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Dubai investors look to Sheikh Mohammed to beef up the DIFC and DFM amid QFC competition

Posted on 18 November 2012 with no comments from readers

The Ruler of Dubai, and Vice-President and Prime Minister of the UAE, Sheikh Mohammed bin Rashid Al Maktoum seemed to return to the old days of the Dubai boom yesterday, unveiling more than a billion dollars worth of major projects. But investors would like to know what he is going to do to kick-start the still moribund local financial sector in the Dubai International Financial Centre and Dubai Financial Market.

The trading floor of the DFM first opened in 2001 and the Dubai International Financial Centre in 2004. These projects represented huge advances on the previous over-the-counter local stock market and the small collection of international financial institutions based in Dubai.

No bounce back

But since the global financial crisis of late 2008 and the Dubai real estate crash, one of the worst in global real estate history, the DFM has struggled to recover in terms of share prices and volume, and has enjoyed nothing of the rally seen in other major stock markets around the world.

For its part the DIFC is also stuck in a time warp with 333 regulated financial firms employing some 14,000 staff. It has done well to keep these people employed perhaps, but the hopes of creating a regional version of Singapore or Hong Kong look a lost vision of the future.

Today The National newspaper even dared to suggest that the Qatar Financial Centre might prove to be a regional rival. But then it is much smaller with only 70 regulated financial firms. Recent knee-jerk bans on the sale of alcohol on The Pearl Qatar have also left many questioning whether Qatar is a reliable business base and sufficiently Western for global expats.

That said the onus is still on Dubai to get its mojo back to attract the international majors to relocate. The global focus on cost saving ought to favor Dubai with its low-cost offices and no-tax for staff regime. But many firms dislike the twin regulatory systems with the DIFC having its own and the UAE another for local banks and financial institutions.

Dual regulator?

Unlike Qatar firms located in the DIFC find themselves locked out of the extremely wealthy local market on their doorstep. It’s a conundrum that can only be solved by decisive action at the highest levels. You might also say the same about a merger of the Dubai and Abu Dhabi stock markets to create a deeper and more liquid national stock market.

It’s great to hear news like a new $680 million hotel to be added to the Madinat Jumeirah facing the Burj Al Arab and that the extension of the Dubai Creek through Jumeirah will be awarded very soon. There is also to be $400 million to finish off parts of the Business Bay office district.

However, the success of the DIFC and Business Bay office districts crucially depend on getting the financial sector fixed and moving again in Dubai. This will take more than building more offices. Some radical decisions need to be taken to boost the DIFC and DFM.

Posted on 18 November 2012 Categories: GCC Economics, GCC Real Estate, GCC Stock Markets

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