The UAE’s Next Great Leap
Dubai’s skyline as seen from Port Rashid. Photo courtesy of Wikimedia Commons.
It is no secret that for the United Arab Emirates (UAE), the discovery of oil changed everything. Since the emergence of the oil industry in the 1950s, the UAE has rapidly established itself as an economic and financial powerhouse in the region. Unlike other Gulf Cooperation Council (GCC) nations with similar oil and natural gas resources, the UAE diversified its economy early, capitalizing on initial growth fueled by oil revenues. The UAE has built on the wealth generated by oil through its establishment as a corporate hub as a result of its attractive tax incentives and free trade zones, its investment into the tourism, service, and entertainment industries, and by establishing itself as the region’s foremost trade and logistics hub. It has successfully leveraged its geographic location at the mouth of the Persian Gulf and as a gateway to the Indian Ocean and the rest of Asia, thanks to large-scale investments in Dubai’s Jebel Ali port infrastructure. The countries around the UAE, while also exploiting the riches of the oil industry, have in the past struggled to replicate such broad and all-encompassing diversification. Only after the success of the UAE have the other Gulf nations actively sought to diversify through their policies and investments. Countries such as Saudi Arabia, Qatar, Bahrain, and Kuwait have just recently begun trying to catch up with the UAE’s diversification success and establish themselves as major commercial centers in the region.
The UAE’s regional dominance is under threat from intensifying competition among Gulf nations seeking to consolidate power and overtake the UAE. The country’s continued success depends on pursuing a new path forward––that is, one that relies on new investments and some key reinforcements to its current economic system. By forging strategic partnerships with key nations and making direct reinvestments into the country’s logistics infrastructure, including the development of internal networks and enhancement of existing structures, the UAE can sustain its regional economic leadership.
The UAE’s effort to maintain its status as the Gulf’s trade and commerce hub is evident through several foreign policy postures it has taken. Dubai’s D33 Agenda clearly outlines a goal for a “connected city,” aiming to establish trade corridors with Africa, Latin America, and Southeast Asia while “doubling the volume of Dubai’s foreign trade.” More important, however, are the alliances and agreements the UAE has been forming with multiple nations as it seeks to secure its trade position. Rather than becoming entangled in complicated geopolitical feuds and bloc alignments, as seen with its neighbors Saudi Arabia and Qatar, the UAE has chosen to forge key strategic partnerships with multiple nations, even those with which it might have conflicting political interests. This strategy maximizes commercial flow through the country and has manifested in various ways.
The UAE’s strong ties with the West, particularly the U.S. and Europe, were further solidified with the signing of the Abraham Accords, which normalized diplomatic relations with Israel. This not only enabled trade between former enemies but also facilitated the India Middle East Europe Economic Corridor (IMEC), connecting the Mediterranean to India through trade corridors linking Israel, Jordan, Saudi Arabia, and the UAE. Recently, the UAE has also cultivated a budding alliance and economic alignment with China and the Eastern bloc. The UAE joined the BRICS alliance, paving the way for the International North-South Transport Corridor (INSTC) that goes through Russia and Iran, along with China’s broader Belt and Road Initiatives (BRI), which has prompted potential free trade agreements with the UAE. Additionally, the UAE has signed a Memorandum of Understanding with Iraq, Turkey, and Qatar to help finance and develop the Development Road project—a rail, road, and maritime trade corridor from Turkey to the Gulf through Iraq. These partnerships have placed the UAE as a critical gateway for access to the Indian Ocean, ensuring a significant portion of world trade and commerce runs through the country. The UAE has primed itself to stay a global hub for trade in the face of a more geopolitically adversarial world, taking advantage of neutrality to expand into new markets, with everyone standing to gain from the formation of these vital trade corridors all running through the UAE. The pressing question now is whether the UAE’s domestic infrastructure is prepared for such a shift.
The answer to that question is complicated. Up to this point, the UAE has relied on road and highway networks, along with its ports—most notably Dubai’s Jebel Ali Port—to accommodate trade through the country. However, as demand and traffic along these routes within the country increase due to higher trade volumes (with container port traffic projected to reach 20.32 million TE units by 2029), the existing logistics infrastructure will struggle to sustain this new demand. Regarding internal ground transport networks, reports of bottlenecks at border crossings and high traffic volumes over the past decade will be exacerbated even further by this new activity. Enhancing the road system to meet this demand would be expensive, environmentally unsustainable, and further increase the risks of traffic congestion and accidents. Among others, this challenge in inter-emirate trade has underscored the need to improve internal networks, prompting the development of the UAE’s current plan for the Etihad Rail Network.
This comprehensive railroad network aims to connect the major industrial, logistics, and population centers. The UAE’s experiment with railway infrastructure will improve current systems of inter-emirate trade by enhancing accessibility, making it easier for goods to be transported. Rail network construction is also more cost-effective than adapting the current road system to meet new demand. Additionally, it will attract more businesses and industries while supporting key initiatives like Dubai’s D33 Agenda by creating jobs and economic opportunities. Crucially, the rail network will seamlessly integrate the UAE with the proposed INSTC, BRI, and IMEC trade corridors, potentially driving industrial production in the GCC as well. Etihad Rail is one example of the UAE’s effort to boost its own infrastructure to effectively compete with other regional economic powers.
On the other hand, the UAE’s maritime logistical infrastructure is also unequipped to accommodate growing demand, but unlike issues with internal ground infrastructure, there is no proposed solution in sight. The proposed trade corridor agreements involving the West, China, Russia/Iran, and Iraq/Turkey rely on the UAE’s strategic location as a gateway to the Indian Ocean, providing an alternative to the traditional route passing through the Suez Canal in Egypt. The importance of moving away from total reliance on the Suez Canal is underscored by the global supply chain disruptions during the COVID-19 pandemic, the Ever Given incident of 2021, and the latest attacks by Houthi rebels on ships in the Bab el-Mandeb Strait. Current efforts addressing maritime port infrastructure have focused on expanding the UAE’s current largest ports—Abu Dhabi, and Dubai—to handle increased traffic. However, these efforts fail to address a deeper issue at play. In addition to the three main ports above, each of the seven emirates operates its own major seaport, each competing to become the dominant logistical port with the most traffic. Rather than advancing development and innovation, competition among ports has led to fragmentation and inefficiency as the ports vie for dominance. Dubai’s Jebel Ali port, benefitting from its first-mover advantage, has established itself as the country’s primary maritime logistical hub and will likely continue as such. Jebel Ali’s dominance has led to a lack of coordination between the other ports, which now compete against each other for the same traffic. This “cannibalization” becomes a large obstacle to the UAE’s goal of becoming a global trade hub. While the development of Etihad Rail helps to better connect the UAE with the region and the planned trade corridors, the rail system alone cannot overcome inefficiencies in maritime infrastructure. To maximize its potential as a gateway to the Indian Ocean and efficiently move goods through its ports to the rest of Asia, the UAE must address these issues within its ports.
Currently, most of the UAE’s policy objectives to meet this goal have not tackled this crucial deficiency in its maritime logistics infrastructure. One potential solution lies in port specialization. Rather than competing for the same traffic, each major port in the UAE should adopt a unique value proposition, preventing cannibalization, and fostering a balanced development of multiple logistics assets. UAE ports could specialize by cargo destination types (e.g. trans-shipment and origin-destination) or specific cargo types (e.g. containers, bulk, roll-on/roll-off, and bunkering). The UAE’s Port Fujairah has already set a strong example for port specialization. Directly situated on the Indian Ocean, The Port of Fujairah has specialized as a bunkering port, becoming the “Middle East’s largest commercial storage capacity for refined and crude oil.” In 2023 alone, it dealt with 3.4 million metric tons of bunker demand. If other Emirates ports followed Fujairah’s model, the UAE could transform its port infrastructure into a cohesive network taking on new demands as a trade hub and focusing on growth and cohesiveness rather than competition.
The UAE’s next path forward will be one that distinguishes itself from Gulf neighbors who are quickly catching up. The UAE has chosen to leverage its strategic location as a gateway to the Indian Ocean and the wider Asian continent to develop trade relationships with major global powers, navigating a multipolar and adversarial world. However, its existing infrastructure was not designed to support this scale of expansion. While the Etihad Rail is a step in the right direction the UAE’s ultimate success depends on whether the maritime, and logistical infrastructure will operate cohesively rather than competitively. If the UAE successfully reinvests and develops this new infrastructure, it will be well-positioned to capitalize on its new strategic alliances and emerge as a stronger global trade hub.
Tommaso Tricamo (CC '28) is a staff writer from Milan, Italy planning to study Political Science. He is passionate about politics, history, and good food and can be reached at tvt2105@columbia.edu.