Dubai International Financial Centre (DIFC) on track to double in size…

Dubai International Financial Centre (DIFC) is on track to double in size over the next decade with companies from China and South-east Asia set to fuel its next phase of growth, the governor of the financial free zone said yesterday.

The zone’s expansion illustrates the shift away from traditional financial centres such as London and New York due to the increasing wealth of emerging market economies, and the increasing importance of the Middle East as a hub.

DIFC has its own labour laws and court system separate from the wider UAE. Since opening a decade ago, it has risen to become a prominent financial hub in the Middle East, with many international banks, law and advisory firms and insurance companies using it as their regional base of operations.

“We’ve been growing very fast, in terms of the number of companies and people that are working in the DIFC, and if you extrapolate that, we’ll manage to double everything in the next 10 years,” DIFC governor Essa Kazim told reporters at a media event. “Chinese and South-east Asian companies are showing a strong interest in the region so we are working with them to capitalise on Dubai and the DIFC as a hub for their businesses to expand. That is where I feel the growth will happen.” The doubling in size would be in terms of floor space, the number of people working in the centre and the number of companies there, Kazim added.

In total, around 17,000 people worked in 1,147 companies based in the area at the end of August, according to figures provided by the centre.

The DIFC currently has around 15.2mn sq ft of office and other space, such as retail and hotels, and plans to add an extra 10.2mn sq ft have already been announced.

DIFC Investments, the investment arm of the free zone, raised $700mn from a 10-year sukuk earlier this month that will help to fund its real estate development as well as pay off existing debt.

There were no plans to sell further Islamic bonds at the present time, chief financial officer Rajesh Pareek told the event, saying the money that was raised from the sukuk was sufficient for its needs.

Qatar SWF displays new prudence in pivot to Asia

By Una Galani, Hong Kong

Qatar’s sovereign wealth fund is displaying new prudence in its pivot to Asia. The Qatar Investment Authority has announced it will join forces with China’s CITIC Group to invest $10bn in the country over five years. The tie-up reflects the challenges of putting large sums to work on the mainland compared with Qatar’s traditional hunting ground in Europe. Creating value will be the tricky part.

The alliance with China’s top state-owned company is the latest move by the QIA fund as it ramps up its exposure to Asia. In October, Qatar bought a near-20% in the Hong Kong operator of Sogo department stores for $616mn. Earlier this year it picked up a stake in Chinese e-commerce giant Alibaba and invested in new partner CITIC as the Chinese company completed a backdoor listing on the Hong Kong stock exchange. Past investments include stakes in Agricultural Bank of China (Agbank) and in privately-held CITIC Capital.

Qatar’s decision to join hands with a state-controlled partner reflects the limited opportunities big funds have to invest in China, especially those trying to write large cheques. Even buying Chinese stocks is not straightforward. After waiting two years, Qatar recently received a $4.9bn investment quota to access China’s domestic capital markets. That is still a small sum for a country that the International Monetary Fund estimates will generate a current account surplus of $57bn in 2014.

While Qatar continues to make acquisitions and direct investments in the West, it appears to be taking a softer approach in Asia. That reflects a wider recalibration of Qatar’s foreign policy to a more measured style.

The challenge will be to make its new partnership turn a profit. China’s state-owned entities typically lag their private sector peers when it comes to creating value. Just take Agbank. The lender’s Hong Kong-listed shares – of which Qatar owns 17% – have underperformed the benchmark Hang Seng index by 5% since Agbank listed in 2010. Though Qatar’s new approach may be more prudent, success is far from guaranteed. Source: Reuters / Gulf Times