DIFC, DMCC, twin pillars of Dubai's financial future

Two major new free zones comprise the core projects the will turn Dubai into a regional financial hub, the Dubai International Financial Centre and Dubai Metals and Commodities Centre.

Both free zones are under construction in prestige locations: the DIFC next to the Dubai World Trade Centre complex; and the DMCC on the opposite side of the Sheikh Zayed highway to the Dubai Marina.

And both projects have recently announced major steps forward: the DIFC has secured its Federal Decree detailing the sovereign rights of the free zone within the UAE Federation. The DMCC has signed up a raft of manufacturers for its gold smelter complex and freehold manufacturing units.

Yet much work remains to be done. The DIFC has to frame its Regulatory and Company Law, and hopes to have its first clutch of registered tenants before the IMF and World Bank meetings in Dubai at the end of September.

For its part the DMCC needs to attract more tenants, although phase one and two of the project are going well with gold smelter deals complete and 75% of the manufacturing units sold. The challenge for this autumn will be to make a success of phase three, the trading complex and landmark office tower.

Within the next two years the DIFC and DMCC projects will result in the arrival of more than 50,000 financial services and commodities employees in Dubai. These highly paid staff will be a huge boost to the local economy occupying local real estate and spending in the local economy.

It will be interesting to see exactly how the different activities in the two free zones pan out. Neither project is being too rigid about occupants and will adjust to suit applicants.

At the moment asset management appears to be the most popular segment in the DIFC along with re-insurance. Back offices have proven less popular, and Bahrain has stolen a lead in developing its Islamic banking sector. Another thrust will be towards creating a regional stock market, although whether this is actually possible is not entirely clear yet.

Likewise the DMCC seems to be doing well in attracting medium and large sized jewellery, gold, and diamond concerns. But the real test will be whether trading in such commodities can become a core activity.

Thus Dubai seems to be well on the way to establishing a new future as a regional financial hub, though we will have to wait to see which activities predominate.