Building Hub Economies - Does Size Matter?

Arriving in Dubai for the first time presents a culture shock for the unprepared. This is after all, one of the most successful examples of the world’s growing family of 21st century ‘hub-economies’, regional magnets for investment and the rapid growth of new Internet and service businesses.

Each Arab country along the Gulf coast, between Kuwait and Oman wishes to rival Dubai and each will tell you why its own geographical position and economy offer a unique advantage over those of its neighbours. Bahrain, the region’s banking ‘hub’ is already ranked as the fifteenth most liberalized economy on global scale and Dubai is on equal terms with leading European Union countries in the delivery of basic online services . In common, all the GCC (Gulf Cooperation Council) states now understand that a relatively small window of opportunity exists for them to lay the foundations of more advanced and business-friendly service economies before natural resources start to dwindle. While these small states compete to build bigger hotels and better Internet cities, they are nervously watching the new political and economic progress of their largest neighbour.

Iran, the region’s sleeping giant, with a population of 67 million is, under President Ali Mohammed Khatami, on a path, which might yet imitate the Islamic renaissance of the eighth century’s Abbasid Caliphate. For President Khatami, isolationism represents an unsustainable threat to Iran’s future and his solution may lie in a rapid programme of reform, with the aim of turning Iran into a politically stable and technologically advanced regional hub economy. A moderate Islamic society capable of exporting new skills to assist in the development of its Farsi-speaking neighbours, while simultaneously appearing as a new rival to the out-sourcing success of the Indian subcontinent as a source of cheap, skilled labour.

The largest market in the Middle East, bordering thirteen other countries, Iran is taking the role of technology in its future seriously. With half a million Internet users, the country now boasts three-layer telecommunications coverage, involving fibre-optic, digital-microwave and satellite links and every government official now has to pass an internationally recognised (ICDL) diploma course in Microsoft Office software. Iran believes that size matters, as much for new economies as it does for old economies and Britain, a county of comparative population size, presents a benchmark, in devising a national technology programme capable of delivering against the President’s objectives, which include the introduction of eCommerce legislation and the connection of 130,000 of the country’s schools to the Internet.

While Iran may be unable to evolve as swiftly as its smaller and wealthier Arab neighbours, it is laying the foundations that may lead it towards becoming the region’s dominant new economy. Over the course of the next decade, Iran’s mix of ambition and position will project an increasingly powerful gravitational influence on the progress of the smaller transitional economies of the countries that surround it.


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