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Dubai's war on corruption

IF ANYONE had any doubts about Dubai's commitment to become a world-class financial centre, Sunday's statement from the offices of His Highness Shaikh Mohamed bin Rashid al Maktoum should have taken care of it.

The statement could not have been more categorical when it said that the government was committed to maintaining the highest global standards in fighting corruption, and that it would continue to create an ideal investment climate which had made the emirate gain the "confidence of business leaders throughout the region and world."

The timing of the statement was crucial. Come September, about two dozen sovereign wealth funds from across the world would meet in Chile's capital Santiago to finalise the draft of an agreement on principles that properly reflect their best practices and objectives. Being part of the United Arab Emirates, home to some of the world's richest sovereign funds, Dubai has to be more transparent.

Corruption, at both the public and private sector levels, is a pestering issue across the world. Violations of insider trading laws keep popping up at some of the world's prestigious bourses like the Wall Street and the London Stock Exchange. Creative accounting, as some would call irregularities in reporting accounts, has not only lured small businesses but has taken down massive corporate giants like Enron in the United States.

The fast-growing financial hubs in emerging markets have first and foremost a structural issue to take care of when it comes to corruption. A lack of robust legal and regulatory framework or simply archaic set of rules in a world of innovative financial wizardry makes speculation and insider trading look like business as usual. Some of the more mature financial capitals in Asia like Hong Kong, Singapore and Shanghai have all faced the evil of corruption and have dealt with them in their own way. China till recently dealt with official corruption with an iron hand. But others have approached the problem in a more holistic way. Singapore, for example, made a conscious decision a couple of decades back to not only institute tough criminal laws to deal with corruption but has since been tweaking its economic policy and regulations in a way to take the incentive out of rent-seeking, and make speculation near impossible.

Dubai needs to look at corruption the same way. It cannot be handled by judicial decrees alone. What is needed is swift legislation of laws that set clear rules of the game — how to do business in the emirate. Anyone who dares venture out of the well-defined parameters should know that he or she would not be spared.

Today, given the strong economic fundamentals, Dubai is among the few places where people can make a lot more money than anywhere else. The emirate had so far been very successful in attracting investors due to the fact while the Gulf region has more than $1 trillion in market capitalisation and only $70 billion are under management by fund managers. The policy focus, therefore, has to change to long-term investors. Of course that's all easier said than done. But there is no time to lose, and there will be no breather. Where there is opportunity, there will always be greed. Dubai, by committing itself to a "zero tolerance" policy on corruption has in fact made a big leap towards achieving the ambitious goals set in the Dubai Strategic Plan 2015.