By any standard, the Dubai International Financial Centre has had an impressive first decade of business. Chirag Shah, head of strategy and business development for the DIFC for most of those 10 years, has been at the centre of it.
“It has been an incredible journey. Back then Dubai had no name as a financial centre. Now it has the infrastructure, credibility and governance to be one of the top financial hubs of the world. Some people might say that’s ambitious, but look at how far we have come. All we have to do is to continue on the growth trajectory we have already got,” he says.
It certainly is ambitious. By 2024, DIFC aims to roughly triple in size, looking to lure 1,000 of the world’s top financial firms to Dubai, with a members’ combined balance sheet of $400 billion and a total workforce of 50,000.
Achievable? Mr Shah thinks so. The biggest potential for growth over the next decade, he says, will come from “bridging the south-south corridor” that links Dubai with Asia and Africa, on the back of the continuing tilt away from the traditional centres of financial business in Europe and America.
Another large chunk of growth will be fuelled by existing clients “deepening their core strengths”, especially in banking and wealth management, while the rest will come from specialisms Dubai is seeking to develop and exploit, such as Islamic finance, and family and SME business.
With DIFC’s high-standard property offering providing the hard infrastructure, and the Dubai Financial Services Authority the appropriate regulatory framework, the course for the next decade looks set fair.
And, says Mr Shah, the beauty of it is that DIFC just has to keep on growing at the current pace to easily hit those targets. “To get where we hope to be in 10 years’ time requires around 11 or 12 per cent growth each year. For the past couple of years we have been growing at between 14 and 18 per cent, depending on which measure you use. So we just have to carry on like we are to get there,” he says.
What could possibly go wrong? There are several variables in the DIFC growth model that could throw the calculations out.
Shortly after the new DIFC strategy was unveiled by the governor Essa Kazim a couple of weeks ago, the World Bank issued a report forecasting that growth in the emerging markets would slow down in the medium term, with the western economies earmarked for a recovery. How does Mr Shah feel about that?
“Even if there is a slowdown in emerging markets as the World Bank says, the shift in power towards the eastern economies is not going to stop, or be reversed. There is a demographic dividend that will not change, as India and China become consumer markets that will drive their economic growth,” he says.
“And it’s not like we have given up on the West. Nearly half our members are from America and Europe, and they can see the attractions of Dubai as a bridge to the East too,” he adds.
Nonetheless, banks from outside the West have lately been far more willing to plunge themselves wholeheartedly into DIFC, opting for “category 1” status that means they book financial profits in the centre, rather than their home countries. Nine out of the top 10 Chinese banks are in DIFC, and eight have category 1 licences.
Then there is the threat of another global financial crisis, like the one in 2009 that was the most serious threat to DIFC growth in the first decade. “If the global financial centre falls off a cliff, we are a much more diversified organisation than we were back then. Is it expected that the Middle East, South Asia and Africa will all flip into negative growth? Unlikely,” says Mr Shah.
With regard to regional security threats, he takes comfort from the past. “There have been security issues in the regions for decades – the Iran/Iraq war, Gulf wars, Lebanon, Arab Spring – and Dubai has weathered all that. Dubai does well when there is regional peace, and better when there is not,” he says. He sees the possible end of financial sanctions against Iran as a big potential bonus for DIFC
The other variable is the lure of competing centres within the region. Newly opened Saudi Arabia is building financial centres, Doha has big ambitions, and Abu Dhabi is close to opening its own financial centre, the Abu Dhabi Global Market.
All these are competing for a finite pool of resources, especially in the sector of wealth management and private banking, traditionally one of the region’s attractions. “This has always been one of our great strengths. Julius Baer [a Swiss private bank] was our very first licences member. There is $7 trillion worth of assets in the business in the Middle East, and we have hardly scratched the surface,” he says.
In fact, Dubai is raising the stakes in the bid to attract wealth management and private banking business, with a new round of reform planned to “enhance the regulatory structure and the funds regime”.
Mr Shah is also confident that there will be enough business to go around between Dubai and Abu Dhabi. “Lots of regions have multiple financial centres, look at the USA and Europe. The UAE has shown it can run two successful airlines, why not financial centres too?” He insists the prospect of increased competition with ADGM was not a factor in his strategic planning for the next decade. “It did not figure in our planning any more than any other regional centre,” he says.
Follow The National’s Business section on Twitter