Refuge from revolutionary rage

Outsize TV screens were showing graphic live footage of the clashes in Cairo’s Tahrir Square, but watching the soaring musical fountains at the foot of Dubai’s Burj Khalifa, the tallest building in the world, one banker confidently dismissed doom and bust scenarios

Despite talk of an Arab revolution, the Gulf’s one-time capital of bling was awash with rumours of hundreds of millions of pounds, dirhams and dinars flooding into local banks. While ATMs and branches were closing in Cairo, they were wide open in Dubai, and wealthy Egyptians (and other investors) were not waiting for a signed agreement on the fate of the Last Pharaoh.

“The money is not going to London or Geneva,” said the banker. “It is coming here. This is how far we have come.”

Dubai’s financial institutions have been the somewhat surprised but happy recipients of panic cash from not only Egypt, but also Pakistan, Algeria, Tunisia, Yemen, Jordan, and even Bahrain. Yet, after its own local crisis 18 months ago, Dubai’s once flamboyant financial sector keeps its successes largely to itself. The schadenfreude that followed the bursting of the property bubble has taught the local population (only about 20% of whom are Emiratis) a degree of circumspection, if not humility.

The city is decidedly quieter, having lost thousands of cars, famously abandoned at airports as their leaseholders fled  jobless back to their own countries. The traffic is positively pleasant compared with the gridlock common at the height of the boom. Even the malls are less busy. But local authorities are not sitting idle: the tangle of concrete motorways across the metropolis is being painted a golden yellow, with decorative plastering picked out in green and red. So much for funding squeezes.

Dubai has clearly bounced back from its days of debt, default and downgrades, when, according to a Moody’s report, the emirate’s $80bn of outstanding corporate and government debt nearly overtook its $82bn GDP. Although it may never regain the heady atmosphere of its gold rush days, strong flows of business and investment, significant deals, and substantial planning are taking place. Wealth managers that tap the global expat community working there report a better type of business, and a more discerning client.

Uncertainties remain, but the financial, regulatory, social and operational infrastructure has improved. Some modest post-crisis bets by Dubai’s sovereign wealth funds have paid off. Local banks are extending their franchises regionally, and recruitment is once again picking up. A flurry of fund launches is meeting renewed local demand.

A recent study of the mutual fund industry, sponsored by local financial authorities and undertaken by PricewaterhouseCoopers, shows fund assets in the Gulf rose 9% ($2.3bn) in the first half of last year, but remained below 2007’s peak levels. Saudi Arabia remains the region’s largest market, and is increasingly likely to use its weight in the region.

In 2009, Dubai was effectively reminded by Abu Dhabi, the wealthiest member of the UAE with more than 85% of the federation’s total oil output, to align its social and perhaps political outlook more closely with traditional values. It has publicly – not least with the renaming of the towering Burj Khalifa – complied.

But as unrest sweeps across North Africa down to the Gulf, Dubai’s pioneering openness to outside influences looks prescient. Democratic it is not, but it has proved responsive to financial turmoil, which recent history proves can be almost as disruptive as political upheaval. In the region, Dubai is considered a safe haven for people and assets. There is a swelling tide of both through its airports, malls and offices. That confers a certain status, but also a growing burden of responsibility.

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