What is the Dubai International Financial Centre?

Barely six months since conception, the Dubai International Financial Centre is starting to take shape, and chairman Anis Al Jallaf is on the road talking to potential tenants and the business community.

His slide presentation contains an unusual statement of what the DIFC is not. It is not an offshore finance centre. It is not for the UAE retail banks. Mr. Al Jallaf cleverly compares the DIFC to an international airport, a major piece of infrastructure that is outside the existing local administrative framework.

Indeed, the DIFC is to have its own powerful regulators and regulations modeled on international best practice. Ian Hay Davison, former chairman of Lloyd's of London, is the man chosen to sit at the top of the regulatory apex.

But the whole point is that financial institutions in the DIFC will feel that to all intents and purposes they are in London or New York. The regulatory safeguards for operation will be the same. Yet if that is the case why come to Dubai?

Mr Al Jallaf is a very persuasive man, and musters an impressive case. Quite apart from the high standard of living and comfortable business environment, Dubai is at the centre of a region that does not have an internationally recognized financial centre. Even Bahrain is something of a backwater, with the lion's share of its business with Saudi Arabia. There is an overwhelming demand in the financial community for a place to do its business in the Middle East.

The World Bank's decision to launch its first bond in the Middle East in Dubai was a turning point for Mr Al Jallaf. He says that since then his life has been much easier, as what is good for the World Bank is also good enough for most international financial institutions.

So what will the DIFC have under its regulatory umbrella? A regional stock market, Islamic finance, asset management, reinsurance and investment banking are its current focus of interest. But all bankers are natural skeptics, and there is much discussion among them as to whether these targets are practical.

Some recall the Dubai Internet City which began as a dot-com start up base for the Middle East, and has ended up a business park for major IT companies with ancillary services and a few start ups. There was also the Dubai Ideas Oasis that dried up. But the DIC and its neighboring Dubai Media City are big successes and doubtless the DIFC will also succeed.

For Dubai is flexible and adaptable and will mould the DIFC to the needs of the market place. But with global financial markets in a situation perilously close to meltdown it would be a bold man who claimed to know how markets will look in the near future, or the demand for the various services that the DIFC has in prospect.

Maybe the DIFC will still find a role as an offshore banking centre, like Jersey or Singapore, or maybe the long cherished dream of a regional stock market will be a winner. Only time will tell.