Business | Investment
DIFC remains strong despite fears
As the news becomes ever grimmer at home, Middle Eastern bankers have tended to talk about fundamentals a lot.
- By Simeon Kerr, Financial Times
- Published: 23:24 November 28, 2008
- Image Credit: Illustration: Dwynn Ronald V. Trazo/Gulf News
As the news becomes ever grimmer at home, Middle Eastern bankers have tended to talk about fundamentals a lot.
The region, awash with the biggest petrodollar pool in its history, also sits on the world's largest oil reserves and is diversifying into a dynamic economic zone. Of course the global financial crisis will affect the region, but less so than elsewhere, they argue.
All this may remain true, but the freefalling oil price has served to remind the legions of international bankers propping up the bars in Dubai, Manama and Doha that the outlook may not be so assured for everyone. There are bound to be some losers.
Dubai International Financial Centre, the natural home for most banks setting out their stalls for Gulf clients, continues to talk up a long waiting list for space. Many companies registered with the DIFC currently maintain office space outside the centre, nervously awaiting the call from the DIFC to say that (invariably more expensive) office space has become available.
While a long way off a trend, people close to the situation say three DIFC companies are in the process of closing their businesses as the rise of regional competition collides with the global downturn.
"We've seen a number of banks announcing job cuts, and I think here they are clearly looking at headcount management. It's not surprising if there is a lull in transaction activity," says Eric Milne, head of banking and finance for the Middle East and North Africa, for law firm Simmons & Simmons.
Despite the end of global investment banks, the large names at the DIFC profess to be in expansion mode. And luring new staff to the region is a lot easier these days given the economic woes and job-shedding elsewhere.
The late Lehman Brothers is to be rebranded under the Nomura nomenclature over the next few weeks. A couple of senior staff moved on to other Dubai-based jobs, but the Nomura operation is keeping on many staff at the failed investment bank's DIFC base, according to people close to the company.
Emerging markets
Emerging markets are also forming a second wave of entrants into the DIFC, perhaps signalling a deepening of the Gulf's dependence on the east away from its traditional European and US ties.
Some Dubai officials believe that courting Asian banks, as well as the region's internal petrodollar resources, is the only way for the emirate and the Gulf to access the hundreds of billions of working capital needed to fund the Gulf's infrastructure requirements over the next few years.
A clutch of Asian financial institutions have already set up in Dubai and Qatar, while other emerging powers, such as Latin America, have already moved into the region, via Banco Itau's securities unit and Intesa Sanpaulo.
VTB Capital, the investment banking arm of the second-largest bank in Russia, is hoping to receive its DIFC licence in December and launch operations early next year, building on strong Gulf tourist flows and real estate investments from the former Soviet Union.
Yuri Soloviev, chief executive, says the Gulf-Russian link has been overlooked in the oil boom years, but he hopes that this trade and investment channel flows more freely now.
How have you been affected by the global downturn? Did your company suffer from it? What happened?
Your comments
Clients are looking critically at Dubai and the region as a destination of choice be it as a structured conduit for Investment funding and business or as an HQ. Key drivers will be the return of confidence motivated by value added flows of tangible investment, people and capital into and from DIFC and Dubai.
M Chatur
London,UK
Posted: November 29, 2008, 12:31
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