At a client seminar last week I was asked if Abu Dhabi’s new financial district (ADGM) could compete with Dubai’s DIFC as the primary financial services hub for the Arabian Gulf. I believe it can.
Over the last decade, there is no question that Dubai has successfully attracted some of the biggest names in finance, BNY Mellon included. We opened our first UAE branch in the DIFC in 2008.
Much of the DIFC’s appeal is rooted in its robust and transparent legal and regulatory framework. Modelled on those of New York and London, it feels familiar and trusted by international investors and institutions. It has a respected global reputation for quality.
Extensive groundwork to create equally strong infrastructure in Abu Dhabi has been undertaken, creating an attractive environment for overseas asset managers and wealth managers wanting to do business with Abu Dhabi’s sovereign wealth funds, family offices and financial institutions. And there are already signs of this investment paying dividends.
Earlier this year, two large global asset managers announced they would base their Middle East and North Africa (MENA) hubs in Abu Dhabi rather than Dubai. In announcing their decision, the CEO of one of the asset managers said, “We went to Singapore in 1992 when everybody else was going to Hong Kong, and that’s how I see ADGM now.” Endorsements don’t get much better.
A potentially interesting area of growth, and maybe a future differentiator for Abu Dhabi, could come in the guise of ‘fintech.’ As yet, the Gulf does not have a particularly deep fintech ecosystem with no dominant center, akin to that of say London. Key to London’s success is its fintech ecosystem of incubators, entrepreneurs, financial institutions and associated professional services, backed by Government-led investment in technological infrastructure, progressive policy makers and access to talent.
This could be about to change under an initiative announced by Ahmed Al Sayegh, chairman of the ADGM, in March this year, whose aim is to establish Abu Dhabi as the fintech capital of the Gulf. If Abu Dhabi is keen to develop a slightly different financial character to its successful neighbor Dubai, complementing rather than competing, fintech could be the answer. Further diversifying the city’s economy and creating a new avenue for jobs.
I think the more important observation here though is not one of local rivalry. I personally think the broader Middle East and Africa (MEA) region as a whole would benefit from having a greater number of strong financial hubs here.
With a MEA regional economy of circa $7.8 trillion, there is more than sufficient space for several financial hubs to flourish. Not just here in UAE, but also Bahrain, Qatar, Saudi Arabia, and so on. If you compare the region to Asia-Pacific, the steady rise of Shanghai and Shenzhen for example, is not eroding Hong Kong, Singapore or Tokyo. The potential of Asia-Pacific is such that there is room for several centers of financial services excellence. The same can be said for the Gulf.
There is enough potential for Abu Dhabi’s financial district to survive and thrive. It will be interesting to see what steps the ADGM and other Gulf financial centers take in the coming years to compete with Dubai’s DIFC and other world financial capitals.