“Silicon Valley and Wall Street, talking about emerging economies”. That is how the International Finance Corporation’s Managing Director Makhtar Diop sees the UAE.
Mr Diop is visiting the UAE this week to explore the opportunities in the country, which he described as “something quite unique”.
In an exclusive interview with The National, Mr Diop said that “the pace of technology adoption in the UAE is quite impressive. They are at the forefront of anything technology … at the same time, this is one of the more vibrant capital markets ... also this is a place where everybody is converging."
The three elements, speed of technology adoption, vibrant capital market and convergence of talent from around the world are attracting companies to set up and develop in the UAE.
“The diversity of what you have here is quite impressive."
Mr Diop said that “some companies from some countries are localising to the UAE because they cannot find enough coders in their own countries, they believe that settling here in UAE [makes them] able to attract the best of the best in the world”.
He said this represents “a very powerful proposition because it allows the UAE to diversify its economy”.
The fast pace of the UAE economy's diversification makes it "much more resilient to any shock that will happen on commodities”, Mr Diop said.
"What I see here is a vibrant economy, with a lot of innovation, and always a willingness to be ahead of the curve and to anticipate the next challenges.”
Part of that innovation is the UAE’s focus on climate action. Mr Diop said that fact that the UAE is “in a region of oil producers but is thinking very seriously about climate change, shows that there is a willingness to anticipate the issues and to make sure that they are part of the [climate] movement, and more importantly to lead the movement”. He added that “the IFC would like to be part of it. That's why I'm here."
Having attended Cop26 most recently in Glasgow and a number of Cop meetings before, Mr Diop’s mind is greatly focused on climate. After the focus on the role of the public sector and NGOs in tackling climate change during Cop21, Mr Diop said that during Cop26, the private sector started “becoming the solution”.
He said that “everybody agrees that private sector investing [will] play a key role”. However, a key element depends on “how to measure the investment and the money spent by the private sector to make sure that it goes towards reducing emissions”.
Mr Diop stresses the importance of measuring impact. He explains that the “IFC was the first one to have created asset classes around green bonds. Ten years ago, [we] were among the first one to finance this bond”. Now, Mr Diop says the funding will continue and new financing tools are being launched that will also expand to sustainability. “When we talk about sustainability, we talked about inclusion, we talked about recovery was post-Covid," he said.
The IFC has decided to be fully aligned with the Paris climate accords by 2025, and by 2023, 85 per cent of its investments will be Paris aligned. “This is quite a challenge, and we are being asked by other development institutions or private sector to help [set] the standard, because we want to compare apple to apple, because a lot of people are talking about greening the balance sheet, but it's not always clear that they are talking about the same thing," he said.
However, “we don't want to have people left behind”, Mr Diop said.
It is important to “make sure that this process of greening the value chain doesn't exclude the small producers … those who don't have access to capital, those don't have access to the appropriate technology”, he said. Support for those producers means ensuring they receive technical assistance and access to markets.
The most immediate challenge facing the global economy is the continuing pandemic, which has had a major effect on small and medium-sized enterprises around the world, including an inability to access financing for trade.
Mr Diop said: “We have been doing a lot of trade financing to help companies to be able to be to maintain their activities."
The IFC has launched a “Distressed Asset Recovery Programme, which helped companies which were viable before the crisis and will continue to be profitable after the crisis, to just go through this period and help the asset which had been distressed, to be reassessed and refinanced”.
In addition, the IFC has launched more bond funds, including the Sustainable Emerging Economy Debt (SEED) bond fund, which is a new fund to mobilise $2 billion in private investment into emerging markets' sustainable bonds that support Covid-19 relief efforts and promote a green and inclusive recovery from the pandemic.
Mr Diop explained that “these crises are forcing us to adapt our instruments to be able to respond very fast to the situation, because the situation was dire for a lot of companies, and be able to look at the hot point that they be facing”.
During his visit to the UAE, Mr Diop witnessed the launch of an agreement between Abu Dhabi Global Market (ADGM) on an initiative called “She Wins Arabia” to help women-led start-ups across the Middle East and North Africa obtain advice, finance and mentorship to grow their businesses.
Mr Diop said “the mandate of our institution is to make development inclusive and we cannot talk about inclusive development without including half of the world – women are half of the world. And when you are excluding them, you excluding half of your potential and ability”.
Mr Diop explained the initiative, saying “we will be financing 50 start-ups, we will be investing in them and helping them really grow. And we hope that in the near future, among the unicorns that we want to create in the Emirates, that we have a unicorn ... led by women”.
Looking to 2022, Mr Diop said he sees many opportunities, one being "part of the recovery [from Covid-19]. I think we are all in the middle of coming out slowly from this health crisis." He said the growth he sees in the UAE “is a source of growth in the world economy”.
A second opportunity Mr Diop sees is in cross-border investment. “One of the reasons why I'm here is to continue talking to the capital market here to the companies ... to continue investing in the south and there is a lot of investment going on here."
He added that “the fact that the IFC has such a large footprint in emerging economies, we can be a good link, a good support for those companies to invest in emerging economies”. He said he hopes “to have the voice [of] the Emirates, and other countries [in] the same situation, in the discussion on global public goods, such as climate change, issues of water, of smart agriculture, all these kinds of issues discussed largely as we are moving towards Cop28".