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A triple jump to success

DIFC executives believe its business expansion strategy is sufficiently diversified not to be completely reliant on one market for growth.

The Dubai International Financial Centre is well on the way to meeting the ambitious goals it set itself two years ago, when it declared it would aim to triple in size – in terms of physical capacity, financial firepower and member firms – by 2024.

Essa Kazim, the governor of the DIFC and one of the architects of Dubai’s strategy in the financial industry, was able to report a record 2015 year for the centre, with a 16% gain in member firms and a 14% jump in number of employees to more than 21,000. That performance means it is already more than 40% nearer reaching its target in just two years.

Mr Kazim said: “We are the gateway to the world’s fastest- growing markets across the Middle East, South Asia and Africa. This is reflected in our latest results and initiatives, which represent a major milestone in delivering on the centre’s forward-looking 2024 strategy.”

To reach its target, DIFC calculates it has to keep growing at a minimum of 10% per year – which looks eminently achievable set against current growth rates. One of the main elements of the “Triple” strategy has been to tap the growing financial sectors in Asia to attract them to DIFC, and that has been a significant success. Asian and Middle East firms now make up a third of DIFC’s membership – a significant trend compared with the pronounced Western-leaning emphasis on DIFC in its first decade of business.

Banks and other financial institutions from China, India and elsewhere in Asia have been persuaded of the DIFC’s positioning as a bridge between Asia, the Middle East and Africa, part of the new “south-south” pattern of global trade that has been augmented by China’s “One belt, one road” economic strategy.

Most of the top Chinese banks are registered in DIFC, and many have the top Category 1 licence, which means they can provide the full range of financial services including deposit taking and credit provision. Visits to China by DIFC executives earlier this year further cemented relationships between the DIFC and Asia’s biggest economic and financial centre, but attention is also being paid to India, which has the highest economic growth rates of all the big global economies.

In physical terms, the development of DIFC’s location in the heart of Dubai’s business district continues apace. Two big projects remain as the final pieces of the jigsaw: the $272 million plan to build Gate Avenue, a retail and leisure development running along the “spine” of the financial hub, connecting the iconic Gate building virtually to the Emaar Square district, and the development of Gate Village 11, which will add another commercial and retail hub to the Village, an area rapidly turning into the social and cultural heart of DIFC.

Once those two are complete – sometime in 2018 – the DIFC will have the capacity to push towards its 2024 goal of 50,000 employees on the site. Since its launch in 2004, the DIFC has had to meet occasional challenges, none more than the financial crisis of 2009, which put a temporary check on its growth. What might the challenges be between now and 2024?

In a highly leveraged world, the threat of another global financial crisis is always there, and the eastward tilt towards Asia carries with it an element of risk in that some economists believe China will face problems in its transition from being an export-led economy to a domestic consumer-oriented society.

But DIFC executives believe its business expansion strategy is sufficiently diversified not to be completely reliant on one market for growth. Might the threat to growth come instead from increased competition from other financial centres in the region, perhaps from a revamped Qatar Financial Centre or even the recent new comer Abu Dhabi Global Market?

At least with regard to ADGM, Mr Kazim is sanguine about the prospects for competitive rivalry. “DIFC and ADGM are complementary for each other, and will help create a cluster of financial businesses in the UAE,” he said.