It may be a tiny emirate of just 1.1m people, but Dubai is out to conquer by land, sea and air. DP World's bid for P&O, the UK ports group, is the latest foreign move by one of Dubai's state-owned investment vehicles. Dubai Holding has spent $2.4bn buying Tussauds Group and 2 per cent of DaimlerChrysler. Disgraced US brokerage Refco is now in its sights. Emirates, the state-owned flag carrier, is one of the world's fastest growing and most profitable airlines.
A relative lack of oil and gas - just 7 per cent of the economy - has encouraged diversification. A relaxed investment climate and proximity to other Gulf states ensures there is no shortage of petrodollars looking for a home.
Dubai's emergence as a regional hub for finance, tourism and transit, while laudable, is not without problems. Local equities and real estate look frothy. Retail space per head, already on a par with the US, is set to double within five years. Any big fall in oil prices would stem the tide of liquidity flowing in.
Then there are those foreign investments. Those that play to Dubai's strengths, such as P&O, make sense although DPW is estimated to have paid a rich 14 times earnings before interest, tax, depreciation and amortisation for CSX World Terminals last year. Waxworks museums and flashy German cars, as well as skyscrapers, do much to build Dubai's “brand”. But there are inherent risks when a government that already dominates the domestic economy also leads the charge overseas to find a home for surplus capital.
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