Dubai, the modernistic city once projected to conquer the Gulf region, is now fighting to keep global banks from switching to rivals in surrounding countries.
Dubai is a city that is home to over two million residents. The city quickly emerged as the leading financial hub in the Middle East, after opening the Dubai International Financial Centre in 2004. reports Bloomberg. The financial services in Dubai accounted for 11.3 percent of their domestic gross in 2011. This high percentage of domestic gross highlights the significant need for the city to sustain financial prominence, especially because they lack the natural resources, such as oil and gas, of their Gulf neighbours.
Now, however, new challengers are emerging.
Qatar’s financial sector is growing aggressively with hiring rates exceeding those in the U.A.E. Qatar is continuously spending billions of dollars to build infrastructure in preparation of its hosting the World Cup soccer tournament in 2022. Doha, the capital city, has future plans to build a subway system, new roads, hotels and stadiums. All of these developments are an attempt to attract global finance institutions and filter money into the country by transforming the tourism and banking services.
Saudi Arabia’s capital, Riyadh, has also challenged Dubai, as it holds the region’s largest stock market and recently received a government-funded $500 billion spree to build its financial hub. Several banks, including Morgan Stanley and Credit Suisse Group AG, have been cutting positions in Dubai and switching regional equities teams over to Riyadh. Saudi Arabia’s stock market is three times the size of U.A.E. and Qatar, and is expected to continue growth as the country may soon permit non-resident foreigners to invest directly in the shares of Saudi companies.
What may keep Dubai afloat amongst its austere competitors is the notion that in order for a city to flourish financially, it should be able to attract human capital. Riyadh may have trouble convincing expatriates, who represent a significant portion of the global banking positions, to move to Saudi Arabia’s financial sector.
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Saudi Arabia has many regulations for women, which require them to often ask for permission from male guardians or husbands to attend school, travel or marry. Women in Saudi Arabia are also prohibited from driving. Dubai has no such laws constraining women, and the U.A.E. also tolerates drinking, while alcohol is considered a black market in Saudi Arabia. Dubai’s cutting-edge building designs and abundance of recreational activities have proven to attract plentiful human capital.
With imminent plans to install a federal credit bureau and a recent switch to direct debit within companies, Dubai may continue to be a financial leader. Regardless of the result, the recent aggressiveness of competition amongst the Gulf cities indicates a progression in the financial industry.
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