• June 10, 2009

The Top Three Islamic Trading Centers in the Middle East

The Middle East region now has three main trading centers and the stakes are very high in terms of investment potential of the Gulf. These financial centers include: the Bahrain Financial Harbor (BFH), the Dubai International Financial Center (DIFC) and the Qatar Financial Center Regulatory Authority (QFC). The landmark building owned by DIFC is nearing completion. It is set on a 110-acre piece of land and is a massive complex that is to the south of Dubai Emirates Towers.

Six major towers are set to be built around the headquarters of DIFC. All legal paper work was completed in February, paving way for the construction work.  The Ritz Hotel and Apartment complex is set to be built very soon and initial work is set to cost $185 million. This complex is targeted at thousands of financial professionals who will be working for the DIFC.  The first phase of the construction of DIFC will cost $122 million.

There has been a rather slow uptake of licenses being issued to financial institutions by DIFC. Some of the major financial institutions that have been attracted include Standard Chartered Bank, GCC Energy Fund Managers, Credit Suisse First Boston and Franklin Templeton Investment Management.

DIFC has maintained a lead over QFC although the former trading center has been off to a slow start which has contributed to its low competitive edge. Teething problems at DIFC have also contributed to its rather low rankings compared to its chief competitors.

On the part of QFC, a simpler structure and management chain has worked to the financial center’s advantage. What is unclear is if the DIFC or QFC will compete for a similar business or not. The reason for this is that the economy of Qatar differs remarkably from that of Dubai. Qatar is a major exporter of oil with a population of only 700,000. On the other hand, Dubai does not have much oil but has diversified on the service industry, construction and tourism.

In a bid to stand out in financial markets, Bahrain, Dubai and Qatar are all faced with major challenges. However, all three of them have a favorable economic environment as well as sustainable oil prices that are likely to propel them ahead in their quest for dominance in the world of finance and investment. According to the Institute of International Finance, the asset holdings of GCC (Gulf Cooperation Council) increased by over $150 billion during the period between 2004 and 2005. This is a positive indication that augurs rather well for DIFC.

Dubai has in many respects outsmarted the Gulf in terms of growth. The future of growth in the Gulf is in many ways dependent on growth trends Western and Southern Asia. India’s expanding economy is among the most monitored economies that are going to determine the Gulf’s financial fate. Invesco is an international asset valuation and management group that has already applied for a license to operate in the DIFC. The company already has $382 million under its management.