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The shimmering coastline of Dubai’s tree-shaped Palm Jumeirah island is known for its posh apartments, glitzy hotels, and upscale restaurants—but the lights in this exclusive enclave, like much of the city, have started to dim.
That’s because Dubai’s economy, built on the hopes of globalization, was on thin ice long before the pandemic.
In 2018 and 2019, the image-conscience emirate had reportedly kept the lights on in some emptied skyscrapers and hotels to maintain its reputation as an “instagramable” destination.
“Through the medium-term, it could very well be touch-and-go for Dubai,” said Varsha Koduvayur, senior research analyst covering the Gulf states for Washington D.C.-based Foundation for Defense of Democracies. “The Covid shock will affect the leadership’s thinking and spur Dubai’s leaders to look towards building up other sectors that might (to the extent possible) be more pandemic-proof.”
Although Dubai seemed to have handled the chaos of Covid-19 well during the early months of the crisis, that quickly changed around New Year’s when tourists and locals hit the pubs and parties without face-masks or social distancing measures.
The city had welcomed international visitors too soon, with about 300,000 people traveling between the UAE and the U.K. in November and December alone. That’s when Dubai was accused by the global community of being a “super-spreader” of the virus abroad.
On February 1, the city took action to close all bars and pubs for the entire month and limit other activities amid rising coronavirus cases and an ongoing crash in oil prices.
The CEO of Dubai’s Tourism Authority did not respond to Skift’s request for comment in time for publishing.
“Dubai is in a different situation than that of Abu Dhabi, as Abu Dhabi can still rely on oil and gas revenues; which have supported Dubai and helped the emirate to bounce back after the financial crisis of 2008,” said Dean Mikkelsen, director of UAE-based Hannibal Global Insight, a political risk consultancy.
Before coronavirus brought global travel to a standstill, Dubai International Airport was one of the world’s busiest. This year, officials expect a difficult chapter ahead after passenger numbers slid 70 percent in 2020.
Dubai, home to long-haul carrier Emirates, now has its hopes pinned on vaccination rollouts.
“The UAE and Emirates are supporting the IATA version that indicates whether an individual has been vaccinated or not and is Covid-negative,” Mikkelsen told Skift.
But these measures will take time to implement, and would only allow some tourism from Europe, the U.K., or other developed nations.
This excludes travelers from regions that haven’t adopted digital health passports, such as Southeast Asia, Africa, or other parts of the Middle East — places that the majority of Dubai’s service sector employees call home.
“The vaccine has not been distributed equally across the world and many smaller or less wealthy nations have been left behind. This raises questions about much of the service-based market in Dubai, as many of the employees come from South Asian countries and may not be vaccinated,” said Mikkelsen.
Desperate times call for desperate measures
The UAE now faces a defining moment in history. Its leaders will be forced to make tough decisions amid intensifying economic rivalries in the Middle East, as well as growing pressure from a more socially conscious global community.
Read Skift’s take: 5 Middle East Travel Innovations Born Out of Pandemic and Fierce Rivalries
In 2020, Dubai’s population fell 8.4 percent — the steepest decline in the Gulf region — as many expatriate workers exited the country due to the pandemic’s negative impact on key employment sectors of tourism, aviation, hospitality, and retail.
Recognizing the need for reforms, the UAE announced a new citizenship scheme last month. The UAE passport, which is valuable when it comes to mobility, will be offered to select investors and professionals including “doctors, inventors, specialists, intellectuals, artists and their families.”
Foreigners can only be invited to apply by UAE royals or government officials.
“The UAE’s decision to enact some recent societal reforms, aimed at improving its attractiveness as an expat and business hub amidst growing competition from Riyadh for the same businesses, is also a good move … but it is still too restrictive,” Koduvayur told Skift.
“To keep its competitive edge, the UAE should seek to tap into its huge and talented expat pool and incentivize ways for these groups to create a more permanent presence in the UAE,” she added.
The UAE also signed the Abraham Accords with Israel in September, allowing for full normalization for the first time between the two nations. The move was seen as strategic since Israel is a competitor for the UAE in many ways — particularly when it comes to tourism, travel, and research and development (R&D).
Now Israel has become the world’s most unlikely country keeping tourism going in Dubai, with up to 50,000 Israelis visiting the emirate since last November.
Trouble on the home front
Long before the coronavirus pandemic, there was trouble in paradise.
Dubai’s economic growth had been steadily slowing since 2017, and job cuts were hitting the emirate’s expat workers — who make up about 90 percent of the 3.3 million population.
Hotel occupancy rates in the emirate were also shrinking, with revenues down by 15 percent in the first 10 months of 2019.
The exodus of high-paid senior expats and blue-collar workers had started chiseling away at spending in the consumer-driven economy. By then, the emirate had already invested about $7 billion towards construction costs for Expo 2020. The now postponed event was expected to bring in about 25 million visitors.
One of the Middle East’s most powerful leaders, UAE Vice President and Ruler of Dubai Mohammed bin Rashid Al Maktoum, had pledged many expo surprises, but even he couldn’t have predicted the economic onslaught that would bring his city to a standstill — nor did he plan for it.
With a strong PR machine under their command, Dubai’s rulers managed to keep much of that bad news under wraps, until the pandemic forced these issues to the surface.
The emirate also faces growing criticism amid reports of rights abuses, including failing to meet minimum standards for the elimination of human trafficking and limitations that still keep many women living below a glass ceiling.
Princess Latifa Al Maktoum, Sheikh Mohammed’s daughter, recently spoke against her father – who she said is holding her hostage in a Dubai villa. She has also accused him of forcibly kidnapping and disappearing her sister, Princess Shamsa.
“This will be Dubai’s biggest challenge,” Koduvayur told Skift. “The revelations about Princess Latifa and the growing public awareness over women’s abuses in the emirate will be hard to shake off.”
“Unless the emirate responds and adapts to these criticisms in positive ways — which, frankly, we have not yet seen — through the medium-term, Dubai’s undisputed position as the region’s tourism and business hub could very well be in jeopardy.”