Dubai leading Gulf charge as global financial centre: study

August 12th, 2008 - 5:59 pm ICT by IANS  

Dubai, Aug 12 (IANS) This Middle East metropolis is boosting the emergence of the Gulf region as a global financial centre, according to a new study. The study, titled ‘The Gulf as a Global Financial Centre: Growing Opportunities and International Influence’, by Britain-based global research organisation Chatham House, said Dubai’s rapid growth as a financial centre has been a major reason for the growing prominence of the Gulf Cooperation Council (GCC) region as a global financial centre.

The GCC comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE).

The study pointed out to Dubai’s high ranking in the City of London’s Global Financial Centres Index (GFCI) for March 2008.

It ranked Dubai 24th, ahead of cities like Shanghai, Stockholm, Brussels, Mumbai and Madrid, according to a Dubai International Financial Centre (DIFC) statement.

The Chatham House report highlighted the fact that, outside Europe and North America, Dubai was ranked fifth in the world in the London survey.

DIFC governor Omar Bin Sulaiman said in the statement that the guidance of Vice-President and Prime Minister of the UAE and ruler of Dubai Sheikh Mohammed Bin Rashid Al Maktoum greatly helped in the growth of DIFC, the institution that has been primarily responsible for transforming Dubai into a global financial centre.

“With the new initiatives being undertaken by DIFC, Dubai is poised to develop further as an industry hub that rivals many of the world’s most prominent financial centres,” Sulaiman said.

According to the Chatham House study, the GCC could overtake both Australia and Tokyo in the rankings over the next decade.

The Gulf economy has approximately tripled in size in just five years and the combined GDP will be well above $1 trillion in 2008, while the states’ external financial wealth in the form of sovereign wealth funds (SWFs) and foreign exchange reserves alone is more than double this figure, it said.

“The report shows the great dynamism of the GCC economies and their capacity to be serious players in the world economy,” Paola Subacchi, research director for international economics at Chatham House, said.

Chatham House conducted the study together with DIFC, Qatar Financial Centre Authority (QFCA) and Bahrain’s Economic Development Board (EDB).

According to the study, economic growth and wealth creation will continue to provide the big punch behind the GCC brand.

It also suggested that GCC countries should aggressively correct the tendency for observers to view the region as a ‘developing economy’.

The GCC’s average gross domestic product (GDP) per capita is now almost at par with many developed economies such as Spain while its non-energy GDP per capita is well above emerging-market levels, it noted.

It, however, cautioned policy-makers in the region against ad hoc experimentation in policies that could endanger growth and the region’s brand.

“…Any changes in the exchange rate system should be carefully coordinated to enhance confidence and avoid potential confusion and volatility in regional cross rates, which might be both distracting and damaging to the image of GCC cohesion,” Chatham House said.

“The move to a common currency would avoid such pitfalls and offer a significant boost to financial-market activity,” it said.

The six Gulf nations have been working on a common currency for a sometime.

The move has assumed more importance in recent times because the currencies of all GCC nations, except Kuwait, are pegged to the falling US dollar.

A critically important development to meet both investor needs and the GCC’s financial market aspirations would be the creation of a larger, deeper debt market, whether based on Western-style bonds or the Islamic Sharia model, building on the region’s strength in Islamic finance, the study said.

“If successful, this move could open up a much larger role for the GCC in global debt markets, especially across the Middle East and Asia,” it said.

“This would be sufficient to provide a massive ‘hinterland’ within which the GCC’s financial markets could operate, allowing them to succeed in achieving the target of becoming a global financial centre,” it added.

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