Download GFMF Day 1 Report - English - Global Financial Markets Forum

Global Financial Markets Forum 2016
Daily Report (1/2): 2 March
The Forum kicked off with a welcome note from H.E. Nasser Ahmed AlSowaidi,
Chairman of NBAD and Etihad Rail. AlSowaidi emphasised the UAE’s position as a vital
finance, trade and logistics hub in a changing geopolitical and economic environment.
The country continues to “act as a bridge between some of the fastest growing and most
exciting markets from the West of Africa through the Middle East to the farthest reaches
in Asia,” he said.
The UAE’s long-term investment strategy, financial depth and economic diversity are
key to navigating through the current period of low oil prices. While the UAE wasn’t
immune to fluctuations in oil prices, it was no longer “enslaved” to them, he added.
Mr. Al Sowaidi concluded his speech by stressing the crucial role financial institutions
play in today’s changing economic environment. Banks, such as NBAD, ought to continue
advancing the UAE’s position in international capital markets, preserve liquidity in the
domestic market, and extend their support to local businesses and people.
Building a knowledge economy
H.E. Sheikh Nahyan bin Mubarak Al Nahyan, Minister of Culture and Knowledge
Development, discussed the increasing importance of knowledge to the future of the
UAE, as the country seeks to become a major regional hub in the global economy. “Our
cultures, whatever their distinctive characteristics must create, produce, transfer, adapt,
and localise knowledge if they are to flourish,” he said.
Creating a knowledge-based economy and society were the primary goals of the UAE’s
late founder Sheikh Zayed bin Sultan Al Nahyan and remain the fundamental goals of the
country’s present leadership, he said.
Wisdom will be the moral compass that will guide the country in its quest to improve
the health and safety of its communities, deal effectively with critical environmental
issues such as climate change, waste management, recycling, potable water and
renewable energy, he argued.
In an interconnected world, it is vital that individuals and institutions work together and
embrace knowledge to achieve success. He lauded Abu Dhabi’s institutions and
economic plan 2030 that seeks to achieve a socially cohesive and economically
sustainable community, with knowledge at its core.
A Fin Tech hub in Abu Dhabi
Following the Minister’s speech, H.E. Ahmed Al Sayegh, Chairman of Abu Dhabi Global
Market (ADGM), took to the stage to recount the latest developments and milestones at
the emirate’s new financial centre and its future plans.
After becoming fully operational in October 2015, the ADGM attracted local and
international institutions aiming to set up a regional hub from the UAE’s capital. ADGM
underscores the government’s efforts to attract local and international financial
institutions to the UAE’s robust financial services sector and home to some of the
world’s largest sovereign wealth funds. According to H.E. Al Sayegh ADGM’s activities
reflect its strategy of cooperation with global funds and trust houses to support Abu
Dhabi’s ambitions, H.E. Al Sayegh said.
Global uncertainty and market volatility continue to be seen in 2016, with heightened
risk aversion among investors that triggered global equity market declines since the
beginning of the year, he continued.
However, an increasing focus on financial innovation and technology can be seen in
markets such as the U.S., Europe and China. “Fin tech eco-systems have stimulated
technological innovation, improved efficiency of financial markets and systems and
more importantly raised the standards of the overall customer experience,” he said.
Abu Dhabi beyond oil
In a panel discussion moderated by CNN’s Emerging Markets Editor John Defterios,
H.E. Khalifa Salem Al Mansoori, Undersecretary of the Department of Economic
Development in Abu Dhabi and H.E. Homaid Al Shemmari, CEO of Aerospace and
Engineering Services at Mubadala, discussed the emirate’s post-oil future. Both
panelists emphasised the UAE’s long-term view and its economic diversification
plans.
Mr. Al Shemmari stressed that the UAE and Abu Dhabi have been saving for “these
rainy days”, referring to the slump in the price of oil. “This oil price slug is not new to
us. Since the 1970s, our late founder of this country has saved the earnings of oil in
the UAE to make sure we have funds and capital investments for the future,” he said.
Since 2008, Abu Dhabi Vision 2030 has been driving investment in industrial sectors
to diversify away from oil and petrochemicals, he added. The country’s dependence
on oil has been declining, as new industries such as aerospace and renewable energy
expanded, according to the CEO.
Mr Al Mansoori, for his part, said that the Department of Economic Development was
looking at the country’s future 50 years from now, seeking to translate its leaders’
vision into concrete plans and perhaps re-visit its diversification model to create a
sustainable economy beyond oil. “We are not in the panic mood of looking at oil as
the primary driver of economic growth,” he stressed. Sectors such as healthcare,
education, infrastructure, logistics, industries and renewable energy will play an
important role in Abu Dhabi’s economy in the next 20 years, he added.
Mubadala’s Mr. Al Shemmari echoed his comments, adding that the UAE’s
commitment to education “is second to none” in the region and is designed to build
knowledge that will cater to the needs of the industries being created. Education,
research and development, and a knowledge-based economy are the UAE’s future, he
said.
In conclusion, H.E. Al Mansoori said the country is not “sidetracked by oil prices or
the geopolitical situation in the region” and has a robust strategy to deal with various
future scenarios that may arise.
China & India: Two Economic Superpowers?
The following panel discussion looked at the main challenges facing the world’s most
important economies, China and India. According the first panelist, Xiaodong Tang,
CEO of China AMC - one of the leading asset management companies in the country
- the world has paid “way too much attention to the devaluation of the Chinese local
currency”. There is no need to deny that the economy is slowing down and that
people are concerned but there are also a lot of opportunities he said. “The local real
estate market is coming back and the central bank relaxed the quota restrictions on
foreign institutions investing in China”, he said, adding that there is still a large
amount of industrial growth.
Alok Agarwal, the Chief Financial Officer of Reliance Industries Ltd acknowledged
that watching what happens in an emerging country like China was very important for
Indian companies. “The change of the Chinese currency is going to change the
competitiveness of Indian industries” he said.
As to the question of why India was still pushing for more manufacturing industry in
spite of the global economic slowdown, Ms Zia Mody, the Founding and Managing
Partner, AZB Partners, a prominent law firm in India reminded the audience of the
demographics. The country is expecting more than 111 million people between the
age of 15 and 29 by 2025, which is 40% more than what China is expecting, she said.
“We have to get them engaged”.
Concerning China’s “One belt, one road” plan, Professor Rana Mitter, Deutsche
Bank’s Director of the University China Centre at the University of Oxford, said that
while China can build railways and ports very successfully, it must not ignore security
issues, and try to find a balance between security and economy.
One question from the audience also raised the credibility issue of China’s economic
data, after the government changed the way it calculates the GDP. Mr Mody said that
as people suspect manipulation “they will find it harder to use these statistics”.
Opportunities in times of crisis
In day one’s last panel discussion analysing the performance of sovereign wealth
funds (SWFs), Jean-Paul Villain, Director, Strategy Unit, Managing Director’s Office
at the Abu Dhabi Investment Authority, and Uche Orji, Managing Director and CEO
of the Nigeria Sovereign Investment Authority (NSIA), discussed the drop in oil
price, its cyclical nature and investment opportunities in today’s financial climate.
On whether the slump in oil prices has reduced the value of SWFs’ assets, Orji said
this was largely dependent on the fund’s design. “Commodities by definition are
cyclical and you should design for moments like this. People shouldn’t be surprised
by the current decline [and its impact] on businesses like this,” he said. From the
beginning, the structure of the NSIA was based on a level of cautiousness,
anticipating such drops, he added.
The bigger challenge and concern today was negative interest rates in three of the
world’s major markets, a trend that could force people to be more careful, Orji said.
The U.S. Federal Reserve increased interest rates in December for the first time in
almost a decade.
While acknowledging the world economy was in crisis, Orji said it was nowhere near
the scale of the financial downturn in 2008, with financial institutions being better
regulated today, leaving room for optimism. He recalled the bust that followed the dot
com bubble and the subsequent recovery.
“The world always innovates. There’s always consumption and demand that follows
that innovation. If you think about it that way you will always find opportunity within
that crisis,” he explained.