Once dismissed as a real estate play, the Dubai International Financial Centre (DIFC) has shaken off doubts about its ability to attract the best financial players to a region awash with oil boom liquidity. Doubts have lifted, having seemed to weigh heavy only two years ago when two senior British regulators tasked with overseeing the DIFC were dismissed. Their sacking raised questions about standards of corporate governance , but things appear to be back on track.
“Anybody who is anybody either has a licence, or is lining up for one,” says DIFC director-general Dr Omar Bin Sulaiman. This has been especially noticeable this year with a steady flow of companies including Citigroup, Morgan Stanley, Deutsche Bank, EFG Bank and American Life Insurance Co. opening offices in the DIFC.
Asian banks are taking note of Dubai’s position as a bridge to the west: the Japan Bank for International Cooperation has opened, to cover the Gulf Co-operation Council (GCC) states, Iran and Yemen. According to John Baggerman, general manager of DBS Bank’s Dubai branch, his Singapore-based bank is there “to help our clients tap into the increasing volume of capital flows between Asia and the Middle East.”
pushing the efficiency agenda
Dubai’s regulatory environment cannot compare with Bahrain’s. The latter is a much older financial centre, but “we are pushing the agenda in terms of efficiency, transparency and integrity,” says Bin Sulaiman. Dubai Financial Services Authority (DFSA) claims that by introducing a robust regulatory framework the DIFC is one of the world’s best-regulated financial centres.
Like everything else in Dubai, things have moved quickly: the DIFC concept only emerged in early 2002, and it was immediately clear that the new Dubai hub would need an internationally credible regulatory regime – Bahrain’s unique selling point as the region’s offshore centre – and “a commercially viable and unique role in the world financial services industry”. Its backers say the Dubai International Financial Exchange (DIFX), launched last September, fulfils this second point.
“Between the Far East and Europe, you have a big area that does not necessarily have an international market – yet the GCC countries and India are highly active economies,” says DIFX chief executive Steffen Schubert. “By creating an international market here, a market that attracts a vast populous region – stretching from India to Egypt, Turkey to South Africa – you attract investors that have not been served so far,” he says. Schubert sees a “tremendous opportunity” to introduce companies from across this region that are seeking capital and development finance, together with the cash-rich Gulf investor community. Major players, like Saudi billionaire Prince Alwaleed Bin Talal, seem to agree.
growing competition
But Dubai cannot rest on its laurels. Regional giant Saudi Arabia has announced plans to build a $6.7 billion financial district in Riyadh by 2010. According to Riyadh-based Bekheet Financial Advisors’ Beshr Bekheet, “it’s only normal that Saudi Arabia will be the major financial centre because it is the biggest economy and the largest market.” Bekheet believes that, ultimately, Dubai may come to play Hong Kong to Riyadh’s Shanghai.
DFSA chairman Dr Habib Al-Mulla says other Gulf financial centres pose no threat to the DIFC, arguing: “The region has enough scope for more than one financial centre. However, the DIFC will be the only international financial centre in the region.”
Bahrain, Riyadh and even Qatar and Kuwait may have something to say about that.