Dubai, Wall Street in Arabia

Aired August 2005

The United Arab Emirates, a country slightly smaller than the state of Maine is home to an estimated 60,000 millionaires and deal-flow is the pulse of the nation.

Dubai’s role is doing the conventional exceptionally, putting itself firmly on the global map and providing a stable platform for productive and profitable ventures to its 1.2 million inhabitants.

To help fast track modernization and economic diversification away from oil dependence, the government is structured like a corporation.

Dubai is a city low on oil, but high on diversified economy to draw in petrol dollars. Consequently, its objective is to facilitate international business toward carrying out sophisticated activities. Dubai allows for 100% foreign ownership for corporations and property owners, no income or corporate tax, a stable US Dollar-pegged currency, plus a myriad of further conveniences.

Dubai’s International Airport is currently undergoing a 4.1 Billion USD expansion. This will increase passenger numbers from the current 22 million to 60 million by 2007. The new Jebel Ali Airport is also due to be fully operational by 2007. It is located next to the Jebel Ali Port, one of the world’s largest ports. Once completed, the Jebel Ali Airport and Port will be the largest air-sea logistics and transportation center of its kind in the Middle East.

To best serve this market, Dubai’s strategy is to identify and replicate the most effective models in every industry worldwide, and make the Dubai version bigger, better and more efficient. To highlight this 16% of the world's cranes can already be seen swinging in Dubai’s skies.

Cluster economy projects are fuelling a boom in construction and real estate throughout Dubai. The government estimates 50 Billion USD will be invested in the real estate sector between 2004 and 2010.

With Dubai successfully established as a business and tourism destination, creating a hub for financial services was the next logical step to growth.

The DIFC is one of the government’s newest massive undertakings that will ultimately tilt the global flow of funds balance towards the region. The man orchestrating this initiative is Dr. Omar bin Sulaiman. His job is no less than to make Dubai an international financial center that fits nicely between the likes of Hong Kong, London and New York City. The financial services industry in Dubai has been earmarked by the Dubai Government to grow from 10% of the city’s GDP to 20% via the creation of the DIFC.

As a property development project, “The Gate” and complimenting community will offer everything necessary for over 52,000 inhabitants to live and work within the DIFC complex. Measuring in at over 1.45 million square feet, the Dubai International Financial Center complex will provide office space for all DIFC licensees. This will be accompanied with a myriad of facilities inclusive of residential right through to entertainment options. The monorail planned for Dubai will also have a main stop within the DIFC.

Yet, despite this impressive development, the question remains: Can they really create another international financial center in Dubai?

Building a new financial center in Dubai to the highest international regulations and standards supplies the missing link. It fills the time-zone gap not covered by the international financial centers of Europe, the Far East and North America.

The DIFC is an onshore capital market designated as a financial free zone. It is not an “offshore” tax haven but a highly regulated onshore capital market like London or New York, housing all categories of financial services institutions.

Why would the world’s top financial institutions come to Dubai? Why are Mellon Global Investments, Merrill Lynch, Franklin Templeton, Julius Baer and Credit Suisse already here?

The government of Dubai recognized the need for an entirely separate, independent jurisdiction in which international financial institutions would operate. It thus formed the Dubai Financial Services Authority, or DFSA, as a fully independent regulatory authority specifically created for the DIFC.

Creating the correct regulatory environment even required an amendment to the UAE’s federal constitution in order to make the Free Zone completely independent in its legal framework. This is the first amendment to the UAE’s constitution since its creation in 1971.

Institutions operating in the DIFC will be doing business in a familiar and reliable environment.

The DIFC has specific goals in mind. It aims to help repatriate the 1.8 trillion USD of regional capital currently invested and managed outside the region. It will facilitate regional privatizations and IPOs, and create extra insurance and reinsurance capacity. It is also positioned to build a pension fund industry and develop into a global center for Islamic finance.

Islamic banking, based on centuries-old traditions, has become globally popular over the last two decades, with Dubai providing a hub for such banking activities and product development.

Today, many western financial organizations are turning to Islamic banking in order to provide financing to developing Muslim countries.

The DIFC will have its own bourse: the Dubai International Financial Exchange, known as DIFX. Opening in September 2005, its practices, standards and technology will be comparable to international exchanges like the New York Stock Exchange, FTSE and Hang Seng.

Integrity, transparency and efficiency are the three hallmark mottos of the DIFC and its operation. And, to its credit, the formula is paying off.

From mortgage to masonry, finance to free trade, Dubai has it all and more coming as trade opportunities increase.

The UAE and the US are due to sign a bilateral free trade agreement by the end of this year, which will open the UAE market to facilitate ease of trade between the two countries.

For the international investor, the vigor and speed at which Dubai is attracting foreign joint venture partnerships piques curiosity.

Two additional Dubai-based entities have been catching headlines around the world. Istithmar, a major investment holding company run by The Corporate Office, has been instrumental in financing Dubai’s more innovative initiatives.

The second company causing a stir on the private equity scene is Dubai International Capital, the international investment arm of Dubai Holding. Where Istithmar’s forte lies in innovation, Dubai International Capital’s strength is its stature. Launched in October of 2004, International Capital invested close to 3 billion USD in its first six months of operation.

Generating economic diversification away from oil has set it on the path. The global financial corridor may soon be fast tracking its way to the model economy that is Dubai.

Thank you for watching Dubai; “Wall Street in Arabia”, we hope it has given you a new perspective on everything that is to emerge.