Dubai financial hub sees growth from Asia links

Updated 14 February 2013
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Dubai financial hub sees growth from Asia links

DUBAI: The Dubai International Financial Center, a business zone, says it aims to double the number of companies there over five years by serving as a base for business with China, south Asia and Africa, not merely the Gulf.
With political unrest plaguing parts of the Middle East and Western financial firms still retrenching because of debt problems in their home markets, the business environment is challenging for Dubai.
But Jeffrey Singer, chief executive of the DIFC Authority, which manages the business zone, said Dubai could keep expanding rapidly as the Gulf’s main financial center by becoming a conduit for trade and investment with a larger region.
“Increasingly institutions are using Dubai not just as a base for business in the Gulf, but as a base to access a much wider area,” he said.
The DIFC, opened in 2004, is one of the United Arab Emirates’ “free zones,” offering foreign investors 100 percent ownership of their ventures and business-friendly regulation.
The number of registered firms operating in the DIFC rose 7 percent last year to 912, while workers at those firms jumped 16 percent to 14,000. The DIFC has declared it wants to double its size in the five years from 2011, when it had 848 companies.
The DIFC has had to contend over the past year with the shrinkage of some of its top US and European clients. Citigroup Inc. this week began laying off investment bankers across its Europe, Middle East and Africa division, with 50 positions to be eliminated in the near term.
But Singer said that overall, cutbacks of investment bankers and back-office staff at Western institutions in the DIFC had been more than offset by their expansion in other areas, as foreign firms tried to capture part of the Gulf’s infrastructure spending boom.
In some cases, retrenchment by foreign firms in the Gulf has prompted them to bring staff back from other parts of the region to Dubai, actually boosting their presence in the DIFC.
“The European presence has grown every year in terms of both employment and the number of firms here,” said Singer, an American who took his job last July after heading the NASDAQ Dubai exchange.
Much of the DIFC’s future growth is expected to come from Chinese institutions. Assets at Industrial & Commercial Bank of China’s (ICBC) Middle East unit, which operates from Dubai, soared 128 percent from a year earlier to $ 6.1 billion in the first half of 2012.
Four Chinese institutions — ICBC, Bank of China, Agricultural Bank of China and Petrochina — now have presences in the DIFC. Singer said the DIFC was discussing the possibility of others coming, but declined to elaborate.
Trade in the Chinese yuan by banks in Dubai has been increasing; ICBC said it conducted $ 2.1 billion of yuan transactions in the interbank money market in the first half of 2012, up 58 percent. Last week Emirates NBD, Dubai’s largest bank, said it had started offering yuan accounts.
Dubai may struggle to become a major market for trading the yuan, however, if it does not arrange for clearing of trades to be done locally.
Yuan clearing is conducted in Hong Kong and Taipei, and last week China named ICBC as the clearing bank for yuan business in Singapore, but Singer said any similar arrangement for Dubai would depend on discussions between UAE and Chinese authorities.
“Banks in the DIFC would like to have yuan settlement occur here but that is an issue for the UAE central bank to handle,” he said, without predicting when that might happen.
Risks for the DIFC include political instability in other Arab countries, which Singer said could deter foreign investment throughout the region, and any major slowdown in the Gulf’s infrastructure spending.
The DIFC also faces competition from nearby financial centers, particularly Qatar, but it has maintained its lead over them in recent years. The Qatar Financial Center Authority’s register lists about 140 active, licensed firms.
Bahrain’s status as a financial center has been hurt by political unrest that erupted there two years ago. Some financial operations moved to Dubai from Bahrain for that reason, though Bahrain has been successful in preventing a mass exodus of financial firms, Singer said.
Some fund managers complain that new UAE investment fund rules introduced late last year could hurt the DIFC by placing a bigger burden of regulation on it and making it harder for funds to market themselves in the wider country outside the free zone.
The DIFC is continuing to hold discussions with the UAE Securities and Commodities Authority on how to apply the rules to the DIFC, Singer said.


Gulf airlines Emirates, Etihad, Qatar Airways seen flying under radar at Farnborough Airshow

Updated 40 min 22 sec ago
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Gulf airlines Emirates, Etihad, Qatar Airways seen flying under radar at Farnborough Airshow

  • Over 1,500 exhibitors and 100,000 trade visitors are expected to attend this week’s airshow
  • Farnborough and the Paris Airshow — held on alternate years — have accounted for around 30 percent of annual commercial business

LONDON: The aviation industry heads to the UK’s Farnborough International Airshow on Monday in rude health, with higher oil prices and a strong global economy leading to predictions of a large number of orders at the week-long show.
But this time around, significant orders from Gulf carriers such as Etihad, Emirates and Qatar Airways are unlikely to materialize, as the region’s carriers continue to take stock after a period of bruising losses.
Over 1,500 exhibitors and 100,000 trade visitors are expected to attend this week’s airshow, one of the most important events for the global aviation industry.
Farnborough and the Paris Airshow — held on alternate years — have accounted for around 30 percent of annual commercial business for manufacturers like Boeing and Airbus since 2012, according to aviation consultancy IBA Group.
Some $124 billion worth of orders and commitments were placed at the 2016 show, according to organizers.
The aviation industry is in rude health in 2018, with passenger numbers and load factors rising internationally thanks to global economic growth.
Plane makers bagged around 900 firm or provisional orders in Paris last year, the consultancy said. And while the international order backlog is high, a similar number of orders is expected next week on the back of recent rises in the price of oil.
“The trend between oil price and annualized orders has been uncannily strong,” said IBA’s Chief Executive Officer Stuart Hatcher in a report issued July 9.
“This is not surprising given that most orders have been placed for new fuel-efficient technology, but even with such large backlogs in play, orders continue to come in as oil rises.”
This time around however, the big three Gulf carriers — Etihad Airways, Emirates and Qatar Airways — are unlikely to feature too heavily among the big spenders next week, analysts predict.
Etihad Airways made headlines in Farnborough in 2008, when it made $20 billion worth of orders from Boeing and Airbus.
Fast forward 10 years though, and the Abu Dhabi carrier is in consolidation and restructuring mode, its international expansion plan on hold following the insolvency of its European partners Air Berlin and Alitalia.
After posting an annual loss of $1.5 billion for 2017 (albeit an improvement on the previous year), Etihad earlier this month announced a reorganization into seven business units to be accompanied by further job cuts, significantly scaling back its international ambitions.
The main deals the carrier is reportedly working on with manufacturers are attempted price reductions for previously placed orders.
“It’s not the done thing to cancel existing orders at airshows,” said Saj Ahmad, chief analyst at Strategic Aero Research.
Etihad did not respond to a request for comment.
John Strickland, director of JLS Consulting, said the other two big Gulf carriers were also unlikely to splash significant cash at Farnborough.
“It’s probable that any statements by Emirates and Qatar Airways will be more modest,” he told Arab News.
Dubai’s Emirates has fared better than its Abu Dhabi counterpart, reporting a $1.1 billion profit for the year ending March 2018.
Despite the airline’s continuing recovery, recent headline orders from both Boeing and Airbus are tempering the expectations for what will be announced at Farnborough.
“Emirates has placed recent orders for Boeing 787s and more Airbus A380s so large headline orders are unlikely,” said Strickland.
Emirates declined to comment.
Qatar Airways has been hit hard by the boycott of its home market by the Anti-Terror Quartet — Saudi Arabia, the UAE, Bahrain and Egypt — last year, with the group’s CEO Akbar Al-Baker admitting the airline is likely to report a large loss for the past year.
But the company has been in acquisition mode, acquiring a 9.6 percent stake in Cathay Pacific in November for $662 million, and has expanded a number of its routes in recent months.
“Qatar Airways may plump up for more (Boeing) 777Fs as it looks to build its freight capacity in the wake of the (boycott) to alleviate import pressures on goods and services,” Ahmad told Arab News.
IBA forecasts that aircraft leasing firms may dominate Farnborough orders, accounting for between 30 and 50 percent of orders.
Ahmad told Arab News that Dubai-based DAE Capital may be one of the firms preparing to place large orders, with rumors of 100 jets apiece for Airbus and Boeing.
DAE, Airbus and Boeing did not respond to requests for comment.