Dubai's blue skies and white elephants

By Peter Day BBC business correspondent, Dubai

Moulded from scratch to create a dynamic international business centre and deluxe holiday destination, Dubai continues to reach new dazzling heights.

The Burj al-Arab in Dubai is the only seven star hotel in the world

I have just come back from the lap of luxury, and the experience was slightly disconcerting.

Dubai in August is hot - a shimmering fantasy land.

You may know the place from the posters or the pictures in the glossy magazines: the world's tallest, most luxurious hotel, soaring like a great sail across the waters of the Persian Gulf, bristling with a self-awarded seven stars.

In the Burj al-Arab Hotel, there are only suites. They start at £500 ($900) a night, and there is a mirror on the bedroom ceiling so that the first thing you see when you wake up in the morning is yourself... looking down on yourself.

I said that luxury is disconcerting.

Then there is The Palm: the property development the size of an international airport, now rising out of the sea in the shape of a vast palm tree. Crazy but real.

As I chugged around the perimeter by boat the other morning, one of The Palm's fronds was already lined with half-completed villas and earth-movers stretched to the horizon.

'White elephants'

Tiring of Spain, British buyers are said to be flocking to claim their place in the sun on The Palm. Dubai is, after all, only six and a half hours from London.

Work on a second, larger Palm will start soon.

And if you are genuinely rich enough, do not forget The World, which is even more extraordinary: a huge map of the world laid out as a series of artificial islands.

Anyone with the money can buy a whole country, an island accessible only by boat.

But in Dubai, you ain't seen nothing yet.

Thirty years ago, this was just a small trading port specialising in pearls and gold smuggling, one of seven emirates run by ruling families in a dusty part of the Middle East.

Government censors with felt tip pens black out the breasts of topless women in brazen imported magazines

Unlike its neighbours, Dubai never had much oil, so the country's ruling family - the international racehorse owners, the Al Maktoums - fell back on ingenuity.

They dredged the Dubai Creek to provide a harbour to service the oil industry nearby; they created a duty free zone to encourage trade; they built an airport open to any airline, and they created Emirates, an airline of their own.

At each step, people laughed at the Sheikh's white elephants.

But if they built it, people came.

'Full throttle'

The population sprouted too. One and a half million people now live in Dubai.

Four-fifths of them are non-native; dozens of different nationalities with work permits, only because they have jobs.

Did I mention there was no income tax in Dubai?

Emirates has signed a series of major deals with Airbus Industrie

At noon the cries of the Mezzuin echo from the minarets that punctuate the skyline.

This is a Muslim country, but a pragmatic one. It takes easily to alcohol confined to hotels, even though government censors with felt-tip pens black out the breasts of topless women in brazen imported magazines.

Meanwhile, inspired by the "full throttle" vision of Sheikh Mohammed that everybody talks about, here comes more real estate: the tallest tower in the world, surrounded by the biggest shopping mall in the world.

There were huge new orders for the new Airbus SuperJumbo airliner from Emirates Airlines and a new tourist development called Dubailand that quite simply doubles the area of the current city.

A media city, an internet city... here is no fear, and apparently no recession.

It is disconcerting.

Fashionable

Following the example of Singapore before it, Dubai with few natural resources has created an island of international business, shopping and tourism, out of the turmoil of the Middle East.

It now wants to be a financial centre, grabbing back the Arab business that until now has been done in London or Frankfurt or New York.

The buildings for the financial centre are rising fast.

But a month or two ago, the distinguished British chairman and chief executive of the new Dubai financial regulators was abruptly sacked for querying property sales related to the development.

This was not a good way to inaugurate a financial centre designed to bring global standards of rectitude to Middle East banking, but the people who run it insist that international banks are still lining up to open offices - confidence unshaken - despite the heat.

August is not the best time to visit Dubai, with the temperature at 40C.

As you go from deal to deal, you feel as though you are being microwaved in the brief open-air moments between the icy chill of a building and the inside of an air-conditioned taxi; and it takes the odd cloudy day to bring out the crowds to the beach.

But for nine months of the year, they say, the weather is balmy.

And when it is hot, well, then they cool the swimming pools, they really do.

As I said, luxury is disconcerting.

From Our Own Correspondent was broadcast on Saturday, 4 September, 2004 at 1130 BST on BBC Radio 4. Please check the programme schedules for World Service transmission times.