A tussle of two cities puts states on collision course

The battle of the city states is upon us. The desert emirate of Dubai and the tropical state of Singapore are slugging it out to be the world's top destinations for tourism, finance and expat professionals.

Dubai has long sought to emulate Singapore's success. Like Singapore, Dubai positions itself as a centre for regional trade and as a safe, clean place for expat professionals.

But much as leaders in the two cities admire one another, their shared ambitions have put their two economies on a collision course.

Since independence in 1965, Singapore has wooed world manufacturers and banks with tax breaks, a well-educated workforce and modern infrastructure.

"Dubai's model is Singapore. Whatever we do which [is] successful, they copy and do it on a larger scale," Singapore Senior Minister Goh Chok Tong said after a 2005 Middle East trip.

"In Dubai, whatever they do, they want to be the biggest," Goh told Parliament, citing Dubai's ambitions to have the world's tallest building and largest shopping mall.

This obsession with superlatives in the two cities - Singapore has 4.4 million people, Dubai 1.4 million - is driving a flurry of investment and building, and stoking the rivalry.

So while Dubai's property projects include a luxury island built in the shape of a palm tree, Singapore wants to build a US$3 billion casino whose design it hopes will rival Sydney's iconic Opera House.

Singapore even plans a waterfront skyscraper shaped as a billowing sail, just like Dubai's landmark Burj Al Arab hotel.

Such projects may help lure tourists, as Dubai and Singapore have few natural or cultural attractions and risk losing their role as stopovers with the advent of long-distance aircraft.

Both cities also need to boost their service economies.

Although the United Arab Emirates is a major oil exporter, Dubai - one of seven emirates that make up the UAE - has little oil, with only 6 per cent of its GDP made through oil exports.

To compensate, Dubai has spent the past three decades investing in tourism, real estate, retailing, shipping, airlines and financial services.

Singapore too needs to diversify, as its decades-old mainstay of electronics manufacturing is under threat from low-cost China and the Government tries to boost the pharmaceutical and biomedical sector, education, and even arts and entertainment.

What both cities ultimately want is to be leading regional centres for trade, transport, finance and tourism.

The two states are battling to become major port hubs, with both vying for deals with P&O. Whoever wins will become a dominant ports force. The loser will never recover. Long before they clashed over ports, the two merchant cities started competing in the airline and airport business.

Dubai has been pumping money into its flag carrier, Emirates, one of the world's fastest growing airlines, and is challenging Singapore Airlines in many of its key markets.

"Dubai could be a threat because it is building up its airport, and it has built up a strong airline, so it could be an aviation hub," said Zafar Momin at Boston Consulting Group.

Dubai has earmarked US$4.1 billion to expand its international airport and aims to handle 60 million passengers a year by 2010.

It more than doubled the number of passengers from 9.7 million in 1998 to 21.7 million in 2004. In the same period, Singapore's Changi airport had a 28 per cent increase, from 23.8 million to 30.4 million.

Dubai also hopes the Gulf's abundant liquidity will persuade companies from outside the region to list on a new bourse in the dollar-based Dubai International Financial Centre. Glossy ads in the run-up to the launch of the exchange in September showed a world map with just four cities: New York, London, Hong Kong and Dubai. Singapore, like Tokyo, was conspicuous by its absence.

- REUTERS