About a year ago I wrote about the UAE as a financial center and in particular compared it to Singapore. The article states:

Let’s go back to Singapore with a GDP of $293 billion and population of 5.5 million versus our GDP of $371 billion and population of 9 million. So not only is their market cap four times larger than ours as a percentage of GDP, but their GDP per capita is about $53,000 versus our $41,000. [Data source: The World Bank]

In short, the statistics indicated at that time that Singapore was far more efficient as a financial center.

Let’s move to the present day, a year later. A Dubai International Financial Center (DIFC) report, compiled in partnership with Thomson Reuters, was recently released. The DIFC report studied the wealth and asset management opportunities in the Middle East, Africa and South Asia region (Menasa). I got to page six of this 50+ page report and found some statistics that contradicted my view of the world. I summarise them in the table below.

[table “DIFC-GCC-AUM-2017” not found /]

My first surprise was to see that the UAE’s AUM was only 56% of Kuwait’s and a paltry 9% of Bahrain’s. Reading the news, the reports, the announcements I was under the impression that we were at worst second to Saudi. To find out that our asset management industry, measured by AUM, ranks the UAE in the bottom half of the DIFC’s rankings is completely inconsistent with the narrative that I hear.

The bigger shock is the growth rates that the DIFC projects. For Bahrain, 20% over four years is achievable. For Saudi, 125% is challenging but attainable given the privatisations that Vision 2030 plans. But for the UAE to grow AUM by 1,047% is extremely difficult to believe and DIFC’s expectation that Qatar AUM’s will grow 2,946% in four years is simply delusional.

My question, my first question, is how our asset management industry is only 10% of Bahrain’s by AUM? The DIFC began operations in 2004, over a decade ago. DIFC’s report states:

While Bahrain has long been the jurisdiction of choice for many fund managers operating within the GCC, growth slowed there in the wake of the financial crisis. Political instability during the Arab Spring also hit confidence and many fund managers who moved to Dubai at that time have stayed despite a return to stability in Bahrain.

Well, the Arab Spring kicked off in December 2010. Bahrain’s famous protests, characterised by the report as instability, began in 2011. Is the DIFC saying that what little fund management business exists in the UAE is due to external geopolitics? Because the numbers show that the fund managers did not change jurisdiction in any material numbers. Since we are at USD 1.6 billion AUM, then in the last five to six years, with oil over USD 100 for half of it, then the most we added in that time is USD 1.6 billion. How is it conceivable that we can add USD 18 billion in the next four years? I wasn’t convinced.

What I find surprising is that I could not find in the document any analysis of performance so far. To me, the question of why the UAE’s AUM is 9% of Bahrain’s AUM is far more important than some future prediction. Predicting fantastic growth rates of over 1,000% in four years makes us feel good, but I don’t see how we can come close to achieving it if we don’t review our performance so far.

What is strange is that report states that:

The Global Financial Centres Index 21 released in March ranked 88 different financial centres based on a wide variety of factors including country risk, business environment, financial secrecy, logistics, telecommunications, and innovation.

The report then states that Dubai is ranked 25th on the list and Bahrain is ranked 57th. First, the source cited is China Development Institute & Z/yen Global Financial Centres Index 21. Never heard of them. World Bank or the International Monetary Fund are my preferred sources. Second, this index does not seem to use any performance measures, such as AUM, in its ranking.

There is a difference between a marketing report and a research report. If we keep telling ourselves that the future is rosy we might forget what we need to do and how hard we have to work to achieve this rosy  future.

To support the UAE in becoming a leading global business hub, not just in financial services but in multiple sectors, the very first question we should ask is why aren’t we at our 2020 goals today? The second question is why aren’t we already a regional leader? The numbers in this report put us soundly in the third quartile of AUM for GCC countries. The rest of the report should have been a study as to why this was so and what we can do about it.

Saying we are going see outstanding performance when the data shows us well behind our competitors is akin to telling your boss good news only. We don’t want to become the emperor who wore no clothes.