The Dubai International Financial Centre, a business zone, says it aims to double the number of companies there over five years by serving as a base for business with China, south Asia and Africa, not merely the Gulf.
With political unrest plaguing parts of the Middle East and Western financial firms still retrenching because of debt problems in their home markets, the business environment is challenging for Dubai.
But Jeffrey Singer, chief executive of the DIFC Authority, which manages the business zone, said Dubai could keep expanding rapidly as the Gulf's main financial centre by becoming a conduit for trade and investment with a larger region.
"Increasingly institutions are using Dubai not just as a base for business in the Gulf, but as a base to access a much wider area," he said in an interview with Reuters.
The DIFC, opened in 2004, is one of the UAE's "free zones", offering foreign investors 100 percent ownership of their ventures and business-friendly regulation.
The number of registered firms operating in the DIFC rose 7 percent last year to 912, while workers at those firms jumped 16 percent to 14,000. The DIFC has declared it wants to double its size in the five years from 2011, when it had 848 companies.
The DIFC has had to contend over the past year with the shrinkage of some of its top US and European clients. This week, Citigroup Inc began laying off investment bankers across its Europe, Middle East and Africa division, with 50 positions to be eliminated in the near term.
But Singer said that overall, cutbacks of investment bankers and back-office staff at Western institutions in the DIFC had been more than offset by their expansion in other areas, as foreign firms tried to capture part of the oil-rich Gulf's infrastructure spending boom.
In some cases, retrenchment by foreign firms in the Gulf has prompted them to bring staff back from other parts of the region to Dubai, actually boosting their presence in the DIFC.
"The European presence has grown every year in terms of both employment and the number of firms here," said Singer, an American who took his job last July after heading the NASDAQ Dubai exchange.
Much of the DIFC's future growth is expected to come from Chinese institutions. Assets at Industrial & Commercial Bank of China's (ICBC) Middle East unit, which operates from Dubai, soared 128 percent from a year earlier to $6.1bn in the first half of 2012.
Four Chinese institutions - ICBC, Bank of China, Agricultural Bank of China and Petrochina - now have presences in the DIFC. Singer said the DIFC was discussing the possibility of others coming, but declined to elaborate.
Trade in the Chinese yuan by banks in Dubai has been increasing; ICBC said it conducted $2.1bn of yuan transactions in the interbank money market in the first half of 2012, up 58 percent. Last week Emirates NBD, Dubai's largest bank, said it had started offering yuan accounts.
Dubai may struggle to become a major market for trading the yuan, however, if it does not arrange for clearing of trades to be done locally.
Yuan clearing is conducted in Hong Kong and Taipei, and last week China named ICBC as the clearing bank for yuan business in Singapore, but Singer said any similar arrangement for Dubai would depend on discussions between UAE and Chinese authorities.
"Banks in the DIFC would like to have yuan settlement occur here but that is an issue for the UAE central bank to handle," he said, without predicting when that might happen.
Risks for the DIFC include political instability in other Arab countries, which Singer said could deter foreign investment throughout the region, and any major slowdown in the Gulf's infrastructure spending.
The DIFC also faces competition from nearby financial centres, particularly Qatar, but it has maintained its lead over them in recent years. The Qatar Financial Centre Authority's register lists about 140 active, licensed firms.
Bahrain's status as a financial centre has been hurt by political unrest that erupted there two years ago. Some financial operations moved to Dubai from Bahrain for that reason, though Bahrain has been successful in preventing a mass exodus of financial firms, Singer said.
Some fund managers complain that new UAE investment fund rules introduced late last year could hurt the DIFC by placing a bigger burden of regulation on it and making it harder for funds to market themselves in the wider country outside the free zone.
The DIFC is continuing to hold discussions with the UAE Securities and Commodities Authority on how to apply the rules to the DIFC, Singer said without elaborating.
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