Has the DIFC been a success?

Euromoney, March 2015

Euromoney has been visiting the Dubai International Financial Centre regularly since its foundation in 2004, but it wasn’t until a recent visit in February that it occurred to us that the centre is now so big you can get lost in it. Once just the iconic Gate building, then its linked periphery, the complex – and the legally distinct common-law jurisdiction that exists within its boundaries, demarcated from the Shariah codes of the United Arab Emirates – now sweeps into neighbouring precincts and developments, and hums with restaurants and members-only business clubs.

Ten years on from its foundation, then, can we anoint DIFC a success? Well, that depends slightly on what you think it was really for. A banking centre? A fund management hub? An employment magnet? A real estate project? An exchange?

The cynical think of it as primarily a real estate enterprise, and if you take that view, clearly it’s done very well. The financial crisis apart, there has been consistently high demand for premises within the centre, and although some of the office towers are said not to be full, the scale of the place is now impressive. Euromoney recalls talk of a target of 50,000 workers in the zone at its inception in 2004, and that hasn’t been met – it is thought to have about 15,000, though it clearly gains a significant temporary population from people flying in – but it would be churlish to say it hasn’t achieved a critical mass.

As an international banking centre, probably the best endorsement comes from the entire building filled by Standard Chartered, which has set up its head office for the region within the zone. International banks are pretty much all represented, though not enough of the Islamic banks who were also a stated target of the centre at its inception.

Fund management? That’s a tricky one. The client directory is a list of the great and the good of global asset management, but what are they really doing? To this day, most of them are made up of a sales team whose primary purpose is not to bring money into the UAE, but take it out again, to be managed in head offices in London, New York and Geneva. There are instances of local on-the-ground portfolio management taking place – Man Investments, Franklin Templeton, Schroders – but they remain the exception. If it was ever an intention to facilitate international capital entering the UAE, that’s not really what it’s done.

The international-style regulatory regime within the DIFC is secure and trusted – hence the presence of the foreign banks. But what about the big ambition for the exchange within DIFC? Nasdaq Dubai is a long way short of being any sort of regional equities exchange, but it has carved out a useful niche for listed sukuk.

So, after a decade, the jury’s still out, with successes and failures clear to see. But whatever else it may or may not have achieved, it can at least boast a lot more activity than the Qatar Financial Centre. And that, in this competitive region, will count for something.