Finance 248 Guide

Mary Celadon
FINANCE
FINANCE_248_GUIDE
In 1962 the British Political Agent noted that "Many new houses and blocks of offices and
flats are being built... the Ruler is determined, against advice [from the British authorities]
to press on with the construction of a jet airport... More and more European and Arab firms
are opening up and the future looks bright."In 1962, with expenditure on infrastructure
projects already approaching levels some thought imprudent, Sheikh Rashid approached his
brother-in-law, the Ruler of Qatar, for a loan to build the first bridge crossing Dubai
Creek.This crossing was finished in May 1963 and was paid for by a toll levied on the
crossing from the Dubai side of the creek to the Deira side.BOAC was originally reluctant to
start regular flights between Bombay and Dubai, fearing a lack of demand for
seats.However, by the time the asphalt runway of Dubai Airport was constructed in 1965,
opening Dubai to both regional and long haul traffic, a number of foreign airlines were
competing for landing rights.In 1970 a new airport terminal building was constructed
which included Dubai's first duty-free shops.Throughout the 1960s Dubai was the centre of
a lively gold trade, with 1968 imports of gold at some £56 million.This gold was, in the vast
majority, re-exported – mainly to customers who took delivery in international waters off
India.The import of gold to India had been banned and so the trade was characterized as
smuggling, although Dubai's merchants were quick to point out that they were making legal
deliveries of gold and that it was up to the customer where they took it.In 1966, more gold
was shipped from London to Dubai than almost anywhere else in the world (only France
and Switzerland took more), at 4 million ounces.Dubai also took delivery of over $15 million
worth of watches and over 5 million ounces of silver.The 1967 price of gold was $35 an
ounce but its market price in India was $68 an ounce – a healthy markup.Estimates at the
time put the volume of gold imports from Dubai to India at around 75% of the total
market.=== Oil era ===
After years of exploration following large finds in neighbouring Abu Dhabi, oil was
eventually discovered in territorial waters off Dubai in 1966, albeit in far smaller
quantities.The first field was named "Fateh" or "good fortune".This led to an acceleration of
Sheikh Rashid's infrastructure development plans and a construction boom that brought a
massive influx of foreign workers, mainly Asians and Middle Easterners.Between 1968 and
1975 the city's population grew by over 300%.As part of the infrastructure for pumping and
transporting oil from the Fateh field, located offshore of the Jebel Ali area of Dubai, two
500,000-gallon storage tanks were built, known locally as "Kazzans", by welding them
together on the beach and then digging them out and floating them to drop onto the seabed
at the Fateh field.These were constructed by the Chicago Bridge & Iron Company, which
gave the beach its local name (Chicago Beach), which was transferred to the Chicago Beach
Hotel, which was demolished and replaced by the Jumeirah Beach Hotel in the late
1990s.The Kazzans were an innovative oil storage solution which meant supertankers could
moor offshore even in bad weather and avoided the need to pipe oil onshore from Fateh,
which is some 60 miles out to sea.Dubai had already embarked on a period of
infrastructural development and expansion.Oil revenue flowing from 1969 onwards
supported a period of growth with Sheikh Rashid embarking on a policy of building
infrastructure and a diversified trading economy before the emirate's limited reserves were
depleted.Oil accounted for 24% of GDP in 1990 but had fallen to 7% of GDP by
2004.Critically, one of the first major projects Sheikh Rashid embarked upon when oil
revenue started to flow was the construction of Port Rashid, a deep-water free port
constructed by British company Halcrow.Originally intended to be a four-berth port, it was
extended to sixteen berths as construction was ongoing.The project was an outstanding
success, with shipping queuing to access the new facilities.The port was inaugurated on 5
October 1972, although its berths were each pressed into use as soon as they had been
built.Port Rashid was to be further expanded in 1975 to add a further 35 berths before the
larger port of Jebel Ali were constructed.Port Rashid was the first of a swath of projects
designed to create a modern trading infrastructure, including roads, bridges, schools and
hospitals.=== Reaching the UAE's Act of Union ===
Dubai and the other "Trucial States" had long been a British protectorate where the British
government took care of foreign policy and defence, as well as arbitrating between the
rulers of the Eastern Gulf, the result of a treaty signed in 1892 named the "Exclusive
Agreement".This was to change with PM Harold Wilson's announcement, on 16 January
1968, that all British troops were to be withdrawn from "East of Aden".The decision was to
pitch the coastal emirates, together with Qatar and Bahrain, into fevered negotiations to fill
the political vacuum that the British withdrawal would leave behind.The principle of union
was first agreed upon between the ruler of Abu Dhabi, Sheikh Zayed bin Sultan Al Nahyan,
and Sheikh Rashid of Dubai on 18 February 1968 meeting in an encampment at Argoub Al
Sedirah, near Al Semeih, a desert stop between the two emirates.The two agreed to work
towards bringing the other emirates, including Qatar and Bahrain, into the union.

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Mary Celadon

market.=== Oil era ===

which is some 60 miles out to sea.Dubai had already embarked on a period of

infrastructural development and expansion.Oil revenue flowing from 1969 onwards

supported a period of growth with Sheikh Rashid embarking on a policy of building

constructed by British company Halcrow.Originally intended to be a four-berth port, it was

extended to sixteen berths as construction was ongoing.The project was an outstanding

hospitals.=== Reaching the UAE's Act of Union ===

Agreement".This was to change with PM Harold Wilson's announcement, on 16 January

and Sheikh Rashid of Dubai on 18 February 1968 meeting in an encampment at Argoub Al

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