It's sizzling in Dubai. And we're not just talking about the summer temperatures, which generally range between 113 degrees and 122 degrees Fahrenheit. Global investment banks like Citigroup ( C) and UBS ( UBS) are hot to set up shop in the Middle Eastern nation of Dubai, located in the United Arab Emirates. Although Dubai has a population of just over a million people, it has emerged as a trading hub for a region now swimming in petrodollars. Meanwhile, as the planet's biggest banks jockey for position in the tiny desert kingdom, Dubai's government is investing beyond its own borders in a big way. The Borse Dubai, the government-controlled exchange, for example, recently agreed to take a 19.9% stake in the Nasdaq ( NDAQ) and buy Nasdaq's 28% stake in the London Stock Exchange. TheStreet.com recently caught up with Niket Patankar, CEO of financial services consultant and outsourcer
Adventity , which helps top investment banks research the Dubai market and design Islamic financial products, to find out what the mega-banks are doing in Dubai. TheStreet.com: Why the big interest in Dubai right now? Why are banks falling all over each other to establish themselves there? Patankar: There are multiple reasons, but primarily it is the growth in the domestic market. Dubai's GDP is growing at an annualized rate of 8% to 10%. On top of that, there are a tremendous amount of ex-pats moving in and looking to do business. They are being encouraged by investor-friendly laws created by the ruler of Dubai.
Petrodollars obviously play a role in the attraction. That's a big pot of money building over there. Petrodollars do play a major role. No question about that. However, the region has leveraged petrodollars to attract other forms of investment. They have made it a trading region which is now fundamental to the economy so they are not solely relying on oil. How safe is it for American workers in Dubai? Dubai is very safe. The UAE is one of the safest countries to do business in. Their laws encourage international investing. Regulations are very friendly, especially when it comes to banking products. Are they safe from invasion by their neighbors? That risk exists, but it is low. They are very friendly with most of their neighbors. One of the dominant forces in the region is Saudi Arabia. And they are not only friendly with the Saudis, but have a common support base which is the U.S. Also, Dubai's economy is tied to a number of local economies because it is a trading hub. Other economies in the region are dependent on Dubai. How are you advising clients? What kind of knowledge are they trying to get from Adventity? Due to confidentiality agreements, we can't name our clients. However, we work with numerous top investment banks to help them do research on the market. We advise a lot of banks about Islamic investing, helping them structure and design Islamic banking products. What are the differences between Western and Islamic banking products? The fundamental difference between Western and Islamic banking is the interest component. Islamic banking is essentially based on the fact that you can not charge or collect interest. So banks need to design different structures to accommodate Islamic law.
Which banks are in the lead? Citigroup is ahead in the game. ABN Amro ( ABN) is offering those type of products, so is UBS and HSBC ( HBC). These banks have opened Islamic financing windows which help them to originate Islamic financial products. You'll see more. What about Dubai investing abroad like the Nasdaq deal? It's quite clear that they have the dollars and they are getting aggressive. More importantly, they have developed the capabilities to run a global business out of Dubai. They are now demonstrating that they have good governance principles which will enable them to manage international assets. The Nasdaq and other deals are examples of their ability to channel petrodollars and enter the international financial community. What about the scuttled Dubai port deal which received so much attention here in the U.S.? Any lingering backlash? I don't think so. They are beefing up their own governance principles so they will be able to do those types of deals in the future. They are working to prove themselves to the international community and they are doing a good job of it. You can see it by the private equity and banks streaming over there. Just watch. You'll see.