IMPORTANT WARNING: The contents of this report have been compiled in good faith by Investorsoffshore.com to provide assistance to investors, but do not constitute investment advice or recommendations. Investors should not rely upon the information given in order to choose types or routes of investment but should make their own independent enquiries before making choices. Investorsoffshore.com has taken reasonable care in researching and presenting the information herein but makes no representations as to its accuracy and accepts no liability for actions taken or not taken as a result.

For decades to come, people will point to Dubai's 200-storey, 828-metre Burj Khalifa tower, the tallest in the world, as representing both the peak and the nadir of the city-state's adventurous grasp for regional leadership in a startling range of sectors: real estate, shipping, commodities trading, equities, Islamic finance, e-commerce, air transport and banking.

The investors who bought into Dubai's real estate boom in the last stages of the world's financial bubble, from 2005 to 2008, nursing their losses, will not be comforted at hearing that many parts of the city's complex web of commercial and financial operations are doing quite nicely, thank you, or at least have survived the crash more or less intact, and are now ready to rise again.

Not so for the real estate sector. We will examine it in more depth below; but even here there are signs of life among the ruins, and a general feeling among real estate professionals that the bottom has been reached. If that's the case – and it's a big if – then there are good investments to be made.

Where And What Is Dubai?

The city, one of the seven Emirates making up the United Arab Emirates, is a shimmering collection of skyscrapers and spectacular architectural structures rising out of the desert sands at the eastern end of the Persian Gulf, and until 2008 could easily be labeled the economic success story of the previous ten years.

Dubai lies on the south-eastern shore of the Persian Gulf near the strait of Hormuz, strategically located at the cross roads of Europe, Africa, the Middle East and Asia, making it a gateway to over 1.5 billion consumers located in countries surrounding the Red Sea and the Gulf.

The city has grown rapidly in recent years from little more than a fishing port to a wealthy and decidedly cosmopolitan and modern location. Local emiratees make up a mere 22% of the population with Indians, Pakistanis, Iranians and Southeast Asians and latterly westerners choosing to make Dubai their home. The population remains predominately Muslim. However, in contrast to growing hostility towards western values elsewhere in the Middle East, ethnic and religious tensions are rare and Dubai has gained a reputation as something of a safe haven where westerners can go about their business without fear of attack, and crime in general is very low.

Modern Dubai is the product of more than 20 years of intensive development. Prior to that, Dubai was a small trading port, clustered around the mouth of the Creek. It had grown gradually from a fishing village inhabited in the 18th century by members of the Bani Yas tribe. A flourishing Indian population settled in Dubai and was particularly active in the shops and alleys of the souk. The cosmopolitan atmosphere and air of tolerance began to attract other foreigners too: by the 1930s, nearly a quarter of the 20,000 population was foreign, including 2,000 Persians, 1,000 Baluchis, many Indians and substantial communities from Bahrain, Kuwait and the Hasa province in eastern South Arabia.

Dubai's population has increased tenfold since the 1960s to more than 1.4 million, and now hundreds of hotels accommodate the expat workers and tourists who help run the economy.

This diversity discourages any real ethnic tensions and while war and the threat of war might simmer further north, it creates far less tension in Dubai than many might imagine it would. There are large groups of Indians, Pakistanis, Iranians and Southeast Asians. The population is, however, 95% Muslim. Arabic is of course the official language but English is widely spoken as are Urdu, Malayalam and from the Philippines, Tagalog.

Dubai’s desert climate ensures plenty of year-round sunshine, with temperatures regularly exceeding 40C in the summer, and 30C in the winter making the city and its locale a very popular choice as a second or holiday home location for Europeans and Americans, especially since ownership rules have been relaxed to allow foreigners to buy property in Dubai.

The city’s rapid growth as a financial and commercial powerhouse has also spawned the rapid development of impressive leisure facilities such as golf courses and hotels (including the world’s first seven star rated hotel, the Burj Al Arab). When combined with its coastal location and attractive beaches, Dubai has become one of the world’s premier tourist destinations. As a result, the city is served by good transport links, both by air and by sea.

Transport Is The Key

The spectacular growth of Dubai has been no accident. With what must have seemed like limitless oil reserves, the ruling family consciously set out to create a modern, diversified financial centre, beginning with the trading activities that had been its historical life-blood. Jebel Ali, home of a huge man-made port, has the largest free-trade zone in Arabia, housing an ever growing list of international corporations which use the zone for both manufacturing and as a redistribution point. Following the success of the Jebel Ali free zone, the government has developed Dubai Internet City (DIC), which has a highly developed technical infrastructure. The DIC occupies 3,200 hectares in the South of Dubai, near the Jebel Ali Free Zone. It offers state of the art facilities and sites for manufacturing, offices, housing, and academic, research, distributions and logistics institutions.

More recently has come an equivalently grandiose airport. Dubai International Airport is second only to Tokyo in the number of daily transit passengers it handles and second only to Seattle as a sea-air hub. Its harbor is the most important port in the Middle East and is ranked among the world's top 15 in terms of container throughput. In November 2005, in anticipation of a huge increase in the numbers of tourists, business travellers and rising trading volumes, the Dubai authorities announced the launch of a project to build the world's largest airport in the Jebel Ali Free Zone.

The airport, initially known as the Jebel Ali International Airport (JXB), but since renamed the Al-Maktoum International Airport, will be a massive undertaking, with total infrastrucutre costs expected to hit USD33 billion. When completed, the airport will have six concourses, and be capable of handling more than 120 million passengers, and more than 12 million tonnes of cargo per year.

Like Jebel Ali, the airport has proven resistant to the downturn, clocking up increases in passenger and cargo volumes in the second half of 2009.

“The Middle East continues to demonstrate vibrant growth during the global economic downturn and Dubai International is at the epicentre of that growth,” said Paul Griffiths, CEO of Dubai Airports.

Dubai International is now ranked the world’s 6th busiest airport in terms of international passengers according to Airport Council International’s (ACI) latest published figures, ahead of Amsterdam, Singapore and Tokyo. The ACI international freight traffic monthly ranking also lists Dubai Airports Cargo as the world’s 4th busiest for international air cargo volumes, ahead of Tokyo, Shanghai and Frankfurt.

Then Came Finance

During the 1990s and the 'noughties', the Arab Emirate launched a series of tax-privileged and more or less self governing financial sectors, including the Dubai International Financial Centre, which provides a legislative roof for six primary sectors of focus within the DIFC: Banking Services (Investment Banking, Corporate Banking & Private Banking); Capital Markets (Equity, Debt Instruments, Derivatives & Commodity Trading); Asset Management & Fund Registration (Fund Registration, Fund Administration & Fund Management); Reinsurance; Islamic Finance and Back Office Operations. The DIFC offers benefits such as zero tax on income and profits, 100% foreign ownership, no restrictions on foreign exchange or capital/profit repatriation, operational support and business continuity facilities.

By November 2008, the number of firms licensed by the Dubai Financial Services Authority (DFSA) to operate in the DIFC had reached the 300 mark, comprising 235 authorised firms, 49 ancillary service providers and 16 registered auditors.

The DIFC also houses the The Dubai International Financial Exchange (DIFX), a bourse, the Dubai Metals and Commodities Centre (DMCC), incorporating the Dubai Gold And Commodities Exchange (DGCX), and the Dubai Mercantile Exchange (DME), focusing on energy trading starting with crude futures.

Real Estate

It may not have been the original intention of Dubai's rulers to create a major international real estate centre; but it happened to them nonetheless, originally because of the need to provide accommodation for the swelling numbers of expatriate workers sucked in by the infrastructure construction programs. Eventually the real estate sector took on a life of its own, and the financial problems which now beset the Emirate can be traced to this cause. The rulers created Dubai World as a quasi-state financing agency for real estate development, and when the Emirate was infected by the world-wide property collapse in 2008, it was Dubai World that was found to be over-extended.

As late as November, 2008, the authorities were maintaining a brave front, with Mohammed Alabbar, Chairman of Dubai’s Advisory Council, quashing fears over Dubai’s debt obligations which were estimated to amount to USD10bn.

In his first major public address as the head of the Advisory Council set up to manage the impact of the global financial crisis in Dubai, Alabbar said: “There has been a lot of talk about the debt obligations of Dubai. There is confusion and therefore concern about how much Dubai owes, and how this debt will be refinanced. Let us put an end to that speculation.

“Currently, the Dubai government’s sovereign debt obligations stand at USD10bn (AED37bn). While our key sovereign assets are currently being evaluated, I can give you a rough estimation of its value being over USD90bn (AED330bn). And this does not include our airports, bridges and the Metro.”

Alabbar also estimated the total debt obligations of affiliated companies at USD70bn (AED256bn), compared with assets valued at USD260bn (AED950bn). The total value of the assets of the government and affiliate companies in Dubai was put at over AED1,300bn.

“The government can and will meet all its debt obligations going forward. Let there be no doubt about this fact,” he told an audience of financial business leaders from the region and around the world.

On the state of Dubai’s real estate sector, Alabbar said: “Today, the real estate sector is witnessing a healthy correction. This is a consequence of global financial conditions – and is inherent to the very nature of the market. As we all know, real estate is cyclical. Monitoring supply and sales, the Advisory Council is managing this important sector of our economy, ensuring that new supply is properly managed and that current and future demand is adequately met.”

Investor confidence was bolstered in February by the forging of a deal between Dubai’s finance department and the UAE which would see the UAE purchase USD10bn in bonds from Dubai in order to provide the emirate with liquidity. The UAE would invest USD10bn in Dubai’s five-year USD20bn bond programme, providing much needed liquidity for the emirate to insure itself against default. The loan carried a 4% coupon.

“This issuance will provide Dubai Government with the necessary liquidity to substitute the liquidity that has dried up globally in the last 12 months and accordingly meet all upcoming financial obligations. This programme will secure the necessary funding for Dubai to meet its financial obligations and continue its development programme,” said the Finance Ministry in a statement.

But it didn't, and after property values fell by 50% in just 12 months, the chickens finally came home to roost last November when Dubai World announced a debt moratorium for at least six months.

The government said it intends "to ask all providers of financing to Dubai World . . . to 'standstill' and extend maturities until at least 30 May 2010". The total debt of Dubai World amounts to USD59bn, and it was one small short-term component of that, falling due in December, which the company was unable to finance.

“This issuance will provide Dubai Government with the necessary liquidity to substitute the liquidity that has dried up globally in the last 12 months and accordingly meet all upcoming financial obligations. This programme will secure the necessary funding for Dubai to meet its financial obligations and continue its development programme,” said the Finance Ministry in a statement at the time.

World markets initially fell, but soon recovered, and as before Abu Dhabi, the richest of all the Emirates, stepped into the breach with further short-term financing.

The problems of Dubai World have inevitably had a knock-on effect in terms of the local real-estate market. Consultancy Colliers International says that continuing uncertainty over the availability of financing, job-security worries and a general lack of transparency are hampering recovery, with prices having now fallen to 2005 levels. The commercial property market is affected just as badly as the retail sector: advisory firm Jones Lang LaSalle says that office rents for Grade A space across Dubai (excluding the DIFC) now average AED225 (USD61) per sq ft annually, and the firm expects prices to weaken further as increased levels of new supply hit the market in the next two years. Average prime office rentals in Dubai are now below those in the major international office centres of London, Paris, Hong Kong, Mumbai and Moscow. A January, 2010, report from CB Richard Ellis quotes statistics from the Dubai Land Department showing that that the total number of transactions fell 17.7%, touching 520 during the fourth quarter of 2009, compared to the same period the previous year.

All firms seem to agree though that in general the retail market has bottomed out, with many even reporting an uptick in the fourth quarter.

Buying property in Dubai is a relatively straightforward business, and there are many estate agencies and consultancy services catering for international buyers such as expats, those in search of a second home and investors hoping to earn rental income and/or capital appreciation. Financing a property purchase in Dubai will vary depending on which developer one buys from, one’s own budget and other financing options available at the time. A typical financing structure from a Dubai-based developer might involve: a 10% deposit payable on signing; a further 10% after 30 days; five payments on each stage of construction; and a 20% final payment upon completion. Alternatively, if a more flexible payment term is needed, then it is possible to obtain a longer term mortgage. Some developers and agents will also have struck deals with locally-based banks to offer more favourable terms. In general, access to mortgage financing is more restricted than previously, as is the case just about everywhere.

For a fixed-rate loan, repayment periods vary from five to fifteen years in length, and at present, one can expect to pay an interest rate starting at around 8%, rising to 9% as the term progresses. Floating rate mortgages are typically available on loans of between fifteen and twenty-five years with rates starting at around 8% and rising and falling in tandem with the Dubai Interbank Offered Rate (DIBOR) or, in some cases, the US Fed Funds rate. Overseas residents will pay a slightly higher interest rate than residents.

If employed, mortgage payments are made via a salary transfer while self-employed buyers meet payments by writing a post-dated cheque or by a standing order.

There are legal and geographical limitations on the ability of foreigners to own freehold property in Dubai. In March 2006, a long-awaited Dubai property law was issued, but Law No.7 of 2006 stipulated that freehold is limited to UAE and GCC citizens and companies wholly owned by them, as well as public shareholding companies. However, the law also stipulated that upon approval of Dubai's ruler, non-UAE nationals may be given the right to own properties in some parts of Dubai.

In August 2006, the Dubai International Financial Centre Authority (DIFCA) published draft legislation that would allow foreign freehold ownership of property in the DIFC. The laws included the DIFC Real Property Law 2006 and the Strata Title Law 2006. These laws, enacted in June 2007, allow for foreign companies and individuals to hold freehold ownership of real estate within the Dubai International Financial Centre.

The Governmental And Economic Background

The emirate of Dubai is strategically located between Africa and the Middle East and between the Far East and Europe, making it a gateway to over 1.5 billion consumers located in countries surrounding the Red Sea and the Gulf. It has a superb infrastructure with the consequence that it has become a key link in the global transport and distribution system.

Dubai is served by more than 170 shipping lines and more than 86 airlines offering links to over 100 cities worldwide. The strong shipping and transportation sector is composed of most of the leading regional and international freight forwarders, insurers and shipping agents. It has a rapidly developing high quality manufacturing sector and a buoyant and prosperous domestic market. In a nutshell its infrastructure and services match the highest international standards.

Evidently, most of the Emirate's wealth has been built on the back of vast mineral deposits. However, the rulers of this oil-rich territory were quick to realise that oil wealth will not last forever, and set about putting in place a series of investor-friendly tax, regulatory and legal policies to attract companies, individual investors and wealthy retirees from all over the global to live, work and do business in the city.

Partly as a result of these policies, economic growth over the early part of the past decade was experienced at rates that would be the envy of any pro-business western economy. Government figures revealed that the gross domestic product of the UAE as a whole grew by 15% to AED337 billion (US$91.7 billion) in 2004, whilst the economy of Dubai grew at an even faster pace as its GDP expanded by 16.7% to a little under AED100 billion. Dubai’s economy has grown by an average of 10% per year since 1995 – the fastest growth rate in the world, according to Dubai’s Department of Economic Development.

There are no elections or legal political parties in the UAE. Power rests with the seven hereditary sheikhs who control the seven traditional sheikhdoms (Abu Dhabi, Dubai, Sharjah, Ajman, Umm al-Qaiwain, Ras al-Khaimah and Fujairah) and choose a president from among themselves. Sheikh Khalifa bin Zayid al-Nuhayyan, the ruler of Abu Dhabi has been President since 3 November 2004, following the death of the UAE's Founding Father and first President Zayid bin Sultan Al Nuhayyan.

The Vice President and Prime Minister is the ruler of Dubai, which was Sheikh Maktoum bin Rashid al Maktoum until his death in January 2006, following which the role was assumed by his brother and heir, Sheikh Mohammed bin Rashid al-Maktoum. The Deputy Prime Minister is Sheikh Sultan bin Zayed Al Nahyan. There is also a Cabinet, and its posts are distributed among the seven emirates. (The members of the Cabinet are the government ministers, such as Minister of the Interior, etc.)

The parliament is known as the Federal National Council (FNC). It was established on 13th February 1972 and is considered a landmark in the country's constitutional and legislative process. The FNC advises the Cabinet and the Supreme Council but cannot overrule them. According to the constitution, the FNC consists of 40 members who are drawn proportionately from each of the seven emirates. Each ruler appoints the members for his emirate.

The UAE was a founding member of the Gulf Cooperation Council (GCC) created at a summit conference in Abu Dhabi in 1981. The members of the GCC include Saudi Arabia, Kuwait, Bahrain, Qatar, the Sultanate of Oman as well as the UAE. The country is also a member of the League of Arab States, the Islamic Conference Organization, and the United Nations.

On January 1, 2003, the unified customs area of the Gulf Co-operation Council came into effect, covering Kuwait, Qatar, Oman, Saudi Arabia, Bahrain, and the United Arab Emirates (including Dubai). As of 2006, Yemen has been in negotiations with the existing member states, and hopes to join by 2016.

One major selling point for Dubai is that its enormous oil revenues mean that the government has no need to raise income through direct taxation. Accordingly, the emirate is characterized by an almost complete absence of taxes. This means that there are no withholding or capital taxes and, with the exception of banks and oil companies, no corporate income tax is payable by businesses in Dubai. (Oil companies pay up to 55% tax on UAE sourced taxable income whereas banks pay 20% tax on taxable income).

Despite a relatively small population, total non-oil imports stood at more than AED1 trillion in 2009. The reason is that Dubai is the major re-export centre for the region. Many of the economies of the region served by Dubai are still at a relatively early stage of development, so there is plenty of long term scope for diversification and expansion in the future. Another important consideration is Dubai's rapidly developing role as a supplier to such emerging markets as India, the CIS, Central Asia and South Africa.

There are no foreign exchange controls, quotas or trade barriers. Import duties are extremely low, and many products are exempt. The UAE dirham is freely convertible and is linked to the US dollar, the currency in which oil revenues are paid. The current exchange rate is AED3.6730 = USD1 and no revaluation has occurred since 1977. This has made investing in Dubai particularly attractive for European investors, given the US dollar’s recent weakness against the euro and sterling.

The Dubai International Finance Centre

In July, 2003, the Federal Cabinet of the United Arab Emirates (UAE) approved a Federal Decree allowing the Dubai International Financial Centre (DIFC) a large degree of sovereignty. The approval of the Decree, which allows for Financial Free Zones to be established in the UAE, marked a significant step forward for the Centre.

In January, 2004, the Dubai Financial Services Authority (DFSA) announced 12 new laws relating to operations within the Dubai International Finance Centre (DIFC), providing a wide-ranging corporate legal envelope.

In 2006, the Companies Law contained in the 2004 package was updated.

In April 2007, the Dubai International Financial Centre (DIFC) held an official inauguration ceremony for the DIFC Courts, an independent judicial system which will deal with matters arising from and within the DIFC, and which is expected to raise the bar of legal standards within the region.

The Real Property Law, enacted in June 2007, guarantees ownership of freehold land and buildings, and other interest in land, within the DIFC. The Law is based on the underlying principles of English common law, but also incorporates the Torrens system of land registration, well known in countries such as Australia, New Zealand, Canada and Singapore.

Under the Real Property Law, land transactions are registered in a central register administered in the DIFC. Once registered, the Law certifies them to be fully effective. Unlike some other systems of land registration, title interests registered under the Real Property Law are “indefeasible”. In practical terms, this means that persons buying real estate in the DIFC, lending on the security of real estate in the DIFC, or taking a lease of real estate in the DIFC, can be assured that their investment is backed by the full protection of the Law.

Dubai’s financial centre is regulated by the DIFC Financial Services Authority. The advantage Dubai has over other more established financial jurisdictions in this respect is that the DFSC has had the opportunity to draft a body of regulation pretty much from scratch. This has allowed Dubai to build on a framework of established international best practice, whilst avoiding some of the flaws and complexity inherent in the older jurisdictions where regulations have been constantly amended and patched up to keep pace with developments in the financial markets. The DFSA’s rules are written in English and have been drafted after extensive consultations with leading financial institutions.

The DFSA has also been accepted into the international capital market regulator IOSCO (International Organisation of Securities Commissions).

The Dubai International Financial Exchange

The Dubai International Financial Exchange (DIFX) opened for trading for the first time on September 26, 2005. The stated aim of the DIFX was to become the leading exchange in its region for equities, bonds, funds, Islamic products and other securities, and a gateway for international and regional investment, and in this it appears to have largely succeeded.

In August 2007, the Dubai Government announced the consolidation of its holdings in the Dubai Financial Market (DFM) and Dubai International Financial Exchange (DIFX) into a new holding company, Borse Dubai. The government stated at the time that the move was in line with the Dubai Strategic Plan 2015, and demonstrated its commitment to position Dubai as the leading capital market in the region.

DIFX and DFM continue to be regulated by the Dubai Financial Services Authority (DFSA) and the Emirates Securities and Commodities Authority (ESCA) respectively.

Explaining the role of Borse Dubai within the new structure, DFM Chairman Essa Kazim, who was appointed as the Chairman of Borse Dubai, said that the company is intended to be a facilitator, allowing DIFX and DFM to explore joint opportunities for the development of capital markets in the region and in the broader context of global exchanges.

He commented at the time of the announcement that: "Both exchanges will share best practices, maintaining operational efficiency at international standards. Borse Dubai will boost confidence among issuers, investors, and intermediaries who will benefit from a presence in both exchanges, as well as a broader and more varied range of services."

The DIFX has ambitions to become the exchange of choice for the listing of Islamic finance instruments, and took major steps towards this goal with the listing of over 100 Sukuks, or Islamic bonds, in 2007. In fact, as 2007 drew to a close, the DIFX was already the largest exchange in the world for Sukuk by listed value, at USD13.78 billion.

In October 2007, the DIFX announced that it was preparing to list a range of Islamic structured products that will offer investors new Shariah-compliant opportunities on a new platform known as TraX. Created by the DIFX in August 2007, TraX is the only structured products platform in the region, and major banking institutions including Citigroup, Deutsche Bank, Merrill Lynch and Morgan Stanley plan to list conventional and Islamic products on the platform.

Per E. Larsson, Chief Executive of the DIFX, stated at the time that: “The structured products market is growing rapidly around the world and the DIFX is at the forefront of expansion in its region.

In December 2007, Dubai's Jebel Ali Free Zone listed a AED7.5 billion (USD2.04 billion) Islamic bond, or Sukuk, on the DIFX, confirming the exchange’s status as the largest in the world for Islamic bonds.

The DIFX is also a significant draw for the listing of conventional bonds, and in February 2007 Dubai Holding Commercial Operations Group (DHCOG) listed bonds worth USD2.46 billion on the exchange, in the largest corporate bond issue in the Middle East under a European Medium Term Notes (EMTN) programme.

Commenting on the listing, Mohammed Al Gergawi, Executive Chairman of Dubai Holding, stated that: “The DIFX is a gateway for both regional and international investors. Following its rapid growth, the DIFX is the ideal platform for Dubai Holding to list this important issue of bonds, the first it has ever made. As an exchange that operates to high international regulatory standards, the DIFX provides expanding opportunities for the business and financial community.”

In March 2008, the DIFX announced the composition of its new Board of Directors following the closure of a deal between the DIFX, Borse Dubai Ltd and the Nasdaq Stock Market, Inc., which resulted in the NASDAQ OMX Group, Inc. acquiring a 33.3% stake in the DIFX. The two new DIFX Board members were Robert Greifeld, Chief Executive Officer of NASDAQ OMX Group and Adena T. Friedman, Executive Vice President, Corporate Strategy of NASDAQ OMX Group. The rest of the DIFX Board membership remained unchanged and comprised: Soud Ba’alawy (Chairman), Per E. Larsson (Chief Executive Officer), Maha Al-Ghunaim, Bisher Barazi, Mohamed Binbrek, Essa Kazim, Gerald Lawless, George Möller and Shadi Sanbar. Larsson has since vacated his post to be replaced by former NASDAQ executive Jeffrey Singer.

The year 2008 also saw the first dual listing take place on the DIFX, that of Netsol Technologies Inc., a California-based IT company with extensive interests in the Middle East, which is also listed on the US NASDAQ exchange. Furthermore, 2008 also saw the first Chinese company, (China Security and Surveillance Technology, Inc.) list its shares on the DIFX.

Equities trading volumes on the Nasdaq Dubai exchange, which is soon to be taken over by the Dubai Financial Market (DFM), rose by 30% in 2009 to 3.10 billion shares, up from 2.39 billion in 2008, the bourse has announced.

Volumes for the month of December 2009 reached 410 million shares, the second highest monthly total of the year. This was a 170% increase over the November 2009 figure of 152 million; it was also 170% higher than the December 2008 figure, which also reached 152 million.

The exchange introduced mandatory reporting of all over-the-counter equities trades in September 2008.

Equity derivatives volumes totaled 125,000 in 2009, with 73% of the volume taking place in the second half of the year as the market expanded. A total of 14,100 derivatives traded in December 2009, down 31% from the November 2009 figure of 20,490.

Nasdaq Dubai launched its equity derivatives market in November 2008. Equity futures are listed on 21 individual UAE companies and on the FTSE Nasdaq Dubai UAE 20 share index, which was designed as a hedging and investment mechanism for Gulf Cooperation Council and international investors. The index rose by 48% in 2009 to 1,851.

A total of 81,522 Dubai Gold Securities (DGS) traded in 2009 following their listing in March, with 52% of trades taking place in the last quarter of the year. In December, 641 DGS traded, down from 40,668 in November.

Each DGS security is valued at approximately 1/10th of the spot price of gold. DGS are an initiative of the Dubai Multi Commodities Centre and the World Gold Council and have been declared Shariah-compliant.

The Dubai Gold And Commodities Exchange (DGCX)

The DGCX commenced trading on November 22, 2005, and was the first international commodities derivatives market in the Middle East region. DGCX offers a range of commodities, commencing with gold futures, with electronic trading accessible from anywhere in the world. Transactions on the DGCX take place on a state-of the-art electronic trading platform.

The exchange is established within the Dubai Metals and Commodities Centre (DMCC), which is a strategic initiative of the Dubai government created to establish a commodity market place in Dubai. The DMCC is also a free zone authority offering 100% business ownership, a guaranteed 50 year tax holiday and freehold property options.

The DGCX is regulated by Emirates Securities and Commodities Authority.

The Dubai Merchantile Exchange

The Dubai Merchantile Exchange, which trades oil, has reported a positive year for 2009. Liquidity has increased with trading volumes achieving a 69% year-on-year increase and average daily volumes approaching 3,000 lots in the last quarter. The DME achieved a record delivery of 11.6 million barrels in September.

DME says that the adoption of DME Oman as the basis for setting the Official Selling Price (OSP) for Dubai crude by the Dubai Department of Petroleum Affairs in June 2009 further reinforces the growing acceptance of the DME Oman contract as the third global crude oil pricing benchmark. And fourthly, DME contracts were migrated seamlessly onto CME Globex® thereby allowing market participants to access the world’s three crude oil benchmarks on a single electronic platform.

The DME's annual report notes that through the course of the year there was a significant narrowing of the differentials between light sweet crudes such as Brent with more heavy and sour crudes such as Oman. Although the sweet-sour differential has been volatile, the typical price differential between Brent and DME Oman (see exhibit 2) has more than halved between an average of $1.1 in the first half of 2009 to $0.47 in the later half of the year. This spread reduction is significant when compared to the long-term average differentials of around $3/bbl (for the period 2000 – 2007).

Since its launch DME Oman has continued to demonstrate its fundamental grounding in the supply/demand balance of the region and is today considered the largest physically-delivered crude oil futures contract in the world, with an average of 8.7 million barrels delivered each month through the Exchange.

As part of its proposition to provide market participants with a flexible and comprehensive suite of trading and hedging tools, the DME intends to launch four new DME Oman related contracts in 2010:

• Oman Swap: a cash-settled, cleared-only contract that is settled on the monthly average of daily DME Oman settlements
• Brent-Oman Swap: a cash-settled, cleared-only contract that is settled on the monthly average differential between ICE Brent and DME Oman daily settlements
• Oman Average Price Option: a cash-settled, cleared-only options contract that is settled on the monthly average of daily DME Oman settlements
• Oman European-style Option: a cash-settled, option that will be available for trading on CME Globex© and for clearing. It is settled against the post-close price of DME Oman upon expiration.

The contracts have been drafted and put out to consultation and are awaiting regulatory approval for launch. These new contracts will provide the market with additional flexibility in hedging and trading East of Suez price risk.

The DME is regulated by the Dubai Financial Services Authority (DFSA). All trades executed on the Exchange are cleared through and guaranteed by NYMEX (a member of CME Group), which is regulated by the U.S. Commodity Futures Trading Commission (CFTC) and is a Recognised Body by the DFSA.

Immigration And Visa Rules

The Naturalization and Immigration Department at the Ministry of Interior is the only administrative authority responsible for issuing visas to foreigners wishing to enter the UAE. The visas issued by the Department differ in accordance with the purpose of the visit of the foreign visitor.

In order to work in Dubai, open a bank account or lease accommodation you must have a residency visa. There are two types of residency visa available, one which involves being sponsored by a company for employment and the other which necessitates sponsorship by a family member (for residency only – labour card to be obtained separately).

A Multiple Visit Visa can be granted after a normal visa has been issued and used. A Residence Visa stamped on a passport proves the legal residence of an expatriate in the country. This visa is given to workers who have obtained work permits or for relatives living with them permanently, and additional documentation is required.

Citizens of GCC countries (Gulf Cooperation Council: Saudi Arabia, Kuwait, Bahrain, Qatar and the Sultanate of Oman) and British nationals with the right of abode in the UK do not need visas to enter the UAE. GCC nationals can stay more or less as long as they like. Britons can stay for a month and can then apply for a visa for a further two months.

Whatever kind of visa you request, it will be deposited at the airport for you to collect upon arrival, but there is a charge for this service. If your passport shows any sign of travel to Israel, you will be denied entry to the UAE.

German citizens (both tourists and business visitors) may apply to the UAE embassy in Germany for one or two year multiple-entry visa. No sponsor is required. The maximum duration of stay should not exceed three months a year. The visa fee is AED1,500.

US citizens may apply to the UAE embassy in the US for one to ten year multiple-entry visas. A sponsor is required and the visa will be granted free of charge. The maximum duration of stay should not exceed six months per visit.

A Residence Visa stamped on a passport proves the legal residence of an expatriate in the country. This visa is given to workers who have obtained work permits or for relatives living with them permanently, and additional documentation is required.

In June, 2003, the government announced that it planned to allow expatriate residents to move freely among GCC countries by the end of the year, something which in any case became possible with the establishment of the GCC Common Market.

In 2003, Dubai, and the United Arab Emirates (UAE) started making a determined push to increase the participation of locals in the work-force under a policy known as 'emiratisation'.

Dr Omar bin Sulaiman, CEO of Dubai Internet City, noted at the time that while the Dubai Internet City was devoted to emiratisation, this would not mean that all UAE nationals would be guaranteed a job there. "Nationals must not take for granted that jobs are waiting for them at DIC, which will scour the market to hire the most dedicated individuals irrespective of nationality. Dubai is a cosmopolitan city and we will look at all individuals of various nationalities to recruit the best. You will secure a job not because you are a citizen but because you are a hard-working citizen."

In June 2005, the body responsible for administering the programme, the National Human Resource Development & Employment Authority (or Tanmia) announced plans to deny work permits and entry visas to firms that do not comply with their prescribed 'emiratisation' quotas. The Board of Trustees, chaired by Dr Ali bin Abdullah Al Kaabi, Minister of Labour and Social Affairs, decided to step up measures to deny firms not complying with the prescribed Emiratisation quotas the right to obtain work permits and entry visas for foreign labour.