Globalization of the Palms from 2002 till today

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Last updated: April 15, 2019

As Dubai tries to lower dependencies on income from oil, the city continues to construct global perceptions of it being “The city of Dreams”. Day after another, the city’s vision excels with the brilliant projects it has been undertaking. A 7-star hotel, man made islands, The Palm and The World, Internet City, and Knowledge city are all dreams that have become true in widening international awareness and increasing foreign investments. Dubai has not only become a favored destination for tourism in the area, but has also succeeded in joining the World Trade Organization. In less than 15 years, the city has established itself as a connection of global flows, and proved itself on the international map. (Emerging Market Monitor) This paper will discuss how globalization has aided Dubai and specifically Nakheel and their project “The Palms Islands” in achieving Dubai’s goal.Throughout the 1900s, the Middle East went through tremendous turmoil that halted its economical success.

The majority of the region’s governments, including Lebanon, Syria, Jordan, Saudi Arabia, Iraq, Egypt and Kuwait, focused on pursuing increasing political power rather than economical power. This focus caused excess political tension that brought up the Arab-Israel War in 1943, the Lebanese Civil War in 1975, the Libya-Egypt conflict in 1977 and the Gulf War in 1990, which caused devastating losses. (Middle East)A few countries in the region, specifically the United Arab Emirates, transitioned their government’s political focus to an economical one beginning in the early 1900s. This transition aided the UAE in investing in education, workers, real estate, and tourism rather than investing in wars. This investment in sustainable growth rather than political stability set a ‘capitalistic’ mindset in UAE’s top government officials.

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By the end of the 20th century, oil was still the steroid in UAE’s growth in its six out of seven states. The seventh state, Dubai, was going into a tangent with its extremely low oil reserves. Dubai knew that it had to change its strategy to reach UAE’s economic goal. (Global Energy)Dubai’s strategy was to become a leading hub in commerce, tourism and trading. On March 2, 2006 His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President & Prime Minister of UAE and Ruler of Dubai established Dubai World. Dubai World manages various businesses on behalf of the Dubai government. Their vision was to become the foremost holding company, thus growing at home and abroad, and this was almost fulfilled in their first four months of operation.

In July 2006, Dubai World became one of the world’s largest holding companies having more than 50,000 employees in over 100 cities around the globe. (Vision and Mission)Dubai World acquired DP World, the third largest port operator in the world, Jafza, Nakheel, Dubai Drydocks, Maritime City, Dubai Multi Commodities Centre, Istithmar, Kerzner, One ; Only, Atlantis, Island Global Yachting, Limitless, Inchcape Shipping Services, Tejari, TechnoPark and Tamweel. Some of its main projects include investments in the US, the UK, and South Africa and global ports from China to Peru and Australia to Germany. Dubai World’s goal is to grow locally as well as abroad. Part of their strategy to fulfill their growth is the acquisition of Nakheel, a land reclamation company, which is an Arabic word meaning ‘The Palms’. (The Palms Jumierah)Nakheel was established in 1990 right after the Gulf War.

The Gulf war caused oil prices to spur throughout the world. The price hike and the increasing demand for oil gave the Gulf region accumulating profit. The majority of the governments in the Gulf made sure their citizens received all the benefits from the oil sales. Some governments spent all the profits on public facilities such as roads, parks and education while others used the money to subsidize growing companies.

Dubai used its oil profits to invest exclusively in local companies, which only benefited Dubai’s citizens, which were only 11% of the population. This is because under Dubai’s law only Dubai citizens are allowed to own companies. The rest of the Dubai population is extremely diverse, consisting of 57% from South Asia, 21% Arabs and 11% from Western and Eastern Asia. As a Dubai citizen, Sultan Ahmed Bin Sulayem, the Executive Chairman of Nakheel, had the opportunity to establish Al-Nakheel Properties. (United Arab Emirates)Al-Nakheel Properties is a real estate company headquartered in Dubai and operating in 87 countries around the globe earning as much as 70 Billion dollars in revenue. Nakheel specializes in creating land reclamation projects, which includes the Palm Islands, the Dubai Waterfront, and The World. Nakheel also works on residential projects and shopping projects including Jebel Ali Gardens, International City, Jumeirah Islands, Jumeirah Lake Towers, Dragon Mart, Ibn Battuta Mall and the Palm Trump International Hotel and Tower. (A Short History)The main projects that Nakheel worked on, including all the ones mentioned above, are projects started because of the government’s demands.

Prior to 2002 and before Nakheel was affiliated with the Dubai government, Nakheel was focusing on its own internal vision, which was like any other private company’s goal of making profit and increasing market share. After the government had the majority stake in Nakheel, the internal goal of Nakheel was transitioned into a new goal to aid Dubai in becoming the number one tourist destination. This was verified by Nakheel’s history section on their website, their history begins from 2002 not 1990, which was the year they were established.

(History)Sheikh Muhammad knew that a major tourist attraction is beautiful beaches, which Dubai had very few of. Rather than being discouraged by this and instead of pursuing other tourist attractions, Sheikh Muhammad decided to create his own beaches. He came up with the idea of creating the palms, a 3 man made islands shaped like palm trees.

He stated, “the project will enhance Dubai’s position on the global tourism map as efforts to diversify the emirate’s economy continue in the face of dwindling oil reserves.” The UAE as a whole has around a 100 years of oil reserves. Abu Dhabi, one of UAE’s states, has 94% of those reserves. The UAE government estimated Abu Dhabi’s oil production in 2010 to be 2.8 million barrels per day as opposed to Dubai’s production of only 0.2 million barrels per day.

Dubai’s oil reserves are declining and will be vanishing around 2016. (Oil and Natural Gas)With this decrease in oil reserves Dubai knew they had to start working on their project. It took Nakheel and Dubai World three years of research and planning, 42 consulting firms and over 50 studies to ensure The Palm’s feasibility, including traffic, population and business development. After this feasibility study had been conducted, the results showed that Nakheel had to globalize in order for Dubai to become the World’s top tourist destination. (Construction)There are two main reasons why Nakheel has chosen to globalize in order to achieve Dubai’s goal. The first reason it had to globalize is because it needed the expertise and the aid to create such a project.

The second reason is that it had to attract new markets and market Dubai to the world and potential tourists.Globalizing 1: Looking for Expertise and Top QualityDubai and the UAE are very small in size and in population and in company range. They have great minds however they don’t have enough of them to create such a project. Dubai had to go global and contract with, partner with, merge with and acquire foreign companies that would aid in making Dubai the world’s most attractive, unique, innovative, diversified and pioneering destination.In order to look at how and where Nakheel has globalized to increase their expertise we will look at Nakheel’s two main phases of creating the project, The Palm Islands. Nakheel had to create the island from scratch and this was done in two main phases which are 1) to create the land with dredging process and 2) to create the bridges, roads, buildings, beaches, resorts, and hotels.Phase one was the most challenging for Nakheel.

Many companies had done simple dredging projects but none had created such a project as The Palm Islands. The company that would conduct this project had to dredge the sea bed and use 80 million cubic meters of rock and sand fill to construct the islands, which took two years. Nakheel chose to contract with Malaysia’s Perkapalan Mesra for $270 million to build the first island and with China Railway Engineering Corporation, for the same price, to build the second island. Van Oord Dredging in the Netherlands and De Nul of Belgium were responsible for almost all the dredging on all three islands of The Palms. (Construction)Moreover, Nakheel had to find proper resources such as rock for the islands. The rock had to be brought from Bandar Abbas and Kish Island in Iran. Nakheel had to contract with another company to bring 13 million tones of rock in 14 months.

Phase one’s total cost was 12.3 billion US dollars, with approximately 40,000 workers, mostly from South Asia, involved in the construction process. Nakheel received financing from the Dubai Government, as well as local and international banks, such as Citigroup, Barclays and DIB, who loaned Nakheel 1.8 Billion dollars, to complete this phase. (Emerging Market)Phase two of the project was not as challenging as phase one but was certainly much more intensive.

To become the top tourist destination Nakheel had to find expert companies in building bridges, highways, roads, hotels, resorts, and beaches. Nakheel wanted to give its customers the best quality possible. In order to achieve that they contracted with international companies that would provide beaches and hotels, retail outlets to shop, residential buildings to live in, and entertainment such as golf courses and parks. (Construction)Nakheel had to make sure that there was good transportation. They decided to create a sub-sea tunnel to link as much as 20 hotels in the island.

The main contractor of the project was Taisei Corporation with Parsons De Leuw Cather as supervising consultants and Parsons Brinkerhoff as project managers. Al Naboodah was the civils subcontractor, Halcrow was the design subcontractor and the MEP subcontractor was Kinden. Nakheel has also decided to establish a monorail system which was created by Japanese contractors Marubeni Corporation, who engineered the system and Hitachi Ltd. who manufactured the system. (Monorail)In order for Dubai World to help Nakheel, they acquired hotels that consist of Atlantis, The One ; Only and Kerzner. Additionally, 25 of the top international hotel brands agreed to build their hotels on the palms, these include, Movenpick, Anantara, Fairmont, Radisson SAS, Hilton, Metropolitan, Trump Tower, Shangri La, Starwood, Marriot, Oberoi, Chedi, Taj Executive Resort and Spa, Disut, Kempinski, MGM Mirage (Audi) and Cracknell.

(Urban Infrastructure)Marvin Windows worked with KPMG to design a few malls inside the Palms. These malls included international retail outlets such as Marks ; Spencer, Arcadia, IBM, Gap, Virgin Group and Al-Shaya in Kuwait. Nakheel definitely did not forget its tourists, their main goal, and established residential villas.

Like the rest of the Palms real estate, the residential villas were created by international companies. The Swiss based Tgec Bright, an interior design company, built the Show Villas, and Shimizu Corporation, built the Marina Residences and town houses in Palm Jumeira. (Nakheel)As we can see from figure 1, Nakheel has sub-contracted, merged, acquired, and partnered with many experts in different fields in order to provide the best quality of tourist attractions. Globalization has aided Nakheel in gaining privileged access to resources and top brands.

Globalizing 2: Attracting Potential TouristsDubai’s estimated tourists were 5 million in 2002. Dubai’s goal is to attract 10 million more tourists to reach a total of 15 million. This was challenging for Nakheel since Dubai’s law did not allow foreigners to own property in Dubai. Many tourists, specially the rich that are being targeted, want to be able to own land on the Palms. In May 2002 the Dubai Crown Prince General Sheikh Mohammed bin Rashid Al Maktoum “issued a decree allowing foreigners to buy property freehold.” This decree gave Nakheel a new consumer market. In most of Nakheel’s older projects it was attracting local citizens. Nakheel was able to attract a wider marketplace and to do that it had to target a new consumer base.

(INTERVIEW)Nakheel marketed the Palms targeting high class rich people all over the world. Those rich people are the only ones who can afford taking a 5 hour flight, from Europe and a 20 hour flight, from the US and East Asia. The majority of Nakheel’s advertising occurs in online advertisement, magazines, press, and, most importantly, exhibitions. As Manal Shaheen, Nakheel’s director of sales, marketing and customer services said, “Cityscape is an excellent way to update the market on our projects, raise brand awareness, and offers good networking opportunities.” (Nakheel)More than just exhibitions and advertisements Nakheel had to motivate and attract the public in buying property and visiting the Palms. Nakheel has a vast amount of residential apartments, houses, villas and condos being built in the Palms. The residential part of the Palms was targeted towards both foreigners and locals.

Some apartments were created by Dubai owned companies with Arabic style houses while others were created by foreign companies with international styles to suit all sorts of people. Nakheel wanted to give every foreigner a perfect world. Nakheel has sub-contracted with hotels providing mid-century styles, artistic styles and ‘modern’ styles having one of the biggest water parks. Nakheel made sure that there is something for everyone on the Palms.There strategy was effective.

Nakheel sold all the residential apartments in only a couple of hours after the opening. Some of the Palms property buyers include celebrities such as David Beckham, Joe Cole, Ashley Cole, Michael Owen, Maria Sharapova, Bob Geldof, Brad Pitt and Angelina, Rukh Khan, Richard Bransun, Vijey Singh and Diana Ross. The Palms became one of the ten Wonders of the World bringing in global tourists to Dubai. (Dubai Super Star City) As shown in Figure 2, at least one person from each continent has visited or owns property in the Palms.In the past decade or so, globalization has had its influences on the new hub of the east and west, Dubai. Dubai has evidently proved itself being an emerging global city and one of the world’s major tourist hubs.

This is due to major attractions such as the palms, which was created by Nakheel. Nakheel was a critical player in the development of this international city. Although all the credit goes to Nakheel, we can never forget all the global companies that aid in Nakheel’s success.

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