports the ports,  and economic statistics. I incororate tatistics Center, as well as ectornal reach a

[12] Ibid., 99.

[13] Al-Sayegh, “Merchants’ Role in a Changing Society: The Case of Dubai, 1900-90,” 100.

[14] Sharpley, “Planning for Tourism: The Case of Dubai,” 21.

[15] Ibid., 21.

[16] Phil Camble, “Oil Is Dead? Long Live Tourism!” Middle East Insight 14, no. 5 (1999): 39.

[17] Ibid., 27.

[18] Ibid.

[19] K. Prakash Vel, Laila Mohamed Suhail, and Amal Dokhan, “Events Marketing Model of Dubai Shopping Festival,” REMark 13, no. 6 (2014): 140.

[20] Ibid., 138.

[21] Bray, “Dubai Tries Hedging Its Oil-Thin Future with Six-Week Souk.”

[22] Oxford Business Group, Dubai 2015, report (Oxford: Oxford Business Group, 2015), 192.

[23] Deena Kamel Yousef, “DSF 2012 Rakes Dh14.7b during Festival Period,” Gulf News, December 26, 2012.