From the Financial Times (Feb 4, 2014) by Simeon Kerr
Dubai’s financial centre says it will slash telecommunications rates as it seeks to sustain growth amid increasing competition from neighbours such as Abu Dhabi, Qatar and Saudi Arabia. The DIFC is set this year to roll out a technology transit zone within its data centre, offering prices that can compete with London and other western cities to ease costs for trading desks and asset managers.
Telecommunications costs in the United Arab Emirates, dominated by two state owned companies, are a major cost disadvantage of doing business in the DIFC and the rest of the country. Located in liberal Dubai, the DIFC’s popular cluster, featuring familiar regulations and common law courts, has become the financial gateway to the region. But the indebted commercial capital of the region faces growing competition from its energy-rich neighbours.
The capital of the United Arab Emirates, oil-rich Abu Dhabi, is pushing ahead with Global Marketplace Abu Dhabi, a financial centre modelled on the DIFC. Gas-rich Qatar is seeking to boost asset management and insurance at its financial centre in Doha. And Saudi Arabia, the regional economic superpower, is to open King Abdullah Financial District – dozens of towers near Riyadh’s airport – later this year.
Growth in Dubai’s financial sector, which contributes around 12 per cent to Dubai’s overall GDP, reflects the broader revival of the emirate’s economy, whose bedrock remains trade and tourism.
In 2013, the DIFC had its strongest year since the financial crisis, with the number of registered firms rising 14 per cent to 1,039. The number of people working within the district grew 11 per cent to around 15,600. Regulated financial companies operating from the centre have risen by 11 per cent to 327 in 2013.
The DIFC rented out the largest amount of real estate since the global financial crisis last year, with occupancy at almost 100 per cent in the buildings it operates. But buildings operated by third parties will over the next year provide enough space to house another 15,000 staff.
Filling this extra space is the centre’s main challenge, especially as it faces increasing competition from neighbouring states keen to develop their own financial sectors. The centre has already frozen rents that had become less competitive compared to other parts of Dubai.
Dubai hopes to attract more Asian companies. Reforms this year allowing Chinese banks to open branches in the centre has allowed four major Chinese institutions operating in the DIFC to use their home balance sheet to lend in the region.