By IANS,
Dubai : The Dubai International Financial Centre (DIFC) is preparing itself in the face of the global financial crisis to act as a major channel for capital flows between emerging economies like India, China, the Middle East and North Africa.
“Today we have reached a situation where capital flows between emerging economies can be channelled directly without the intermediation of financial centres in developed countries,” Omar Bin Sulaiman, vice-chairman of DIFC, said while speaking at the three-day ‘Leaders in Dubai Business Forum’ which got under way here Sunday.
“DIFC is focusing on a project to develop a major node where companies from Egypt, India or Azerbaijan, basically, the Middle East, North Africa and South Asia (MENASA) region, could find capital from emerging markets through a listing or through private equity deals or any other convenient instrument. In other words, we are trying to bypass the old channels,” he added.
The DIFC is an onshore hub for global finance designed to bridge the time gap between the financial centres of Hong Kong and London.
Over 700 firms have registered with the DIFC since its inception four years back.
According to Sulaiman, as the global economic structure underwent a transformation, capital flows have inverted their course, particularly from emerging economies to the US.
“China, India, Japan, and Gulf countries are now net suppliers of capital to the world economy thanks to their large current account surpluses,” he said.
“Emerging markets are no longer locked into fluctuations in developed countries. Structural reform and improved macroeconomic policy frameworks combined with strong growth have enabled emerging economies in China, India and the GCC (Gulf Cooperation Council) region to shield themselves from the effects of the turmoil in western economies.”
Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE) comprise the GCC.
Sulaiman said that the current global financial crisis has given the GCC region many opportunities to redefine its role in the global economy.
“We have the opportunity to play a more assertive stance on the international stage and get involved in top-level decision making processes. Stronger engagement in international affairs, primarily in international financial institutions like the IMF (International Monetary Fund), World Bank, Bank of International Settlements and possibly, the OECD (Organisation for Economic Cooperation and Development), will translate into greater visibility,” he said.
At the same time, he stressed that a common Gulf currency as a safe and sound global currency was needed if the region was to play a bigger role in the global economy.
A common Gulf currency has been in the works for a long time and was originally scheduled to be launched in January 2010.
But there are doubts that the deadline could be met as the approach has been riddled by procedural hurdles, questions over the setting up of a regional central bank to monitor the currency and the currency basket to which the new currency could be linked.
As of now, except for Kuwait, all other currencies of the region are pegged to the US dollar.
Earlier this year, Oman had announced that it would delay joining the common currency platform, reiterating its faith in the greenback.
“The GCC currency has the potential to become a prominent global currency backed by the underlying natural and financial resources of the GCC countries,” Sulaiman said.