Dubai’s financial centre is to issue an Islamic bond to pay down bank debt and drive a new phase of growth as the city seeks to become the hub for trade and finance between emerging markets.
The Dubai International Financial Centre, already the region’s main financial hub as it approaches its 10th anniversary, hopes to grow by 50 per cent over the next three years by linking Europe and North America with Asia and, increasingly, Africa.
“South-south financial relationships are going through Dubai,” Essa Kazim, the government-owned DIFC’s governor, told the Financial Times in an interview. “We can act as a gateway to Africa.”
The DIFC, like other parts of Dubai’s services-focused economy, is seeking to capitalise on renewed confidence in the city as an island of stability amid the region’s upheavals to pay off debts and focus on infrastructural growth.
Mr Kazim says more Chinese companies are looking to join China’s four largest banks to use the centre as a launch pad for operations in the oil-rich Gulf and resource-rich Africa.
The DIFC, which faces competition from centres in wealthier Abu Dhabi and Qatar, hopes to develop as a renminbi clearing hub to lure more Asian institutions to the city.
On Sunday, the Agricultural Bank of China listed a 1bn renminbi bond on Nasdaq Dubai, the centre’s international exchange, the first Middle Eastern listing of a bond by a Chinese issuer.
To fuel a new phase of growth, the DIFC is issuing a $700m sukuk in the next few weeks to pay off its $670m syndicated bank debt, which used the centre’s land bank as collateral.
The remaining sukuk proceeds and rental cash flow will fund the development of new DIFC-owned office space. More than 1,100 companies and 16,500 people work at the centre.
As it approaches its 10th anniversary in November, the tax-free common-law zone has established itself as the hub of choice for banks, insurance companies and law firms, helped by Dubai’s strong aviation links and liberal lifestyle.
But high rents and telecommunications costs have acted as a break on growth for many smaller and niche financial operators.
Mr Kazim declined to pledge an immediate reduction in rent at DIFC-controlled buildings, but said the centre would become more cost-effective as leasing rates rise in the rest of booming Dubai.
“Part of our objective is to make the centre affordable for the companies we want to attract,” said Mr Kazim. “That will have rent implications.”
Third-party developers – who own two-thirds of the centre’s 5m sq ft leasable area – are only operating at 39 per cent occupancy.
But as annualised growth rates of 14 per cent a year eat into that excess supply, the DIFC plans to develop its last nine remaining plots.
For now, the centre is pressing ahead with a new office building and a retail-dominated “spine” walkway linking outlying towers to the central “Gate” complex.
It is also in talks with two international telecommunications companies to provide overseas telecoms connections at half the price of the incumbent operators, state-owned Du and Etisalat.
“The DIFC should be about the boosting of Dubai’s economy and creating job opportunities for everyone, rather making money on rent,” said Mr Kazim.