For some, the Middle East offers little of economic and political importance. They view the region with suspicion, seeing it as a breeding ground for terrorists due to radical fundamentalist Islam and the ongoing Israeli-Palestinian conflict. But such a shortsighted and cursory outlook on the Middle East would mean neglecting one of the greatest developments in the region, the city-state of Dubai in the United Arab Emirates (UAE).

Once an outpost for pirates and the pearl trade, this emirate has reinvented itself yet again. Enjoying a political culture that allows for openness and embraces market solutions as a way to think beyond an oil-based economy, Dubai, despite not being a democratic city-state, has been able to leap above its Arab neighbors to become a steadily growing economic powerhouse—one that is both modern and relatively stable.

The United Arab Emirates, created in 1971 after gaining full independence from Great Britain, is a loose federation with each of its seven emirates possessing considerable independence. Until oil was discovered, the city-states were comprised of weak economies. However, due to the insight of the UAE’s first ruler, Sheikh Zayed bin Sultan Al Nahyan, who ruled from 1971 until his recent death in 2004, the UAE took the profits from its oil industry and wisely invested in itself, improving the lives of its citizens while promoting stability. Sheikh Zayed ruled as a benevolent dictator, allowing tolerance for other religions and pushed for a moderate foreign policy that allowed the UAE to avoid unrest and economic turmoil.

The moderate political culture that Sheikh Zayed built for his country was tested in November 2004, when he passed away. Instead of the violent power struggle that often follows such a death in non-democratic countries, the federation swiftly installed his son, who has since resumed many of his father’s policies.

Indeed, Dubai has benefited immensely from the tolerant environment, and it owes much of its success to the openness that has been practiced since the UAE’s founding. The autonomy it enjoys as part of the UAE’s federalist-structured government also allowed its own rulers to make wise choices in governance. In fact, Dubai’s push for modernization began under Sheikh Rashid bin Saeed al-Maktoum in 1958, before the UAE was officially created. Sheikh Rashid sought to modernize the infrastructure of Dubai, completing an airport in 1959 that proved to be a smart, long-term investment that still pays dividends as a vastly expanded airport still used today. In subsequent decades, he created several ports and free trade zones designed to lure foreign businesses.

The lack of religious extremism also has eliminated a serious stumbling block that faces many of its neighbors. Dubai’s population largely consists of immigrants, mainly from South and Southeast Asia, in addition to those from other parts of the world. The diverse composition of Dubai, the moderation and tolerance advanced by the UAE, and the high standards of living have lessened the anti-US feelings prevalent in many Arab countries. In fact, women in Dubai can enter the business field, unlike many other women in the region who remain stifled in deep-seated gender roles.

Market innovations are another reason why Dubai is now one of the fastest growing economies and rapidly changing societies in the world. Oil reserves are expected to run out near the end of the decade, and that possibility has pressured Dubai to diversify its economy. In contrast, the UAE overall has oil reserves that might last for 100 more years. Dubai, literally a city of luxury with its fabulous shopping, grand hotels, and beautiful resorts, has been pushing to become a top tourist destination. In fact, Dubai now has over 270 hotels and 30 shopping malls, bringing in five million visitors annually. Its glamour has created a boom for cruises and other holiday specials, which citizens of neighboring countries see as the perfect vacation getaway. Dubai’s free trade zones have also attracted US companies such as Microsoft and CNN, who benefit from its no taxation policy and lax rules concerning foreign ownership.

Additionally, since many in Dubai use the Internet regularly, Dubai has an expanded online market that many businesses are eager to use to their benefit. In fact, an upcoming project in Dubai is the Dubai International Financial Center (DIFC), an onshore capital market designed as a financial free zone. The DIFC aspires to support economic growth by expanding wealth creation initiatives.

Another key factor in Dubai’s transformation, along with the growth of its airport, was its promotion of an “open skies” policy. By allowing other airlines to compete directly with the country’s Emirates Airline, not only has Dubai been allowed increased interconnection with the rest of the world, but it has also brought in demand for Dubai’s goods and services. Dubai International Airport had 18 million passengers pass through in 2003 and by the end of the decade, the airport is expected to handle 60 million a year.

From fly-by to destination, Dubai has reveled in modernity while still seeking new solutions to its unique situation. Just this past December, Dubai hosted the Arab Strategy Forum entitled “The Arab World in 2020.” In an address to the forum, the Crown Prince of Dubai, General Sheikh Mohammed Bin Rashid Al Maktoum, warned “if you do not change, you will be changed,” urging Arab states to look beyond casting blame and seek solutions to revive its economies and solve domestic strife. A rich city-state not governed by democratic rule, an Arab country looking positively forward due to a strong economy, and an open society that is an example for the region, Dubai should indeed be the model its neighbors seek to emulate.