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DIFC: Mother of all of Dubai's gold mines |
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12/26/2006 9:00:34 AM |
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FINANCIAL centers are the vortex of the trillion dollar daisy chains of credit and leverage that constitute the international money markets.
London’s Square Mile, Manhattan’s Wall Street, Chicago’s Loop, Hong Kong’s Central, Singapore’s Suntec City, Zurich’s Bahnhofstrasse, Tokyo’s Marunouchi and Mumbai’s Dalal Street are places of incalculable power, the high temples for the priesthood of international money, modern incarnations of the Acropolis, Thebes, the Forii Romani and Chichen Itza. Yet hubs of international trade, finance and banking existed for millennia in the Arab world.
Alexandria was the naval base of the Roman fleet that followed the monsoon winds in Kerala to exchange Arabian war horses (the F – 16 of the time) for Cochin’s black gold, the spices that the Roman Empire used to pay tribute to the barbarian Germanic tribes. Petra, the exquisite rose – city of the Nabateans, was an offshore tax haven on the edge of the Persian Empire, a tax free oasis of trade, an ancient Dubai. Makkah, the birthplace of Islam’s Prophet, straddled the ancient frankincense routes from Yemen to the souks of the Hijaz, Syria and the Levant. Abbasid Baghdad was Caliphs Al Mansur’s megalopolis on the Tigris, a global hub of trade and finance, whose merchants issued letters of credits and cheques (from the Arabic word sheekat) accepted everywhere from Venice to Canton. In Arabia, the movement of trade caravans, money and ideas have transformed the desert and caused history to move fast forward from the era of the Roman Caesars, Persian Shahs and Abbasid Caliphs to our own time. Successful financial centers were the monetary equivalents of legendary gold mines.
Dubai has staked its bid to become the world’s latest financial centre with its DIFC, a financial free zone for the Gulf. Yet it is not the only Arab emirate that seeks to morph into an Arabian Singapore. Doha, the LNG capital of the Gulf, has created a financial centre designed to attract the world’s top project finance banks, and hired several ex – DIFC executives. Bahrain, the offshore banking and Euromarkets loan syndications capital of the Gulf since the 1970’s, has built a futuristic Financial Harbor. Saudi Arabia’s King Abdullah Financial City in north Riyadh will be a unique global concept as an international banking centre in a kingdom where alcohol, cinemas and even female drivers are banned, where public beheadings and amputations are enshrined in law. Beirut sought to regain its pre civil war glory as the Levantine Zurich before the summer bombardment by Israel and the government–Hezbollah confrontation turned the Lebanese capital into the Mediterranean Teheran. Aqaba advertises on CNN, promising to turn Jordan’s sand into gold. Just like national airlines and aluminum smelters in the first petrodollar bonanza in the 1970’s, brand new financial centres are the new Arab sovereign status symbols in the new millennium.
Yet Dubai has an ambience, ethos and zeitgeist that truly make it the world’s hottest new East–West money hub. The DIFC has attracted the crème de la crème of the West’s international money centre banks, fund managers and investment banks. The latest entrants include Wall Street’s proverbial Masters of the Universe, the investment bankers at Lehman Brothers, Goldman Sachs and Morgan Stanley. The great and the good of the City of London are scrambling for the DIFC with the single minded fervor of a heat seeking missile. Barclays Capital has won billion dollar sukuk mandates from the DIFC. Standard Chartered and HSBC have become clearing members of the DIFX. Even Rothschilds, the investment bank that advised Peninsula and Orient Steamship in Dubai Port’s takeover bid (and sold their client at a price that was double my estimate of P and O’s value!) is now in Dubai.
Rothschilds is the quintessential British merchant bank, financier of the Suez Canal and Russian Tsars, its Swinthins Lane offices once the London home of the international gold fix, still owned by the eighth generation of aristocratic bankers, descendants of Mayer Amschel Rothschild, a Frankfurt ghetto moneychanger in late 1700’s Germany. Goldman Sachs, which gifted its chairman Hank (the Tank!) Paulson and ex–arbitrage maestro Bob Rubin to the Bush (sonny) and Clinton White Houses, the most fabulous money making machine ever in the history of Wall Street investment banking, is now in the DIFC. Lehman Brothers, an investment bank so venerable its founders financed the Civil War cotton trade from New Orleans in the 1860’s, has chosen the DIFC. Morgan Stanley, once the white shoe legacy of the great John Pierpont Morgan, is now licensed by the DIFC.
International private bankers and fund managers have not been slow to grasp the fact that Dubai is (hopefully) the gateway to the Arabian Gulf’s two trillion dollar private wealth pot of gold. The Gate, a replica of the Arc de Triomphe in Paris, leads to futuristic chambers of glass and marble, where the cognoscenti of Dubai finance do their thing amid the gilded magnificence of new money that not only talks but positively screams in a decibel count whose shock waves hit bank boardrooms from sunrise in Tokyo to sunset in San Fran. Credit Suisse has used Dubai to make its DIFC office a booking centre and its tribes of private bankers are ubiquitous in Dubai, led by the brilliant Monish Advani. Fidelity, under Cormac Sheedy, is America’s mutual fund powerhouse. Franklin Templeton, the name of EM guru Dr Mobius, has its regional marketing office in Dubai. The world’s largest listed hedge fund of funds Man Investments is in DIFC. So is one of the world’s leading family offices, Monaco and Dubai’s Sovereign Group.
It is a fact of life that gold mines do not mine themselves. They have to be lovingly nurtured, bankrolled, and developed. If the roll call of its members is any index of success, DIFC is the mother of all of Dubai’s goldmines. |
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