DEC proposes a 5-policies package to sustain the financial sector in Dubai

A recent report issued by the Dubai Economic Council (DEC) and “Deloitte” about the financial sector in Dubai said that the stated sector has witnessed several developments over the last years which turn to be a critical pillar for Dubai’s economic growth. However, the report suggests a package of five policies to sustain the growth of financial sector and spur its role in attracting FDIs. The report claims that these policies are not confined to the policies that directly related to the said sector but stems from enhanced investment climate and thus considers all elements that subsequently impact the performance of the sector. These policies include:

Policy 1: Government initiatives to support creation and growth of SMEs and start-ups

Policy 2: Improve trading capability

Policy 3: Develop the financial services industry

A well-functioning financial services industry is crucial for supporting other industries and thereby economic growth. Dubai has successfully established itself as the regional leading financial hub, however further improvements could be introduced.

The benchmarking analysis identified three key areas that could contribute to developing the financial services industry further, which include:

A competitive environment that encourages product innovation: 

  • Develop the derivatives market to add benefits of diversification and risk management opportunities for investors;
  • The introduction of mortgage-backed securities could allow banks to manage exposure to the real estate market;
  • Developing the appropriate infrastructure and regulatory framework to regulate Islamic financial products could significantly contribute to establishing Dubai as a regional Islamic financial center and further attract investment; and
  • Develop Dubai’s capability as a regional clearing and settlement center for Chinese Yuan transactions could enhance trading and improve market liquidity via increased Yuan denominated deposits in Dubai.

Balance between asset quality, growth and liquidity

Balancing asset quality, growth and liquidity through appropriate regulatory policies would be critical for the sustainable growth of the banking sector. The UAE Central bank has introduced a number of measures to ensure the robustness of the banking sector including:

  • New lending restrictions for Government Related Entities (GREs);
  • Issuance of guidelines on liquidity as of Basel III; and
  • Introduction of caps on mortgage amounts.

Develop the wealth management industry

  • Increasing liquidity of capital markets through more IPOs, introduction of Islamic finance products and issuance of government bonds, could increase investment opportunities for wealth managers;
  • Implementation of already drafted regulation to allow for admission of mutual and exchange traded funds into Dubai’s capital market;
  • Allow usage of omnibus account (accounts between two brokerage firms whereby a number of individual customer accounts of one firm are grouped into a single account) in Dubai’s capital market to attract investment by foreign wealth managers; and
  • Enhancement of regulation to introduce rigorous training and minimum qualifications for wealth managers and to ensure monitoring of wealth managers activity and prevention of unethical conduct and practices.

Policy 4: Enhance capital market activity

Policy 5: Formalize the regulatory framework

About the DEC

Since its inception in 2003 at the initiative of HH Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, Ruler of Dubai, the Dubai Economic Council (DEC) has and continues to play a major role in supporting the Government of Dubai’s economic policy decision-making.

The Dubai Economic Council, chaired by H.E. Juma Al Majed, comprises leading businessmen and officials representing the most vital sectors of the Emirate’s economy, and a Secretariat General led by H.E. Hani Al Hamli encompassing a world-class team of economists, strategists, researchers and legal advisors.

Author: Jason Williams

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