Marriage made in hell

The DIFC has got over the sackings of its two chief regulators. But it needs to learn from the scandal.

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By  Anil Bhoyrul Published  June 28, 2004

It didn’t take long for a sense of crisis to engulf the Dubai International Financial Centre. Just two and a half years into their regulatory tasks, chairman Ian Hay Davison, and his chief executive Phillip Thorpe, were sent packing. The unceremonious nature of their departure has not surprisingly left a bitter feeling across the global financial community. The story has made headlines world-wide, and the fall out may continue for some time. Is this the beginning of the end for the grand project? Absolutely not. With $1.3 trillion at stake, Dubai’s hopes of creating an international financial centre on a par with London, New York and Tokyo cannot afford to fail. But what of the central allegations made by the dismissed duo, that the DIFC’s governing board were too busy awarding contracts to their own companies? Hay Davison has been quick to suggest that whilst the DIFC may have stayed on the right side of the road legally, it long crossed it morally. For him to do so shows a deeply flawed understanding of the region. The DIFC board members controls many companies between them, all of which are ultimately UAE government owned. Some have undoubtedly handed out lucrative property contracts to other firms they run – which are also ultimately government controlled. This may be a scandal to Hay Davison, but it is good business in the Middle East. And Hay Davison’s mistake was not being able to recognize that. But at the same time, the DIFC needs to learn fast from this scandal. Hay Davison was clearly on borrowed time. However, his peers should have taken note of his international reputation. And of his track record of falling out with the establishment. On the day of his appointment, the DIFC described Hay Davison as a “living legend”. In truth, it was a marriage made in hell, and when it came, the divorce was always going to be a public relations disaster. For now though, that is all this is.

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