Dictators: Meet the CEO, Dubai Inc

William Wallis on Sheikh Mohammed bin Rashid Al Maktoum of Dubai

A flurry of white tunics moves forcefully in triangular for mation across one of Dubai's top designer shopping arcades. At the head is Sheikh Mohammed bin Rashid Al Maktoum, Dubai's ruler. He and his retinue may be on an impromptu inspection tour of one of a host of new mega-projects, or perhaps they are heading to another session of the debate on how to maintain the pace of Dubai's development over the next 20 years. They do not invite questioning.

When it gained independence from Britain in 1971, Dubai was little more than a desert outpost: a junior partner in a federation of tiny emirates held together by the immense wealth of Abu Dhabi, with the world's fourth-largest oil reserves. But, early on, Dubai's ruling Maktoum family were loathe to play understudy. Defying the sceptics, they built up a vast deep-water port that turned Dubai into a global trading centre, positioning it at the centre of a property, tourism and financial services boom, as oil prices began their recent ascent and flooded better-endowed neighbours with petrodollars.

The city has promoted itself as a natural home to multinationals and as a pragmatic ally of the west, capable of shrugging off the vexed issues that have turned other parts of the region into cauldrons of anti-western sentiment. At a time when tackling the Middle East's volatile mix of oil, author itarianism and religious extremism is a priority for western policymakers, Dubai has provided a compelling example of an Arab city embracing modernity.

But transition to a more democratic form of government has never been on the agenda. The United Arab Emirates' attempts to keep up with the efforts of other Gulf states and create a veneer of political change have been tortuous, limited to devising a toothless consultative assembly selected by a hand-picked electorate of several thousand dignitaries.

City officials argue that greater public participation in decision-making would allow more conservative elements of Emirati society to stall Dubai's transformation, predicting that they would raise objections to the influx of expatriates who have helped to build the city but have diluted its Islamic culture in the process.

Foreigners now outnumber Emiratis by around ten to one, but are not exempt from Dubai's tight political controls. Expatriates who cross red lines can themselves quickly find their residence permits withdrawn; investment bankers too honest about stock market prospects risk jeopardising their client base; and journalists are theoretically in breach of the law if they write anything that could be interpreted as damaging the economy or currency. But those with the fewest rights are the mostly Indian labourers who have raised the skyline with their sweat, receiving a pittance in return. Trade union organisers smuggled into Dubai from Kerala in India have been quickly sniffed out and dispatched. As well as having one of the Gulf's most flamboyant rulers, Dubai has one of the region's most ruthlessly efficient security outfits.

Yet the style, if not the system, of government is unique among the Gulf's dynastic autocracies. While state and ruling family assets are as opaque as in the other autocracies, the bureaucracy is leaner, appointments are more meritocratic, and in general government is more efficient.

There is nothing unusual in Sheikh Mohammed's sudden appearance in public places. When he is not writing poetry, racing horses, or entertaining on the world's largest privately owned yacht, he takes a hands-on approach to ruling, intervening to reprimand officials or promoting those whose performance meets with royal approval. Because he runs the state like a business, people refer to him as the chief executive, and the city state as "Dubai Inc".

But it is his willingness to delegate to loyal subordinates that has maintained dynamism. The outlandish real-estate projects that have established Dubai as a global brand have been devised by the city's three most powerful businessmen, all of whom also have official state functions. All three are commoners empowered by Sheikh Mohammed on the basis of their track records; their role is to push the boundaries of what is possible, in turn encouraging the private sector to be more ambitious.

So far, the system has played to Dubai's advantage, marking it out as a rare regional success and setting the pace for other Gulf states seeking to diversify their economies away from energy dependence.

But there are no institutional checks or balances to Sheikh Mohammed's ambitions. Critics worry that one day the projects, which already include the world's tallest building and largest shopping mall, will get so grandiose that the whole edifice will come tumbling down.

William Wallis is Cairo correspondent for the Financial Times