How the road from Fife led to the blue waters of the Gulf

No other economy in the world shows faster growth than its 17 per cent 2004 GDP rise. No other economy pipes in more speculative cash or attracts more fortune-seeking labour from the developing or developed worlds.

Few other governments, autocratic, Islamic or otherwise, offer more inducements to financiers, traders and pleasure seekers to buy into its self-fulfilling hype as the new hub of the 21st century.

Thrown into sharp relief against this razzmatazz is Douglas Dowie, general manager of the National Bank of Dubai. Severe, ultra-discreet, humour as dry as the desert, the banker from Leven cuts an unlikely figure as top moneyman in a gold-rush economy.

But Dowie’s reserve masks big ambitions, the first mostly achieved already; for Dubai to surpass Bahrain as the regional financial nerve centre. His experience, mostly with Standard Chartered Bank, and his shrewd eye on Western banking trends has made him indispensable to the Emirate’s strategy.

As he explains it, the NBD’s priority is to use the free-trade bonanza to catch up with richer regional banks. The latest figures show the NBD’s total assets rising 3.3 per cent, or 1.3 billion dirhams (185 million) on December’s figures to 41.6 billion dirhams (5.1bn) in March.

The second task is to ensure that the bank holds its own against the likes of Citibank, HSBC and RBS now joining the rush.

"We are roughly equal to the Bank of Abu Dhabi and about half the size of the Bank of Kuwait. The arrival of these much bigger banks in a relatively small market is a challenge. New WTO rules have expanded the eight-branch limit on foreign banks. The challenge for us is to bulk up our balance sheet before they eat our lunch."

From a core business in corporate banking, trade finance and treasury operations, the NBD is branching out. It is hitching a ride on the property boom, offering housing loans and other retail products. New branches are planned in Tehran, Doha, Bahrain, Riyadh and Kuwait City.

Dowie calls his bank "very conservative" but it seems as flexible and opportunistic as the best of local institutions. It is on the verge of branching into "Islamic banking", a parallel, and usually strictly separate system of interest-free lending important to its regional strategy. Meanwhile, the core operation encourages female management talent, defying regional norms.

M&A, however, is seen as a modernisation too far. The bank is confident that its role as state-sanctioned financier locks in organic growth.

"It’s difficult to see any imperative for mergers. Given how the economy is growing and with all the new projects coming forward, projections for this year are as bullish as last year’s"

It helps that the NBD is chaired by Abdullah Mohamed Saleh, a scion of the ruling al-Makhtoum family. Every successful Dubai institution bears the gilded fingerprints of this benign autocracy. The NBD’s sleek, sail-shaped glass tower on the Creek is, in effect, its financial arm.

Dowie’s path to the upper floors started in a manner familiar to generations of expatriate Scots. After graduating from Buckhaven High School, boredom with the pinched, parochial world of 1960s Scottish banking drove him first to Aden in 1963.

Trained in Arabic at the notorious Beirut "spy school" from where Kim Philby defected, Dowie’s mastery of Middle Eastern business etiquette won him high-flying posts from Tripoli to Tehran.

He finds Dubai, however, the closest thing to home, having spent 16 years here in total. Recent changes in the law have allowed him to buy property, in the Palm at Jameira, an artificial island shaped like a palm tree. Posh and Becks will be neighbours.

But isn’t it the traditional role of a Scots banker to warn that such gaudy exuberance will end in tears?

"I don’t use the word bubble, because with a bubble even a little setback will burst it. But there is so much equity in private-sector development, underpinning what you see. Critical mass is sucking in money. It’s no longer just government-driven."

The momentum is underpinned by the government’s high-spending support for the private sector, the explosion of tourism and trade, and although it only accounts for 6 per cent of income, stratospheric oil prices.

"Because of the reach and strategic ambition of Emirates, and the decision to operate an open skies policy, Dubai has become a global hub. Confidence in further expansion is clear from the size of Emirates [aircraft] order books," says Dowie.

"Nowhere else in the region can match Dubai’s combination of free trade, tax breaks and a commitment to transparency."

An obscure backwater when Dowie first arrived in the 60s, Dubai’s ascent is most evident in the demand for property, far outpacing even the breakneck pace of supply. Numberless cranes are throwing up housing developments, port infrastructure, glassy office towers, theme parks, sports stadia and component parts of the tax-free trade environment in which the NBD thrives.

One illustration: two months before the event, even the well-connected Dowie struggled to find a hotel room (there are 30,000) for guests at his daughter’s wedding. As the bed-blockers were potential boosters of his bank’s ascent, he did not complain.

A BRIDGE BETWEEN EUROPE AND ASIA

AFTER the Jebel Ali port and free zone, which houses 2,600 companies and is a key staging post for China, Dubai now has a further successful manifestation of its "if we build it they will come" philosophy. The Dubai International Finance Centre (DIFC), an onshore capital market, is a financial free zone designed to act as the financial services cluster for the region. With subdivisions for banking services, capital markets, asset management and fund registration, reinsurance, Islamic finance and back-office operations, the DIFC offers zero tax on income and profits and allows 100 per cent foreign ownership, with no restrictions on foreign exchange or capital/profit repatriation.