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.”