Dubai Report: Dubai's race to the top

The ruling family's strategy to transform this small emirate into a world-class business and leisure hub by 2015 is impressive. But serious challenges loom. Morice Mendoza reports.

Ever since Sheikh Rashid Al-Maktoum, ruler of Dubai, gave the order in 1959 to modernise the local creek - a trading port since the 1830s - the small desert sheikhdom on the east coast of the Arabian Peninsula 120 miles from Iran across the Straits of Hormuz, has been developing at breakneck speed. Its aim is to become one of the world's biggest commercial hubs. Dubai struck oil in the 1960s, but this commodity is no longer its economic mainstay: oil revenues fell from 46% of GDP in 1975 to 7.1% in 2004.

In 1959, Sheikh Rashid borrowed money from Kuwait to help realise his ambitions for the Creek, from which local traders had peddled pearls, gold and, lately, grey goods to markets in India, Pakistan and Iran. He took an enormous risk. The cost of modernising the port was several times Dubai's annual GDP at the time and sceptics didn't think the project would work. But the newly dredged port increased trade by 20% in the first year, and import taxes helped to repay the Kuwaiti loan early.

In 1960, Dubai International Airport was built with an 1,800-metre runway; two decades later, it was handling 2.8 million passengers, rising to 25 million by 2005. Rashid's son, the present ruler Sheikh Mohammed, has launched a new project: the Dubai World Central International Airport, which will be 10 times larger than the old airport and is expected to handle 60 million passengers by 2010. It will also include a logistics hub, residential and commercial areas, a golf resort and a business park.

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