Feeding off each other.
Summary: DIFC is the world's 7th most competitive financial center, while Dubai is the 10th, according to a report by the DIFC and KPMG in the UAE. The authorities claim that DIFC's success-story is boosting Dubai's profile. How?
The Dubai International Financial Centre (DIFC) was ranked seventh out of 15 countries in a competitiveness study titled the 'International Financial Centres Competitive Assessment Report', conducted by the DIFC and KPMG in the UAE.
DIFC beat notable financial centers in the West, including Frankfurt, Germany and Paris, France. It also outclassed regional centers surveyed in the report, including Doha, Qatar and Riyadh, Saudi Arabia.
Interestingly, however, while DIFC was ranked seventh, Dubai was ranked tenth. The DIFC's "world-class legal and regulatory standards" and its "independent regulator and judiciary system" were cited as reasons for its competitiveness, which suggests that Dubai's own regulator and judiciary system are not as world-class.
In fact, the DIFC's independent legal framework begs the question: If Dubai's judiciary system is as outstanding as local officials claim, why would the government feel the need to create an independent financial center like DIFC in the first place? If Dubai's legal system is world-class, it should be enough to attract foreign businesses, right?
Maybe not. The governor of the DIFC Ahmed Humaid al-Tayer said in an emailed statement that "the results of the report underscore the interdependent relationship between DIFC, Dubai and the UAE. While Dubai and the UAE have gained from DIFC's achievements in the international arena and its strong commitment to global best practices, DIFC has benefited immensely from the infrastructure created by Dubai and the UAE."
In short, DIFC's got the first-class goods, while Dubai and the UAE have skeletal framework.
However, according to Vijay Malhotra, Chairman and CEO of KPMG in the UAE, DIFC will help boost Dubai's image internationally: "DIFC's performance on the International Financial Centres Competitiveness Assessment Report is a reflection of its leading soft and hard infrastructure [...] The results of the report clearly highlights that, leveraging on DIFC's immense potential, Dubai is all set to play an important role in the global financial services industry map."
Either Malhotra is an upbeat, optimistic man, or Kipp is looking at the wrong report, because coming in tenth place out of 15 locations isn't exactly an indication that Dubai is ready to play an "important role" globally. Dubai beat financial centers like Doha, Riyadh and Dublin, Ireland, which is hardly an achievement.
Kipp understands that this is a difficult time for Dubai, but there's only so much positivity you can juice out of this report. Dubai's reputation as a viable financial hub is in trouble due to years of poor transparency laws and corporate governance practices; and while Dubai government's gargantuan debts have harmed the emirate's reputation significantly of late (have we agreed that they're government entities, or is that still in dispute? Shall we call them private-public to stay on the safe side? How about public with a private twist?), reports about a lack of a clear-cut legal framework in Dubai have circulated for years. Dubai's problems extend beyond its debts, that's for sure.
So how will DIFC elevate Dubai's profile if the emirate's core issues as a financial center (lack of transparency, etc) are not addressed? And why is anyone proud to note that an independent financial center within Dubai fared better than the emirate's own financial center?
2009 Dubai Business | Kippreport. All Rights Reserved.
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|Date:||Dec 22, 2009|
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