Qatar downsizes its financial centre, Dubai victorious
Posted on 02 February 2010 with no comments from readers
The Qatar Financial Centre is being downsized in the wake of the resignation late last year of its director-general Stuart Pearce and a move to a unitary regulatory authority covering all financial institutions operating in the emirate.
This appears to be an end to the QFC’s rivalry with Dubai as a regional financial centre, if that was ever a serious proposition. Its high profile and award-winning television advertising campaigns won a good deal of attention and spread the message that Qatar is a place to watch to global financial institutions.
Fastest growing economy
Indeed, Qatar is expected to be the fastest growing economy in the world this year with key gas installations coming on stream. But that is also a part of the problem.
The ‘resource curse’ is a phenomenon identified by economists that afflicts economies with one dominant source of income. For Qatar read gas. The problem is essentially that one sector bids up the cost of labour, resources and credit and dominates the economy to the exclusion of all else.
From the perspective of global financial institutions that has made Qatar a highly expensive country in which to operate, and certainly not suitable for the large numbers of staff required for a regional base. Hence the raison d’etre of the QFC is strangled at birth.
Debt-ridden Dubai with its empty towers and plunging office and housing rentals looks far more attractive to banks and financial institutions looking to save on costs. Staff can also save on rising personal taxes, so everybody is happy.
QFC role
There has been no official announcement yet about changes at the QFC. But it looks as if it will continue to provide visa and ancillary support for foreign financial institutions in Doha – which remains valuable in this dynamic economy.
For such a small place to have two regulators always seemed a trifle excessive, and this simplification will actually help existing foreign financial institutions in Qatar. The QFC will still be open for business but Dubai wins the undisputed crown as regional financial centre for global financial institutions.
Bahrain with its Sharia law in Arabic is not a contender for global financial institutions whose business language is English. So Dubai, as the regional business centre, is where they belong.
