Overall, 2011 was a very interesting year. It started out very well but then came to a halt very quickly when the Arab Spring affected the whole MENA region. The combination of the Arab Spring and the international economic situation made it extremely difficult for players in the UAE to access international debt capital markets. The challenging times in the market resulted in six or so months of inactivity in the region. It wasn’t until the Abu Dhabi-based company IPIC decided to pursue some significant debt capital market transactions that other entities in the region decided to follow suit. So far, 2012 has been an interesting year. The variety of financial instruments that have come onto the market this year has demonstrated that there is a large appetite for debt and sukuk instruments in the region. It is now clear that the Emirate plays a crucial role in debt capital markets simply because the vast majority of players that operate in the sector—not the debt issuers, but the banks, the lawyers, advisors, and traders—are all based in Dubai.
As a first step in pursuing our regional expansion plans, we chose the UAE on the basis of its status as a world-class regional hub with a robust regulatory structure offering an efficient and straightforward business environment. Being a dedicated MENA investment bank, on-the-ground presence in key markets was a necessity, not an option, and we needed a regional platform with international standards that would enable us to attract global and regional talents and for that the UAE was our premier choice. Of course, having a robust financial and logistical infrastructure and a favorable time zone, with among the most convenient and modern travel infrastructure in the region, allowed the UAE to be the trade and merchants hub for the region, and we were eager to be part of that.
Investors will pay a premium for companies that have good disclosure in this region. And we know there is a problem when people globally do not trust the information. Over the last three to four years we have started to see a positive change in this region. However, many companies do not fully understand the benefits of transparency, and so there is a long way to go. Still, if we look at how far we have come in terms of transparency in the last three to four years, there really has been a shift. Another problem was that, back in 2008 with the financial crisis, most of the companies coming into the region were hedge funds. So as soon as the crisis hit, this fast money left, driving the market down further. The repercussion was that for the next two to three years companies perceived foreign investors as more trouble than they were worth—not fully comprehending that by taking control of the investor relations function they could attract longer-term value and growth-driven investors.
We officially set up our offices here in February 2008 after a history of running the business out of London. Our business model is to look after institutional money, sovereign wealth funds, endowments, and foundations. The significance, therefore, of Dubai, is the strength of domestic opportunity. The other part of the distribution business is looking after the wealth of individuals, and Dubai offers the best opportunities in the region. Approximately 90% of wealth and assets in the broader Middle East sit in the GCC. Within that space, there is a real focus around Saudi Arabia, the UAE, Kuwait, and Bahrain. Qatar and Oman are also significant, but from a regulatory perspective, this was the best choice. This is because of the Dubai Financial Services Authority (DFSA). It is a regulatory framework that everyone is aware of, and it is very easy for us as a foreign organization to operate here. Our expansion plans are always just around working with our clients to grow assets and look after them.
© The Business Year