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A Visit To Dubai Inc.

Part 1: Dubai Inc. 12:01

This segment was originally broadcast on Oct. 14, 2007. It was updated on July 30, 2008.

Dubai is a tiny sheikdom nestled along the Persian Gulf on the eastern edge of the Arabian peninsula and part of a tiny, oil-rich country called the United Arab Emirates. Over the course of just a few decades, it has transformed itself from a spit of sand about the size of Rhode Island into the Singapore of the Middle East.

It's a political, economic and financial success story, in a region torn by conflict, and as 60 Minutes first reported last October, it's all the vision of one man, Sheikh Mohammed bin Rashid al Maktoum. He rarely gives interviews and but he gave one to correspondent Steve Kroft, along with a tour of his sheikhdom.

No matter how many articles you read or how many pictures you see, they don't quite capture the enormity and the energy of Dubai. It is a physical manifestation of Arab oil wealth set in concrete, glass and steel, a place so rich and ambitious that is changing the geography of the world as a business center, transportation hub, and tourist destination.

It's a 21st century city at the crossroads of a new world. Skyscrapers rise in clusters, man-made islands rise from the sea, and entire neighborhoods with hundreds of office buildings and apartments that rise from the sand. And it is all Sheikh Mohammed's vision.

One project, called by some the "largest construction site on earth," was just desert several years ago. The site employs half a million laborers, working 12-hour shifts on a reported $300 billion worth of projects, building Sheikh Mohammed's dream of a modern, efficient and tolerant Arab city with fine restaurants, a vibrant nightlife, that is both the playground and business capital of a new Middle East.

"What are you trying to do here? What do you want this place to be?" Kroft asks.

"I want it to be number one. Not in the region, but in the world," Sheikh Mohammed says.

Asked what he means by "number one in the world," Sheikh Mohammed says, "In everything. High education, health, housing. Just making my people the highest way of living."

At 59 years old, he is one of the richest people in the world, a member of the Maktoum family which has ruled here for nearly two centuries. He is a former air force pilot and an avid horseman who competes in cross country endurance races and is one of the largest breeders of thoroughbred race horses in the world.

By Western standards his marital situation is a little complicated. He's married to Princess Haya, the daughter of the late King Hussein of Jordan, but he also has another wife who is rarely seen in public.

He is frequently described as a workaholic and, as 60 Minutes found one morning, always in motion. The sheikh, who likes to stay on his feet, walks around without a security detail.

He is famous for dropping in unannounced at construction sites and government offices to see how things are going.

He uses his cars as mobile offices, traveling most of the time by himself.

There is a little bit of Donald Trump in him, at least when it comes to showmanship and getting people to come to Dubai. "You know this building up here? This is where we have snow skiing," Sheikh Mohammed points out.

The strange looking building the sheikh had pointed out is the world's tallest indoor ski slope. Outside it may be 120 degrees but inside it feels like the Alps.

There is the Dubai World Cup, showcasing the fastest horses in the world running for the world's richest purse. Not to mention the most luxurious hotel in the world, the Burj al Arab, where the cheapest room is $2,000 a night.

"Why do you want everything to be the biggest, the tallest?" Kroft asks.

"Steve, why not? Why not? If you can have it in New York, why can't we have it here?" Sheikh Mohammed asks.

"Why are you in such a hurry? Most people would try and do this in a lifetime, not five years," Kroft asks.

"I want my people to live better now. To go to high school now. To go to good health care now. Not after 20 years," the sheikh explains.

His people, the descendants of Bedouin tribesmen, pearl divers and traders, now make up a small fraction of the population in the emirate. They enjoy one of the highest standards of living in the world, with free healthcare and college tuition and no taxes.

The rest of the population are foreigners -- European, Indian, Russians, Iranian, and Saudi -- and they are coming at the rate of 25,000 per month. They are developers, architects, middle managers, domestics and bellboys, all united by a common goal: to make money.

"People can smell the opportunity. And they go for it," says Georges Makoul, vice president for Morgan Stanley in charge of its Middle East region.

He believes Dubai has the perfect business environment for multi-national corporations. It is strategically located halfway between the financial capitals of London and Singapore, a billion and a half people within a three hour plane flight, and it is the perfect jumping off point to tap the emerging markets of South Asia.

"So essentially what's happened is that Sheikh Mohammed and the Maktoum family were able to convince people to come in vest money there," Kroft asks Makhoul.

"Well they articulated a very good case or investing in Dubai. And I think they jump started it with some of their own investments," Makhoul explains.

The initial investment was made by Sheikh Mohammed's father, who decided to dredge a coastal waterway called "The Creek," which had been the center of Dubai's commercial activity for centuries. It was the beginning of what would become one of the largest ports in the world and a major transshipment point for goods headed to and from Asia.

Next, Sheikh Mohammed came up with the idea of turning Dubai into an international center for finance and media. He set up a series of free trade zones, promising no taxes, minimal regulation, and special incentive to corporations willing to locate to the emirate.

And he began building it all, convinced they would come. And they have.

"It's an amazing experiment," Dr. Omar Bin Sulaiman, the governor of Dubai's financial district, tells Kroft. "Everything is done with risks, but calculated risks."

Since it opened three years ago, the Dubai International Finance Center has attracted banks, investment firms, and capital from around the world. And according to Dr. Bin Sulaiman, this is just the beginning of what will eventually be a city within a city.

What is the financial district going to look like in five years?

"Five years from now you're gonna see towers on your right, towers on your left. You're gonna see a kilometer-and-a-half garden where you can exercise. And if you're bored of that, you can go underneath it for a kilo-and-a-half shopping mall," Bin Sulaiman explains.

"Kilo and a half, that's more than a mile?" Kroft asks.

"Yes. And it is not the largest shopping center in the world. Because that's next door," Bin Sulaiman tells Kroft, laughing.

Next door is the Burj Dubai development, where the largest shopping center in the world is under construction at the base what will become the world's tallest building.

It is being built by Emaar Properties, by some measures the world's largest real estate developer. It is one-third owned by Sheikh Mohammed and the Dubai government, which has a financial stake in almost all of the development in the emirate.

Emaar's chairman, Mohamed Alabbar, took 60 Minutes up to what was then the top of the building, past what will be the first Giorgio Armani hotel, and floor after floor of million dollar apartments. It was already nearly a mile high, and when it is finished it will be twice as tall as the Empire State Building.

But Alabbar isn't worried about finding tenants with deep pockets. "We are about 85 percent sold. We sold 1.1 billion U.S. in two nights, which is really amazing," Alabbar explains.

Alabbar, educated in the United States, is one of Sheikh Mohammed's young lions, protégés hand picked by the sheikh to run one of his largest enterprises.

Another is Sultan Ahmed bin Sulayem, the chairman of Dubai World, who also runs a significant part of Sheikh Mohammed's business empire. "I think he looks at Dubai. What does Dubai need? What is missing in Dubai? And when he thinks there's something missing, we're gonna do it," Sultan Bin Sulayem says.

Eight years ago, Sheikh Mohammed decided what Dubai needed was more waterfront property and beaches for all the tourists who are going to come. Dubai only had 60 miles of coastline, so ordered Sultan Bin Sulayem to create more.

"After two months, I came to him and I showed him this picture, of a perspective of a picture of an island. He said 'How much beach is this going to give us?' I said seven kilometer. He said 'Why not 70?' You know he always ask you the impossible. Not what you are able, but what you cannot do," Sultan Bin Sulayem remembers.

"So, Sheikh Mohammed gave you the land and told you to start building?" Kroft asks.

"He gave us the water," Sultan Bin Sulayem says. "We have to make the land."

Business consultants told him the project was unfeasible, but with no environmental regulations to stop him, Sultan began dredging a hundred million cubic yards of sand from the Persian Gulf, along with seven million tons of rock to form a man-made Island in the shape of a palm. It more the doubled the coastline of Dubai, and created waterfront condos and homes for 150,000 people, not including 35 hotels.

"Most people, if they brought in a business consultant, and they told them, 'This is a terrible idea. It's not gonna work.' They wouldn't do it," Kroft remarks.

"Most people, yes, but not us," Sheikh Mohammed says.

"I must tell you, your Highness, that there are some members on your team who, from time to time had doubts. I won't name them, but they looked and they said, after you told them what you wanted they said, 'This is impossible,'" Kroft remarks. "They thought that you were crazy."

"Yeah, if you don't want to name them, I can name them," the sheikh said, laughing.

It's easy to laugh about it now. The palm island project sold out in less than a week, and houses that initially went for $1 million are being resold by original investors and real estate speculators for five times that. But the day 60 Minutes went ashore, a month after the official opening, the island was a ghost town.

"People just started moving in," Sultan Bin Sulayem explains.

It's not clear when or if people will actually start moving in. Most of the properties were bought as second or third homes by wealthy Arabs, Russians, and Europeans to be used a few months a year, or as real estate investments, or a way to move money offshore to a safe haven. But it has not stopped the building.

Three more off-shore developments are underway, including a chain of 300 man-made islands, some of which will be private. They are shaped and situated to resemble a map of the world, which is what the project is called. Demand is said to be strong, but to many, Dubai has the feel of a speculative bubble, that could burst.

Man-made islands with multi-million dollar homes on them are only one component of Sheikh Mohammed's vision to make his kingdom a safe haven for capital and a model for social and political change in the region.

From financiers and entrepreneurs, to construction workers and maids, Dubai has become a kind of El Dorado, the setting for a modern day gold rush. Everything is in overdrive. And not surprisingly, the speed of it all has had unintended social and political consequences.

"A number of people have described you as the chief executive officer of a huge business enterprise. Is that an accurate way of describing what you do?" Kroft asks the sheikh.

"Actually, yes. I change the way of government to make it like a big company," Sheikh Mohammed says.

Some people call it Dubai Inc. and, besides investments at home, includes extensive holdings throughout the Middle East and around the world. In the U.S. its list of properties is way too long to go into but includes resorts, hotels and real estate holdings from Las Vegas to New York. The company is also negotiating to buy a significant interest in the NASDAQ stock exchange.

"Could what's happened here have happened in any other Arab country?" Kroft asks Abdul Rahman al Rashed, the general manager of Al Arabiya, one of the most influential news organizations in the Middle East.

"No way. No," Al Rashid says.

"What is it about the rest of the Arab world that that would've made it incredibly difficult, if not impossible, to do what's been done here?" Kroft says.

"I think lack of vision, heavy bureaucracy, lousy governments and corruption," Al Rashed says.

Asked what Dubai's reputation is in the rest of the Arab world, Al Rashed tells Kroft, "Remember, we have 300 million people live in this region. Eighty-six percent of the youth being questioned, they say they want to come to Dubai. Their destination number one is not London, is not New York, as it used to be in old days, or France. It is Dubai."

But the sheikh is also trying to construct a new society based on religious tolerance and gender equality, at least in the work place. He has made recruiting and promoting women a priority.

"I think we, the government, we are doing all that we can to really make of you a leader and we are concentrating on the woman," the sheikh remarked at a meeting.

That's a significant change for women from a conservative Muslim culture.

"The resistance that people already have in our society because of the religious background and cultural background should reduce," a female attendee at a meeting said to the sheikh.

"That's right. I agree with you, but ah I only worried that you take over all," he replied, to laughter.

It isn't the only cultural change taking place in Dubai. For starters, being outnumbered by foreigners nine to one has had a huge impact on the local population. Bikinis are mixing with burkas, and churches with mosques, as traditional customs are challenged by modern sensibilities.

Take the ancient sport of camel racing, an extremely popular local sport. Traditionally, the camel jockeys were always small boys, but an international uproar over the way they were being treated led to a novel solution. The boys have been replaced with radio-controlled robots. The riding crops are controlled by owners, who follow their camels around the track in SUVs.

It was a high-tech solution that preserved an old tradition but the solution to Dubai's other problems, like prostitution, aren't so simple. The U.S. State Department estimates that 10,000 women from Africa, Asia and Eastern Europe may be victims of sex trafficking, lured to Dubai under false pretenses and pressed into service as prostitutes.

"You allow alcohol. A lot of the women wear Western dress. You have some prostitution. Are those concerns?" Kroft asks Itbisam Al-Kitby, a local college professor.

"Yeah. This is main concern of people here. Of course!" Al-Kitby says.

Asked what he thinks the effect has been, Al-Kitby tells Kroft. "People, you know, they've been put in a situation they didn't choose. Nobody asked them, 'What do you want? Is it really, this is what you want?'"

"What do you think of Sheikh Mohammed?" Kroft asks.

"He is great. He is original. But his ambition without any limits," the professor says.

Professor Al-Kitby warns that the sheikh's ambition could have some consequences. "And those people are coming from democratic countries. They cannot be ruled with undemocratic way. It will be a political risk for you in the future. Did you think in that? Did you think about this?" Al-Kitby wonders.

"We are not talking about a democracy here," says Dr. Rochdi Younsi, the lead analyst for the Eurasia Group, a firm that does political and economic risk analysis for companies interested in Dubai and the other Gulf states.

"You get a sense of freedom when you are in Dubai. You do not really feel that you live under an oppressive regime. At the same time, freedom of expression is not guaranteed," Dr. Younsi says.

"Dubai, in many ways, is a Western country. A Western-style country. Why hasn't it become a target, you think, for al Qaeda terrorism?" Kroft asks.

Says Younsi, "If you're concerned about the risk that al Qaeda may pose to Dubai in the future, I would look at the labor issue in Dubai. Many of these people have been disgruntled for years now because of the horrible working and living conditions. And it is pretty easy for an organization like al Qaeda to exploit that kind of anger."

Amidst the smell of opportunity and prosperity, there is also a whiff of exploitation. Sheikh Mohammed's dream is being built by armies of contract workers from South Asia, who work 12-hour shifts, six days a week, for an average of $4 or $5 a day. It is more than they can make at home, but human rights groups say they are little more than indentured servants, forced to live in substandard conditions.

At the end of a shift, they board buses for the trip out of the city to remote desert compounds, where they live far from the gleaming towers they're building.

"There have been allegations, and reports, that a lot of contractors, a lot of labor contractors have brought people into the country, and taken advantage of them, abused them," Kroft says to the Sheikh Mohammed.

"We had some problem. But we're dealing with it. And now the law is against it. And we're dealing a lot about it," the sheikh says.

Sheikh Mohammed says he is dealing with it by building new modern dormitories and compounds for thousands of workers. The government has also created a court where workers can voice their grievances. And Sheikh Mohammed told 60 Minutes that tough new laws have been passed to protect workers and crack down on labor contractors who violate them.

"People will go to prison, if they keep doing this," Sheikh Mohammed vows.

But according to letter by Human Rights Watch, no one has. The group wrote that it was "not aware of a single instance" in which an employer had been prosecuted for labor violations.

"There have been efforts to improve their situation. But, clearly not enough," Younsi says.

"Sheikh Muhammad and the government of Dubai say, 'Look, this is a problem that has been created by labor contractors.' Mostly foreign nationals. That they're the ones that are exploiting these workers. Not the people in Dubai. What's your reaction to that?" Kroft asks Younsi.

"I'm not sure it's a credible answer," Younsi says. "They want the cheap labor. And it's been working to their advantage."

The worker situation has damaged Dubai's reputation but it's not the first time Sheikh Mohammed's had a public relations problem. Two years ago, President Bush approved a deal for one of the sheikh's companies, Dubai Ports World, to take over the operation six U.S. ports.

"This deal wouldn't go forward if we were concerned about the security for the United States of America," President Bush said at the time.

But not everyone saw it that way and a nasty debate erupted in Congress over whether a company owned by a Middle East sheikhdom should be managing U.S. ports vulnerable to terrorist attacks.

The 9/11 Commission report had already pointed out that at least nine of the hijackers "came through Dubai" on their way to the U.S. and that "funds wired from Dubai" were used to finance the attacks.

It was the first time most Americans had even heard of Dubai, and the controversy didn't end until Sheikh Mohammed decided to cut his losses and sell.

"If that's what the American people want, sell to somebody else," the sheikh says.

"Do you think you got a fair shake out of the ports deal?" Kroft asks.

"I leave that to you," Sheikh Mohammed says with a chuckle.

Asked if he's disappointed, the sheikh tells Kroft, "As I say, I don't want to disturb our relationship."

"You didn't wanna make a big deal out of it," Kroft remarks.

"Exactly," Sheikh Mohammed agrees.

Dubai is still one of the U.S.'s staunchest allies in the Middle East, and the U.S. relies on its ports to service Navy warships in Persian Gulf.

Sheikh Mohammed says he considers himself a friend of the United States and the he loves the country and its people.

Asked what he likes about the U.S., Sheikh Mohammed says, "I like everything about them, except their foreign policy little bit. I don't like their foreign policy."

"Can you be more specific about the foreign policy? What don't you like about the foreign policy?" Kroft asks.

"No I'll leave it vague. Just, I'll leave it like that," the sheikh says. "I think the American people will know what I mean."

"You had conversations, and consultations with the United States before the Iraq war," Kroft says.

"Yes. Yes. We gave the best advice we can to our friends. But, as you know, they don't always listen," the sheikh says.

Sheikh Mohammed acknowledges he was against the war. "It was wrong war," he says.

There are also differences with the U.S. over Iran, which is one of Dubai's closest neighbor, largest trading partners, and one of its biggest investors. Any hostilities in the Persian Gulf could present the sheikh with some difficult choices. But for the time being, business is still booming.

"What do you do when you're not the ruler of Dubai? What gives you happiness and pleasure?" Kroft asks.

"I'll be riding my horses," Sheikh Mohammed says. "I love horses."

Sheikh Mohammed owns one of the world's top breeding and thoroughbred racing operations. The morning 60 Minutes visited, the sheikh was selecting horses for races all over the world. Some of the world's most expensive thoroughbreds were on display.

His passion is evident. "These are the best horses in the world," he tells Kroft.

Asked what it is that he loves so much about horse racing, Sheikh Mohammed says, "It's my hobby. The horse in my blood."

"Of the horses we've seen today racing, what are they worth?" Kroft asks.

"I mean, each one if he win what we think he will win, he'll be worth 50 to 60 million dollar!" Sheikh Mohammed says.

There was one horse in particular that interested the sheikh. "I expect this to pass this before its done. Otherwise I'll be disappointed," he said, watching the race.

On this particular day the sheikh was not disappointed. Nobody likes to disappoint the sheikh -- not even the horses.

"That's what I want to see!" the sheikh says. "That's what I want to see!"

Produced By Harry A. Radliffe II

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