Abu Dhabi: MENA’s new FinTech Hub?
Established in 2013, with its official opening in 2015, the Abu Dhabi Global Market (ADGM) aims to support Abu Dhabi’s long term strategy to diversify its economy and establish the capital as an international financial centre. One year into its launch, ADGM was named the International Financial Centre of the Year (MENA) by the prominent Global Investor/ISF publication. An endorsement like this testifies the attractiveness of the Abu Dhabi region as a financial hub. However, we have yet to see whether the ADG will live up to its expectations.
ADGM, with its three independent authorities, the Financial Services Regulatory Authority (FSRA), the Registration Authority and the ADGM Courts, aims to establish a self-regulating, business-friendly financial free-zone, operating in line with international best practices. With a unique legal framework, that, according to Richard Teng, “is an integrated one that cuts across banking, insurance and capital markets”; ADGM has been devised with the intention of encouraging firms to base their activities in Abu Dhabi. Within a year of opening its doors, over 170 local and international companies have established themselves in ADGM, along with 13 financial services, and 12 more in the pipeline.
International alliances, a strong regulatory framework, the promotion of Fintech, and the establishment of a stock exchange are all part of the bigger picture.
Establishing close relationships within the region as well as globally is a key feature of the ADGM strategy. These relationships will help facilitate cross-border activities, harness the expertise of leaders in the industry, and uphold the integrity of financial markets.
Within UAE, ADGM has built partnerships with the Central Bank of the UAE, Ministry of Finance, Securities and Commodities Authority, and Abu Dhabi Securities Market. Key international alliances include Memorandums of Understanding signed with China, India, South Africa, Europe, and many others. Just a week ago, the ADGM and the Monetary Authority of Singapore (MAS) entered into an agreement to develop close cooperation in initiatives that nurture FinTech entrepreneurship and support financial innovation in both regions. This cross-border partnership will foster synergies, and help both regions develop a strong and robust FinTech ecosystem that is conducive to growth.
In March 2016, ADGM announced the launch of its Regulatory Lab (RegLab) – the region’s first FinTech incubator. Falling under the financial free-zone, the established FinTech startups will face a lighter regulatory framework for two years under the customized RegLab framework. While such incubators exist in London and Singapore, it is the first of its kind in the MENA region, and it aims to help FinTech startups by providing them with a cost-effective and controlled environment, while also preparing them for the more stringent requirements of the real world. In May, ADGM and Flat6Labs (a well-recognized technology accelerator) signed an MOU that would allow the two parties to harness each other’s expertise and knowledge, and work together in developing the FinTech ecosystem in Abu Dhabi.
Among other initiatives, ADGM is in talks with partners to establish a stock exchange, similar to London’s Stock Exchange’s off-shoot AIM, which caters to smaller companies. The exchange aims to add further liquidity to the region, rather than take away liquidity from the existing Abu Dhabi Exchange (ADX). While details haven’t been finalized yet, the team is working hard towards making sure it is done in the best possible way.
The ADGM faces close competition in the form of DIFC, which is an already established financial free-zone, just 150 kilometers away. Within the region, other centers are competing for the top spot as well, with Qatar, Bahrain and Saudi Arabia not far behind. While Qatar held great promise as a financial centre, the recent Global Financial Centre Index (GFCI) shows Dubai holding the first position in the region, followed closely by Tel Aviv, and then Abu Dhabi. The DIFC and ADGM carry many similarities, particularly in terms of their legal status and their self-legislative abilities, both based on the Common Law.
By the first half of 2016, 1,539 firms had registered with DIFC, including most of the world’s top banks, money managers, law firms and insurance companies. DIFC and ADGM offer a similar proposition, both being self-regulating financial free-zones, within a politically stable environment with geographical proximity to the East and West. The ADGM however, does not position itself as competing with the DIFC. With a new focus on FinTech and a distinct focus on wealth management, Richard Teng sees the two states complementing one another rather than fighting for a single spot.
While it is still early days for ADGM, it will be interesting to see how the relationship between the two centers plays out.