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So whilst everyone was making final
preparations for SIBOS this past weekend, I was in Dubai keeping good on a long
standing promise to visit a friend.
If you haven’t been
to Dubai before, I’d strongly suggest you take a trip there soon to see the
amazing amount of development even as compared to Shanghai where I live. Dubai is one of the 7 emirates that make up
the United Arab Emirates (UAE). While UAE
ranks 5th in the world in oil production, Dubai on its own actually only
produces about 6% of the UAE total.
Essentially what the
government of Dubai has decided to do is to create a business capital, from
scratch, in the middle of the desert. With
an abundance of sand, and not much else in terms of natural resources, creating
a human capital based economy (knowledge & services) is one of the few
options. So the government has taken
what was once dunes of sand and started to build what they envision to be the financial
capital of the Middle East. It is, to
use the trite phrase, truly a ‘build it and they will come’ strategy. The centre of the financial services development
is the Dubai International Financial Centre (DIFC), which was opened in 2004
and resembles a 1990’s Canary Wharf with lots of buildings, but no inhabitants.
Surprisingly enough
though, of the 1.3M people that live in Dubai, 60% are Indian, Pakistani, and
Filipino, 25% are from the Emirates, 12% Arab, and 3% westerners. Now granted that many of the 60% in the first
category are the manual labourers (for which Dubai has had some human rights
questions raised in the past), a large number are involved in international
business throughout the region. While I
was there I met people selling timber from China to Europe and India, mobile
phones from China to Africa, and Indian outsourcing services to Middle East
companies. Take that into account with
the fact that geographically, Dubai sits in the middle of Russia, the Middle
East, Africa, Europe and India it could very well be that Dubai is becomes the
London of the Middle East. There are
some caveats though.
While all 7 UAE emirates
are technically one country, they all have aspirations of being the financial
centre of the Middle East. In fact, in
the complex LSE-NASDAQ-OMX-Borse Dubai stock exchange deal happening right now,
Qatar is turning out to be one of the biggest competitors for Borse Dubai in closing
the deal.
In addition, most of
the Dubai economy is a result of the incredible construction development
happening in the country. When you start
to peel through the layers of real-estate/property development companies, there’s
actually not much organic development underneath. Most of the money coming in is from state
owned companies or essentially ‘recycled’ money from property development/speculation.
However, even with
those issues, it will get there eventually, but I’d have to agree with how one
friend put it: “I’ll believe Dubai is the financial capital of the
middle east, when I meet an Goldman M&A banker at the bar.”
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