Less than a year ago, bankers in London were being given a stark choice of either "Dubai or goodbye". As business declined in the rest of the world, it was thought that Dubai could pick up the slack. For a while that was the case, but the depth of the crisis in western banking, combined with the fall in asset values in the Emirates, has brought upheaval to many financial institutions here too. Despite growing numbers of departures from Dubai's financial centre, bankers say no-one should write off the emirate as the Gulf's banking hub.
"Bankers are leaving here partly due to business drying up and investment firms moving staff to cut operational costs," says Wadah al Taha, a banking and markets analyst based in Dubai. "Business has reduced significantly from what it was in the first quarter of 2008." When ING Investment Management opened its office in the Dubai International Financial Centre (DIFC) in May last year, Grant Bailey moved from his position as chief executive of the firm's operations in Australia to head the Middle East team. Less than a year later, Mr Bailey has left for Hong Kong to "take on a more strategic role" with ING Investment Management in Asia. He was one of many senior bankers shifted to the Middle East early last year on expectations that the region would ride out the global financial crisis and see continued demand for financial services.
That has been proved wrong, and many bankers are not hanging around to find out if the market is going to pick up soon, having been redeployed elsewhere or retrenched. Alisdair Warren, who was posted to Dubai as a senior banker with Goldman Sachs in March last year, is expected to return to London. Mr Warren was co-head of UK investment banking at Goldman Sachs before his stint in Dubai. The firm declined to comment.
The dilemma that investment firms now face is to convince investors - institutional or otherwise - to part with their money when no one is certain whether asset prices have bottomed out. "When investors are getting better yields in fixed deposits, why would they invest in riskier assets elsewhere?" says Mr al Taha. "Bankers here are struggling to raise funds for even the most lucrative projects." Still, some analysts and bankers are convinced Dubai's growth potential has not been compromised and that this is the optimal time for investment bankers, wealth managers and fund managers to prepare for an upward shift in the economic cycle that will eventually come.
One DIFC-based fund manager says: "Big blocks of high-net-worth liquidity is in the wings, waiting. It makes sense for investment firms to maintain their presence in Dubai and sit out the storm." According to the manager, there have been staff retrenchments in some investment firms, but this was because too many people were hired when the market was at its peak. "The speed with which the region has been hit by the downturn is amazing; investment firms have realised that they have to trim costs in order to survive," he adds.
Many banks have cut back perks and bonuses, or opted to sack employees. There are no consolidated figures as to how many have lost jobs in Dubai - within and outside of DIFC - but trimming fat salary bills has been one of the most widely exercised tools. About 325,000 financial services jobs have been cut worldwide since Aug 2007, according to the International Labour Organisation. Abu Dhabi-based First Gulf Bank, the country's fourth-largest lender, shed about 30 employees from its payroll, largely from retail and investment banking.
Shuaa Capital, the UAE's largest investment bank, was one of the first financial services firms to begin shedding staff, making redundant 21 employees last quarter - 9 per cent of its Dubai-based workers. It last week cut about another dozen jobs, largely "internal staff and personnel hired for specific projects", says Oliver Schutzmann, the firm's spokesman. Mashreq has also recently announced job cuts, trimming its workforce by 4 per cent.
They are following moves by large international players that acted to reduce staff as soon as it became clear the crisis would hit the Gulf. Morgan Stanley and Goldman Sachs reduced their staff in the UAE by nearly 15 per cent and 10 per cent, respectively. "There are signs, although we are in early days, that a number of international competitors are retrenching in terms of capacity devoted to international business," says Youssef Nasr, the chairman of HSBC Middle East.
Analysts say one trend is of some global firms moving some operations to Bahrain and Qatar, where operating costs are significantly lower than in Dubai's DIFC. Does that mean it's goodbye to Dubai? No, according to financiers. They stress their commitment to the region and are keen to maintain a presence in Dubai. Farah Foustok, formerly the chief investment officer of ING Investment Management, took over the reins of the firm from Mr Bailey. She says the firm is committed to the region, despite Mr Bailey's departure. "The future for the region remains bright."
In a just-published study, Global Financial Centres, commissioned by the City of London, Dubai retains its ranking as the 23rd most important financial hub. Ms Foustok says plans are in place to add "locally manufactured asset vehicles" this year, as are strategies to bring more of the firm's international investment methods to regional institutions by tapping into its global network. So, despite industry restructuring, the news is not all gloom and doom. The signs are that although bankers may be shuffling their players, once the market picks up they will be back in force.