HE Ahmed Humaid Al Tayer, Governor, DIFCPress Release 24 May 2010 12:27 pm
Speech notes for Welcome Address at the inaugural MENASA Forum
Your Highness Sheikh Maktoum Bin Mohammed Bin Rashid Al Maktoum, Deputy Ruler of Dubai and President of the Dubai International Financial Centre, Your Excellencies, Distinguished Guests, Ladies and Gentlemen,
On behalf of the Dubai International Financial Centre, I am delighted to welcome all of you to the first MENASA Forum.
It gives me great pleasure to see so many business and thought leaders from across MENASA here today.
I would like to welcome the delegates who have come from various parts of MENASA as well as the UAE. I hope that those visiting from abroad will have the opportunity to stay longer after the Forum to explore the UAE and enjoy the hospitality of its people.
The countries that comprise the MENASA region have a long history of trade, investment, political and cultural ties. To this day, they share significant cultural, political, and economic relations, which have led to strong trade links, labour mobility and investment opportunities.
Over the last decade, the MENASA region has played an increasing role in the global economy. The region is right at the centre of a shift in the balance of global economic power towards the east, a shift that has gained speed following the global economic crisis.
Juergen Fitschen said: “The successful drive for the creation of a stronger regional market should not give way to a return to protectionist tendencies at times of crisis. The successful way in which the UAE has dealt with the crisis is very encouraging in this respect, as the country continues to focus on broadening its role as a regional hub.”
The MENASA region’s real economic growth rates are currently only second to that of China, while the region’s GDP is on par with the UK and China. According to Goldman Sachs, the region is expected to overtake the US as the world’s second largest economy by 2050
The robust economic fundamentals of the countries in the region have enabled them to be resilient to the impact of the global financial crisis.
In addition, the prompt roll-out of fiscal policy measures by governments across the region has played an important role in stabilising and stimulating their economies.
In the UAE, the government introduced fiscal stimulus measures amounting to almost 7 per cent of the GDP - among the biggest in emerging markets. The timely financial support provided by the UAE Central Bank was instrumental in preventing problems in the banking system.
The UAE Central Bank deployed bank liquidity support facilities and lowered interest rates while the Federal Government provided 50 billion dirhams in term funding to banks. The government guaranteed all deposits including inter-bank. It also set up a 50 billion dirhams emergency liquidity facility and deposited 70 billion dirhams in local banks. In general, the UAE adopted a counter-cyclical fiscal policy, which proved vital in avoiding a disruption in economic activity.
In addition, the UAE is introducing a wide-ranging programme to address regulatory and legal short-comings in our financial system. Although we expect a return to high economic growth, it is critical that we urgently address the deeper risks and challenges that the economic crisis has revealed.
In the coming years, fiscal policy measures combined with systemic reform will be vital to ensure that the recovery becomes firmly entrenched in MENASA and that our growth remains strong, sustainable, and balanced.
Ladies and gentlemen, To come back to the growth prospects of the region, despite the challenges we face today, the vast potential for MENASA’s development is undeniable.
The region has a population profile that is creating huge new demand leading to production growth and greater diversification. The region’s large and mostly young population of 1.6 billion people is expected to grow at a rate of 1.4 per cent over the next decade. Per capita income is increasing, leading to the development of larger consumer markets.
The region’s vast oil and gas-based liquidity promotes vast wealth creation, economic growth, and infrastructure development.
It is estimated that at an oil price of 50 dollars, the present value of the GCC’s oil and gas exports is $18.3 trillion dollars - larger than the 2008 GDP of the US. If oil prices were to average 100 dollars per barrel and gas 15 dollars, the value of GCC energy exports will be 37.7 trillion dollars. This is equal to the world's total stock market value at the end of 2008!
On another front, governments across the region are focusing on reform, liberalisation and diversification programmes. Regional governments are pushing non-oil sector diversification and looking to encourage greater private sector participation. The privatisation pipeline in the region is expected to be more than 900 billion dollars in the next ten years.
In addition to this, the development needs of the MENASA region are massive. Historic under-development in key sectors has created huge demand and high growth potential.
Over the course of the Forum, we will explore the prospects of the MENASA region in five critical areas - Capital Markets; Infrastructure, Energy & Environment, Islamic Finance and the Developmental Model of the Region. In many ways, these five areas will define the region’s economic surge over the next decade.
The Forum will take a close look at the opportunities that the changing global financial structure is bringing. The world is going through massive economic transformation. MENASA countries are in many ways driving and leading the major shift in the balance of global economic power. India and the GCC region are now net suppliers of capital to the world economy thanks to their large current account surpluses.
In this context, the Forum aims to bring to the fore the potential for enhanced capital and investment flows between MENASA countries. There are vast new opportunities for the investing the wealth being generated in the MENASA region within the region itself. Enhancing investment flows in the region can transform MENASA in a dramatic way.
The Dubai International Financial Centre was created to serve as a gateway for financial institutions and governments in MENASA countries to find capital from within the region.
DIFC has developed into a global financial centre that is catalysing financial, capital and investment activity in the MENASA region and has created a bridge between the capital markets of the East and West. As a financial centre, DIFC is unique in that it has all the key elements of a financial industry ecosystem. Each of these elements has been modeled on world-class systems and meets the highest global standards.
DIFC has invested significantly in building an independent regulatory framework and judicial system, a financial exchange and a physical infrastructure. In addition, we have created a whole array of institutions and services to support financial and capital market growth.
At the heart of the DIFC model is an independent risk-based regulator, the Dubai Financial Services Authority (DFSA), whose regulatory framework is closely modelled on legislation used in London and New York. The DFSA has played a major role in providing financial companies in DIFC the confidence that they have a sound, stable, secure and growth-oriented platform for their business.
Furthermore, the establishment of NASDAQ Dubai within DIFC has provided a powerful catalyst for capital market growth in the region. Nasdaq Dubai provides access to a deep pool of liquidity for the primary listing and secondary trading of sophisticated financial instruments. NASDAQ Dubai has also established high global standards in the regulation of issuers and post-listing disclosures.
We have also created a globally-benchmarked insolvency and creditor rights regime, another critical element for promoting growth and instilling market confidence.
DIFC is also actively working to support the development of various financial sectors. In addition to the major mainstream sectors, we are particularly focusing on promoting the growth of Islamic Finance, which is attracting global attention as an alternative financial system. One of MENASA’s fastest growing financial sectors, Islamic finance is providing many quality alternatives to the financial products and services available in international markets today.
Since its inception in 2004, DIFC has today developed into one of the largest clusters of financial services companies. Over 900 companies are based in DIFC including 20 of the world’s top 25 banks and six of the world’s 10 largest asset managers.
DIFC’s growth has made it a significant force for economic growth in Dubai and the UAE. In 2008, its nominal Gross Domestic Product (GDP) grew 47.1 percent to reach 2.8 billion dollars. This accounts for 3.4 per cent of Dubai’s GDP of 82 billion dollars. Apart from its direct contribution to the GDP, the DIFC sub-economy has a significant 'multiplier effect' on the economy of both the UAE and the wider region.
During the course of the Forum, we hope to share ideas with you on how DIFC can contribute to facilitating greater capital flows and integration in trade, investment and finance between MENASA countries.
Ladies and Gentlemen, I am confident that 2010 will be a year of greater transformation for MENASA. Over the next decade, the MENASA region will play a more central role in shaping the future of the global economy, with a more assertive role in the international stage. Supported by greater mutual cooperation among MENASA countries, I believe we can meet and overcome any challenges that stand in the way of our progress.
We in Dubai and the UAE are determined to work with the rest of the region to make this happen — for MENASA, and for the world.
Thank You Very Much