Globalisation processes and responses to them have important consequences for the growth and development of cities. This, however, is not a uniform process. In addition to traditional factors such as geographic location, resource availability and comparative advantages the outcome at the regional and local level is highly path dependent on inherited social, economic and regulatory structures and relationships.
Haila (2000) notes that there are many different approaches to the study of globalisation and global cities. To mention but a few we can consider the works of Sassen (1991, 1994), Amin and Thrift (1995), Short and Kim (1999), Dicken (1998), Behrem and Rondinelli (1992), Castells (1996), Friedman and Wolff (1982), Hall (1966) and Knox (1995). However, important concepts, which emerged from the body of literature, are complementary functional activity and competition. As pointed out by Taylor (1997) global cities exhibit a hierarchical tendency. Forming networks, they engage in complementary activities; at the same time, they compete with each other to attract investments. A situation that has been succinctly described as "competitive co-operation" (Drbohlav and Sykora, 1997).
In 'The Global City' (1991) and 'Cities in a World Economy' (1994), Sassen used producer services (advertising, accountancy, legal services) to rank global cities and showed New York, London and Tokyo to be at the apex. These cities were shown to be functioning as highly concentrated command points in the organisation of the world economy. They were identified as key locations for finance and for specialist service firms, and were at the same time, sites of production of innovations. They also acted as markets for the products and innovations produced. In the 1980's, Tokyo was the exporter of capital, London the processing base for the capital, given its vast banking network and New York, the main receiver of the capital, the center for investment decision and for the production of innovations that could maximise profitability (Sassen, 1991).
At the regional level, cities can form functional city systems that seek to create synergies for increasing the competitive advantage of the region as a whole in the global economy. Lo and Marcotullio (2000) have, for example, noted the formation of such regional systems in Pacific Asia. Development of cross border growth corridors in this region, particularly between Singapore, Indonesia and Malaysia and between Hong Kong and Gunagdong province in China during the 1990s are perhaps the most clear examples of such functional city systems in action (Ho and So, 1997; Rimmer, 1994). Inspired by the experience in Pacific Asia, Parsa and Keivani (2002) demonstrate the high level of urban interaction and functional synergy between cities of UAE and south of Iran arguing for the formation of a growth corridor in the Persian Gulf region. Similarly, Drbohlav and Sykora (1997) have demonstrated the existence of an integrated system of cities, which compete and complement each other in the central European region leading to the greater comparative advantage of the region as a whole.
In this respect it is important to note that as pointed out by Ciampi (1996) competitiveness is not a 'zero-sum game'. Network functionality and competitive co-operation creates synergetic effects for a win-win situation. Success is often dependent on the ability to offer institutionalising processes to attract flows of investment and entrepreneur-ship and to offer a variety of external economies of sufficient scope and scale to business (Yeung, 1998; Amin and Thrift, 1995). Much depends on global/local interplay in terms of Trans National Corporations' (TNC) location requirements and institutional and infra-structural capacities for meeting such requirements.
Singapore is often quoted as an exemplary city to have successfully embedded its development strategy within the global economic circuit thus becoming a major regional/global head-quarter, financial and export service as well as manufacturing centre (Arun and Yap, 2000; Weder and Brunetti, 2000; Wong, 1999; Ho, 2000). The main UAE cities i.e., Abu Dhabi, Dubai and Sharjah, on the other hand, are among many urban regions in the developing countries that hope to emulate Singapore as an emerging global city. Indeed as Stanley (2001) notes Dubai is the most aggressive "aspiring city" in the Middle East and North Africa region pursuing this goal within its 20 year strategic development plan. A similar strategy now also underpins development efforts in Sharjah and Abu Dhabi in their attempts to find their own niche in the global economy. Although there have been a number of research examining the impact of globalisation processes on urban and regional development in various geographical areas including Singapore, there is a distinct lack of studies on the Middle Eastern Region particularly the UAE cities. These are in spite of the increasing prominence and role of these cities in the regional/global economy as emerging regional gateway and headquarter centres. In view of this, the following study delves into the very path that each of the subject cities has employed. It is an attempt to evaluate both the past development and the present and future capacity of their milieu, through an institutional study approach, to accomplish their respective 'development visions' and emerge as centres of the global supply chain. This particular study is the first of its kind to include these cities as part of a comparative study with an established regional global city.
THE INSTITUTIONAL APPROACH
The institutional approach has gained importance for analyzing the diversity of economic formations in different localities in recent years. Scholars have researched on the relations between economic activity and the forms of governance, and the relative balance between local and global dynamics (Amin, 1999; Cooke et al, 1998; Crouch et al, 2001; Storper, 1997).
To North (1990) institutions are 'rules of the game' in a society. Organisations, whether political, economic or social, behave and perform within a framework defined by institutions, which are regarded as both formal and informal rules. Formal rules are laws and regulations while the informal rules are norms, conventions, traditions and customs. Institutions were seen to be the principles found in acknowledged norms, something like the rules of behaviour (Healey, 1999; Powell and Dimaggio 1991).
A useful concept for our purposes is that of "institutional thickness" (Amin and Thrift, 1995). This is primarily predicated on a number of factors including the existence of a large number of public, private and non-governmental institutions, a high level of interactions between them and a structure of domination or coalition to ensure unity of action and perception. The most important and most difficult condition for developing institutional thickness, however, relates to creating a synergy and common sense of purpose that enhances the "capacity of places to develop, consolidate and transmit structures of representation, interaction and innovation" (Amin and Thrift, p106).
Thus, the institutional approach does not emphasise the presence of institutions per se but rather the process of institutionalisation - the institutionalising processes that both encourage and support diffused entrepreneurship - a recognised set of conduct, supports, and practices.
The methodological constructs underpinning of this research draws upon the institutional school of urban analysis. In essence this is an examination of rules, regulations, conventions and structures that shape processes and resultant interactions vis-à-vis the city's capacity for attracting and embedding international business. A body of recent work has utilised this approach for the study of urban development and change particularly in the context of global local interplay and inter-action (Keivani et al 2001; Weder and Brunetti 2000; Ho, 2000, Parsa et al 2000; Amin and Thrift 1995, Sykora 1994).
In evaluating institutional capacities in the studies a series of semi-structured interviews were conducted. These involved senior policy makers from different government departments and agencies concerned with economic and urban policy formulation, and implementation. Based on the work on world cities and global urban networks by Sassen (1991, 1994) and Beaverstock et al (1999) international private sector participants were drawn primarily from economic sectors that have been identified as being central to the economic globalisation process in terms of higher value added functions. To these must be added some firms from the more traditional sectors of comparative advantage in each case study city. Overall a total of 118 interviews were carried out in the four cities encompassing 15 different private categories. Table 1 shows the breakdown of these interviews according to each case study city.
Table 1: Categories and number of interviews conducted during the fieldwork
The questionnaires and the interview programme were designed to enable detailed exploration of perceptions and actual experiences of both public officials and international firms in respect of a range of institutional processes and capacities framing and facilitating the business environment in the studied cases. This paper however, concentrates on the general development vision and structures of institutional domination, co-ordination and accountability.
Figure 1: Location map of Singapore
Under strong state direction Singapore has passed through several stages of rapid export based economic development since its early post independence days as the low value added and labour intensive manufacturing base of south east Asia. From the early 1990's the strategy path was focused on high knowledge intensive companies, and one that entailed globalisation and regionalisation challenges. The development of the Singapore Science Park to cater to such facilities is one of the efforts to promote such businesses in Singapore. Also, there was realisation of the need to transfer resource dependant productions, which are land, labour and capital intensive, to developing zones that provide lower cost production, while fostering higher value resource rich production locally. As a result, there has been initiative by Singapore to further capitalise from these lower cost productions sites by developing technology and industrial parks in neighbouring countries and destinations. These were first implemented in the growth triangle set up between Singapore, Johore (Malaysia) and Riau (Indonesia) in the late 1980s. Similar concepts aiming at creating synergetic effects with other locations have now been extended as far as India, China and Vietnam.
At present, due to the synchronised deceleration in the global economy, Singapore has experienced a 9.4% shrink in total trade in 2001, as opposed to a 22.9% growth in 2000 (Trade Development Board Review 2001). Also, Singapore's highly export oriented economy's over reliance in the Electronics sector, which presently forms 66% of the non-oil domestic exports and 12% of the GDP which stood at about S$160 billion in 2000 (BBC News, 2002), has driven the city state into its worst recession in four decades. Recognising the deep impact of this over-reliance on the electronics sector, the development model is now being shifted towards diversified service groups such as the financial and business services, high-value production, knowledge based industries and since recent the life sciences and bio-technology. Deregulation of the financial markets is already evident with the steps taken by the Monetary Authority of Singapore, to allow foreign banks to open branches in Singapore. Such measures will become increasingly important in taking the city to its new model of market development.
Overall, however, the city state enjoys a sound economic foundation and has become a major world city in the Asia Pacific region. To date more than 5000 international companies operate in Singapore, with about half having regional operations.
The Economic Development Board (EDB) and the Trade Development Board (TDB) are the key drivers for taking Singapore in the regional and global marketplace. As the spearheads, each of these statutory bodies functions at attracting businesses through fiscal incentives, sound business policies and environment. The Singapore Economic Board (EDB) is the lead agency that plans and executes strategies to sustain Singapore as a compelling global hub for business and investment while TDB works on spreading the external wing through trade and investments. TDB also aids in internationalising the local companies. Together, the two boards work along with the other member boards such as the Products and Service Board, Singapore Tourism Board, Agency for Science, Technology and Research et al to foster business growth in Singapore.
With an evolving economy, institutions in Singapore developed focus groups to study and recommend the best approach to weathering future downturns and sustain the economic and social development. In May 1997, the Committee on Singapore's Competitiveness (CSC) was formed with a mandate to review and develop a path for Singapore's strive to become a globally competitive knowledge based economy. The CSC outlined eight key strategies to achieve the set goals:
The institutions acknowledge the renewed importance of developing a more resilient development model specifically due to the global economic downturn and political instabilities, coupled with the emergence of China into the global market. Prime Minister Goh Chok Tongs' National Rally Speech 2001 outlined the multiple challenges and development strategy that Singapore will need to undertake and presented the vision for Singapore. To take this vision further, as done in the past by the CSC, a new focus group, The Economic Review Committee (ERC) was established in October 2001 to address the emerging global and regional issues impacting Singapore's development strategy. The ERC comprises of both institutional and senior practitioners, with a mandate to evaluate and restructure the economic framework for Singapore and recommend a development strategy. Among other subjects, the committee will take into account issues such as further developing human capital, dealing with income disparities, improving entrepreneurial capabilities and creating a competitive edge in global and local service and technology industries. In a more turbulent economic scenario and with the prevailing changes in Asian economic balances, this committee has been given the task to aid Singapore ride the current downturn as well as to develop a resilient platform for future economic fluctuations. This is to be achieved by competing and complementing with emerging markets and also leveraging on the existing potentials of Singapore to become a global centre for business.
In this process of globalisation, the demographic balance of Singapore has also changed considerably. The total population growth increased from two million in 1970 to four million in 2000. The growth of Singapore and its open door policy is clearly reflected in the increased number of foreign workers that have chosen to work and reside in this city state and currently stands at about 20% of the total population.
United Arab Emirates
Figure 2: Location map of UAE and its main urban centres
The United Arab Emirates has also witnessed rapid economic growth and physical development since independence in 1971. Overall, GDP in UAE has increased from about 39 billion Dirhams in 1975 to over 241 billion in 2000 (Ministry of Planning Annual Statistics, 2001). In spite of the continuing importance of oil to the UAE economy, take for example the 6% decline in GDP in 1988 due to a reduction in oil prices, the country has made serious and successful attempts at diversification in both the service sector and manufacturing. Accordingly the share of these sectors has risen respectively from 22% and 3.8% in 1980 to 42% and 11.4% in 2000 (World Bank, 2002 and Ministry of Planning Annual Statistics, 2001). Taking into consideration the role of other sectors, including construction and agriculture, the non-oil sector grew to 160 billion Dirhams in 2000 thereby contributing to around 66% of total GDP in the country (Ministry of Planning Annual Statistics, 2001).
Of the seven Emirates comprising UAE we shall focus on the three largest. Abu Dhabi is by far the largest emirate with 83% of the total land area of UAE and its biggest oil producer, controlling more than 85% of the UAE's total oil output capacity and over 90% of its crude reserves. Not surprisingly, therefore, Abu Dhabi accounts for some 60% of the total GDP (White Page, 2002). At the same time Abu Dhabi accounts for about 47% of the total non-oil GDP primarily due to the heavy capital intensive petrochemical industries. This falls back to about 24%, 35% and 40% respectively in the trade, transport and financial sub-sectors (Ministry of Planning Annual Statistics, 2001).
Dubai, on the other hand, has almost depleted its oil reserves and instead has long relied on expanding its regional trade, tourist, business services and transport capacities. Overall Dubai contributes to about 25% of the total GDP in UAE (White Page, 2002). Its contribution in the Non-Oil GDP is about 35% in 2000. This is more so in the Trade and Transport sector, where 47.2% and 44.1% respectively of the GDP is drawn from Dubai. Finance and Insurance sector of Dubai accounts for 41.7% of the non-oil GDP, which clearly emulates the level of success it has achieved for the national economy in the non-oil sectors, primarily in the business services (Ministry of Planning Annual Statistics, 2001).
With only a 9% share of the country's total GDP Sharjah is clearly the more junior partner to the other two emirates (White Page, 2002). Yet Sharjah is an up and coming emirate with about 5% of oil and gas reserves in the UAE and an estimated 30% cost advantage over both Abu Dhabi and Dubai. This has resulted in an influx of largely small and medium size industries to this emirate. Its overall contribution to the UAE economy in the non-oil sectors stood at about 12% for the year 2000. The same figures for the trade, transport and finance sub-sectors respectively stood at 12%, 10% and 13% (Ministry of Planning Annual Statistics, 2001).
The overall institutional set up in the UAE is a two tier system comprising the federal level and individual emirate levels. The individual emirates, however, have a high degree of autonomy in their social and economic development planning and implementation set within an overall federal regulatory structure.
There are also local governments in each of the emirates, while each major urban centre has a Municipality for local affairs. There is however a great degree of interaction between the emirate level and city level functions in the different emirates. This is particularly the case in Dubai and Sharjah due to lack of other significant population centres outside their main capital cities. Respectively Dubai city and Sharjah city house 97% and 79% of their emirates populations giving them a total of 923,000 and 418,000 inhabitants (Ministry of Planning Annual Statistics, 2001). The city of Abu Dhabi on the other hand has a population of about 531,000 which is 47% of the total for the emirate. A distinctive feature of all UAE cities is the large ratio of expatriate residents comprising roughly 80% of the total population.
As absolute monarchies all social and economic development activities fall under the direct leadership of the rulers in each emirate. However, they have moved towards greater institutionalisation of their decision making process through creation of executive councils comprising the heads of all departments in Abu Dhabi and Sharjah and an informal "ideas" council in Dubai. The task is similar to that of a cabinet in considering proposals and approving proposals and presenting them to the ruler for final ratification. In terms of economic development Dubai and Sharjah have moved another step forward through the formation of Economic Development Departments charged with the specific task policy formulation and implementation in this arena. lack a specific organisation dedicated to economic development planning outside the executive council. This task is to some degree spread between the Chamber of Commerce, Abu Dhabi municipality and the Planning Department.
In spite of some differences the economic development strategies of all three emirates puts a major emphasis on positioning them to become regional centres in a range of service, trade and manufacturing functions. These can be summarized as revolving around two main axis:
As part of their efforts for achieving these objectives all three emirates have engaged in rapid infrastructure development including commercial and retail developments, seaports, airports and establishment of free zones. This is exemplified by the case of Dubai with the early establishment of the Jebel Ali Free Zone in 1985, now the largest free zone in the entire region and the expansion of its airport to become the main regional transport hub handling more than 12 million passengers in 2000. The most recent initiative has been launching the Dubai Technology, Electronic Commerce and Media Free Zone -TECOM, comprising the Dubai Internet City (DIC), Dubai Ideas Oasis and Dubai Media City (DMC). This is aimed at making Dubai the e-commerce, internet and media capital of the Middle East. Abu Dhabi and Sharjah have followed suit in some of these areas primarily following the model set by the Dubai in respect of free zone development.
In addition to differences in the pace and timing of infrastructure development other differences stem from their institutional milieu, development history and emphasis. With its vast financial resources and oil revenue as well as being the political center of UAE Abu Dhabi's natural focus is its petrochemical industry. Dubai, on the other hand, has a strong tradition in trade and service functions and highly focused on economic growth while Sharjah has maintained a strong cultural Islamic and educational focus in parallel to its economic development strategy.
From an institutional perspective the question for us is how have these institutional differences impacted the pursuit of economic development strategies in these cities? We answer this question by examining the main elements of institutional thickness in the subject cities from the perspective of both international private and public respondents. The analysis compares not only the situation within UAE but also between them and that of Singapore which acts more as a bench mark of an established successful regional world city.
PRIMARY DATA ANALYSIS
Prior to engaging in the discussion of the research findings it is important to reiterate the different context of the studied cases. Previous discussion has distinguished different functions and scale of activity in the global economy between Singapore and UAE on the one hand and between the cities in UAE on the other. It is clearly evident that Singapore is a well established regional world city whereas the cities of UAE are at present functioning at a more limited regional scale. The same difference is also apparent between the three cities in UAE with the leading regional position taken by Dubai and Abu Dhabi and a lesser extent Sharjah. Our interview results, therefore, are inevitably shaped by the expectations of respondents from their perceived overall regional/global function of the cities concerned. As such the important issue for our work is the basic principles derived from the results rather than a mechanistic comparison of percentage responses.
Getting the Vision Right
The section on institutional analysis has highlighted the fundamental influence of a clear economic development vision or strategy on the competitive position of cities within the global economy. Indeed, it is only through a clearly defined, intelligently targeted, and well implemented development strategy that comparative advantages are fully utilised, one dare say even created, to gain a competitive advantage in the global market place. In terms of international investors their perceptions and understanding of such a vision forms a crucial part in enhancing investor confidence, or lack of, in viability of future investment and economic activity, be it inward direct investment or merely location of local or regional offices, in the city concerned.
In so far as the existence of a grand development vision in the studied cities is concerned there was unanimity of perception among all of interviewed actors that an overall development strategy was guiding development activity in all four cities. Perceptions on the degree of its coherency, effectiveness and institutional awareness of such a vision, however, varied considerably between the studies cases.
In Singapore there was a clear awareness among all private and public respondents as to the direction of the city's development trajectory and the overall methods by which it wants to achieve this. This concerted response is evidence enough of the awareness level that the government initiates in the business community and its statutory boards, so as to allow each of the organisations to plan future actions. Also, public respondents indicated that this vision, in part or whole, has been reiterated in multiple documents and speeches by the respective public figures. The cohesive political structure of Singapore is attributed much of the credit for the formation of this transparent and path detailed vision. World Competitive Yearbook 2001, where Singapore is ranked #1 for Government transparency and efficiency (Ministry of Trade and Industry, 2001), is recognition of the same.
As for the government role in Singapore market dynamics, it is seen as both an advantage and a disadvantage. As an advantage, it is seen as a security that businesses perceive in conducting their operations and arriving at investment decisions in this region. On the other hand, there is also a converse view that the government of a global city requires to be an enabler of business and not the principal visionary for the same, stating that a free market approach will be more beneficial in the long run. As noted by Lam (2000) there is acknowledgement of excessive regulation and public intervention in Singapore as signified by moves towards reducing direct public involvement in the economy and greater emphasis on partnerships with both business and labour since the early 1980's. The move towards greater liberalisation of the economy is driven further by political, economic and social imperatives in terms of greater demands for plurality and public participation as well as Singapore's desire for overtaking Hong Kong as the regional financial centre in Pacific Asia. Nevertheless, as Lam's (2000) Singapore-Hong Kong comparison highlights laissez-faire free market approach is no panacea either with Hong Kong being forced to increasingly adopt interventionist's policies in the recent decade due to economic necessity for supporting and revitalising its economy post 1997 financial crisis.
The situation in the UAE cities, however, is somewhat less clear cut. In Abu Dhabi, for example, we find it surprising that in spite of a seemingly well formulated and documented strategy practically all of the interviewed private respondents while being aware of existence of a formal strategy were ignorant of its main focus or objectives. This is exemplified by the fact that some 74% of international private respondents allocated a lower moderate to very low ranking to the city's marketing strategy. What is perhaps even more surprising is that even the vast majority of the public respondents were also largely unaware of the main outlines of the economic development strategy. Admittedly, most of our public respondents were not directly involved in economic/development planning but the very fact that they seem to be unaware of the main elements of the development strategy is indicative of a serious failure of communication across the institutional structure in Abu Dhabi.
Dubai, on the other hand fares much better. Similar to Abu Dhabi it has a formally defined development vision and strategy but this is much better communicated and understood both in the business community and the public institutional structure. Similar to Singapore there is it seems a much better sense of common purpose towards a clearly focused objective. First and foremost Dubai sees itself as a regional economic hub with the goal of full independence from oil by 2010 and attaining "developed economy status" by 2030. In the words one international respondent "if its good for business Dubai will do it, if it's not good for business then it will not."
The results of the interview programme highlight the focus of Dubai on economic development and its success to date both in terms of promotion and implementation of its vision. In this respect there was unanimous agreement and awareness among the interviewed respondents as to the main elements of Dubai's vision as well as praise for their achievements thus far. This was particularly the case in respect of making Dubai a regional hub in air transport, shipping and trade and the city's more recent emphasis on the development of tourism, IT services, and HQ and export service functions. Here Dubai was perceived to have done particularly well in creating the necessary infrastructure and milieu for these sectors to flourish and enable it to establish itself as the regional base for international firms to provide a range of services to the neighbouring countries and the greater Middle East.
More than any other city in UAE Dubai is perceived as an open, tolerant and cosmopolitan city. As such while restricting and regulating certain activities such as nominally limiting sale of alcohol to non-Muslim permit holders, there is a much more liberal attitude to social behaviour and life style choices. This was seen as highly important for Dubai's economic position. As noted by one respondent "life style choices are becoming very important for international business." This supports conclusions reached by various researches on location decisions of international firms particularly for regional HQ operations (see for example Ho, 2000). Overall, therefore, coupled with its infrastructure base and specific development projects for facilitating and supporting different sectors, e.g., Dubai Internet City, Media city, Jebel Ali Free Zone, etc, the city was seen as having created a highly conducive business environment.
The main concerns with respect to Dubai's vision were targeted at certain institutional aspects that were seen as limiting the city's capacities in achieving its final objectives in terms of establishing a regional world city for commercial hub or high technology research and development activity. These concerns will be discussed later in the analysis. At the same time, however, Dubai is to some degree also a victim of its own success with general expectation running far ahead of its own planned objectives. In so far as the higher end of research and development is concerned, for example, our interviews show that concurrent to aggressive promotion of high tech sectors there is a highly pragmatic and stepped approach in terms of attaining the city's final objectives. In the words of one top public official "Dubai at present excels at the lower end of the value chain. Our intention is to go a little higher. We are not intending to fit in at the higher end of research and development but there will be a role for us. Dubai Internet City has [major firms like] Microsoft and Oracle. At present they are in distribution and marketing but we hope that in the future they will move to customised areas of development like for example Arabic language."
This brings us to perceptions of Sharjah's development strategy. In so far as the economic aspect of this vision is concerned it is highly significant that 90% of international private respondents expressed concerns as to its clarity or effective implementation. These revolved around three main factors:
In respect of the first issue there is a degree of acknowledgement from a number of public sector respondents in Sharjah that in the past the City's economic vision either in general or on specific issues such as tourism had not been promoted as well as it could have been. This is particularly the case when comparing the situation to Dubai. As acknowledged by private respondents, however, the situation has been improving in recent times with the appointment of more dynamic and highly educated younger generation of managers and technocrats in the different departments. Nevertheless, overall there seems to be a need for adoption of a more aggressive city marketing campaign based on its economic vision both within Sharjah and on the regional and even international scale.
With respect to the second area of concern our interview results indicate that in so far as the higher echelons of public managers are concerned there is, on the whole, a clear understanding of the city's economic objectives. Perceptions of lack of ambiguity and different interpretation, in this regard therefore, may be partly explained by the rather informal nature of the economic strategy and failure to transmit a clear understanding of it further down the hierarchy. To a certain degree the work involved in producing a more formal document, which is lacking at present, setting out Sharjah's medium to long term development vision and objectives would assist in this process.
The third issue relates to the concern of Sharjah authorities for preserving their culture and social values in the face of global influences. This is a legitimate concern and an age old dilemma which has gained particular resonance in the current context due to the increasing pace of globalisation tendencies. The question is how to tackle the problem without killing the goose that lays the golden egg.
In respect of tourism Sharjah has responded to this dilemma by promoting an alternative form of tourism based on culture and heritage. Hence, there has been investment in museums and restoration of heritage sites. As part of this they are targeting specific markets particularly within the region as well as niche markets in Europe. There is certainly great merit in developing niche markets. Inevitably, however, such a focus reduces the scope for developing mass leisure tourism. A sector that Sharjah is well placed to develop much more than it has done so far.
Attracting international capital investment is rather more problematic. Sharjah has the comparative advantage of its strategic location in close proximity to Dubai yet much lower business costs of up to 30% particularly in terms of property and manufacturing production costs. In addition the establishment of well serviced free zones and a well developed infrastructure capacity have provided additional incentives for attracting international investors. As a result some international firms particularly cost conscious regional firms have located in Sharjah as their base for the entire region. At the same time Sharjah's SAIF free zone has also been successful in attracting a large number of small to medium sized firms, particularly from the Indian subcontinent. As noted earlier, however, in addition to location and economic incentives quality of life both in terms of physical surrounding and general satisfaction of living and working environment is a crucial element to long term success in attracting and maintaining investors as a place of choice rather than default. This is particularly relevant to regional HQ and producer service functions and is clearly indicated in concerns regarding social restrictions and uncertainty on future rules and regulations by such firms.
Sharjah in fact prides itself as being a place with family values which is seen by public respondents as a positive element in attracting international investors. This was acknowledged by most international respondents and certainly formed a consideration by some of them for deciding to live in Sharjah but not for locating their businesses there. Even then while most international respondents regarded Sharjah as a relatively tolerant and cosmopolitan city suitable for their family requirements practically all of them expressed concerns as to future developments. An example of this was given as the recent introduction of the "decency code". In reality this code merely urges more considerate dress codes and public behaviour in view of perceived excesses from a certain section of international visitors to the city. The coinciding of the interviews and the introduction of the decency code may have to some degree influenced the responses. Nevertheless, a mindset has been created among the interviewed private respondents that further similar laws may be introduced in the future that will impact on their living and working culture. Moreover, as was pointed out by a few international respondents modern business relies on a great deal of networking and socialising which itself requires its own space and facilities in the form of top quality hotels, business clubs, restaurants, cafes, etc. Overall there was a perception of shortage of such facilities in Sharjah leading most firms to conduct their corporate hospitality in Dubai. This issue is being partly tackled through plans for construction of new international hotels as well as development of the corniche.
The point of this debate is not to reject the validity of the efforts for preserving local cultural and social values. Most societies are to varying degrees faced with this dilemma which must be resolved on the basis of local needs and priorities. From a developmental point of view, however, what is important is to reach the right balance between what is deemed to be necessary for preservation of local culture and that necessary for economic development in the context of the global economy. In this respect there is a need for greater consideration of the interaction between, and mutual impact of, social and economic policies in order to avoid unnecessary conflict and fully utilise developmental potentials towards achieving desired objectives.
Dealing with Competition
Our interview results reaffirmed the fact that Singapore faces serious regional competition from Hong Kong, Shanghai and Sydney in a range of functions. As a result a defining characteristic of the Singaporean development strategy has been its initiatives to regional create economic synergies starting with its immediate neighbours in the late 1980s and now being expanded to city regions in countries as far a field as India, China and Vietnam.
The situation in the studied UAE cities is in sharp contrast to that of Singapore. Here both international private and public respondents noted the solitary "go for it alone" attitude of the authorities in all three emirates until now. Clearly differences in regional conditions and capacities have partly led to this approach. In the first instance, the cities of UAE are in a highly privileged position in terms of lack of immediate comparable competition in the region. Indeed, there was general agreement among all international respondents that non of the cities in the region can offer a serious challenge to them in respect of the combined assets of political stability, excellent infrastructure capacities and high quality and tolerant living environments. Secondly, Growth corridors and inter-state synergetic partnerships in Pacific Asia would not have been possible without resolving political differences and the opening up of China during the 1980s. Regional political and economic development in the Middle Eastern region must similarly reach a stage where mutual economic interests take precedence over narrower political divisions and thus allow such synergies to be realistically contemplated.
Regional instability, however, can only explain part of the problem. The most logical place to look for synergetic corridors must surely be within UAE in the first place and the GCC in the second. It is interesting to note that in the eyes of all international private respondents both in Dubai and Sharjah, for example, these two cities were considered as one urban conurbation. Many international respondents pointed to a symbiotic relationship between Dubai and Sharjah whereby each city was providing an important functional service for the success of the other. Sharjah, therefore, was seen as providing an important support function to commercial activity in Dubai due to its lower property and living costs, thereby allowing a more affordable location for housing large sections of expatriate residents who were working in Dubai. This is reflected in the morning peak hour traffic (7-8 A.M) between Sharjah and Dubai which stood at 12,500 vehicles according to a study conducted in 2001 compared to 4,700 vehicles in the opposite direction (Yalamarty and Bin Butti, 2002). The rate of growth of vehicular traffic between the two cities during the period 1997 to 2001 stood at 5.8% per annum. In this respect the more peaceful and family oriented nature of life in Sharjah was deemed particularly attractive to Asian and Arab expatriate residents who work in Dubai. Similarly, cheaper commercial offices and comparable infrastructural services allowed profitable operation of many firms out of Sharjah whose client base were largely in Dubai and/or the wider region. At the same time Sharjah is seen as offering unrivalled higher educational facilities to both local and foreign residents of Dubai as well as other emirates. Overall, therefore, the interconnection between the two cities provides a choice of living and working environments and facilities which creates a stronger competitive position for the Dubai-Sharjah axis in terms of regional competition for attracting international business. This is exemplified by the comment of the MD of an international Engineering firm with their regional HQ in Sharjah who stated "we feel we are in both Sharjah and Dubai at one and the same time."
In spite of such close proximity and interconnections there is, however, a complete lack of a conscious planning effort at co-ordination or synergy creation between the two cities. Public attitude in this regard is represented by one senior public respondent in Dubai who stated "it is better to leave this to the market forces and allow the market to decide." Clearly one can not buck the market particularly in respect of international investment. However, the Singaporean experience does suggest that there is much to be gained by building on mutual and complementary areas of strength and directing the market to the benefit of all concerned.
Institutionalisation of the Development Strategy
If markets are global, so must be the regulations and institutions that govern them. Also if the vision is to be materialized, there needs to be a synergy between the same and the laws and regulations that go with it.
In Singapore, the institutions are said to be adequately focused on each aspect of the economy and converge as a focus group in the event of any restructuring or new projects. This fluid institutional framework has enabled them to be more resilient and cohesive in approach when dealing with inadvertent economic events. In these, the Economic Development Board (EDB) spearheads the role of marketing, sustaining and developing further the competitiveness of Singapore. There is recognition in the private sector for EDB as an effective intermediary between them and the government.
The perceptions of the respondents in the context of the cities of UAE show a mixed result. In the case of Abu Dhabi we are faced with the limitation that the responses must be qualified to general perceptions on the relationship between the institutional set up and a unified development vision, which all respondents accepted existed in Abu Dhabi in spite of the fact that they were not aware of its general principles. Moreover, given their lack of knowledge of the development strategy they were not able to expand on their views in any great detail in discussions.
Taking in to consideration the above qualification we can still draw valuable lessons from their views on the institutional set up vis-à-vis their international business activity in Abu Dhabi and their general understanding with respect to improving Abu Dhabi's regional and international competitive position. In this respect only 38% of the respondents regarded the overall institutional set up to be adequate. At the same time 52% of international respondents considered the institutional set up could be improved in various aspects. These concerns can be summarised in to three main areas dealing with:
These concerns, however, were not shared by public respondents all of whom regarded the overall institutional set up to be very good in terms of Abu Dhabi's future development or international business activity.
The situation in Dubai and Sharjah is some what similar to Singapore in that international respondents in the main considered that the overall institutional set up was adequate for implementing their economic development strategies. However, several issues were raised in Dubai that are worth noting and in fact applicable in UAE in general:
Many respondents pointed to shortcomings in terms of federal laws and regulations which were seen as hampering Dubai's vision in creating a truly global and cosmopolitan city.
Several respondents pointed to problems of human resources in developing institutional back up to decision making and implementation processes. Often, it was argued, the entire processes depend on 2-3 key people whose absence could cause serious problems. Undoubtedly, the organic and personal nature of decision making and implementation has proved highly effective in Dubai as evidenced by the city's economic dynamism and its imaginative responses to the global economic challenge. This point was accepted by these same respondents. Nevertheless, it was argued that the scale of development was now reaching the point where it was getting too large for it to be effectively managed through personal and organic methods. Therefore, there was a danger of lack of institutional continuity particularly if key individuals were lost. It was agreed, however, that the institutionalisation process had been underway in Dubai for some time and the situation was improving slowly. Other factors related to improving the culture of service delivery and attention to detail.
Finally, in terms of specific organisations several respondents pointed out that the city lacked a proper stock exchange and an Asset Management Company to look after public investments. These issues, particularly lack of stock exchange, can be of major importance to Dubai's vision as a regional financial centre. At present the stock exchange is seen to be in its infantile stages operating on a small scale, insufficient regulatory set up and a high degree of insider trading. This issue is in fact now being tackled by Dubai authorities with plans for large scale investment for developing and expanding its stock exchange to fill in the time gap between eastern and western markets. The development of a sound financial market could relate to high volume trading given the strategic time zone of Dubai, since it falls between the western markets (the primary investors) and the Asian market (emerging markets). Also, its development may lead to larger financial services and secondary markets for financial products for both local and foreign investors and allow for a more active participation of the global investor community.
As far as Dubai is concerned these concerns were, by and large, corroborated by the majority of public respondents. It was accepted that federal laws were in some instances hampering the City's capacities for effective responses to changed economic situation. It was argued, therefore, that there was a need for faster development of federal laws and regulations to cope with new economic situations. Moreover, there was also recognition of the need to improve institutional capacities and service delivery. As one senior official noted "the overall institutional set up is adequate. However, there are areas that need to be improved. We need to have clearer task specification and description. Responsibility should be distributed to avoid duplication of tasks"
This brings us to structures of domination and co-ordination between different public institutions. This is deemed to be essential to ensure that the vision is implemented in a concerted approach. In respect of the former we consider the degree to which the vision is perceived to actually guide rules and regulations, extent of institutional awareness and compliance with it. What emerges from table 2 is a strong structure of domination in the case of Singapore and Dubai in all three aspects with practically all respondents allocating a frequently to always ranking. Abu Dhabi and Sharjah, however, are perceived as having relatively weaker structures of domination. In Abu Dhabi a significant minority of respectively 37%, 47% and 45% of respondents allocated a sometimes to seldom ranking to these factors. In Sharjah only the first two factors were perceived as relatively weak by respectively 26% and 47% of international respondents.
In the case of Abu Dhabi lack of awareness of the main principles of the development vision may partly explain the relatively lower rankings by the private respondents. However, this issue is itself a result of the failure of public institutions to communicate the vision to the business community or horizontally to the interviewed public institutions. Indeed, the very fact that most public respondents were themselves unable to expand on the main principles of Abu Dhabi development vision is itself corroborating evidence for the more critical perceptions of the international private respondents. Clearly, more attention must be paid to these issues particularly in terms of raising both public and private awareness of the development strategy that would to a large degree rectify the situation in other aspects. A first step towards such a development would be creating a unified and dynamic public entity with sufficient focus and competence to direct and co-ordinate all activities related to economic development similar to the tasks performed by the Economic Development Department in the other three examined cities.
Sharjah in fact does much better as 75% and 94% of private respondents respectively perceived laws and regulations as being largely set within the parameters of the overall development vision and a high degree of compliance with the strategy by public officials once they are aware of the strategy. The main problem it seems lies in the awareness of public officials where 47% of the respondents gave rankings indicating that they perceived public officials were not sufficiently aware of the economic development vision of the city. Similar to Abu Dhabi this takes us to the issue of horizontal and vertical communication of the strategy which was discussed previously.
Table 2: International private perceptions on institutional structures of domination
Figure 3: International private perceptions on institutional structures of domination showing the cumulative result of the three highest rankings
A related factor to the structure of domination is inter-institutional co-ordination. As table 3 illustrates, both Singapore and Dubai score very highly with 89% and 86% of international respondents respectively, giving them higher moderate to very high ranking. This is followed by Abu Dhabi with 62% and Sharjah with about 48%. The particularly high level of perceived co-ordination in Singapore is emphasised by its high to very high scores from 66% of the respondents.
Table 3: International private perceptions on inter-institutional co-ordination
Figure 4: International private perceptions on institutional co-ordination showing the cumulative result of the three highest rankings
In Singapore examples were cited where institutions converge on projects wherein the outcome had an impact on multiple organisations, e.g. the Concept Plan, which has inputs from JTC, HDB, National Parks Board, Land Office and URA, to name a few. This exhibits the recognition in the institutions the need for concerted efforts for multi-disciplinary projects. Other projects such as tourism development initiatives have also seen focus groups being formed from multiple institutions.
It was further established that a new public organisation called Singapore Business Federation is due to be formed in the coming year, which is aimed at catering to the concerns of the local and international businesses in Singapore. This proactive approach of formulating focus groups to service the business environment is viewed by the industry as a positive quality of the public sector.
At a more micro-level, an example cited in favour of this institutional co-ordination was the concept of 'fire fly'. As a 'fire fly', a personnel from one ministry will move to another ministry to enhance his/ her exposure to the functioning of a different institution and study their respective policies. This is seen as an effective and a co-ordinated effort initiated by the institutions to develop the civil servants' knowledge awareness on efficient and holistic public body management.
Public respondents in Abu Dhabi and Sharjah in the main did not share the views of private respondents. In Sharjah, however public respondents accepted that prior to the setting up of the executive council in 1998 there was a degree of confusion and lack of co-ordination between different departments. Furthermore, there was recognition by some public officials for wider public involvement in vision formulation and dissemination. In so far as the higher management levels are concerned their view on a high level of co-ordination is at least in part corroborated by the results of the public interviews. As noted earlier, the problem therefore must be partially sought in greater clarification of some aspects of the strategy at the higher levels, greater promotion of the economic strategy as a whole at the lower levels as well as teething problems of consolidation of a recently established co-ordinating body. This view is to some degree shared by the private respondents many of whom commented on the greater dynamism and efforts of the younger generation of policy makers and public managers in driving forward the economic vision and formulating and implementing supportive policies. This is reflected in the recent formation of the service committee to provide a one stop shop for addressing business requirements and recognition by the Economic Development Department of the need for setting up a specific Industrial Planning Corporation which would actively encourage industrial investment through joint venture incentives.
As table 4 indicates in respect of co-ordination, public respondents in Singapore and Dubai had a much more critical view of their own performance. In Singapore they are in fact more critical than private ones. In Dubai, public officials specifically acknowledged the need for improving cross functional understanding and communication within and between public institutions. It was noted that at the level of heads of department there was a clear understanding of the vision and the required implementation policies however there was a need for greater communication to achieve the necessary co-ordination of activities at the lower levels.
In both cities, however, these concerns reflected more the higher expectations of international investors and the critical attitude and desire of the public officials for greater efficiency and improvement of service delivery rather than a perception of inadequate co-ordination per se.
Table 4: Public perceptions on institutional co-ordination
Figure 5: Public perceptions on institutional co-ordination showing the cumulative result of the three highest rankings
Stability of Business Environment
A further measure of institutional capacities and economic competitiveness of cities for attracting and embedding international investment must be sought in the stability of its economic and investment environment. Business decisions are based on the stability of the policies and laws within which organisations need to operate. These policies are essential for the long term planning than multi-national companies conduct before entering a market.
Table 5 shows that Singapore scores very highly with about 97% of the private respondents regarding major changes in laws and policies to be fairly to highly predictable. The cities of UAE also score relatively well however a minority of between 24% and 42% regard changes in laws in these cities to be unpredictable. In all three cities a large part of this was due to concerns in changes in federal labour laws which formed a major problematic issue for international business in these areas. In the case of Sharjah an added factor are concerns related to changes in social regulations which were discussed in previous sections. While not directly related to economic and business issues they have certainly created a perception of greater regulatory uncertainty that also impacts on the economic sphere.
Table 5: International private perceptions on predictability of major policy changes
Figure 6: International private perceptions on stability of policy showing the cumulative result of the three highest rankings
A related issue to stability and predictability of policy framework relates to interaction between public decision makers and private business for meeting business concerns and refining policy development and implementation. In this respect table 6 shows that Singapore scores very highly with international private respondents with 83% giving it a frequently to always ranking. Interestingly, this did not detract in any way in the accountability of international business itself to public scrutiny. In fact many private firms stated that in Singapore private organisations are accountable to the public bodies rather than the other way around. However, most were quick to add that in case of any major changes, the public institutions kept them informed and therefore a fair degree of accountability in that sense was available to them.
In UAE the situation is somewhat different. In these cities while the majority regard the authorities to largely take account of their concerns a significant minority of between 69% and 36% give a sometimes to never ranking. This needs greater expansion as the situation in each city is rather different.
In Abu Dhabi further discussions in fact revealed a much higher degree of dissatisfaction with government/private interaction and consultation than that indicated in table 6. The general view of respondents across the range of firms, with the exception of one, was that public-private consultation was very poor in Abu Dhabi with international private firms in general facing a "take it or leave it" situation with very little room for negotiation. This is exemplified by the fact that 17 out of 21 firms interviewed or 81% could not identify any mechanism through which they actually did interact or consult with government in terms of business laws/policies/regulations etc. The exception to this were seen to be situations where certain firms in specific sectors, such as defence or major petrochemical industries, were specifically targeted, in which case the government was seen to be very pro-active in having a close inter-active co-operation with them at all levels.
In Dubai, further discussion shows that these firms in the main regarded the authorities to listen to international private concerns, however, they perceived little action coming from such listening exercises. To this must be added some concerns as to a lower level of interaction at the more junior levels while it was accepted that there is a high degree of interaction at the more senior levels. Overall, however, most firms accepted that the situation in recent years has greatly improved with the Economic Development Department taking several initiatives to enhance communication and interaction between firms.
Sharjah seems to have fared worst than the others with 69% of respondents giving it a sometimes to never ranking. Overall, the perception was that while the authorities are active in many areas to facilitate business activity they are not much open to views expressed by the business community itself such that even if they listen they do not act on it.
Table 6: Private and Public perceptions on public accountability to international private requirements
Figure 7: International private perceptions on public accountability to international private requirement showing the cumulative result of the three highest rankings
Table 6 also indicates that in so far as UAE cities are concerned there is clearly a conflict of view between public and private perception and experience on the quality of level interaction between the two sides.
Clearly, one can not expect public officials to act on every whim of individual private investors. However, as the Singapore example illustrates improving interaction and participation of private firms in policy development and implementation actually increases their own accountability to the public sector. In this respect the results in Dubai and Sharjah is rather puzzling as discussions with public officials in both cities indicated a serious commitment to operating an open door policy and taking on board private sector concerns. In addition a majority of the interviewed private respondents had engaged in some form of interaction with public authorities with over 60% in both cities citing personal contact as the most effective means of interaction. The problem, therefore, may be largely overcome by the adoption of a more proactive information campaign by the related public authorities. This can include active promotion and raising awareness within the international business community and public institutions through greater use of existing channels of communication as well as adopting new methods such as regular surveys of business opinion and issues of concern. In Abu Dhabi, however, the results is not only indicative of the need for greater communication but also a fundamental change in public attitude towards interaction with international private business from selective interaction to a more general pro-business attitude.
The most important message emanating from this work is to reconfirm the central role of institutions in economic development and competitive position of cities in the world economy. In Singapore a clear definition and openness of the intended goals for the country along with the initiatives that is made available to both public and private organisations through a focused, harmonised, transparent and accountable institutional structure has allowed the regulations and business markets to align their interests. This unification has resulted in Singapore attaining immense growth and global recognition.
Active feedback with the international business in developing policies has allowed businesses to realign their respective objectives, thereby avoiding shocks and increasing adaptability. This two fold advantage of effective implementation and continuous dialogue on policies is set to be taken further with the establishment of the Singapore Business Federation, whose primary mandate is to cater to the business community in Singapore. Notably, the responses from public and private organisations bore similarities that reflected the transparency and openness in the business culture. This is one of the keys to a successful city, where interests and aspiration of the business community are in line with the institutions and vice versa.
The cities of UAE have successfully exploited their positions as islands of stability in a region characterised by conflict and instability during the past two decades. Thus becoming the choice location for most firms wishing to establish a regional base in the Middle East as well as an upcoming tourist industry. The analysis has shown, however, their long term success and further growth as regional centres for higher value added functions is dependent on addressing certain institutional concerns/issues highlighted in this paper.
Dubai is clearly the most dynamic and institutionally most developed of the three examined cities. Similar to Singapore it has a focused economic vision built around its traditional role as the trade and transport hub of the middle east which it now wants to expand to regional higher value added functions in corporate and IT services, niche research and development activity and tourism. There is in addition a much better sense of common purpose and a higher level of co-ordination between the different institutions. There are, however, issues that must be tackled in terms of greater harmonisation of objectives and implementation, particularly at the lower levels and developing more effective feedback mechanisms between the public authorities and international private business.
Abu Dhabi is also following a similar development strategy but with a greater focus on the development of capital intensive petro-chemical industries and services. Interestingly, however, while it is in fact financially much more powerful than Dubai and has the advantage of being the political centre it is perceived by international respondents as having the weakest institutional structure. This stems from a range of issues from a lack of a unified and clearly mandated entity for formulating and implementing its development strategy to a lack of transparency and feedback with international business with the exception of a select number of chosen firms. The comparison of Abu Dhabi and Dubai clearly highlights the importance of institutional processes to the competitive position of cities in the global economy. Abu Dhabi's immense wealth and capital status will undoubtedly make it attractive to a large number of international firms wishing to exploit the local market. However, with the exception of areas of strong comparative advantage, e.g., oil and petroleum, its position as a regional centre of operations in the greater regional economy remains doubtful given current perceptions of its institutional milieu.
Sharjah has a much smaller economy than the other two cities in UAE. By definition it has more modest objectives in terms of attracting international investment and a greater focus on small and medium manufacturing. This, however, does not preclude its aspirations in other sectors including a share of the higher value added sectors in HQ and service sectors and knowledge based industries. Similar to Abu Dhabi but to a lesser degree Sharjah suffers from a lack of effective communication of its economic development strategy. However, the most important area of specific concern stems from an imbalance between its social and economic objectives. Sharjah is in a unique position to exploit its close proximity to Dubai and expand on its support role for the latter without having to make the same degree of direct infrastructure investment. In time and as part of the same developmental corridor Sharjah can become a major centre for international business activity in its own right. However, much will be dependent on creating synergies with Dubai and resolving the current tension between its economic and social objectives in a manner that satisfies the quality of life and anxieties of international business firms and their personnel.
This brings us to a major issue of concern that relates to the go it alone attitude evident in all three cities. The Singaporean example has highlighted the benefits of creating synergies for full utilisation of potentials and complementary factors endowments. In the case of UAE the most logical starting point for creating such synergies is between the different emirates themselves. Clearly none of the emirates can afford to be hampered in pursuing its developmental objectives by the conflicting interests and development strategies of the other emirates. Nevertheless, there are major interconnections and complementary functional activities which should be harnessed to greater effect.
Finally, an area of concern that is common to all three UAE cities is the shortage of human resource capacities to enable greater instiutionalisation of the decision making and implementation process, business facilitation and efficient servicing. Similar to Singapore this issue must be tackled through a twin strategy of training local capacity and attracting foreign talent of the highest calibre. In addition innovative schemes could be developed to enhance the efficiency and knowledge base of existing personnel as well as fostering greater inter-institutional co-ordination and creating a sense of common purpose and understanding. A good example here is the "fire-fly" scheme used in Singapore.
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** Loo Lee Sim and Seow Eng Ong, National University of Singapore.
*** Bassam Younis, University of Sharjah.
1. Taken from a paper by Stanley 2001.
2. This paper stems from a recent research partly funded by the RICS Foundation. The authors acknowledge the financial help received.
Edited and posted on the web on 2nd May 2003