Luring success

Excerpted from City of Gold: Dubai and the Dream of Capitalism:

In 1894, Sheikh Maktoum bin Hasher took over in Dubai. He wanted to do more to coax merchants from Iran. In 1900, the Persians made his job easier. They raised taxes in Lengeh and another Iranian port, Bushehr. The exodus intensified and included Arabs as well as Iranians.

Sheikh Maktoum saw the low-hanging fruit. He launched a plan to make Dubai the most business-friendly port in the lower Gulf. He abolished the 5 percent customs duty and slashed fees, turning Dubai into a free port. At the same time, Sheikh Maktoum sent his agents across the water to sweet-talk the biggest merchants, whether Arab or Persian, into moving to Dubai. The agents offered free land, guarantees of a friendly ear in the leader's majlis (quasi-parliament), and a hands-off government policy.

The incentives worked. The heads of a few of the biggest Iranian businesses agreed to relocate, and as the Dubai sheikh planned, their business partners and customers followed. By 1901, a census found five hundred Persians in Dubai. Within a few years it was clear that most of the Iranian traders who'd packed up and left Lengeh were unpacking in Dubai.

...Free trade was another mother's milk for Dubai. Wharves now lined the creek, and the newly built Iranian souk was crammed with goods from British-run India. Cargo was reexported to ports nearby or strapped onto camels bound for inland bazaars like the Buraimi Oasis. Within a few years, Dubai was closing in on larger ports like Sharjah, Ras Al-Khaimah, and Bandar Lengeh to become the chief trade center between the Strait of Hormuz and Qatar.

Low taxes, free trade and minimal government interference -- essential ingredients of economic growth.