For a decade, Dubai has prospered as the Middle East’s top financial centre, handling tens of billions of dollars of oil wealth.
Abu Dhabi’s planned financial zone will complement Dubai, which should benefit from a deepening of financial markets in the UAE, a senior Abu Dhabi executive has said.
“It brings complementarity to Dubai and to the region overall,” Mahmood Ebraheem al Mahmood, chief executive and chairman of ADS Holding, said of Abu Dhabi’s plan.
In an interview, he noted that other successful financial centres operated in close proximity, such as Tokyo and Osaka, London-Frankfurt-Zurich, and New York and Chicago.
Early this month the Abu Dhabi government said it would set up a full-service financial zone on an island near the city’s downtown. The zone would have its own administration and court system to attract banks and other firms from around the world.
The announcement prompted speculation that because of its oil wealth, Abu Dhabi could eventually become a major competitor to the Dubai International Financial Centre (DIFC), currently the Middle East’s top financial centre. The DIFC is little more than an hour’s drive from Abu Dhabi.
Al Mahmood, who is also on the board of Abu Dhabi state investment fund Mubadala, said ADS, a major, privately owned financial firm based in Abu Dhabi, would establish operations in the zone. He took part in preliminary discussions with Abu Dhabi authorities planning the new financial centre.
Business types that are likely to flourish in Abu Dhabi include market-making, money markets, asset management, commodities trading and prime brokerage services – activities that currently lack sophistication and depth in Abu Dhabi, said Al Mahmood.
“We are looking at opening a door of a new set of services that wasn’t here. If you open this door, there will only be more traffic flow,” he said.
Because of the presence of big Abu Dhabi investment firms such as its sovereign wealth fund, the Abu Dhabi Investment Authority with estimated assets of $400-600 billion, Abu Dhabi has traditionally been a centre for “buy side” financial activity.
Now the emirate is providing an environment for sell-side services to cater to the buy-side requirements of Abu Dhabi and the region, Al Mahmood said. “The buy side is really going to attract a lot of the sell side to come in,” he said.
The private sector will be expected to take the leadership in developing Abu Dhabi’s financial zone, instead of leaving it to the government to build the zone, he said. The zone is to be launched in the fourth quarter of this year.
“Private sector players will make a big mistake if they don’t take advantage of that and try to invest there.”
Meanwhile, ADS Securities, a unit of ADS Holding, plans to expand to Singapore and Hong Kong to cater to its clients there and take advantage of growth opportunities in emerging markets in the vicinity of those two hubs, Al Mahmood said.
ADS offers trading in foreign exchange, bullion and precious metals, derivates and fixed income, as well as investment banking; it trades about $6 billion daily, a figure which could more than quadruple in the next three years, Al Mahmood added.