Sean Evers: All of the region's economies would benefit if the jurisdictions co-ordinated their licensing and other rules instead of vying individually for financial supremacy.
A regional hub would benefit all countries
One question has been asked in the region more than any other since the collapse of Lehman Brothers some 20 months ago: "Will Dubai be knocked off its perch as the Middle East business hub?" Speculating on this singular point has become nearly an obsession, and it is not just the chattering classes of the Gulf, but it would appear that news editors as far away as London and New York are caught in the same vortex of speculation - Dubai has no chance to compete with Abu Dhabi's oil wealth; Doha is steaming up on the inside with its latest ambitionto host the World Cup in 2022; Beirut may be re-emerging to reclaim its old crown after a three-year economic boom.
It is curious that this is the theme to rise above all else in a period when the global economy went on the endangered species list. While there are many reasons that an obsession with Dubai took hold across the world in the past decade, it is, in my view, the wrong question to ask. The question that the private and public sectors must address is: can the Middle East support more than one business hub?
In the almost two years since Dubai has been struggling to regain its composure, other aspiring contenders to its crown have pushed companies to decamp from their regional base in the emirate and set up fully serviced offices in cities such as Abu Dhabi, Doha and Riyadh if they want to secure contracts in those markets. It would appear that for the time being this is not a sustainable posture for companies, given its limited success in adding to the bottom line, and regional countries' insistence on pushing it could backfire.
The Gulf in particular should be pushing with urgency towards a European model of integrated markets that facilitates the movement of people and capital across borders, rather than that a decade after the first mutterings of a common central bank, the idea of a co-ordinated destiny increasingly becomes a desert mirage. Instead of compelling companies to absorb the burden of complying with multiple regulatory jurisdictions, the region should introduce a universal system that recognises an EU-style financial analyst "passport" accepted in every country. Three stock exchanges in the UAE alone and several others in this small neighbourhood that individually require separate licences is a deterrent to global investors that seek deep liquidity and a single point of entry. This continued deterrence threatens the region's opportunity of giving birth to a truly global hub that could serve the individual advancement of all the states.
An easier question to grapple with geographically than the whole Middle East may be: can the Gulf support more than one business hub? Either way, my view is that the answer is no. I do not think the region can support more than one business hub over the next decade. That said, there is no reason that multiple gateways cannot emerge in that time with the potential to evolve into hubs as the regional economy expands, in much the same way as we have seen in Asia with first the rise of Singapore, Tokyo and Hong Kong, and now Shanghai and Mumbai.
The modern history of the wider Middle East has seen cities' reign as the hub of the neighbourhood short-lived for a combination of reasons. Alexandria in Egypt thrived in the aftermath of the First World War with the fall of the Ottoman Empire, in which a dynamic multicultural population drove commerce and the arts to global recognition. Alexandria's halcyon period ended soon after the toppling of Egypt's royal family in a coup d'etat in 1952 that brought with it a regional wave of socialist, state-controlled economies.
Beirut was ready to take up the reins and lead the region through the swinging 1960s, and the first binge of oil wealth took refuge in Lebanon's bank vaults. This Switzerland of the East was short-lived and died with the explosion in 1975 of the long civil war. Few contenders for a business hub emerged in the 1980s and 1990s as a series of wars kept the region subdued. But quietly in the Gulf, the concept of a regional business centre was being reborn, first in Bahrain as the international banks set up regional offices after the end of the Iran-Iraq War in 1988 to better serve the oil-rich region. This achievement stumbled in the late 1990s, allowing Dubai to step forward.
Now only a decade or so later, Dubai's moment on the stage appears threatened by the deep global downturn, which has hit the dynamic, globalised emirate a mighty blow. This is a punch it can withstand, in my view, because its first-mover advantage is substantial, especially when it comes to its unrivalled physical infrastructure. Though as we move firmly into the 21st century, when knowledge, not steel, will dictate who leads, new gateways will emerge in the Middle East and the regional business hub of the future will most likely be the place that invests most in soft infrastructure such as education, laws, transparency, technology and accountability.
Beirut is a perfect example of an emerging gateway where, increasingly, regional companies such as Zawya and Arqaam Capital and international companies such as Deloitte & Touche have recognised the rich vein of intellectual capital available there to build crucial support functions for backing up front-line sales forces operating in the lucrative Gulf markets and Egypt. Similarly, Dubai is fast becoming a logistics support gateway for the vast energy opportunities that are emerging in Iraq.
Let economic opportunity, not politics and old rivalries, dictate the growth. Sean Evers is a former Cairo correspondent for the Financial Times and Gulf bureau chief for Bloomberg. He is the managing partner of the Dubai-based Gulf Intelligence @Email:email@example.com