Dubai Powers Ahead Despite Middle East Woes

by Lorys Charalambous, Tax-News.com, Cyprus

24 March 2003

With the Middle East in turmoil over the Iraq war and the ongoing Israeli/Palestinian confrontation, it might seem that Dubai's efforts to establish itself as a business hub could be held back until stability returns; but the Emirate is confident about its future and continues to plan for the development of its Dubai International Finance Centre (DIFC), which will be the region's most modern capital market.

Naser T Nabulsi, formerly with Merrill Lynch, and senior investment officer and head of asset management at The Executive Office in Dubai, was recently confirmed as the DIFC's chief executive.

"We are not seeking to recycle existing business from our neighbours but to create the new opportunities that our region urgently needs," says Nabulsi. "By creating a new financial centre, the DIFC will be a magnet for the investment needed to stimulate business and employment growth. We intend to achieve this goal - ambitious but attainable - by combining the entrepreneurial spirit of the Emirates with the very best financial, legal and regulatory practices from the world's leading markets."

Ian Hay Davison, chairman of the Dubai Financial Services Authority, emphasises that "There is a need for a regional capital market to direct investors towards the legitimate enterprises of the area." Davison is predicting the evolution of a diverse financial sector, covering fund management, wholesale banking, back-office, life assurance and a stock exchange.

The DIFC intends to fill a significant gap in the market for international Shariah banking, fund management and life assurance. One of its biggest selling points is that it will appeal to both Arab money looking for a local centre of excellence and Western cash seeking sophistication and safety.

A regulatory body, consisting of leading expatriate business professionals, is being established, with laws written in English; and international legal experts will run its judicial system, based on the Scottish model. Its financial regime has been drawn up by "cherry picking the best of international regulation".

While the DIFC awaits formal approval of the first set of laws from the Sheikh, Deutsche Bank, HSBC and Standard Chartered Bank are among dozens of international financial sector firms who have already signed up to be among the first residents. More than 90 privatisations are expected in the DIFC's area, (from Cairo to Calcutta and Almati to Sudan), fuelling plans for developing a stock market over the next few years.

In the short term, Davison believes the DIFC has a major role to play in developing the region: "Iraq used to be an important trading partner and Iran is looking ready to open up. We expect Dubai to play a major role in peacetime, although equally we always gain from any trouble."

Recommended