Saudi reforms won’t come at a cost to Abu Dhabi, ADGM CEO says
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A woman Emirati paddles her canoe through Abu Dhabi’s skyscrapers on Wednesday, October 2, 2019,
Bloomberg. Getty Images| Bloomberg | Getty Images
ABU DHABI, United Arab Emirates — Saudi Arabia’s efforts to rival the United Arab Emirates as the region’s top business and financial hub won’t have a “dramatic negative impact” on Abu Dhabi, Mark Cutis, chief executive of Abu Dhabi Global Market (ADGM) told CNBC on Sunday in an exclusive interview.
Cutis explained that it was easy to relocate your family here.
These comments are his first since he was appointed ADGM CEO in June. They come amid growing economic rivalry between Saudi Arabian and United Arab Emirates as the two countries try to recover from the pandemic.
Saudi Arabia said its government would stop doing business with international companies that didn’t have regional headquarters in the kingdom by 2024 — a move seen widely as an attempt to draw multinationals to Riyadh from Dubai. The UAE responded by last month launching a plan for $150 billion of foreign investment in the next nine-years and reforming its visa programs to retain and attract foreign talent.
Also, the UAE is expected to attract significant amounts of foreign investment $33 billionPre-pandemic EY estimates show that Expo 2020 will result in a 1.5% rise in GDP and an increase of investments. While the Expo cost was $6.8B by the same advisor firm, it’s still too early to predict if the largest event in the Middle East would return investment.
“The non-financial return is very important — from a signaling standpoint — showing the world that the country is open again, we came through the pandemic, and we’re back in business,” Cutis said.
The UAE Central Bank predicts that the UAE economy will grow by 2.1% in 2018 and 4.2% in 2022.
Cutis stated that business has actually been quite robust. Cutis said, “I’d put us in the group of people who emerged from post-pandemic life on the right side, so overall thumbs up.”
Abu Dhabi Global Markets (an international financial center located on Al Maryah Island, Abu Dhabi’s capital) is home to 348 companies and has more than $75 Billion in assets. According to ADGM’s website.
Is consolidation possible?
Cutis offered an honest assessment of UAE’s capital markets and suggested that consolidation of three of its major exchanges might be possible in the near future.
Cutis said that “Eventually, the economics and efficiency imperatives outweigh any other considerations” when asked by CNBC about the possibility for the UAE’s three stock exchanges to merge at one point.
It has been rumored that the two exchanges will merge. The Abu Dhabi Exchange (ADX), which is effectively competing against the Dubai Financial Market and Nasdaq Dubai, was a contender for listing and trading activities.
After the December 11th, 2019, debut of Saudi Aramco’s initial public offer (IPO), investors monitor a screen that displays stock information at Tadawul, Riyadh (Saudi Arabia).
Reuters| Reuters
Tarek Faddlallah, Nomura Asset Management Middle East CEO, gave a critical assessment of the current arrangement.
Fadlallah said that fragmentation in regional markets, which operate under different rules and have their own systems, prevents them from scaling up and attracting the most institutional investors.
He said that only one regional exchange, Saudi Tadawul, has achieved significant progress. This has led to a rise in listings, foreign ownership increasing, the creation of secondary markets, and the introduction of many new products including derivatives, REITs, and a variety of other products.
“In stock exchanges, size matters.”
Saudi Arabia’s Tadawul, the most valuable exchange by market capitalization is number one.
Crypto “Cowboys”
ADGM has also set itself up as a hub for cryptocurrency. UAE has long been a pioneer in blockchain technology adoption. aimingTo transform half of all government transactions to the Blockchain Platform by 2021.
Cutis indicated that while he believes that cryptocurrency will become mainstream eventually, ADGM would take a more cautious approach to the area. I believe that ADGM’s role should not be to direct it but to create a framework, encourage innovation and at the sametime, to be prudent.
ADGM established the region’s first regulatory framework on crypto assets in 2018 to deal with risks associated crypto asset activity, including anti-money laundering efforts.
Cutis said, “You shouldn’t be too open that cowboys are encouraged to enter, which leads to people being scammed.” Cutis stated that there has been significant scamming in America based on statistics.
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