Economist.com Cities Guide: Dubai Briefing - May 2006

News this month

Still sinking

Tales of woe among Dubai’s stockmarket traders spread further as share prices continued to fall in early May. The Dubai Financial Market index dipped below 500 points—down from about 1,300 points late last year. The stockmarket's fortunes directly affect many of Dubai's residents—in a city of about 1.5m people, 300,000 are registered with the Dubai Financial Market. Emirates Today, a local newspaper, reported that some expatriate investors were pulling their children out of school because they could not afford the fees. (Private schooling is the only option for expatriates, as free state education is reserved for United Arab Emirates nationals.) Others reportedly fled the country to avoid repaying debts, having borrowed heavily to speculate on the market during a bull run in 2005.

The downturn has also hit local businesses. Firms ranging from poultry farms to cement factories placed huge bets on the market, which made heavy losses in the first quarter of 2006 after paying rich dividends in 2005. This has left companies with less money to invest in their core activities. Still, with oil trading at around $70 a barrel, the going will not get too rough in Dubai, the Gulf’s main commercial hub. Property development continues apace. After unveiling plans to build a desert resort with 29,000 hotel rooms, called Badawi, Dubai government officials said they had received pledges worth $8 billion from private investors within just nine hours.

A new boss

Dubai's government has hired David Eldon, a former boss of HSBC bank, to run the city’s new financial centre. Mr Eldon’s appointment in May is part of a big restructuring plan for the Dubai International Financial Centre (DIFC), an offshore centre set up in 2004 that boasts Morgan Stanley and Barclays Capital among its tenants. (Citigroup, HSBC and Standard Chartered are among other financial giants waiting for offices to be built.) Mr Eldon will lead the DIFC’s new board.

The DIFC has been largely successful so far, having achieved its goal of attracting the world’s leading financial firms. The board’s next challenge is to jump-start the centre’s lifeless financial exchange, DIFX, which has been slow to list companies since its launch last year. A recent downturn in the Gulf’s more established stockmarkets has not helped. Mr Eldon’s appointment came as speculation mounted that the DIFC would bid for Euronext, a European stockmarket operator. The DIFC bought a 1.7% stake in Euronext in late April; buying the bourse operator outright could spark interest in DIFX and help make it the international financial powerhouse it aspires to become. Mr Eldon, who made a name for himself at HSBC by specialising in mergers and acquisitions, should be the right man for the job.

The not-so-poor public servant

Dubai’s Sheikh Mohammed bin Rashid al Maktoum was ranked the world’s fourth-richest ruler by Forbes magazine in May. The list was topped by Saudi Arabia’s King Abdullah, followed by Sultan Hassanal Bolkiah of Brunei. Forbes estimated Sheikh Mohammed's personal fortune at $14 billion, making him slightly poorer than his neighbour in Abu Dhabi, Sheikh Khalifa, who ranked third with $19 billion. Unlike most royals in the Middle East, the Maktoums’ wealth does not flow directly from oil sales—Dubai pumps little more than 100,000 barrels each day, and its reserves are expected to dry up by 2010. The emirate’s wealth stems instead from successful businesses, including Emirates Airline and its hotels and resorts. The Maktoum portfolio is boosted by significant stakes in a number of local banks and international firms such as DaimlerChrylser, a carmaker.

As is always the case when estimating a ruler’s wealth, the line between Sheikh Mohammed’s personal assets and those of the government is blurred. The sheikh did not refute Forbes’s figures, though most local newspapers were “advised” not to republish the story. Meanwhile, Time magazine ranked Sheikh Mohammed as one of the “Top 100 People Who Shape Our World” in 2006. Interestingly, he was placed in the list of leading business figures, not politicians. Sheikh Mohammed has devoted himself to making Dubai a hub for businesses and tourists. It is no coincidence that he is often referred to as the emirate’s chief executive.

Access denied

Dubai’s effort to become a business hub has been accompanied by a push to raise corporate-governance standards. In May Dubai’s financial watchdog took a firm stand—and one sure to earn publicity—when it refused to let David Mills, a lawyer and the estranged husband of Tessa Jowell, Britain’s culture secretary, practise law in Dubai. Mr Mills stands accused of taking bribes from Italy’s former prime minister, Silvio Berlusconi, in exchange for providing helpful evidence in two corruption trials. He had wanted to open an office in the Dubai International Financial Centre, but the Dubai Financial Services Authority (DFSA) rejected his application, claiming that Mr Mills had given false answers to questions on his form. Mr Mills has denied the claim, but the incident came at a bad time—his trial for bribery is set to begin in June.

A violent spring

Dubai’s reputation for safety has been rocked by a series of violent crimes this spring. In late April Zakeel Abdul Aziz, a Saudi businessman, was driving with his brother through downtown at night when Abdullah Bidrham, a 21-year-old Saudi, allegedly entered their car and demanded to be driven to the luxury Burj al Arab hotel. When the brothers refused, Mr Bidrham shot them both. Mr Abdul Aziz later died in hospital. Police say that while the motive for the murder is unclear, Mr Bidrham appeared to have been suffering from a psychological disorder or had taken drugs.

The shooting came just weeks after the high-profile robbery of a jewellery shop, and was followed by the brutal murder of a taxi driver. None of the incidents appear to be linked. Dubai does not publish regular statistics on violent crime, so it is impossible to track the ebbs and flows of the local rate. But as the city continues to welcome a flood of expatriates from the Arab world, Europe, Asia and the former Soviet Union, the perception among residents is that violent crime is on the rise, albeit from a low starting point.

Catch if you can

May 2006

The Imperial Russian Ballet's “Swan Lake”

June 5th–9th 2006

The Imperial Russian Ballet has revived the classic tale of Prince Siegfried and Odette, queen of the swans, with a glamorous new production. Still, one might think the company's dancers would be tired of the ballet, having performed it in Japan, Austria, Finland, Portugal, Brazil, Germany, France, Switzerland, Lithuania and, most recently, Italy at the Winter Olympic Games. This month the apparently tireless company trades the chill of Torino for the flush of the desert. The company takes the stage at the Madinat Theatre, which has become a prime destination for music and dance fans. Recent acts at the Madinat include Carmen Cantero, a flamenco outfit, “Chicago”, a Broadway smash, and the ever popular “The Sound of Music”.

Madinat Theatre, Madinat Jumeirah, Dubai. Tel: +971 (0)4 366 8888. For tickets, visit the Box Office website.

More from the Dubai cultural calendar