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Dubai still in lead, but race for Gulf financial supremacy is hotting up

The Dubai International Financial Center (DIFC) last week gave an update on the impressive plans it has to expand — both physically and commercially — as part of a 10-year plan that aims to triple its size by 2024.
On the real estate side of the strategy, work is progressing well. The two big flagship projects are: A $280 million plan to link the current Gate complex with the southern end of the DIFC jurisdiction via an avenue of commercial, retail and leisure facilities; and a new $50 million office block addition to the Gate Village complex. Both will open in the first half of next year, according to Nabil Al-Kindi, the DIFC’s real estate chief.
That progress is matched by advances on the financial business side. Nearly 22,000 people now work at the center, making the 2024 target of 50,000 eminently achievable; there are some 463 financial firms registered at DIFC, against a target of 1,000 in seven years; assets under management — also forecast to triple — got a big boost last year when HSBC moved its Middle East headquarters to DIFC.
It is just as well the DIFC’s plan is on track, because it is facing increased competition to remain the leading financial center in the region. Not that policymakers would describe it as a race. The public stance is that Dubai welcomes the increased competition provided by the Abu Dhabi Global Market (ADGM), just down the road in the UAE capital, and welcomes the opportunities offered by the boom in financial services in Saudi Arabia.
But privately, it is looking over its shoulder at Abu Dhabi and Riyadh as contenders for its crown as the premier financial market place in the Arabian Gulf.
Which is why comments a couple of weeks ago from Bill Winters, the chief executive of Standard Chartered, caused some concern in DIFC. His bank has been a key member of the center since it opened in 2004, and a big chunk of its global business is managed through the DIFC.
Winters was asked by Reuters in London about the effect of the ongoing standoff between the members of the Anti-Terror Quartet (ATQ) and Qatar over allegations of terrorism funding. “There is a lot of benefit we get from having a Dubai hub, we are looking to see what the effect of this will be. There is a risk of turning away from the UAE,” he answered.

DIFC officials were quick to dismiss the report as a throwaway reaction spoken in haste, and certainly it is hard to see how the Qatar situation would affect Dubai directly or immediately.

Given the current climate, why would a big global financial institution want to be based in Doha, rather than in Dubai, Abu Dhabi, Riyadh or even Bahrain?

Frank Kane

If big financial institutions were to avoid the Gulf altogether because of the increased instability, Dubai might lose some business along with the rest. But it is also well placed to pick up any new business from financial institutions that want to avoid sanctioned Doha.
The Qatari capital stands to lose more than any other city in the Gulf. In the current climate, why would a big global financial institution want to be there rather than Dubai, Abu Dhabi, Riyadh or even Bahrain?
The risk of any kind of financial involvement with Qatar has become apparent in recent weeks, with the UAE running an informal blacklist for banks with Qatari shareholders seeking to get involved in government-related transactions.
There was also the suggestion that Qatar’s presence as a 10 percent shareholder of the London Stock Exchange will be the clincher in persuading the government of Saudi Arabia to opt for New York as the venue for the forthcoming initial public offering (IPO) of $2 trillion rated Saudi Aramco. That is one downside to the Qatari policy of “soft power.”
Wherever the Aramco IPO ends up, the preparations for that listing, and the $200 billion privatization of other state-owned companies in the Kingdom, will also increase the pressure on DIFC. While some bankers will prefer to live in Dubai and commute to Saudi Arabia, there will inevitably be a boost to financial business located in the Kingdom.
HSBC, Citibank and Mitsubishi of Japan have all recently announced plans to increase employee numbers in Saudi Arabia in anticipation of the fees bonanza to come from the economic transformation set in train by the Vision 2030 strategy.
Dubai is aware of the opportunities Saudi Arabia presents, but so too is ADGM, which you could argue is better placed to win it, in view of the close relationship between senior policymakers in Abu Dhabi and Riyadh.
Competition between Dubai and Abu Dhabi, so far largely confined to their rivalry in financial technology (fintech) initiatives, looks set to hot up.
We will get a clearer snapshot of the current standing of competing regional financial centers next month, when the biannual index of global financial centers is published by British consultancy Z/Yen Partners and the China Development Institute.
The “big five” hubs — London, New York, Singapore, Hong Kong and Tokyo — will probably continue to dominate, but look out for advances by other Asian cities, and from the Middle East. Political problems in the UK and America can only serve to emphasize the eastward drift of global capital.

Frank Kane is an award-winning business journalist based in Dubai. He can be reached on Twitter @frankkanedubai.