Fierce competition to attract foreign firms

Competition is heating up among the GCC countries to attract foreign institution to their soils to become the financial hub of the region.

As Western economies struggle under credit crunch, high oil prices, sustained liquidity inflow and a real estate boom in the region concurrently creates huge opportunities for the international financial institutions.

Experts that Emirates Business spoke to said that this competition is not only healthy, but also vital in the long run as each country in the Gulf region is going for diversification.

Hani Kablawi, Managing Director, Head of Middle East and Africa at The Bank of New York Mellon, believes "the competition is both healthy and specialised".

Agrees Kashif Zia, Senior Vice-President, Investment Banking at The National Investor. "Yes, there are hubs in the region. We have Abu Dhabi, Dubai, Riyadh, Doha and Bahrain. Financial services companies are interested in building a presence in more than just one jurisdiction. It is imperative to deploy resources on the ground in order to provide effective coverage," he said.

Even though competition is increasing between these financial hubs, each of these economies behaves differently, say experts. "The GCC is an economic bloc but each country is in a different economic situation. For example, Bahrain does not have [much] oil and it's the same for Oman. Qatar, Saudi and the UAE have different strengths with different characteristics, which financial institutions will look at if they decide to come here," explained Imran Ahmed, Managing Director, Asset Management, Mashreq.

Dubai took the lead in attracting foreign institutions but soon, other member states of the GCC also opened up to the idea in order to diversify away from hydrocarbons by building a strong financial sector.

"Dubai was the first to develop a world-class facility and regulatory framework in the DIFC (Dubai International Financial Centre) and invite foreign banks to come. The combination of Dubai's familiar western lifestyle, coupled with its first-mover advantage just as oil prices were beginning to rise in 2003 and 2004, led most US and European banks to move their front offices for Mena from London to Dubai to be closer to their clients, who were now demanding an increased presence in the region and increased sophistication by those calling on them," Kablawi said.

"Qatar followed but has more of a local focus, with banks wanting to do business with the Qatari government and businesses having a physical presence in the Qatar Financial Centre. Qatar's growing resources may very well prove this to be a winning strategy."

"Bahrain is reclaiming past glories by pitching itself as a well established funds domicile, Islamic banking hub, and a financial centre boasting some of the best trained and educated local talent pools," he added.

"The wild card is Saudi, which has some of the world's largest companies by market value but remains inaccessible to direct investment by foreign institutional investors. Should Saudi open up, the landscape in the region will change considerably," he added.

Kablawi says there will be a big change if Saudi Arabia opens to foreign investors.