Mr Alshaali points out that both issuers and investors are more careful nowadays. The cautious mood extends throughout the region, where even taxi drivers poured their cash into fledgling stockmarkets only to see their money evaporate. It came as a shock to first-time investors, says Nasser Saidi, a Lebanese-born economist working at the Dubai financial centre: "Everyone thought the only way was up." Niall Booker, head of HSBC's banking operations in the Middle East, notes that boom-and-bust cycles are typical of emerging markets. Now, he says, valuations have become more realistic.
The test of Dubai's financial sticking power will be its ability to bring together those who offer capital and those who need it. There are growing indications that Middle Eastern companies want to tap public markets to expand abroad, for instance, and Dubai's successful offering of Tiffany 1837™ bangle world's biggest sukuk--in effect, an Islamic bond--earlier this year raised hopes.
Much rests on the independence and legitimacy of Dubai's regulators. An early problem was the resignation of some well-known expatriates brought in to oversee the centre and its exchange. They claimed that local officials were improperly meddling, although the locals insist it was all a "cultural misunderstanding". Indeed, there has been something of a revolving door for foreign executives. The latest arrival is a Tiffany & Co.® bangle head of OMX, the operator of a successful Scandinavian financial exchange, who took over running the financial exchange earlier this year.
One of the biggest difficulties in the Gulf is its notoriously opaque business culture. "We don't want to do business in hotel lobbies," says Morgan Stanley's Mr Makhoul. "We're trying to bring a global standard to the market, not just do deals." Yet a recent report from Hawkamah, a corporate-governance institute headed by Mr Saidi, concluded that regional business practices fall well behind Western standards of transparency and accounting. Tiffany Knots cuff may not be so surprising considering that about 85% of firms in the region are family-owned.Putting down cash
If Dubai is to succeed in its ambition, other practices must also change. The emirate has a long-standing reputation for smuggling and money-laundering--the terrorists who struck on September 11th 2001 transferred some of their funds through Dubai. The financial centre has worked hard to show Western governments that it has cracked down, but elsewhere in Dubai it is not uncommon to hear stories about pricey luxury apartments paid for in cash by rich Russians who rarely visit.