The newly appointed managing director of the Dubai International Financial Centre Authority (DIFCA), Abdulla Al Awar, has described the centre as a one-stop-shop for financial services. It offers a regulatory base for different categories of financial institutions as well as business and financial infrastructure and physical home for both the institutions and their clients.
However, Al Awar told Emirates Business there are two main challenges to the DIFC's progress; the first is to meet the Dubai strategic plan for 2015 when financial services are expected to represent 15 per cent of Dubai's GDP, and the second is to make sure that the DIFC master plan is progressing rapidly to keep up with the increasing demand for financial services in the region.
How will you ensure the DIFC is a one-stop-shop for financial services?
The DIFC is located in a very strategic position between the international financial centres of Europe and Southeast Asia. We are in the middle of a region of more than two billion people and a combined economy worth $1.8 trillion (Dh6.6trn) in terms of GDP, growing at an annual rate in excess of five per cent. This great region, stretching from the western tip of North Africa to the eastern part of South Asia has not had a world-class financial centre. So the DIFC is located at the crossroads of the major international capital markets of New York and London in the West and Hong Kong in the East and we seek to create a regional capital market, offering investors and issuers of capital world-class regulations and standards with integrity, transparency and efficiency.
Our main target is to make sure financial institutions registered in the centre have access to an attractive investment environment. So our mission is to ensure that clients registered in the DIFC have full accessibility to the latest advancements in services and operations and to provide all regulatory systems and physical installations that'll enable them operate in a world-class environment.
What are your expansion plans for financial services in the DIFC?
The next seven to eight years, until 2015, will witness a lot of developments in financial services, not only in the UAE, but also in the Middle East. The Dubai 2015 strategy poses a lot of challenges for the development of financial services.
The contribution of financial services to Dubai's GDP is planned to reach 15 per cent and this is a main challenge as it represents at the moment between seven and 10 per cent. However, we feel the 15 per cent target can be achieved by that time. We need to widen different categories of financial services in the centre, especially wealth management and Islamic finance services. We are also continuing to build the critical mass of financial institutions in the DIFC.
What are your plans for the wealth management sector?
Recently we noticed increasing number of family businesses are opening up offices in the DIFC and this expands our base for wealth management. There are also large numbers of fund management services and trust services providers coming to the DIFC.
We entered in to a joint venture to establish a Shariah-compliant trust provider called Waqf to keep up with the growing demand for trust services. With the robust economic development in the region, there is an urgent requirement to channel financial assets of individuals and institutions in the region. The scope for repatriating more than $1.4trn invested, managed and administered outside the region represents a huge opportunity for asset management firms.
What is the plan for developing Islamic finance?
Islamic finance is increasing rapidly and is becoming the centre of financial services in the region. There has been a continuous surge in both demand and services, from the investment side and capital markets.
There has been a dramatic growth in Shariah-compliant financial products, reflecting a number of trends including the economic development in the Arab world, giving rise to infrastructure and other projects, which require Islamic financing and the emergence of the international market in sukuk. Also the expansion of the takaful system as an alternative form of insurance creates major opportunities. In general, more than 200 Islamic financial institutions offer a comprehensive range of products, many of which match or exceed their conventional alternatives in terms of innovation, efficiency and return.
The DIFC offers a domicile for the registration of Islamic collective investment schemes, reflecting an increasing investor preference for Shariah-compliant investment products originated and managed in the region. Our main target in the DIFC is to build a strong platform for Shariah-compliant services in the region.
The number of insurers and reinsurers is growing in the DIFC. How do you think this sector will grow in the future?
The sector is growing very fast as there is increasing demand from the market to expand their services to the region. We feel the next few years will show increasing demand for these services, so this is an important area for the DIFC. In general, insurance penetration in the region has been well below levels seen in other parts of the world.
However, with economic development, industrialisation, rise in global trade, international mergers and acquisitions, improved regulation and increased focus on corporate governance, the region is witnessing a change of attitudes towards corporate risk management, and a growing awareness of the need for innovative ways to finance the future cost of corporate risk.
The DIFC has set out to create a global hub to foster the development of a regional insurance industry by attracting global insurers, reinsurers, brokers, insurance managers, actuaries, as well as educational and training providers. The DIFC also seeks to raise the profile of the regional insurance industry by creating awareness for enterprise risk management (ERM), alternative risk transfer (ART) and promoting captives.
With these expected expansions, what is your outlook for DIFC growth?
There are more than 550 companies and offices currently located in the DIFC and the growth in 2007 was very impressive as we saw around a 35 per cent increase in the number of financial institutions opening up in the DIFC. We expect a 15 per cent increase in the number of firms this year and this percentage will continue during the next few years.
However, the increase in the number of companies is one part in addition to the major progress we noticed recently is the increasing operations of each company. All firms working in different areas including Islamic finance, insurance, fund management, and banking, are expanding their operations and this is very impressive because this shows the perception of financial services in the region is very positive compared to the current decline in global financial markets.
When we started in 2004, we estimated that we would have only seven or eight financial institutions regulated by the DIFC, but actually we exceeded that target by around 25 institutions.
How are you planning to accommodate this increasing number of financial institutions and employees?
We have completed around 50 per cent of the DIFC masterplan and when the total plan is being implemented, the centre will house between 55,000 and 60,000 employees. This reflects the vast financial services planned to operate in the centre.
What is really interesting about the DIFC masterplan is that it offers a comprehensive lifestyle service, not only financial services. The lifestyle strategy is very important to offer people a comprehensive set of services as more than 40 per cent of the masterplan is dedicated for residential, hotel, commercial, retail and entertainment facilities.
There will be a set of residential, commercial and entertainment components that will serve the DIFC. There will be a huge parking area that can accommodate 37,000 cars.
Despite the tightness of space in the DIFC, we planned this underground parking area to serve employees and visitors. We will also depend on Dubai Metro and there will be easy access to the main roads in Dubai and to the city's airports. With these plans, people will be less dependant on their cars to commute to the centre. Around 50 per cent of the plan is still under construction and within the next two years, there will be major developments in the DIFC.
PROFILE: Abdulla Al Awar Managing Director, DIFC Authority
Prior to joining the DIFC, Al Awar worked as an account manager in Dubai Internet City, after which he was promoted to regional sales manager for Dubai Internet City and Knowledge Village.
Al Awar then joined Dubai International Financial Centre Authority (DIFCA) as business development manager in 2004. He was promoted to the post of executive director of the Ancillary Service Providers and Non-Regulated Organisations Department in 2005 before assuming his current position.
He holds a Bachelor's of Science degree in business administration from the University of Colorado at Boulder, United States. He has also been a member of the Sheikh Mohammed Bin Rashid Programme for Leadership Development since 2005.