Posted on 09/25/2007 12:11:23 PM PDT by Squidpup
Long-term vision to become 'an Arab city of global significance' powered Nasdaq deal, writes Frank Kane
Sheikh Mohammed bin Rashid Al Maktoum, the Ruler of Dubai, explained the essence of his ambitions for the Gulf city-state at a grand presentation earlier this year. He told an audience of the emirate's political and business elite that he wanted Dubai to become "an Arab city of global significance".
The events of last week, when in a complex set of deals, Dubai forced its way on to centre stage in the rush to consolidate the world's stock exchanges, should be viewed in the light of that long-term vision.
The sheikh, who rules Dubai with benevolent but absolute authority, put his strategy into historical context. He wanted Dubai to rival Cordoba and Baghdad, he told the audience. He hit exactly the right note for his Arab listeners – those two cities, at the height of their prominence when the Islamic empire was at its zenith in the 10th century – are still regarded as models of how Arab civilisation can play a world role, even in the era of Western dominance of global business.
Dubai wants to become the financial marketplace of the Middle East, and the sheikh is prepared to spend billions of his own, and the emirate's wealth, to achieve that goal. "Vision" is a frequently overused word in this part of the world, but the Maktoum family's strategy for their city-state – population 1.3m – is on a truly grand scale.
It is based on the premise that, unlike some of its neighbours along the Gulf coast, Dubai cannot rely on energy products to finance its future. The emirate is not sitting on vast reserves of oil or gas, and energy revenue makes up only 3pc of total GDP. So Dubai has had to think of other ways to ensure its economic livelihood.
The mega-projects that have become the city's hallmarks – seven-star hotels, man-made islands, cavernous shopping malls and iconic buildings – are all symbols of this need to get away from dependence on oil and gas. Under Sheikh Mohammed, the city has become a thriving hub for tourism, retailing and commerce in the Middle East, all based on his axiom that "if you build it, they will come". The same applies to financial services.
Hence, three years ago, the Dubai government embarked on a policy of building and equipping a financial city within the city itself. The result is the Dubai International Financial Centre, a mini-conurbation set beside the architectural canyons of Sheikh Zayed Road. It houses two stock markets – the domestic Dubai Financial Market and the Dubai International Financial Exchange, now linked in the Borse Dubai – as well as the infrastructure of hotels, shopping malls, restaurants and leisure facilities needed to service an army of traders, bankers and administrators. When it is completed in a couple of years, 45,000 people will live and work in the DIFC.
No other Gulf city can boast such a development. Abu Dhabi, the capital of the United Arab Emirates just a couple of hours' drive away along the coast, has the cash and ambition to become a regional hub, but has left the financial market to its extrovert "small brother" to the north-east. Qatar and Bahrain also have big reserves of petro-dollars and plans to expand as financial centres, but are years behind Dubai in the execution of the plan. That is why the battle for the London Stock Exchange and the Swedish market OMX is so crucial – whoever wins will have taken a giant stride towards market supremacy in the Middle East.
The thinking at each city is based on a simple equation. The West – Europe and the USA – have mature and sophisticated financial markets, with a developed culture of investment in equities and other financial instruments. But – as is becoming more apparent with each creak of the West's cash-strapped markets – they lack liquidity.
With oil north of $80 a barrel and likely to carry on rising, the Middle East has liquidity galore in sovereign wealth funds and private corporations. It also has businesses looking to tap into the global markets for their future funding requirements. Marry up the Gulf's petrodollars with the cash-raising machines in London, New York or Stockholm, and you have the perfect match. It also makes a crucial link in the "new silk road" – the commerce between the region and the booming economies of China and India.
This is why the deal between Borse Dubai and Nasdaq is such a crucial alliance for Dubai, regardless of what happens with the London Stock Exchange. The New York alliance gives Dubai access to the world's most vibrant stock market. Essa Kazim, the Borse Dubai chairman who was the architect of the tie-up, expects a steady stream of deals, dual listings and IPOs to flow between the US and the Gulf. Qatar obviously sees the same logic, hence its intervention at LSE and OMX. It would like to deny Dubai the opportunity to steal a march in the bid to be the Middle East's financial hub.
There is a bitter rivalry between the two centres, going back to the time of independence in the early 1970s, and aggravated a few years back when a team of financial regulators left Dubai in some acrimony and were promptly hired by Qatar. But there is also a feeling that two Arab states cannot be seen to be squabbling over such a rich prize while the world looks on, and an unspoken expectation that they will sit down together, perhaps even at sheikh level, to thrash out a deal to their mutual benefit.
But Dubai's determination to see it through should not be underestimated. There is an awareness that the emirate's standing in the world is being tested. One government-owned newspaper splashed its front page the day after the deal last week with the headline: "Dubai stuns world with historic deal". Even allowing for journalistic hyperbole, that is an accurate measure of the grand ambition of Dubai, and its ruler.
Frank Kane is director of business media for the Dubai-based Arab Media Group
Dubai is truly awesome to behold! I have been there 6 or 7 times and each time I visit, there are more buildings then there were before. It is next to impossible to count all the construction sites. I have never seen a skyline dotted with so many cranes. I love Dubai! It is a model to be emulated by the rest of the Arab world.
Yep. Nothing like a good ol' "benevolent" dictatorship.
Best beaches, good fishing and plenty of booze.
At this point, I'll take Sheik Mo' over pretty much every other ruler in Arabia right now -or any Muslim country, for that matter. At least Sheik Mo' is relatively civilized and modern.
BTW, he tells me that no mater how much money one has in the bank, a trip to Dubai will make you fell poor. Says that the wealth one sees there is unbelievable!
Yep! Awesome nightlife and shopping as well. Fantastic restaurants, hotels, and on and on...
I'm always amazed by the folks who would criticize Dubai as some desert backwater. They have clearly never visited the place.
Fell = feel. Sorry.
I know what he means! The American dollar has decent purchasing power and I was always able to enjoy myself without going broke. You can get an excellent hotel room for under $200/night and food and drinks are pretty reasonable. But I'll never forget walking through the endless Emirates Mall (the one with the ski slope) and seeing a $250,000 Swiss watch sitting in the window display of a jewelry store.
And yes, I've always felt safe in Dubai --even stumbling around the back alleys late at night after a few drinks in one hotel bar while trying to find another hotel bar! LOL!
So was the Shah of Iran.
Is it safe for a non Muslim?
The first time I visited Dubai was in 1971 on my way to Das Island. The only thing I thought worthwhile at that time was the cold Heineken available in a building that was purported to be the airport.
When I was going through Dubai, there was a guy from Houston running a Tex-Mex restaurant. After we found him, we brought in Texas memorabilia and he gave us food and beer.
So true. islamic countries can turn on the infidels on a whim. With the global situation of islamic madness getting worse and worse, I wouldn’t trust dubai not to have some sort of islamic revolution against the ‘debauchery’ that goes on.
Yep. Nothing like being ruled by a dictator, with "Absolute authority".
Just change your dictator, and 'oila...no more benevolence...
Keep in mind, less than 20% of the population are “locals”.
Just above Sana’a in Yemen there is a small place that advertises itself to be a restaurant. We called it the Petroleum Club. Its owner was a Yemeni who had lived in New Jersey for 15 years. He served the cheapest and biggest shrimp I have ever had. The tails we threw over our shoulders for the cats to eat. There must’ve been a couple of dozen. Don’t go to the restroom - drive off the road a few miles.
Further up the mountain there was a chicken farm. Expats bought chickenshit in 50 pound bags for garden fertilizer. The owner spoke better English than many of our HS graduates. He had worked in Lansing, MI for Ford for many years and went back to Yemen to retire.
This world is getting smaller and smaller.
Um... Hardly. The Shah was a brutal tyrant who had a particular fondness towards torturing the children of his enemies in front of their parents. But he was our good buddy so that made it OK. < /s
They've gotten a taste of the good life and they aren't going to give that up. Keep in mind, Dubai doesn't have an impoverished lower class of have-nots. They have wealthy citizens who live a life of leisure and make up about 15% of the population and then they have an imported labor class who travel on work visas and can be deported on a whim if they start causing trouble.
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