The Dubai International Financial Centre (DIFC) announced today that it is working closely with the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA), on an initiative to assist and support the development of the region’s bond and Sukuk market.
The two institutions are also co-operating closely on their overall aim of promoting Foreign Direct Investment (FDI) into the Middle East North Africa (MENA) region.
HE Dr. Omar Bin Sulaiman, Governor of the Dubai International Financial Centre (DIFC) and Vice Chairman of UAE Central Bank said: “DIFC’s partnership with MIGA will contribute significantly to enhancing the growth potential of the bond and Sukuk markets in the region. This partnership supports DIFC’s long-term strategy for developing highly efficient and liquid capital markets. By providing the means for mitigating political risks, this partnership can play a significant role in stimulating foreign investment, which is critical to the region’s economic growth.”
As part of the initiative, the DIFC and MIGA hosted a conference for the region’s capital markets industry at the DIFC Conference Centre. The delegates were welcomed by Abdulla Al Awar, Chief Executive Officer of the DIFC Authority.
Announcing the joint initiative, Al Awar explained that: “By leveraging DIFC’s knowledge of the regional markets and MIGA’s experience in working closely with emerging markets, the initiative will help create cost-efficient, cross-border financial structures, which are critical for facilitating investments.”
The DIFC Authority CEO pointed out that the risk perception of the region, and particularly of the Gulf Co-operation Council (GCC) member countries, is reducing rapidly with the abatement of the global financial crisis. “Despite the financial crisis, there have been a couple of successful bond issues, in the UAE for example this year, indicating a continuing appetite. The DIFC and MIGA are working closely to nurture, assist and support the industry to expand and gain depth,” Al Awar said.
Dr. Nasser Saidi, Chief Economist of the DIFC Authority, gave a presentation on ‘Breaking down barriers to investment: Developing bond and Sukuk markets in the region’.
“In recent years, the bond market in MENA in general and in the Gulf in particular, has grown. Exceptional growth has been witnessed in the Islamic Sukuk market. But it must be remembered that the Sukuk is a relatively new instrument and its growth is still minor given the huge potential for the Islamic bond in the mainly-Muslim MENA region,” Dr. Saidi said.
“The same is true for the overall FDI situation in the Arab World. Though the numbers have gone up in recent years, they still do not match the potential or the requirements of our region,” Dr Saidi pointed out while calling for a cross-border regional policy approach towards dismantling obsolete investment laws and creating opportunities and channels for foreign investments.
Ileana Boza, Global Head of Business Strategy and Client Development at MIGA, spoke on supporting foreign investment into the region.
“Concerns about economic and political stability often inhibit investments, particularly in securities issued by developing countries and emerging markets,” Ms. Boza said.
“However, conventional bonds or Islamic Sukuk issued by either the public or the private sector institutions in such countries and markets, offer potentially high-return investment opportunities,” she pointed out.
“This is where MIGA comes in,” said Emanuel Salinas, Senior Investment Officer at MIGA.
“MIGA, a member of the World Bank Group, addresses investor concerns by providing ‘political risk insurance’ for foreign investments in developing countries,” Salinas explained in his presentation on ‘Mitigating and managing political risk through insurance’.
The Role of Market Players and Market Associations was elaborated upon by majors of the regional and global financial industry. They included Mustafa Aziz Ata, Director of Capital Markets at HSBC Bank Middle East; Michael Grifferty, President of the Gulf Bond Market Association; and Giambattista Atzeni, MENA Strategic Business Development Manager with The Bank of New York Mellon.
A highly interactive panel discussion followed, which also included Jan Willem Plantagie, Managing Director of Standard & Poor’s.
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