DIFC leads the field, showing strength of free zones

The value of business conducted in the DIFC rose by 7 per cent to $3.13 billion last year as the free zone picked a path through the turmoil of regional unrest and the euro zone crisis.

The value of business conducted at the Dubai International Finance Centre rose 7 per cent to US$3.13 billion last year compared with 2010. Pawan Singh / The National

Business activity in the Dubai International Financial Centre (DIFC) grew at a faster pace last year than the overall UAE economy.

The news underlines the free zone's status as a haven from regional unrest and euro-zone turmoil.

The value of business conducted jumped by 7 per cent to US$3.13 billion (Dh11.49bn) compared with 2010, according to data released yesterday in the free zone's annual economic activity survey.

Activity was on course to pick up again this year, said Nasser Saidi, the chief economist of the DIFC Authority. "If you look at 2012, it looks better than 2011," he said. "You have a continuation of high oil prices, growth in trade and business services, tourism and the like. The additional factor that helps the DIFC is the safe haven aspect.

"More companies are coming to establish themselves at the DIFC as they consider it a haven," he said.

The DIFC accounted for 3 per cent of Dubai's growth last year and 1.4 per cent of UAE non-oil GDP, the data showed. The UAE economy expanded by 2.3 per cent last year, according to the IMF.

"Emerging market economies are doing much better than advanced economies and financial sectors are growing faster than their economies, which is what we would expect," Mr Saidi said. "You get a phenomenon called financial deepening."

The DIFC's rate of business growth last year was on a par with expansion in the financial sectors of Asian banking centres such as Singapore (9.1 per cent) and Hong Kong (7.8 per cent).

But it was also much faster than growth in Bahrain, another aspiring regional financial centre but whose prospects were dented by protests in the country. Activity in the kingdom rose just 0.1 per cent.

The DIFC's growth was also quicker than that in the United Kingdom, Luxembourg and the United States, where the euro-zone sovereign debt crisis and wrangling over the US debt ceiling checked the development of banking and financial services.

Last year's data suggests the Dubai free zone is managing to pick a path through the wreckage left by the waves of instability across parts of the Middle East and North Africa as well the lingering sovereign debt and banking problems in Europe.

An increased focus on the region's growing links with Asia is helping weather the storm. It is in contrast to the first phase of the DIFC's development since 2004, when officials built bridges with the West to help attractEuropean and US banking giants.

A steady stream of western banks and financial firms setting up regional headquarters and offices helped the free zone expand by 54.4 per cent in 2008 before the global economic downturn prompted a contraction in activity the following year.

"Increasingly, we are attracting companies from other emerging markets," said Abdulla Mohammed Al Awar, the chief executive of DIFC Authority.

"Over the last two years the bulk of companies we are attracting are from emerging markets and Asia."

The number of companies at the DIFC reached 817 last year, up 5.7 per cent from 2010.

After the UAE, the US and the UK remained the most dominant nationalities of foreign owners of parent companies in the DIFC. Both accounted for 15 per cent of ownership of companies last year but the share from emerging markets is rising.

India accounts for the highest foreign ownership among other countries. The DIFC has a current occupancy rate of 95 per cent, Mr Al Awar said.

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