In its ambition to rise to a global financial center, Dubai suffered a number of setbacks in recent months, which have proven the might of London as a hub for Middle Eastern banking.

Although Dubai established almost a decade ago the Dubai International Financial Center (DIFC), which, as a "state in a state," is governed by laws similar the British financial regulations, the sheikhdom is still struggling to lure capital and attract financial experts.

Earlier in the year, London, on the other hand, attracted two stock listings from the United Arab Emirates (UAE). New Medical Clinics (NMC) and Al Noor Hospitals opted for the London Stock Exchange instead of the stock markets in Dubai.

LONDON PREFERRED

The DIFC attracted 311 licensed banks, insurance firms and asset managers, and harbors since 2005 NASDAQ Dubai, the only international exchange in the time zone. However, "The real money in Dubai is still earned outside the DIFC," a chief executive told Xinhua on condition of anonymity.

Christopher Laing, a London-based managing director at Deutsche Bank, told Abu Dhabi media that most of the investors in NMC and Al Noor Hospitals where not Arabs but global investors outside the Gulf Arab region.

Moreover, an ongoing brain-drain of top economists weighs on Dubai's ambition of becoming a financial center.

Farouk Soussa, who has been Citgroup's chief economist for the Middle East since 2009, told Xinhua that he would relocate to London but would retain his role within the bank.

London has strong links to the Gulf region due to its historical bonds with the sheikhdoms when they granted Britain as trucial states access to the Arab peninsula's ports in exchange for protection against invaders and piracy.

KNOWLEDGE EXODUS

The latest talent loss that Dubai has to suffer is HSBC's regional chief executive and chief economist Simon Cooper.

On July 9, HSBC Middle East announced it had reshuffled its top management which saw Cooper being promoted to the lender's global head of commercial banking at the bank's headquarter in London.

Philippe Dauba-Pantanacce, a prominent economist with British lender Standard, already moved last year to London from Dubai, where he worked for 5 years. He was the first economist who pointed to the rise in "hidden taxes," namely corporate licensing fees and toll gates on roads, in so-called tax-free Dubai.

Nevertheless, Dubai does not give up. According to Craig Hewett, the head of business development at NASDAQ Dubai, the market has reached out with road-shows to family-owned small and medium enterprises, to thousands of Dubai-based firms located in the emirate's free zones and to Indian enterprises.

Both the DIFC and the NASDAQ Dubai are regulated by the Dubai Financial Services Authority or DFSA whose rule book is based on the internationally accepted British financial law. But as of Sunday, only two primary listed shares, Dubai Ports (DP) World and Depa, an interior design firm that made the inner fit-out of the world's tallest tower Burj Khalifa, are listed on NASDAQ Dubai, the other 7 shares are all secondary listings.

However, the NASDAQ Dubai also has 10 Islamic bonds or sukuk listed with a nominal value of 7.05 billion U.S. dollars, which makes it an important player in global Islamic finance, which according to Ernst and Young will hit 1.8 trillion U.S. dollars worldwide by the end of 2013.

That said, with five stand-alone Islamic banks and the biggest volume of sukuk listed on the London Stock Exchange, Dubai faces an uphill struggle to become the world capital of Islamic finance, an objective Dubai ruler Sheikh Mohammed Bin Rashid Al-Maktoum announced at the beginning of this year. Endi

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