Saudi reforms will come at no cost to Abu Dhabi, says ADGM CEO

An Emirati woman paddles in a canoe along the skyscrapers of Abu Dhabi, United Arab Emirates, Wednesday, October 2, 2019.

Christophe Brochet | Bloomberg | Getty Images

ABU DHABI, United Arab Emirates – Saudi Arabia’s efforts to compete with the United Arab Emirates as the region’s main commercial and financial center will not have a “dramatic negative impact” on Abu Dhabi, Mark Cutis, director General of Abu Dhabi Global Market (ADGM) told CNBC on Sunday in an exclusive interview.

“Here it’s easy to move your family, it’s easy to live here, and you have the rule of law, the capital reserves and the visa situation – it’s a package,” Cutis said.

His comments, the first since he became CEO of ADGM in June this year, come amid growing economic rivalry between Saudi Arabia and the United Arab Emirates, as the two countries recover from the crisis. pandemic by seeking to stimulate the growth of the non-oil sector.

Saudi Arabia has said its government will stop doing business with international companies that do not have a regional headquarters in the kingdom by 2024 – a move widely seen as an attempt to attract multinationals to Riyadh from Dubai. Last month, the UAE retaliated by launching a plan to attract $ 150 billion in foreign investment over the next nine years and reformed its visa programs to attract and retain foreign talent.

The UAE is also expected to bring $ 33 billion in investment to Expo 2020 Dubai, as well as a 1.5% increase in GDP, according to EY’s pre-pandemic estimates. The same consulting firm cost the Expo $ 6.8 billion, but it’s too early to say if the Middle East’s biggest event will deliver a return on investment.

“The non-financial return is very important – from a signaling point of view – showing the world that the country is open again, we’ve been through the pandemic and we’re back to business,” Cutis said.

The UAE’s economy is expected to grow 2.1 percent this year and 4.2 percent in 2022, according to the UAE Central Bank.

“The business has been surprisingly strong,” Cutis added. “I would put us in the category of people who emerged from the post-pandemic world on the bright side, so overall, well done,” he said.

Abu Dhabi Global Markets, an international financial center based on the island of Al Maryah in the capital Abu Dhabi, is home to 3,448 companies registered in the first quarter of 2021 and manages more than $ 75 billion in assets, according to the website of ‘ADGM.

Consolidation to come?

Cutis also offered a candid assessment of the UAE’s capital markets, saying consolidation of the country’s three major stock exchanges could be considered in the future.

“At the end of the day, economics and efficiency imperatives trump other considerations,” Cutis told CNBC of the possibility of merging the three exchanges in the UAE at some point.

Speculation on a merger between stock exchanges dates back a decade, with the Abu Dhabi Stock Exchange (ADX) competing effectively with the neighboring Dubai Financial Market (DFM) and Nasdaq Dubai for listings and trading activities. negotiation.

Investors watch a screen displaying stock information on the Saudi Stock Exchange (Tadawul) after Saudi Aramco’s initial public offering (IPO) begins on the Riyadh Stock Market in Riyadh, Saudi Arabia on December 11, 2019.

Ahmed Yosri | Reuters

Tarek Fadlallah, CEO of Nomura Asset Management Middle East, criticized the current arrangement.

“Fragmented regional exchanges, each operating their own systems and according to their own rules, hamper their ability to grow and attract larger institutional investors,” Fadlallah told CNBC.

“Among the regional exchanges, only Saudi Tadawul has made major progress which has seen the number of listings skyrocket, a steady increase in foreign ownership, the launch of a secondary market and the introduction of a range of new products, including REITs and derivatives, ”he added.

“On the stock market, size matters.”

Saudi Arabia’s Tadawul is the region’s largest stock exchange by market capitalization.

Crypto ‘Cowboys’

ADGM is also positioning itself as a cryptocurrency hub. The UAE government was one of the early adopters of blockchain technology, aiming to turn 50% of government transactions into a blockchain platform by 2021.

“I think cryptocurrencies will be more mainstream eventually,” Cutis said, while also suggesting that ADGM will take a cautious approach in the space. “I think the role ADGM should play is not to lead it, but to define a framework and encourage innovation, but at the same time to be careful.

ADGM launched the region’s first crypto asset regulatory framework in 2018, seeking to address risks associated with crypto asset activities, such as anti-money laundering initiatives.

“You don’t want to be so open, that you encourage cowboys to come in, who end up scamming people. And if you look at the statistics in the United States, there have been a fair amount of scams,” he said. said Cutis.

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