Executives see Abu Dhabi as the new financial and investment hub of the Gulf

Written by Ray Clancy

Thursday, 21 October 2010 08:27

Abu Dhabi is set to become the financial and investment hub of the Middle East as it appeals to regional and international investors, it is claimed.

It is also able to distance itself from the gloom in neighbouring Dubai which has been particularly badly hit by the decline in its real estate sector.

Abu Dhabi came into the spotlight after its high profile bailout of state owned Dubai World turned the emirate into a white knight and its conservative financial approach appealed to investors burned by Dubai’s exuberance.

‘I’m finding attracting people to Abu Dhabi is easier than it was three years ago because people know where it is now, for starters. The infrastructure is improving,’ Declan Hegerty, managing director and head of business, Abu Dhabi at HSBC told the Reuters Middle East Investment Summit.

Abu Dhabi's appeal with regional and international investors crosses sectors, from oil and gas to the battered corporate banking and real estate markets, the summit heard. At the same time, Abu Dhabi is emulating Dubai in ways, building leisure and entertainment facilities, as well as more active financial districts, to draw more residents.

Traditionally Abu Dhabi was more conservative in its development projects compared to neighbouring Dubai. During the heydays of the real estate boom, Dubai’s glitz easily eclipsed Abu Dhabi conservative policies.

But Abu Dhabi, which suspended a number of projects in the past two years, has been more cautious in awarding project tenders as the real estate market took a tumble, according to Ziad Makhzoumi, chief financial officer of Arabtec. With the collapse of the six year boom, Abu Dhabi has fared better, making it more appealing to investors, he added.

Abu Dhabi developers will continue to complete and hand over projects next year, mainly in the high end market, said Gurjit Singh, chief operating officer, of Sorouh Real Estate. But there is a dearth in middle income housing, a market developers can explore to attract expats and Emiratis.

Singh said there has been an influx of oil and gas companies, as well as infrastructure related entities, that now have long term contracts in Abu Dhabi of 15 to 25 years and are looking for reasons to reside in the emirate, rather than Dubai.

‘In Abu Dhabi, we will start producing some of those new lifestyle destinations. I would say anything between two to three years, then you may see a major reversal in the flow,’ said Singh.

Abu Dhabi is also expected to be an active hub for corporate banking. Financial institutions, like HSBC, are expanding their presence to meet the growing need in the market. There is wide expectation that the emirate will issue a sovereign bond next year and HSBC’s Hegerty said there should be an uptick in mergers and acquisitions both within the emirate and with Abu Dhabi based entities looking globally for opportunity in 2011.

‘You have a growing level of confidence in the Abu Dhabi range of companies as to how they can manage their growth and how Abu Dhabi can diversify its wealth and plan for its future,’ he explained.