Can the DIFC beat Bahrain? (page 1 of 2)

When the Dubai International Finance Center project was first announced last February, it was thought to be a surefire way of making Dubai the financial center of the Middle East. For a while, it seemed that everything Dubai touched turned to gold.

The Dubai Internet City and Dubai Media City projects were resounding successes; the DIFC was supposed to be the project that cemented Dubai's status at the cutting edge of the New Economy, opening up a new marketplace for fund and asset management, Islamic finance and trusts, and a revitalized insurance and reinsurance services sector.

By 2007, the DIFC was expected to create 50,000 white-collar jobs and attract new investors, who would provide the ballast for the many premium real estate ventures in Dubai. Such was the conventional wisdom surrounding the DIFC at the time of its creation. That was then. A lot has changed in a year.

Laws have been slow to be passed, and there is a lot of arguing about who should be taking the blame. This has, in turn, led to further delays. Licenses have yet to be issued to prospective clients - and the issuing process was supposed to start last December.

Standard Chartered and Deutsche Bank are among the big names that have confirmed their interest in office space at the DIFC. Standard Chartered had gone on record as saying that it would consolidate all of its regional operations there.

Now, the licensing process has been pushed back "tentatively" to some time during the second quarter of this year, said a senior official with one of the interested parties.

"We are holding regular meetings with our counterparts from the DIFC," said the official, "and they have assured us that everything possible is being done to ensure that the licensing will start before June. The ball is in their court, but they are losing valuable time."

Apparently, the DIFC project is awaiting UAE federal government approval. Only then can it get on with the serious business of processing applications and licensing. However, the official version at the DIFC is that it is business as usual.

"There will always be teething problems with any enterprise of this magnitude," said a member of the regulatory board. "We are very close to finalizing the draft laws, which is by far the most important milestone in such a project. In these very uncertain times, however, there is always a case for going slowly."

The appeal of the DIFC is that it could be a magnet for international financial institutions looking for a regional operations center. The laws in place were to be an amalgam of the best practices the world over.

Some of the best brains in the business - used to treading the corridors of the London Stock Exchange and other estimable institutions - were brought in to oversee the drafting of the laws and practices that would govern the conduct of companies wishing to set up offices in the DIFC. The laws were to be drafted in English and not Arabic - a big plus for international companies.

"By taking the best international laws, we are creating a base for the financial industry in the region," says Hussain Al Qemzi, the DIFC's chief operating officer. "They will be very similar to the laws applied in financial centers like London, New York, Singapore and Hong Kong."

Basing regulations on international law would be a big boost for financial institutions looking for a regional base. Interpreting UAE laws to judge the merits of a case would tax even the best legal brains.