Accessing global markets through UAE
The author’s shorthand for Happiness Index, Infrastructure, Talent, Regulations, Access and Capital. The six pillars that make UAE a strong business destination. This week, the focus is on capital. HI-tRaC: Research has consistently demonstrated the positive links between the sophistication of a financial system and economic growth Richard teng, CEO, Financial Services Regulatory Authority of the ADGM
The uae is proud to have two International Financial Centres (IFCs), underscoring the strengths and forward looking vision of the nation. The Abu Dhabibased IFC, Abu Dhabi Global Market, or ADGM, has forged ahead on multiple strategic areas in the short time since its inception on October 21, 2015.
The ADGM has rightfully looked at areas that will leverage key strategic advantages that the region has over others. For one, the 2015 Grant Thornton Global Dynamism Index (GDI) ranks the Mena region well above North America, Europe and Latin America in terms of market growth opportunities. The GDI cited the UAE as the region’s leading economy with one of the best business growth environments in the world.
Another key advantage is population growth. Various estimates indicate that 50 per cent of the world’s population growth to 2050 will come from the Middle East and Africa region. Juxtapose this on PwC’s oft-quoted The World in 2050 report that indicates that Asia and Africa will account for 60 per cent of the world’s GDP. It becomes clearly obvious that a well-structured financial centre, sitting at the crossroads of these two gigantic continents will actually have a fair advantage in terms of time zones, cultural affinity, economic ties and distances.
Two recent entries into the Guinness Book of World Records demonstrates the power of being at this crossroad. On the 43rd National Day celebrations, 100,000 students representing 119 nationalities sang the Ishy Baladi — the UAE national anthem — in unison. This year, 600 UAE residents from 101 nationalities partook of a continental breakfast at the Gurudwara Guru Nanak Darbar.
Factors like these make the UAE a compelling investment destination. In 2015, the UAE attracted FDI inflows of $13 billion, a 25 per cent increase from 2014.
Looking around us as we travel between the emirates, we see the strong presence of key global drivers of the economy — excellent infrastructure, the presence of a well-developed financial sector, two of the world’s largest airlines, worldclass retail sophistication, tourism, logistics, shipping and strong consumer services. And of course, the available oil and gas resources.
The ADGM has considered these key strategic, economic and human capital advantages. It has built its role, as an IFC, to identify, and cater to the current and future needs of the markets in the region. A key need is financial intermediation and services such as corporate banking, treasury services, foreign exchange and capital markets.
A few areas that come to mind. It has created the first private Reit regime in the region, provided a comprehensive suite of funds and innovative investment vehicles, enabling global and local institutions to conduct activities in Abu Dhabi and the region that could only be done overseas in the past. Almost 350 financial and non-financial companies have been registered at the ADGM in less than two years.
Fintech
In a recent study published by McKinsey, it is highlighted that digital finance could add $3.7 trillion to the GDP of emerging economies, creating 95 million new jobs, and including 1.6 billion more people in the financial systems. ADGM recognised the impact and opportunities of FinTech in Abu Dhabi and the wider region.
Commenting on the role of an IFC, Richard Teng, CEO, Financial Services Regulatory Authority of the ADGM, said: “Research has consistently demonstrated the positive links between the sophistication of a financial system and economic growth. A well-developed financial system improves the efficiency of financing decisions, bringing about optimal allocation of resources from those that have them, to those that can make use of them to generate returns, and directing assets to higher growth areas in an economy that ultimately leads to a higher growing economy.”
Since March 2016, ADGM has developed both a regulatory as well as growth strategy to foster and nurture FinTech advancement and to establish an inclusive FinTech ecosystem in Abu Dhabi so as to serve the needs of the UAE’s economy and the wider Mena region.
ADGM launched the first FinTech regulatory framework to support activities and growth by licensing FinTech players, including those in the crowd-funding and P2P space. In addition, the first regulatory sandbox in the region, known as Regulatory Laboratory (or RegLab for short) was created in November 2016. As many as 11 applications were received in the first batch of Reglab that closed in January 2017, some coming from as far as the UK, US and Singapore and these are currently under review.
The ADGM is also a member of the Global Fintech Hub Federation to support the needs and aspirations of UAE’s FinTech players. Most recently, the ADGM signed an MoU with Singapore, a key FinTech hub, in creating the first FinTech bridge for the region, helping FinTech players from both these hubs to gain greater access to markets, capital and regulatory recognition. Abu Dhabi has been advancing developments in this area through the ADGM’s Fintech Hub. It has been ranked as the top FinTech Hub for the Mena region in the latest Global FinTech Hubs Review by Deloitte.
Keep a watch on this column as we track the strong momentum being built by the ADGM in the months and years to come.
The writer is a director at Bridge DFS (www.bridgeto.us). He’s a digital banking and digital financial services evangelist, practitioner, advisor and consultant. Views expressed are his own and do not reflect the newspaper’s policy. He can be reached at ves@vyashara.com.