John Defterios' blog

(CNN) -- RAPID CHANGE, REAL INVESTMENTS -- A VIEW FROM CITYSCAPE CONFERENCE. DUBAI

Dubai, October 17, 2007

Whether inspired by our heart or our brain, people usually remember firsts. This is the case when it comes to my initial visit to Dubai in the summer of 1990. It was the week following Saddam Hussein's march on Kuwait. 45 degrees and counting upwards and we were covering the entire region from a five star hotel.

Dubai was just beginning to open up. The government let a whole group of foreign journalists, like me, report from here on one condition -- that we did not identify where we were reporting from.

"Somewhere in the Gulf" was our on-air sign out and we would go to the satellite feed point every day and night trying to sneak some material past the screeners at the Ministry of Information.

There is a certain irony -- the home to Media City today with a long list of media companies including CNN inside -- was back then learning the ropes of a global media village.

Piqued by the changes, I extended my stay in Dubai and sought out stories for our business audience on protecting shipping lanes for oil traffic and the emergence of the emirate as a trading hub.

I even had a sneak preview at the big port and free trade zone expansion plans at Jebel Ali and looked at a blueprint of what was to come.

As reporters we often draw parallels to make the story relevant to our audience. To me the Hong Kong of the Middle East was apropos. First come trade in hard goods, a port, a free trade zone and later financial services.

And my story premise: would the emerging trade hub of this region be under threat by the instability of Iraq? The answer after two major upheavals in the country is a resounding no. If you speak to leading private equity investors here, they say risk has been factored into the market.

17 years have passed. I see them as dog years, meaning let's multiply by 7, since the pace of change has been so rapid.

Like a rock in a pond, the example here is creating ripples in the region: Saudi Arabia, Qatar, Bahrain, Kuwait, and neighboring Abu Dhabi are all undergoing phenomenal transformations.

A tour this week through the largest real estate and development event in the world, Cityscape in Dubai, provided a reality check. 70,000 square meters (700,000 square feet) of exhibition space, showing off $1 trillion dollars of investments that are underway or planned for the next decade. (We are talking about major cities being built from scratch.)

In 2002 this show had only 1000 participants; today it has over 40,000. And if you are not a believer in this growth, why has Cityscape added another five emerging market events on the annual calendar including Shanghai? It is part of a seismic economic shift, supported by record energy prices.

When I was a child growing up in California, a memorable children's program came on every afternoon. The character Hobo Kelly would wear great big magic sunglasses and pretend she could see children at a distance watching her on TV. We somehow knew as four or five year olds that was not true, but we wanted to share a vision of what could be.

I use this analogy of Hobo Kelly because it is what we can see from here that makes our world so interesting. From Dubai we see partnerships with North Africa: Jordan, Egypt, Morocco, Algeria, Libya, Tunisia and going further south into Rwanda, Tanzania and Zanzibar.

It all sounds grand when one puts the numbers into a discussion and looks fantasy-like when touring the giant project displays. But this is no children's program, but the real deal into today's Middle East.

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PUTTING GENIE OR JINN BACK IN THE BOTTLE

London, October 10, 2007

In Arabian mythology Jinn are supernatural creatures. In Wall Street or City of London parlance, economists during the go-go days of the 1980's would say it is difficult to put 'Genie back in the bottle', referring to rising prices.

2007 is perhaps when Arabian mythology and Wall Street intersect. I am sure you have not missed the fact that oil remains stubbornly high at, or above, $80 dollars a barrel. For countries such as Saudi Arabia, Kuwait, the United Arab Emirates and Qatar, this rise not only means a wider pipeline of cash ($165 billion dollars for Saudi Arabia this year), but along with the oil gains comes real inflation.

The so-called headline numbers tell part of the story. The Emirate of Abu Dhabi this week reported that inflation is running at 11.5 percent, Dubai and Qatar 10 percent and Kuwait a more modest 5 percent.

During this weekend of Eid celebrations in the Muslim world, there are stern requests by governments for retailers not to price gouge consumers.

If one explores 'jinn' a bit deeper in the Islamic world you find out that superstition points to invisible creatures living in a parallel world. This mythical world applies today with rising prices in the Middle East. They are there, but many in the region, including ministers and economists, either brush off the suggestion or choose not to see them.

A trip to the emirates or countries noted above provides you a constant reminder. Rents in Dubai for example were up 26 percent in the past year. Even a face-lift in Dubai is more expensive than anywhere else, at nearly $11,000 on average. Plane tickets from London to the Gulf are higher than London to New York. There are plenty of planes flying; they are just all full. The same is true for hotels. As one guest from Lebanon commented at dinner this week, 'London is starting to look like a bargain', this proceeded the extra time he and his wife allocated for a bit more shopping before leaving. That says it a lot with the British pound at a record high against the dollar.

According to the consulting firm Mercer, the dollar's fall is the primary reason Dubai (Ranked 34) and Abu Dhabi (Ranked 45) both dropped in the 2007 world's most expensive city survey, because the Dirham is pegged to the dollar.

Policymakers, expats and citizens of the region are not fooled by rankings and know that with the rise of oil, comes a rise in government spending, leading to growth, opportunity and, yes, inflation.

Genie or Jinn won't be going back in the bottle anytime soon.

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ONE PART MINISTER, ONE PART EXECUTIVE, ONE PART PRINCESS

October 3, 2007

The accent sounds familiar from afar. An undergraduate degree in computer sciences from California State University at Chico (my home state) explains why. It is one of the many intriguing facets to the first female minister in the United Arab Emirates and highest-ranking female minister in the region.

Other facets include CEO of a B2B technology platform, the name behind a new perfume line (with the proceeds earmarked to fight cancer) and a niece to the Ruler of Sharjah, one of seven emirates that make up the U.A.E.

The office sitting atop of the Economy Ministry tower is a near shrine to her VVIP (Very Very Important People) encounters. A photo-op with George Bush Sr., a high-level South Korean trade delegation and most recently receiving the 'Stella Re' award in Turin, Italy given to a woman making strides in contemporary society.

The photos, memorabilia and awards are recognition for the role she has carved out. In fairness, Sheikha Lubna is blessed with lineage but also tested at the highest level. She captured the attention of Sheikh Mohammed bin Rashid Al Maktoum, the Ruler of Dubai and Vice President and Prime Minister of the UAE, when she designed a customized system for clearing goods through ports. It is something computer heads get excited about and those who do business, since her work cut cargo turnaround time from one hour to ten minutes. The technology helped the Port of Jebel Ali build its reputation as a shipping hub for companies in 120 countries.

From port technology to a B2B marketplace called Tejari.com, which was the first platform of its kind in the Middle East. This was an award-winning success and a barrier breaker. No one really expected a company in Dubai to sustain a trading platform for hard goods. With the click of a mouse, bureaucracy in the region tumbles. That same approach was taken by Sheikha Lubna with Dubai e-government, where amongst other things, it was one of the first places one could pay traffic violations online. Not such a great thing if you rack up lots of fines.

As we say in the business world, these are hard deliverables from a businesswoman, offered with a velvet touch and without hype. In the latest role, life is not so black and white. Yes, she has to put forth a budget; keep rapidly growing inflation in check (as best she can) and work within a government team.

She also has to serve as a 'key face' for her government. When DP World strained U.S.-U.A.E. relations over an acquisition of P&O, Sheikha Lubna was thrust onto the frontline to make the case. Much to the ire of Congress the deal included six U.S. ports, meaning these facilities would come under foreign control.

Eventually to soothe tensions the ports were sold off. Companies and governments from the Middle East to China (remember CNOOC and Unocal) now prepare their public affairs strategy alongside their investments. But asked what was learned in the spat of heated diplomacy, the message was kind, but powerful, like the Minister, "If you're going to lock up your interest in terms of selling because either of protectionism or a particular idea in your mind ... there are other places." Translation, "we should all be careful when it comes to those who want to invest in your country."

Sheikha Lubna knows that all too well. The primary reason she moves fast is to help her government sustain first mover status. And beyond the big picture of government, she has another role to play.

"In my personal belief, you need a bridge, you need a door opener for women," as minister, as executive and yes as a princess.

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TWO TRIPS, ONE NEW PROGRAM

Dubai and Abu Dhabi are two of the seven emirates that make up the United Arab Emirates on the Arabian Peninsula and are polar opposites when it comes to the transformation of their economies.

Dubai, September 17-19

Early evening arrival to Dubai International Airport (probably my 20th to the city). Like every visit it's an entirely new experience. A drive down Sheikh Zayed Road, the main artery into Dubai, unveils yet another fresh set of buildings, a new development, and 24-hour construction. This is a place in a hurry and has been for the past decade.

The spirit is evident, the prize for some is enormous. This is a window in time to expand, make new contacts and create more wealth. A visit to the Jumeirah Emirates Towers Hotel captures the scene. It is difficult to get a seat for an espresso. Local bankers or private equity chiefs meet expatriates who want to take part in the energy-driven boom. Oil at $80 dollars a barrel certainly supports their cause.

We are the subject of six press interviews, plus two lunches with two editors, over two full days on the ground in Dubai to unveil plans for our new program, CNN Marketplace Middle East. The interviews shared common themes: Why a program like this now? And why out of London? How are these investments from the Middle East being perceived abroad?

The answer, to sum it all up, is pretty simple and you can point to the numbers to explain. Twenty deals totalling $44bn dollars in the past year. Government investment funds from the region are sitting on, by some estimates, $2.5 trillion (yes, that is with a 'T') of assets and they are ready to put them to use. Middle East investors are moving fast, with a purpose and with a global footprint.

Abu Dhabi, September 25-27

While Dubai seems like a city on steroids, Abu Dhabi, the capital of the UAE, exudes a sense of calm, which comes perhaps from knowing that you are sitting on top of about one tenth of the world's oil and natural gas reserves.

The Emirates Palace Hotel, part conference centre, part meeting point and where the government of Abu Dhabi holds its meetings, press conferences and architectural models for the future, is a $2bn-dollar structure. From the reception desk to your room, it's one kilometre. The hotel sits at the far end of the cornice and it's pretty obvious that this is the first of many, many structures to emerge over the next decade.

Abu Dhabi takes pride on being the quiet capital, but like many of the cities that make up this region, they are thinking 10, 15, 20 years out. I have been going to the Middle East on assignment for the past 20 years, but in the last three years there is a sense of urgency coming from a new generation of business and government leaders.

Take Khaldoon Khalifa Al Mubarak who wears two hats: one as chairman of the Executive Affairs Authority of Abu Dhabi and the other as CEO of Mubadala Development Company. He is 32, educated at Tufts University in Boston and is building a strategic investment fund on its way to $100 billion. Investments include the construction of the largest aluminium smelter in the world, a 370-kilometre gas pipeline from Qatar to Abu Dhabi and securing the F1 race for his city in the autumn of 2009.

On my flight from London to Abu Dhabi he was connecting after an overnight journey from Washington where he signed a $1.35 billion deal for 7.5 percent of the Carlyle Group, a leading private equity firm in the U.S. The firm has within its ranks George Bush Sr., James Baker III and former British prime minister John Major.

Money does capture influence and as the cliché goes, it does make the world go around. Our role at CNN Marketplace Middle East is to look at the region differently; question the merits of these investments; and analyze what they mean for the region and well beyond.

If one were to put the Middle East at the centre of the globe, we would all see the world a bit differently. Investments are going east to China and Southeast Asia, west to the U.S. and Europe and perhaps for the first time, in a sizable fashion, staying closer to home.

Leaders in the region, while trying to build their 'castles in the sand', know they need to create sustainable economies and jobs. And perhaps that is the irony: while generating record wealth from oil and gas, there is also pressure to move. Unemployment throughout the region remains above 10 percent; double that amongst its youth. Strategic investments, whether at home or abroad, need to have a lasting impact.

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