That being said, Dubai has been written off frequently in the past, and queerly the problems of its neighbours (Bahrain, Iraq, to an extent KSA, Iran) will help, I believe, feed continued growth, although Qatar may siphon off some degree of business that would go to Dubai.

On the third hand, so to speak, there are clear signs that Dubai is bumping up against diminishing returns to its strategy and lack of pan-Emirati integration is a problem - e.g. that Sharjah childishly refuses to cooperate with Dubai (it would logically be the bedroom community for Dubai, perhaps especially for the more conservative residents who are uncomfortable with Sin City) and tries incompetently to compete. I recall I was stunned at the poor interconnexions that our own Dubaiwalla showed me a couple years go (or so).

In its bid to become the business capital of the Middle East, Dubai already had purpose-built business parks for most sectors of the economy by the time it opened the Dubai International Financial Centre in 2004.

Property analysts now see a risk that Dubai's proliferating free zones covering everything from media to sports and finance, may start to cannibalise each other once the next rash of mega projects are complete.

The same could prove the case on a regional scale as rival Gulf states seek to mimic Dubai's success in attracting regional headquarters of businesses and banks with glitzy new property developments.

Saudi Arabia announced plans this week to complete construction of a new $6.7bn financial district in Riyadh by 2010. The goal is to accommodate and modernise its own expanding financial sector using technological and regulatory standards that match those of major global financial centres.

Frankly I see zero chance that Saudi developments will actually compete with Dubai - whatever Saudi goals, their domestic incentive structure and infantilely impoverished conception of 'Islamisation' of their financial sector guarantee that only Saudi institutions or foreign operations without a choice will actually locate their operations in KSA. Imposing, e.g. the use of the Islamic calender for banking operations rather than a solar calender for financial operations needlessly raises costs (and in fact banks really follow solar, and rejigger reporting to the authorities to disguise - usual Wahhabite hoop jumping myopic legalistic idiocies).

However, the authorities have signalled longer-term ambitions for Riyadh to become the financial capital of the Middle East.

Yeah.

Riiiiiiiiiiiiight.

Well, Saudi authorities are affflicted with all kinds of self-delusions as well as handicaps imposed by the short-thobed cretin section of their populace.

If these were emanating now from another of the smaller Gulf states - half of whom, Bahrain, Dubai and Qatar, have already announced their own ambitions to be the Middle East's financial capital - it might have caused amusement. But as the region's economic powerhouse, Saudi Arabia's ambitions usually count.

"It's only normal that Saudi Arabia will be the major financial centre because it is the biggest economy and the largest market. This is not to belittle the Dubai International Financial Exchange," said Beshr Bekheet of Bekheet Financial Advisors in Riyadh. Ultimately, he said, Dubai may play Hong Kong to Riyadh's Shanghai.

No, I'd say I would take Bahraini or Qatari pretensions in this area more seriously than Saudi ones.

The Saudi economy is hydrocarbons and consumption.

Sure, the tons of cash flowing into KSA are now feeding wealth growth, first time in 30 odd years actually, but its in concentrated hands, and frankly the main benificeraries like having off-shore activities.

No, while the mechanical progress of prices for hydrocarbons in the near to medium term are surely going to keep the Gulf awash in more liquidity than their economies ex-hydrocarbons would justify, I do not imagine KSA will have anything but a domestic financial sector, and even some important percentage of domestic business will like to be in Bahrain or Dubai...

Major financial center my ass.

Outside Riyadh, analysts were more sceptical.

Yeah, no kidding and no surprise.

"In order to be a regional financial centre of any scope it has to serve a bigger area. The market has to be liberal and open and it has to be an attractive place to live to accommodate the polyglot nature of the financial workforce," said an analyst in Dubai.

While Bahrain has the longest track record as a regional centre for offshore and Islamic banking, recent momentum has been behind Dubai, with global investment banks - including Morgan Stanley and Goldman Sachs - moving large-scale operations to the city in a bid to capture business generated by the oil boom.

Also Dubai relative to Bahrain has set up better infrastructure and has a better image on the stability front (although the quasi-indentured foreign labour job protests have cast a light on a dark underbelly and a potential emergant threat).

The Dubai International Financial Centre was conceived both to complement the emirate's fast growing trade and tourism sectors and to capitalise on a gap in financial services between Europe and Asia.

Qatar has neither a developed financial sector nor much business yet outside the energy industry. What it does have is almost limitless funds generated from gas and the allure of more than $100bn in projects in the coming four years.

Philip Thorpe, who helped build the regulatory framework of the DIFC before moving to the Qatar Financial Centre last year, says the diplomatic view is that the various Gulf centres will develop niche markets and end up complementing each other.

"It's more likely though that over time some of the centres will be more successful than others," he said. "If Saudi builds a centre and all the other components are of London or Frankfurt quality it would be a very attractive proposition. Whether it will or not is hard to judge."

Kha.

Nicely done, Thorpe.

I have to say I doubt that Qatar can really make a run on Dubai - although they might succeed if Dubai fucks and has a nasty scandal boil out into the open. They've managed to sleaze by a number of potential big ones, and there are a number of firms that I frankly think are money laundering machines (some I have been on the other side of transactions with that stank to high heaven. And I knew my MD was sleaze....).

Now, it is a pity Wallace focused exclusively on the fin sector, although that is presently the buzz as the Khalij has stupid amounts of liquidity and all the world's scum are circling about like buzzards around a corpse looking at ways to get a piece of the action.

By the way, Dubai is getting more popular as a subject in US media, as this little NYT arty on another Dubai "city" makes clear It's Not a Mirage: Dubai Is Building a Sports Oasis

[UPDATE]
An arty on the KSA Fin Center subject from the New York Times

Not fundamentally interesting except that I would say rewind around 5 years and this would be smaller arty if published at all.

Regardless, the quote

"Dubai is a very cosmopolitan place, and the Saudis will have difficulty selling themselves the same way," said Benn Steil, director for international economics of the Council on Foreign Relations

is perfectly correct.