The "burj," or tower in Arabic, is set to become the world's tallest skyscraper in 2008, looming more than 2,600 feet above a new neighborhood of offices and residential buildings. But more important, the rival to Burj Dubai's 167 floors will not be the current title-holder, Taiwan's Taipei 101, at 1,667 feet, or even New York's proposed Freedom Tower, which is to rise to a symbolic height of 1,776 feet.
Drive past the Mall of the Emirates with the only indoor ski slope in the Middle East; pass by three man-made islands shaped like palm trees and then a set of islands arrayed like the map of a world; continue past Burj Al Arab, the world's only seven-star hotel, which looks like a giant sail and offers rooms for as much as $13,900 a night.
There, farther down Dubai's coastal highway, another developer is planning to erect a tower that will stand about 2,300 feet tall. Simply known as Al Burj, or The Tower, it is to be the hub of a residential village for half a million people.
Once again, oil producers, particularly in the Arabian peninsula, are experiencing a boom. And just as they did in the 1970's and early 1980's, their coffers are spilling over with cash. Last time around, there was an abundance of outrageous projects, and judging from the extravagance on display in Dubai, lavish projects are finding financing once again.
But this time around, the region's main oil producers, like Saudi Arabia, Kuwait, Qatar and the United Arab Emirates, have gotten wiser. Since the boom started three years ago, they have paid down their debt, saved more money than ever before and created more jobs in the private sector. And they are trying to diversify their economies away from oil and its increasingly volatile cycles.
"People are asking where are all the petrodollars and why we have not seen anything like the spending of the 70's and 80's," said Bader al-Saad, who runs the Kuwait Investment Authority.
"What has changed is the economic and political reforms in the region, the fall of the barriers for investors, and the improvement of the banking and financial system," he said. "If we hadn't learned from our previous mistake, this would have been a big stupidity."
After the 1973 oil shock, governments in the Middle East spent 80 percent of their increase in revenue. Between 2003 and 2005, by contrast, they spent less than 40 percent of their new revenue, according to International Monetary Fund estimates. Governments have also whittled down their debt to an average 20 percent of gross domestic product last year, from about 40 percent in 2004.
Mohsin S. Khan, the director for the Middle East and Central Asia at the International Monetary Fund, said governments were still drawing up their budgets based on oil at $30 a barrel. In fact, since the beginning of 2004, oil prices have doubled and are now near $70 a barrel in New York.
Oil producers in the Organization of the Petroleum Exporting Countries will sell more than $1 trillion in oil exports between 2004 and 2006, according to the United States Energy Information Administration. This year alone, their revenue is projected to grow by 10 percent, to more than $500 billion, according to the Energy Department. The bulk of that wealth will find its way to the Persian Gulf, home to most of the world's top producers.
"The question many have in the region is how not to squander the wealth like they did in the 1970's," said Rachel Bronson, a specialist on Saudi Arabia at the Council on Foreign Relations in New York. "Unlike in the United States, where it feels like high prices are going to last forever, in the Middle East, the feeling is that it will not last. So, how do you avoid the problems of the 1980's that followed the boom of the 1970's?"
Saudi Arabia, for example, tried to use its oil windfall of the 1970's and early 1980's to become an agricultural powerhouse. It spent billions of dollars to irrigate and grow crops on the kingdom's arid lands. In less than a decade, Saudi Arabia became the world's sixth-largest wheat producer.
But then oil prices collapsed, and the Saudi government ran out of money. The costly effort to make the desert bloom then joined a list of financial follies, like the customized Boeing 747's and the palatial resorts in the south of France.
So it is not surprising that the region's finance ministries are still not convinced that oil prices will remain high for very long, even as they shape their oil policies to keep prices from falling.
In Abu Dhabi, the capital of the United Arab Emirates, the government has an investment arm that some analysts say manages more than $250 billion. Kuwait's investment arm, meantime, gets 10 percent of that country's oil sales and controls a fund estimated at well over $100 billion. Both these investment arms have been in talks to buy a part of the Industrial and Commercial Bank of China.
A portion that is not invested at home is finding its way judiciously around the globe. Last year, Dubai bought $1 billion of DaimlerChrysler shares; it purchased the Tussauds Group, Europe's largest tourist-attractions operator; and it made a $5.8 billion bid for Peninsular and Oriental Steam Navigation, a British shipping company.
Much of the Arab world's new wealth that is invested abroad also ends up in the United States, in Treasury bonds as well as corporate and other government debt instruments. Thus, the Arab world is helping to finance America's enormous trade deficit.
About $300 billion flowed from Britain into America's bond markets in the first 11 months of last year, almost three times the amount of 2004. Investment analysts say that much of that money comes from the Middle East.
Yet even as Middle Eastern governments open the spigots to more local spending, analysts like Mr. Khan are confident that the region's oil wealth will not be squandered this time. One major difference is the growing importance of local private investors, who have helped create a tripling in stock valuations in the region in the last three years.
And finally, there are signs that Middle Eastern governments are becoming more confident about the sustainability of its boom-time revenue stream. Last August, the Saudi government gave a 15 percent raise to government employees, the first across-the-board pay increase in more than 20 years; in April, the federal government of the United Arab Emirates raised government wages by 25 percent for nationals and 15 percent for foreigners; in January last year, Kuwaiti authorities provided its citizens with grants worth around $700 apiece.
"Last summer the oil price increase was still somewhat of a surprise to producers," Mr. Khan said. "Now spending has picked up; projects are coming on stream."
Saudi Arabia has not lost its appetite for extra-large projects. For example, the government is seeking to revive a decades-old project to build a railway that stretches 950 kilometers, or 590 miles, linking its capital city, Riyadh, with both eastern and western coasts. And the government is planning to spend billions of dollars to expand its petrochemicals industry.
Last month, it also introduced a $26.6 billion plan to build a new resort city, from scratch, on the Red Sea that will eventually be able to accommodate 500,000 visitors a year. According to color advertisements taken out in local newspapers, the new city, dubbed King Abdullah Economic City, will have a hotel and resort district, a "financial island" for office skyscrapers, a commercial seaport and a residential area with a canal.
Who got the construction contract? A developer called Emaar, owned by the Dubai government, that just happens to be building Burj Dubai.
