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When an adviser ­presented Sheikh Mohammed bin Rashid al-Maktoum three years ago with a scheme to build one of the world’s biggest towers, Dubai’s ruler demanded to know what else was being planned around the world. The adviser returned with a list of the tallest buildings, with Taiwan’s Taipei 101 reaching higher than the proposed Dubai tower.

“The sheikh asked me: ‘Why is it taller – are people there smarter than you?’” says Mohammed Alabbar, the official and head of property giant Emaar. “That’s why I made sure our project was the tallest by far.”

Burj Dubai is still under construction; a floor is added every three days and its exact final size is a well-kept secret. But the story of its inception reflects, above all, the competitive spirit and insatiable ambition of the city-state’s 58-year-old leader.

Sheikh Mohammed, a fighter pilot and horse-racing aficionado, likes to win every race. The Burj Dubai complex will include, when completed, the biggest mall in the world; Dubai’s indoor ski slope (in a country where temperatures reach 48ºC in the summer) built inside another gigantic mall, is billed as the biggest project of its kind. The Palms, man-made islands in the shape of palm trees designed to extend the beachfront and maximise tourist numbers, also typify Dubai’s grand, if quirky, style.

Such projects are more than just marketing tools to help sell the Dubai brand. The pursuit of superlatives is also a struggle for survival in a desert city-state that knew long ago its oil would run out and has worked to ensure new sources of income.

Defying the image of Arab stagnation and inefficiency, the small emirate has enjoyed double-digit annual economic growth rates in recent years, creating a regional trade and finance hub and turning itself into a tourist destination. Today the non-oil sector accounts for 95 per cent of gross domestic product (compared with 46 per cent back in the 1970s), with services making up the bulk.

Dubai is a giant, dusty construction site, where towers are emerging in dozens, not in pairs. Billboards on both sides of Sheikh Zayed road, the traffic-jammed main highway running across the city, promise prospective buyers of property “Riviera life” and “perfect communities”. Tenants of the sprawling business “clusters” include the likes of Oracle, Cisco and Microsoft. They will soon be joined by Halliburton, the US oil services firm that has announced plans to open not a regional but a corporate headquarters in Dubai.

Driven by a business mind and a contempt for bureaucracy – and no doubt the search for a place in history – Sheikh Mohammed’s aspirations go beyond Dubai: he has been making acquisitions abroad and sending his companies to build new districts in other parts of the Middle East and Asia. Neighbours that long looked at Dubai with ­scepticism, mocking its flashy style and over-ambition, have embarked on similar expansions.

“They used to tell us it’s a bubble, that we can’t have tourism,” Sheikh Mohammed says in a rare interview with the Financial Times. “Now they’re running after the bubble.”

Dressed in a long yellow Arab robe and sitting in a slightly futuristic office on the 44th floor of the needle-like Emirates Towers building, the sheikh is casual but confident, insisting there is no reason why anyone should do better than Dubai.

“Why not?” he shoots back when asked why everything has to be the biggest and the tallest in Dubai. “Does anyone ever remember the second man who landed on the moon or the second man who climbed Mount Everest?” Although the Arab world has had a pitiful recent history, he suggests, that should be no obstacle to harbouring great ambition or building what he calls an Arab “renaissance”.

Sheikh Mohammed has been spared many of the distractions that bedevil the typical Middle Eastern ruler and has thus been able to focus almost exclusively on Dubai’s economic development. The emirate’s size and structure – it is one of seven city-states in the United Arab Emirates, where much of the regional politics is left to the capital, Abu Dhabi – make it a more manage­able place than more populous and politically troubled Arab countries.

Dubai is not particularly threatened either from without or within. A system based on patronage has kept much of the local citizenry – which makes up only 15 per cent of the 1.4m people living in Dubai – acquiescent and busily engaged in economic activity. The local media largely steer clear of controversy; many of the people who started the first human rights organisation in the city also hold government jobs.

The oil-fuelled boom that has swept the Gulf over the past five years has helped too, with investors from Saudi Arabia, Kuwait and Abu Dhabi pouring money into property development and the stock market.

Sheikh Mohammed is, essentially, the chairman of Dubai Inc, sitting on top of government as well as a series of companies created to take the lead on development projects. He is assisted by three main chief executives, each of them running a conglomerate and competing with the others. All three – Emaar (now only partially government owned), Dubai Holding and Dubai World (owner of ports operator DP World, among many other businesses) – are heavily involved in property.

Christopher M. Davidson, an expert on the UAE, says there are two keys to understanding the sheikh’s rule: the first is a ruling bargain with his people, in which he ensures that they can take part in the wealth creation; the other is his need to diversify the economy and take gambles on infrastructure projects.

This two-pronged approach to running the seafaring city dates back to Sheikh Mohammed’s great-grandfather, who opened up Dubai in the early 1900s as a tax-free port to lure Iranian and Indian traders. In the 1970s, his father, the late Rashid, went against the advice of local businessmen when he ordered the building of the largest man-made harbour at Jebel Ali, at a time when the existing port more than adequately served the emirate’s needs. Jebel Ali is now one of the world’s busiest ports.

Long before he took over as ruler last year, Sheikh Mohammed was the de facto manager of Dubai under the leadership of his brother Maktoum. Under him, Dubai’s mega-projects have multiplied, dozens of “free zones” dedicated to everything from technology to media and finance have been set up to court foreign companies, and the emirate has opened up sales of property to foreigners. An intensely competitive style and a fixation with efficiency leads businessmen to compare the management of the city to that of Singapore.

The sheikh’s insistence on being first appears to have rubbed off on the rest of the city-state, whether in government-backed companies or the private sector. Investment companies within Dubai Holding and Dubai World are in a race to make acquisitions abroad and sometimes find that they are bidding against each other.

“He pushes people and expects them to deliver,” says a long-time observer and resident of Dubai. “Admired and to a certain degree also feared, he wants bold people to take brave decisions and if he thinks an idea is good he wants it done right away, not in three years’ time.”

To keep his employees on their toes, the sheikh sometimes appears unannounced in government departments. He even sends secret agents – called “mystery shoppers” – to inspect government departments and also to spot talent. Dubai “drills” in the minds of people while others drill for oil, the sheikh is fond of saying.

It was, for example, a “mystery shopper” who first noticed Mohammed Gergawi a decade ago, when he was deputy head of the government’s economics department. Since then, Mr Gergawi has risen to chairman of Dubai Holding, probably the most powerful of Sheikh Mohammed’s companies, as well as to the post of cabinet minister in the UAE federal government, where the sheikh himself acts as prime minister.

“It was two days after I had resigned that I was promoted by him at the economic department,” recalls Mr Gergawi. “Two months later I went to meet him in the majlis [where commoners come to see the ruler] and he said: ‘I know you and you’ll go far.’ As I was about to leave, he told me to sit down and called the mystery shopper and asked him, in front of everybody, to tell his story about me.”

But meteoric rises can be followed by sudden falls from grace. Asked at what point he makes a decision to fire an employee, Sheikh Mohammed says he gives people a chance to learn from their mistakes. And if they don’t?

“There’s a friend of mine who worked with me in a high position, he’s very close to me, he comes to my house, he has lunch and we sit together. But his mind cannot cope with going any further, so I fired him,” he says. “I didn’t see him for 10 days and when I did, I asked him why he had kept away. He said: ‘Do you still like me?’ I said: ‘Of course we’re friends, but your mind cannot cope’.”

The sheikh, who drives his own car – the number-plate of his white jeep is, of course, Dubai 1 – has a visible presence in the city. Halfway through the interview he suggests lunch, and we take the elevator down to Nafoorah, a Lebanese restaurant in the building’s mall. A regular customer, his entrance provokes little commotion. He is immediately served a creamy chicken soup, spicing it up with Tabasco.

Some observers look with alarm at the hyperactive expansion of Dubai, wondering whether the constant contest to do bigger and better things will not drive the city to excesses. Nationals, meanwhile, fret about the loss of their identity as they become a dwindling minority in an international hub.

“Is the city stretching too far? It’s a question that has to be asked,” says Abdulkhaliq Abdulla, a professor of political science at Emirates University. “The record so far has been good but when you adopt such a fast model you’re bound to face problems, and confidence could generate over-confidence.”

The rising cost of living has raised concern that Dubai could lose its competitive advantage to other emerging centres nearby, from Qatar to Abu Dhabi. The system of governance leaves ­little room for open debate, though expatriates are starting to voice their concerns about over-development on blogs and on the internet, recently helping to reverse a planned development on a favourite beach.

Most of the criticism, however, comes from abroad, focusing on the treatment of camel jockeys and alleged abuses of the migrant construction workers building Dubai’s towers and gated communities. After a series of strikes and protests by workers last year, the New York-based Human Rights Watch issued a report entitled “Building Towers, Cheating Workers”.

According to the study, workers commonly complained of “extremely low wages, typically withheld by employers for a minimum of two months along with their passports, as ‘security’ to keep the worker from quitting”.

Workers also complained of inadequate safety conditions, facing “apparently high rates of injury and death with little assurance that their employers will cover their healthcare needs”. The agency called for labour reforms and better enforcement of existing laws, which Sheikh Mohammed has promised to make happen.

The sheikh, however, says he hears criticism all the time in his majlis, the traditional form of consultation, and people regularly stand up to dispute projects and ideas. Does he listen? “First, we try to persuade them of our vision. If we can’t, we listen to them,” he says. The treatment of foreign workers, he insists, is now being addressed. “There was a problem but we’re fixing it – people can go to jail if they misbehave with workers,” he says.

Other officials, meanwhile, say Dubai’s development is not random. A new strategic plan focuses development on a few key sectors, including financial services, tourism, transport and logistics. Rents are being capped and the massive supply of housing units expected on the market should ease the inflation pressure, they argue.

Yet those expecting Sheikh Mohammed to restrain his ambition will be disappointed. He says he is now considering two “big projects” but would not disclose details. “We will not over-reach because we learn from our experience,” he says. But the trade and financial centre that he is hoping to consolidate in Dubai requires him to keep moving forward: “People think we’re just building Dubai. But no, we’re accommodating 1.5bn people in the central world, here, between the east and west. When we say the west and we think of Europe and America. When we say the east and we think of Japan and China. And we are part of Asia but we are in the Middle East. And that’s what I meant by the central world.”

The sheikh has recently also started to take on the government of the UAE federation, declaring earlier this month that many of the federal ministers were “20 years behind their times”, and taking aim in particular at the “backwards” ministry of justice. As prime minister, he suggests, he would now apply performance targets to the UAE ministries. “Now my challenge is bigger,” he said, “and I love it.”

As in the rest of the Arab world, Dubai businessmen worry about the geopolitical risk, particularly the prospect of military confrontation between the US and Iran. Traditionally wary of taking sides in any regional conflict, Dubai has a thriving re­export trade with Tehran but it also maintains close relations with Washington.

According to Sultan bin Sulayem, who heads Dubai World, various companies from the emirate invested $3.5bn in the US last year. This was despite having been forced to sell off US assets acquired in DP World’s purchase of the UK’s P&O, the ports and ferries operator. The deal provoked a political storm in Washington as politicians refused to have an Arab company running key American container terminals.

“We’re insulated because we don’t interfere [in politics],” says Sheikh Mohammed. “I told the Americans hitting Iran would be a big mistake because it can affect our interests and it will make Iraq and Afghanistan worse.”

In western and in domestic circles, another issue that raises anxiety is what happens after Sheikh Mohammed. He says the succession is being prepared (he has 10 children and several of them are described as high achievers) but would not say which one of his sons will be named crown prince. Despite appearances, he insists that he is not “a one-man show”. Dubai is run by a team, he says, and the team will carry on.

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