Gulf: A choice between liberalisation or recovery?

When video showing a UAE royal family member apparently engaged in torture emerged this year, it passed virtually unreported in the Gulf. Such an episode may point towards an encroaching problem for the region, and its potential to reclaim economic glory in a post-recession world.

Jamie Stewart
Tuesday 24 November 2009 01:00 GMT

“The energy can’t last forever; either it runs out, or the world turns to something else. They have the resources to do it right now. It' s up to them - in this blink of an eye - to make non-oil economies.”

The comment is from Dr Christopher Davidson, who has been awaiting word on publication of his book for some time. ‘Abu Dhabi, Oil and Beyond’, charts the trajectory of the energy-laden UAE capital from its Bedouin origins to the verge of preeminence. But Davidson’s take on the story is by his own admission one which the city - along with its neighbour Dubai - would rather not be told.

Dubai and oil-rich neighbour Abu Dhabi are two of seven emirates that make up the UAE federation. The cities have opened their doors to the world in an attempt to diversify their economies away from a reliance on hydrocarbon dollars – a situation mirrored across the Gulf. But rapid global integration has occurred at a frightening pace in the autocratic states, leaving the small matter of political evolution chewing desert dust.

Davidson’s book was held up by the National Media Council, the organisation responsible for media censorship in the UAE, in May. It contains discussions on a number of topics sensitive to the region: Arab human rights; past political collusion between London, Washington, and Abu Dhabi to allow the West access to Arab oil; and the spectre of economic collapse in Dubai, which Davidson modestly says is “not warm reading” for the city.

In Dubai, five miles north from the green where, on Sunday, Lee Westwood claimed victory in golf’s Race to Dubai, the shores of the Persian Gulf lap against the sun scorched beaches of the city state. The credit crunch crept up on these shores, as if with a vengeance, a year ago. The city was hit – hard. Jobs were lost in their thousands, property prices crashed by up to 60 per cent, and some of the world’s most grandiose construction projects began gathering dust - literally.

As the controversy surrounding Davidson’s book suggests, however, the UAE and its component emirates are governed by an autocratic system that does not take kindly to domestic criticism.

In January, the country’s legislature, the Federal National Council, passed a draft media law that was criticised by rights groups. It retained many prohibitive elements of its dated predecessor, including a blanket ban on communication that criticised the rulers of the individual emirates, “harmed the national economy”, or “disparaged” government officials.

New York-based Human Rights Watch condemned the ambiguity of the law, and the protection it granted to government: “This insulation of public officials from criticism violates the fundamental principle in international human rights law that press freedoms should be wider, not narrower, with respect to speech about politicians and government officials,” it said.

The Irish philosopher George Berkeley first raised the famous philosophical point: If a tree falls in a forest and no one is around to hear it, does it make a sound? Or in Dubai’s case: If an entire economy is brought to its knees, but nobody may report it, has it really happened?

Christopher Davidson, a fellow of the Institute for Middle Eastern Studies at Durham University, saw Dubai’s problems coming. In his previous book, ‘Dubai: The Vulnerability of Success’, he warned of the city’s extreme exposure to global recession in a moment of unnerving macro-economic accuracy that made credit crunch soothsayer Vince Cable look like Mystic Meg.

Today, Davidson says that now is the time for Dubai to show more of the leadership that it forged its name through with its rapid economic liberalisation of the past decade; but this time it must lead in a different direction – towards political liberalisation.

“After the recession hit the Gulf, autocracy led to a period of denial; a lack of acceptance; a lot of anger; and an inability to put a plan in place to convince the world that the leaders knew what they must do to recover,” he says.

It must be remembered that democratic societies with freedom of expression also suffer recession, the UK for example. And for all the US’s liberty, no one could accuse Wall Street watchdog Jim Cramer of succeeding in his fourth-estate duty to restrain 2007/8’s cataclysmic tide of financial excess.

But, Davidson says, if political liberty does not guard against the onset of recession, it can aid the process of recovery: “People are still willing to invest in democracies because they are open and transparent,” he says. “Whereas for many investors, Dubai became a black hole.”

There are well documented cases of UK investors who sank millions into Dubai’s property sector, to find developers unable to progress with projects post-credit crunch. “The lack of a free press will continuously affect the Gulf’s ability to climb out of recession,” Davidson says.

“Less than a few hundred metres from here,” he says, motioning to the door of the central London hotel in which we are sat, “decisions are being made about where money will go over the next five years.” Davidson lists hedge funds, private equity, and investment trusts among the dubious sources of potential foreign direct investment.

“New, post-recession money looks for transparency above all else,” he says. “During the credit boom of the last decade, the guys in the City or Wall Street didn’t care about where their money ended up, so long a they got returns. But now, money has been lost in places that lacked transparency. Many investors in Dubai took their risks – and lost.”

The Thai capital Bangkok lies a little over 3,000 miles east of Dubai. The east-Asian economic boom, which peaked in the early 90s, gave rise to a mob of politically impetuous urban Thai professionals who demanded liberty and freedom from autocracy, with eventual, hard-fought success. As a 17-year old report in the New York Times memorably put it at the time: “When a society reaches the point that people worry about fashions or fragrances, they are also likely to ponder democracy.”

Two decades later, Dubai spearheaded the rapid economic development of the Gulf region. The relaxation of freehold property law combined with the establishment of commercial sector-specific free zones. This opened the floodgates to a mass influx of foreign firms eager for their slice of new Arab wealth. What followed was not so much a boom; as an economic explosion, the likes of which had rarely been seen before.

This gave way to a physical manifestation of man’s sky high ambitions throughout the pre-credit crunch years across Dubai, as man-made islands emerged from the sea and the world’s tallest tower blasted skywards from the desert sand.

This developmental fervour spread into neighbouring Abu Dhabi, and a number of other Gulf states, including Qatar. But unlike Thailand in the 90s, where the booming economy saw a newly educated population demand the right to free expression, such freedom in the Gulf has not materialised, and nor have the people taken to the streets to demand it. Why?

“Over the last ten years autocracy has been given as an explanation for the incredible boom, not only in Dubai, but in Abu Dhabi and Qatar as well,” Davidson says. “Build it and they will come – literally. That’s all well and good when its booming; but when recession hits, it starts to unravel.”

There are other reasons behind the continuity of dictatorial rule, however, that are stitched within the very fabric of Middle Eastern society, Dubai being the prime example.

The city’s social hierarchy includes a grossly under-paid labour class from the Asian subcontinent, held virtual economic prisoner by the lack of a minimum wage and appalling salary disparity; an ex-pat, professional middle class mostly kept in check through a tax-free salary and the threat of redundancy should the boat be rocked; and a local population overwhelmingly employed in the public sector and in receipt of ludicrously generous state handouts.

When a bound-and-gagged media is added to the mix, run by a managerial hierarchy who don’t want to risk the marble floored villas and sun kissed lifestyles, it is hard to see where the spark of dissent that ignited the Bangkok fires of 1992 will come from.

Many Dubai-based journalists will only speak of their professional environment under strict anonymity, for fear of the consequences. Consensus is that the newly established media law is indeed vague, but will rarely be exercised due to the inherent self-censorship; journalists know not to challenge the regime.

“If you’re a good journalist and don’t have your own agenda, you’ve nothing really to fear from the authorities,” one says. “It’s self-censorship that’s the problem.”

The lack of consultation between the legislature and the profession itself when the new media law was introduce is also worrying in a city that promotes itself as a global and regional media hub.

“One thing that surprised me about the media law was that the authorities didn’t even bother talking to journalists to get their feedback on what needed to be in it,” the anonymous journalist says.

“It was no surprise to learn that the authorities came up with some vaguely half-assed way of doing things that ignored the bleeding obvious. There’s a long and noble track record of this here in the UAE – which, of course, you can’t draw attention to.”

The most extreme example of a media that regularly fails in its basic fourth estate duty occurred in April with the release of a video showing Sheikh Issa bin Zayed al Nahyan, brother of the UAE’s crown prince, engaged in the torture of an Afghani grain dealer.

In the grim footage, first broadcast by ABC News in the US, the Sheikh used wooden planks with protruding nails, whips, and an electric cattle prod on his victim, before ending the vicious session by running over the ankles of the man – whom he reportedly accused of short-changing him – in a 4x4.

The UAE Interior Ministry acknowledged Sheikh Issa’s involvement, but bizarrely dismissed the actions as “not part of a pattern of behaviour”. The Interior Minister himself, it should be noted, is another of Sheikh Issa’s brothers.

Shockingly, the video was being circulated long before it was first broadcast in April. “I knew about it – I’d seen it in August 2008,” Davidson says. So did he try and bring it to the attention of he media back then? “Yes,” he says.

But media outlets in New York and London were not prepared to break the story: “We were sinking into recession,” Davidson explains. “And the world was interested in Gulf cash. As soon as the recession hit, Gordon Brown and Peter Mandelson, who a year earlier had strongly criticised Gulf sovereign wealth funds for a lack of transparency, went cap-in-hand to the those very same funds. The torture tape was not a story that anyone wanted to run in the West, let alone in the Gulf.” Even the Centre for Media Freedom did not cover the story, Davidson says.

The climate of fear which hangs over the media in the Gulf harks back again to the tree falling in the deserted forest. The authorities take is that if an event occurs, and goes unreported, then the ramifications will be kept to a minimum. The problems begin when the ramifications happen anyway, and the world on which you so rely starts to ask: “what are you going to do about it?”

The link between economic prosperity and freedom of expression is not easy to quantify. The boom in Dubai through the first eight years of this century was accompanied by tight controls on the right to express in the media.

Barack Obama, on a visit to China last week, put across his argument for freedom of speech: “The more freely information flows, the stronger the society becomes,” he said. “Citizens of countries around the world can call their own governments to account and can begin to think for themselves.”

It was no coincidence that this argument should be voiced while on a visit to a country that itself is known for harsh restrictions on free expression. Obama’s speech, ironically, was not broadcast on Chinese TV. Davidson draws an encroaching parallel between China and the Gulf states:

“In the Gulf, we saw economic liberalisation without the political liberalisation because of the unusual form of government they have,” he says. “Rarely have we seen this before, but the credit crunch exposed the disconnect between the two. China, however, is going to pose the same problem in the next few years.

“It’s an authoritarian state but it is trying to integrate with the global economy at speed. That will once again raise the questions that are today being asked of the Gulf, but on a far bigger scale.”

The Chinese middle class claimed its right to wealth from the ashes of communism, beginning with the pro-democracy upheaval of 1989, symbolised by grainy footage of a carrier bag-laden student facing down a column of Type 59 tanks in Tiananmen Square. But the political freedoms that evolved hand in hand with great wealth in the West never materialised.

Yet political liberalisation is a necessary step to true global integration, according to Davidson. It was, until last year, an oft-quoted fact by purveyors of globalisation that no two counties that host a branch of McDonalds had ever gone to war with one another. This was originally termed “the golden arches theory of conflict prevention” by Pulitzer Prize-winning author and journalist Thomas Friedman.

Davidson takes up the point: “If you have McDonalds in your country, you have sufficient liberalisation,” he says. “There’s literally a KFC on the border between Kuwait and Iraq. As you travel from Basra down to Kuwait City, you realise, as you cross into Kuwait: I’m in America now.”

Russia, however, stamped the “golden arches theory” into the dirt of Eastern Europe in August 2008, when it invaded Georgia. The first Big Mac to be sold on Russian soil was lovingly prepared in January 1990. Tbilisi’s first branch of McDonalds opened its doors for business in 1999.

On Friday, the Ruler of Dubai, Sheikh Mohammed, sacked a number of figures behind the city’s boom and bust, including Dubai International Financial Centre governor Omar Bin Sulaiman. The move could signal a bid to usher in a new dawn of investment into the city. Out with the old, in with the new.

So will the need for a continuation of foreign direct investment lead to an eventual shift towards political and personal liberty in the Gulf? Davidson says that, for the sake of cities such as Dubai, it must. The alternative, he insists, makes for far more painful reading than the book he continues to wait on:

“Dubai will be the last great folly of 21st century credit-fuelled hysteria,” he says. “The city had it all in one place. It was the ultimate liability, waiting to happen.” The final question is straightforward: “If Dubai fails to liberalise, has it had its day?” Davidson gives an equally straightforward answer: “Yes,” he says, and leaves it at that.

The author and lecturer, not so much a thorn in the side of the Gulf, but more an insistent economic advisor, disappears into the Central London streets, where the hedge funds, private equity, and investment trusts gamble the cash that may one day find its way back to the distant sands of the Arabian desert..

And elsewhere in the world, a tree falls in a forest, with no one around to hear it. But does it make a sound? That’s one best left to philosophy.

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