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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
Very safe. I'd feel immeasurably safer alone in Dubai at night than I would during the daytime in many US cities.
Hmmmm. Live under a benevolent møøslimb dictator, or under President Hillary!™.
Tough call.
Pancho Villa's in the Astoria Hotel. I have fond memories of that place. The food is pretty good too!
Tough call.
Hmmmm indeed... At least you can still smoke in the bars in Dubai --not to mention the shopping malls!
+=“At least you can still smoke in the bars in Dubai..”
Hell, they still have ashtrays in the elevators in Abu Dhabi like it was when America was America.
Very much so. I went to Dubai (and Abu Dhabi) on my way out of Yemen on R&R's. But I was in the South between the Rub’ al Khali and Al Mukalla, 60 miles from the nearest paved road
In Kuwait, you could have left a Rolex sitting on the dashboard of an unlocked car for a week, and it would still be there when you got back. The Kuwaitis are too rich to steal, and the workers are too terrified of running afoul of the law.
THANKS!!! It was just too many years and beers ago for me to remember. There sure wasn't two of them back then.
It is still there and doing great business. They've cleaned it up a little though. Now they won't let the prostitutes enter until after 5:00pm.
Bookmarking...
And Carter screwed that one up, and really got the radical ball rolling.
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