In a little over a week, the UAE Banks Federation will be hosting its first conference for its member banks, as well as for over 200 invited guests from the regional and international banking community. This comes at a very busy time for business and events in the UAE, but also marks an important milestone for the UAE banking sector.
Banks are important to any country’s economy, not least the UAE’s. Though the 34,000 or so employees in the banking industry represent only a little over 1% of the nation’s total employment, they contribute over 10% of the UAE’s non-oil domestic product. Put another way, each job in the banking sector leads to the creation of 2-3 jobs in other sectors. Banks also perform a crucial role in channelling savings into long term investment. Up to the middle of this year, banks in the UAE held US$341 billion in customer deposits, which they have channelled into $316 billion of loans, to individuals, companies and institutions.
Moreover, since 1997 bank assets in the UAE have increased more than tenfold, and the UAE banking sector has become the largest in the Middle East. So the UAE can rightly call itself the hub for banking in the region.
Now is therefore the right time for the UAE Banks Federation to host its first conference. It is increasingly becoming a crucial platform for the UAE’s banks to agree common policies and discuss issues of concern. Its new code of conduct is clear evidence of the will of banks in the country to upgrade the UAE’s banking industry as a whole, for the benefit of customers, the banks themselves, and the national economy.
Why is this gathering so important? The GCC it is collectively the 12th largest economy in the world, and the UAE is its second largest constituent. Though the financial crisis was only partly felt in the region, thanks largely to the forthright and timely support provided by the UAE and other regional central banks, potential challenges still remain. We need to learn the lessons from the crisis, and we need to make sure that the next stage of our growth is carefully planned and is sustainable.
Of course to an extent our future still revolves very much around oil and gas. But the UAE and other countries in the region have started to make real headway in diversifying and creating opportunities for new industries, and new revenue streams. For instance, the UAE’s non-oil economy now constitutes over 65% of the country’s GDP.
This makes us, and our neighbouring countries, a very fertile location for banks. Tourism, transportation, manufacturing, retail trade, services and real estate have become the engines of growth in this economy, and all of them need the support of the banking industry to prosper and succeed.
And success is looking increasingly tangible. By 2020 the GCC is projected to be a $2 trillion economy supplying 25% of the world’s oil supplies. Tourist arrivals to the region are expected to reach 64 million every year. Planned projects just for upgrading the region’s transportation systems are budgeted to be close to $15 billion.
So the Middle East Banking Forum is a key moment for the top players in the UAE’s and the region’s banks to think about the next steps, and to identify and clarify the issues that are likely to face us in the future.
We will investigate what role banks can play in the aftermath of the Arab Spring, and how the UAE can further develop its role as a regional financial hub for both conventional and Islamic banking and as a centre for the Islamic economy. And we will look at how retail banking services can be better delivered to the region’s rising middle classes as well as to those still excluded or marginalised from the financial system. We do also hope that this forum will bring about added value to all member banks and guests through direct interaction and discussion on above common and relevant issues.
HE AbdulAziz Al Ghurair is Chairman of the UAE Banks Federation, CEO of MashreqBank and Chairman of the Board of Directors of the Dubai International Financial Centre Authority
