Ask Dubai how an oil exporter should diversify: World Bank

Ask Dubai how an oil exporter should diversify: World Bank
Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, Deputy Ruler of Dubai; Essa Kazim, Governor of Dubai International Financial Centre; Arif Amiri, CEO, DIFC Authority; and other guests at Global Financial Forum in Dubai on Tuesday.

Issac John

Published: Tue 14 Nov 2017, 8:56 PM

Last updated: Tue 14 Nov 2017, 11:05 PM

Dubai is a good example of how an oil exporter should diversify, Hafez Ghanem, World Bank Vice President for Middle East North Africa, said and noted that low oil prices are providing an impetus for Gulf economies to diversify away from the oil industry.
Saudi Arabia, with its Vision 2030, is doing the same as what Dubai did years ago, Ghanem said at the inaugural Global Financial Forum (GFF).
The World Bank official stressed the need for the private sector to drive most of the economic growth, and private-public-partnership models will be very important in securing that. He added that the privatisation drive will help prop up the capital markets.
The GFF, organised by the Dubai International Financial Centre (DIFC), the leading international financial hub for the Middle East, Africa and South Asia (Measa), provided a platform for expert-led sessions on geo-economic trends shaping the region as well as technological developments that are geared to take the financial services industry to the next level.
Addressing the conference, Khaled Talhouni, Managing Partner of Wamda Capital, said that "the new oil is the consumer" and that is where there will be the greatest opportunity as the Gulf pivots away from old economy that is state-led and oil-centric to a new economy that is private-led and consumer-centric.
Karim El Solh, co-founder and chief executive officer of Gulf Capital, said the challenge is for capital from the GCC to invest in the region and to attract foreign capital to the region, as it transforms from being state-led to consumer and private sector driven.
Speakers at a session on the "Islamic Economy: Engine of South-South Investment," observed that Islamic finance has been growing, and although it only represents a very small amount of the total finance world, its appeal is spreading to an increasing number of non-Muslims because the principles underlying Islamic finance are in line with ethical and responsible financing. Mohamed Damak, Global Head of Islamic Finance, S&P Global Ratings, said one of the main hurdles that has stunted Islamic finance's growth is the lack of standardisation, mainly that in some jurisdictions one instrument's structure is deemed as Shariah compliant while in another it is not.   Abdulla Al Awar, Chief Executive Officer, Dubai Islamic Economy Development Centre, said that having a single standard may not be necessary, arguing instead for a harmonisation of standards.
Dr. Patrick Njoroge, Governor, Central Bank of Kenya, said that early adopters of mobile banking technology in Kenya has helped bring financial services to those who were underbanked; as of 2016 roughly three-quarters of the adult population have access to financial services. Dr. Njoroge added that micro lending and investment in government securities through various platforms, will encourage a culture of saving and investment, ultimately this is positive for the entire economy.
On a global scale, the governor also said that it would be important to have access to cheaper smart phones, so that the 2 billion people who have no access or limited access to financial technology can be serviced.
Soumya Kanti Ghosh, Chief Economic Advisor, State Bank of India, said that India is on the path to major structural reforms, including demonetisation which will help formalise the unorganised financial sector. Some of the major benefits of those reforms have been financial inclusion, demonetisation, and the empowerment of women.
Bill Winters, Chief Executive Officer, Standard Chartered, believes that the underlying economic story in the Gulf is positive. He added that Standard Chartered is investing heavily in the region due to plenty of competitive opportunities. Across the rest of the Measa region, Winters said that the growth dynamic is positively changing in Africa; Ghana and South Africa are the two biggest markets in that continent that have recovered remarkably over the past two years. As for China, he believes that the leadership is aware of the size of debt that it has accumulated over the last decade and are taking measures to reduce leverage. He also added that in the medium term, the capital markets will continue to open up to foreign investment. On India, Winters said that the Indian government has set itself on a path of positive growth and recovery.
As for FinTech, Winters said that the biggest spenders are banks; over the last several years upgrading and adopting to new technology makes up roughly 10 percent of banks' expense base. In the UAE, Standard Chartered processes over 98 percent of their transactions digitally.
Winters believes that commercial banks will be around for a long time, but they will adapt to new innovative products and services.
Kevin Sneader, Chairman, Asia, McKinsey, said that globalisation has entered a new era; the growth of emerging markets and their middle classes will drive consumption and a further shift of the centre of trade towards Middle East, Africa and Asia.
Sneader also said that initiatives such as China's One Belt, One Road will require more involvement from private sector to ensure long-term sustainable growth.
Alicia Garcia Herrero, Chief Economist, Asia Pacific, Natixis, said the nature of economic relation between China, the second largest economy in the world, and the Middle East has changed substantially in a very short period of time. One of the drivers is China's push for a gigantic investment in its One Belt, One Road initiative where the Middle East received as much as 24 percent of China's total investment in those Belt and Road countries, Herrero noted. -

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