From 6% of Dubai's GDP in 2005 to 11% in 2014

DIFC looks to Asia for next 10 years of growth

GMT 10:38 2014 Monday ,07 July

Arab Today, arab today DIFC looks to Asia for next 10 years of growth

Dubai International Financial Centre (DIFC)
Dubai - Arab Today

The Dubai International Financial Centre, DIFC, has helped grow Dubai's banking and financial industry from 6 to 7 per cent of Dubai's GDP in 2005 to more than 11 per cent today, after 10 years of strong growth the DIFC is now looking to companies from new markets in the Far East to keep growing.
"In the next 10 years we will be looking to new geographical frontiers in China and Africa,” said Eisa Kazim, Governor of the DIFC, in an exclusive interview with Gulf News to mark the DIFC's 10 years of operations.
"We are encouraging more companies to come to Dubai and the DIFC from South East Asia and the Far East, including China, Korea, Japan and India. Strategically speaking, we need to expand in new geographical areas outside our initial base of companies from Europe and North America,” he said.
"We have been very successful in bring the top companies in finance and real economy activities like trading. These companies of the new global economy see Dubai as the centre of several connecting regions, including Asia and Africa.”
The top four Chinese banks are already active in Dubai as the city is becoming a major hub for Chinese operations in Africa, and the DIFC is adding value to that relationship. Kazim said that he and a senior team from the DIFC had just come back from an important visit to China during which they met all the major banks, the regulators and the Central Bank, as well as re-insurance companies and assent managers, all of whom are looking at Dubai as a base for their operations in the wider region.
"Chinese companies want to work with Chinese banks, and many Chinese companies are already in Dubai as they trade into Africa. They would like a cluster of Chinese banks and other skills to support them. We recognised how much the Chinese want to expand in Dubai,” said Kazim.
GCC financial companies
In addition, another important strand of the DIFC's future growth is financial companies from the GCC. "The GCC is under-represented to date considering its financial institutions and their ability to serve the region,” he said, pointing out that the DIFC has not focused on this neighbouring sector in the past.
"We should not forget the GCC. We have not focused on this in the past and today we are looking at getting more GCC banks and financial companies into the DIFC.
DIFC environment
In its 10 years of operations, the DIFC has achieved significant and continual growth by attracting international financial companies to come to base themselves in Dubai while looking at the wider region, which they would not have done without the legal environment created by the DIFC.
"The DIFC has contributed more than US$3 billion to Dubai's GDP from employment, ancillary services, and law and accounting services, and we consider that to be a success,” said Kazim. "In a very short period of time we have built trust from other authorities, and we have 65 to 67 MOUs with different entities from 42 countries in developed economies, which is another indicator of the way the DIFC has become an accepted part of the international financial world.”
Kazim attributed the initial exponential growth to both interest from international financial companies in having easy access through Dubai to the Measa (Middle East, Africa and South Asia) region and its US$6 trillion GDP economies, and to the DIFC's reputable legal environment including its own courts, quality infrastructure and slowly increasing level of maturity.
Kazim is keenly aware that the DIFC has to remain competitive with other global financial centres, and he was clear that he wanted the DIFC to continue improving its infrastructure while remaining cost competitive. "We are in the middle range at present. Not cheap but in the middle and we continually benchmark ourselves carefully”.
As the DIFC moves into its second decade, the institutions registered with it are seeking to deepen the range of their operations. "Many institutions want to expand their operations here, and move from Category 4 to Category 1 like Woori Bank, the large Korean institution, which has just changed its licence to become Category 1 so that it can handle more activities out of Dubai,” said Kazim.
Lots of room
Kazim was sanguine about the prospect of the new financial centre in Abu Dhabi taking its place in the market. "There is plenty of room for all free zones in the find specialisations and develop their own particular niches and strengths, and the competition makes us all stronger, as has been the way in the U.A.E.for decades” he said.
"The regional market can certainly absorb more than one financial free zone, so a financial free zone in Abu Dhabi is not a problem for the DIFC. And there may be room for more than two free zones as the Menasa region is huge with around US$6 trillion GDP divided equally between the subcontinent, the Middle East and GCC, and Africa,” Kazim told Gulf News.
"All these markets are looking for products from the DIFC, and there is plenty of room. You need to look at the development of more than one financial centre in the U.A.E. from the opposite way, and see if the pie is big enough to cope with two financial centres,” he said.
From a different perspective, Kazim said that adding another financial centre to the U.A.E. was welcome as it all helped build the cluster. "The free zones together build the cluster, expanding the number of skilled people who are working in the area, maybe leading to joint activities, and so the U.A.E. becomes the hub for a big region.”
Dubai diversification
Through the 10 years of its development, the DIFC has been a conscious part of the work to continue diversifying Dubai's economy. The emirate has always had a diversified economy but several decades ago the government made a deliberate decision to focus on building the infrastructure that would benefit business.
"Other oil exporting countries used their oil wealth to build sovereign wealth funds and balanced to overseas and local investments, but Dubai has transferred its wealth into the infrastructure that can support business,” said Kazim.
"The backbone of Dubai's economy was its role as a trading hub and re-export centre. Therefore, at first the services and infrastructure focused on sectors like finance and banking, construction, support services, and shipping. Everything you see is because Dubai has excelled as a trading centre.
"In 2005, the government launched a new strategy for Dubai to take its competitive advantage in its traditional trading core business into a range of new sectors, including logistics, tourism, and also the important financial sector.
"That vision recognised that the financial sector is to be an important engine for the emirate's growth and an illustration of how successful that shift has been is the near doubling of the financial sector's share of total Dubai GDP from 6 to 7 per cent in 2005 to more than 11 per cent today.
"The DIFC was a major vehicle in making that expansion happen. There are the local banks, exchange houses and capital markets, and they have played their part, but the main vehicle in making the financial sector the engine of growth was the DIFC,” said Kazim celebrating the first decade of the DIFC.
Source: Gulf News

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