Welcome to Dubai, city of merchants, cultural crossroads, second largest of the seven United Arab Emirates. A country where the dust of the desert is clearing to reveal the potential for one of the most significant international cities of the 21st century.

Wedged between Europe and Asia, buttressed by Africa, Dubai's encouraging tax regimes, state-of-the-art telecommunications and sympathetic business environment have produced a country that is building energetically on the advantages which location, centuries-old trading savvy and oil wealth have given it. Dubai is not just a city of excitement. It's also a city of surprises. Try the ice skating rink in the Galleria shopping mall at the Hyatt Regency, where young men wearing traditional dish dash dress pirouette around the ice while their friends consume French pastries and coffee at Frosty's cafe.

And other surprises. The magnificently-manicured, lush and green golf courses. The Irish Village at the Dubai Tennis Centre. Red telephone boxes which once brightened the British streetscape have found a home in Dubai. So, too, has the world's richest horse race, Dubai World Cup, a dream realised by HH General Sheikh Mohammed Bin Rashid Al Maktoum, Crown Prince of Dubai and Minister of Defence UAE. The race draws the best thoroughbred horses from America, Europe, Australia and Asia and races them at the Nad Al Sheba course alongside the UAE's best.

But it's not just horses which move quickly in Dubai. The cars hurtling past the Holiday Inn Crowne Plaza, on the road to the exclusive Jumeira residential area, and beyond to Abu Dhabi, include a high proportion of current model Mercedes Benz and Toyota Land Cruisers. These rich men's cars should not be taken as evidence that Dubai is frittering away its oil wealth on expensive toys. The oil is due to run out soon but Dubai long ago began the task of diversifying its economy to soften the impact of diminishing oil revenues on future generations.

Tourism is now an important part of the Dubai government's strategy to maintain the flow of foreign dollars into the emirate. "Dubai's attraction," says Patrick Macdonald, deputy chief executive of the Dubai Commerce and Tourism Promotion Board, is that it provides an Arabian experience in a very comfortable, safe and tolerant society.

"Visitors can enjoy all the international pursuits - golf, watersports, horse racing, polo and nightlife. Plus there's the attraction of the desert itself, with the opportunity to be part of an Arabian adventure."

Originally a small fishing settlement, Dubai was taken over in the 1830s by a tribe led by the Maktoum family, which still rules the emirate today. So began a trading empire based on gold, silver, pearls and spices. A fusion of Arab, Persian and Indian flair established Dubai's business acumen.

There is perhaps no better place to delve into Dubai's history than in the museum housed beneath the 180-year-old Al Fahidi Fort in Bur Dubai. Here the old is replicated using new technology.

Tableaux show life as it used to be on a working dhow in Dubai Creek; in the souks and the mosques; and in the desert camps of the Bedouin tribes. And while much of the traditional way of life in Dubai has disappeared in the shiny reflection of the glass and glitz of five star hotels and commercial offices, and has been devoured by modern highways, bridges and underpasses, the essence of Arabia remains in busy side streets, along the creek, and in the desert which blows at Dubai's backdoor.

The city is divided by Dubai Creek. Consequently the most interesting and direct way to travel from Bur Dubai to Deira on the north bank is by abra water taxi, a traditional form of transport used by locals to go about their business; and by tourists to access the spice and gold souks, and the myriad shops selling textiles and electrical goods in the Shindagha quarter.

Visitors stepping off a boat on the waterfront at Deira should make a point of looking at the dhows waiting to be loaded with goods bound for neighboring countries. The piles of unattended cargo on the dockside illustrate the underlying honesty of Dubai society. The dhow owners do not begin loading the boat until every item to be carried has arrived on the wharf. This can often take several weeks. In the meantime, the unpacked cargo stays where it is. But no one touches it. Crime here is the lowest in the world. Dubai is a clean, safe country with great shopping, a good climate for most of the year and lots to do for those who want to be active."

Five star hotels in the city are recording high occupancy rates but the competition is hotting up with several new luxury hotels planned. Hoteliers are keen that perceptions about Dubai do not suffer from negativity associated with some other Islamic countries in the Middle East.

Siggi von Brandt, director of sales and marketing for Meridien, says that more awareness of Dubai is needed in Asia. "This place has great potential, both as a holiday destination in its own right, and as a stopover on the way to Europe. It's a totally different experience to Asia. Different culture, different dress, different cuisine plus the mystique of the desert," he says.