Making the desert bloom has always been difficult but in the Gulf a young, modern-minded government has spent the best part of a decade changing the economic and legal structure of the region, allowing the conditions for 'seeds' of business and investment to root in the politically unstable, continually changing sands of the desert.

People wanting to see how to set up an entirely new centre of finance and business (and how to avoid the pitfalls along the way), should head for the desert city of Dubai. This small, perennially sun baked patch of sand, concrete and glass in the midst of a war-ravaged region started with few advantages other than its many millenia long tradition as a crossing point for Arab trade routes across the Indian Ocean and a centre of pearl diving.

However, over the past few years Dubai has built a new financial centre from next to nothing. Dozens of the world’s leading financial companies and institutions have opened gleaming new offices in its financial district, hoping to grab a portion of the $2.5 trillion-plus investment from the Gulf. Although some argue there is more hype than business, few firms are prepared to risk missing out on a new opportunity. Deals in Dubai centre around The Gate (al-baab) in the Dubai International Financial Centre, a modern cube-shaped structure borrowing elements rather blasphemously from the Kaabah in neighbouring Saudi Arabia. The DIFC is a tax-free zone for wholesale financial services offering a variety of services ranging from mergers to mudarabah ventures and stocks to sukuk bonds.

Although it is mostly Dubai that has generated the greatest international publicity so far (maybe not always for the best of reasons) the entirety of the Persian Gulf region has seen a surge of activity, investment and excitement in recent years. Record petrodollar flows have enabled governments to spend billions on infrastructure projects and development in the Gulf (with even more being invested in Africa and the rest of Asia) whilst personal wealth is also growing. According to Credit Suisse Private Wealth Management the number of people with more than £1 million pounds in disposable financial assets in the Gulf rose by nearly 17% last year to 380,000.

Nearby Abu Dhabi, Qatar and Bahrain also have grand designs for their corporate finance hubs, although they tend to try and keep a lower and more ‘grown up’ profile than brash Dubai. These cities are trying to learn from the more established centres of New York, London and Hong Kong what they must do to achieve the attractive mix of corporate regulation, good infrastructure and low taxes as well as how to bring the brightest English speaking talent from the best universities and business schools from around the world.

Each of the Gulf cities has its own flavour and characteristics. Abu Dhabi is presenting itself as the older brother- more cultured, resistant and responsible. Oil rich Doha in Qatar is an important hub for law and infrastructure with ambitions to develop into a cultural centre, evidenced by the new museum of Islamic Art and the Doha International Film Festival. Bahrain is the most established in Islamic Banking, a vital source of income for any corporation doing business in the Middle East, Indonesia or Malaysia, but is trying to fend off stiff competition from Kuala Lumpur, London and even Mumbai.

The Gulf finance hubs offer vital lessons for aspiring centres in other parts of the developing world, especially Shanghai and Mumbai. Building the confidence of private investors and importantly the markets requires more than large skyscrapers or even tax incentives. The high churn rate of directors amongst corporate firms may imply that this boom in the Gulf finance industry is temporary and suspicions of government meddling along with the negative publicity associated with building these mega cities in some of the world’s most inhospitable locations using underpaid, mistreated labour won’t do the investment friendly image of these cities too much good. Nonetheless they provide a brilliant example of how using market friendly policies, finance and business can lead to new opportunities, ideas and potential not only for businesses but entire regions.

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