US oil services giant Halliburton's surprise decision to relocate from Texas to Dubai has boosted the Gulf emirate's ambitions to be a major player on the international financial scene. "It's very positive for the United Arab Emirates and Dubai especially," said Monica Malik, chief economist at Standard Chartered Bank. "It's just the sort of thing that Dubai wants. It's a place that companies can use as a hub for the wider region," she told AFP. Halliburton said on Sunday that its chief executive officer and chairman, Dave Lesar, would move to Dubai, one of the seven emirates that make up the UAE, to reflect the growth in oil exploration and production in the region.

"There's not much oil in Texas any more," said Dalton Garis, an American energy economist at the Petroleum Institute in Abu Dhabi. "Halliburton is in the oil and gas industry and guess what? Sixty per cent of the world's oil and gas is right here. If they didn't move now, they'd have to do it later." Halliburton, with its links to the US military and the Republican Party is considered one of America's most red-blooded companies. Many Americans were startled to hear Lesar's announcement.

Last year, more than 38 per cent of Halliburton's $13bn oilfield services revenue stemmed from sources in the eastern hemisphere, where the firm has 16,000 of its 45,000 global employees. Dubai's flexible fiscal policy, free-zone set-up and a stable business-minded government have turned the emirate into an area ripe for overseas investment and lured top international blue-chip firms seeking to cash in on the oil-rich Gulf region. Located in the politically volatile Middle East, Dubai will also see the Halliburton move as a vindication of its stability and relatively liberal attitude.

The move will probably be considered by some in Dubai as sweet revenge after the humiliating setback suffered last year, when the US Congress blocked Dubai Ports World's acquisition of operations at six US ports over security fears. Halliburton's decision - which sparked a political firestorm in the United States - coincides with the emirate's recently unveiled strategic plan for 2007-2015. The plan aims for annual growth of about 11 per cent by focusing on the sectors where Dubai has a competitive advantage such as trade, tourism, financial services and transportation.

"The move (by Halliburton) cements its position," said Mustafa Alani, senior advisor at strategic think tank Gulf Research Centre. "Whether it's financial, the service industry or connectivity, Dubai is now a major player." He said there were "political as well as practical motives" for the decision by the company that was headed by Dick Cheney from 1995 to 2000 before he became US vice president. "Halliburton has been linked heavily with US foreign policy and military activities in Iraq and may have faced difficulties from public opinion elsewhere in the region," Alani said. "In Dubai, trade comes first, while politics is further down the list," he said.

"It is yet another company taking advantage of the infrastructure built up in the emirate," said Zahed Chowdhury, head of Middle East company research at Deutsche Bank. "Be it transportation, IT or storage, Dubai has it all." Dubai airport is connected to around 200 destinations. The deal also highlights the growing synergy between Dubai and the UAE capital Abu Dhabi, which is undergoing a $260bn economic diversification programme, while building on its comparative advantage in the oil-related sector. "This move is as much about Abu Dhabi as Dubai," said Standard Chartered's Malik.

Company officials cautioned that Halliburton, which has operated in Dubai for more than 40 years, will remain a US corporation for tax purposes and keep most of its leadership in Houston. But Halliburton's announcement sparked a tough response from leaders of the US Democratic Party, who said the corporation was biting the taxpayers' hand that fed it more than $10bn in military contracts in Iraq, some handed over without competitive bidding.

Western businesses have been pouring into Dubai to capture incoming energy revenues and take advantage of some of the world's most liberal tax, investment and residency laws. Dubai charges no corporate or income tax and in many cases allows companies no restrictions on repatriating profits or importing employees. But Halliburton's decision bears little likeness to the American corporate phenomenon of moving overseas to save on labour costs or circumvent US taxes, Garis and other analysts said.

The company expects no tax benefits or layoffs, spokeswoman Cathy Mann said yesterday. Lesar's departure from Houston has more to do with the vagaries of the oil industry. Halliburton, which has almost completed the spin-off of its KBR military contracting arm, is chiefly interested in selling oil exploration and production equipment and helping producers manage wells and reservoirs. Ninety per cent of the globe's oil exploration to date has taken place in North America, Garis said, and new discoveries there are uncommon. The Middle East, home to some 60 per cent of the world's proven oil reserves, has been explored and drilled far less intensively, mainly because producing wells are so large that there was little need to drill more.