GCC: The New Epicentre for Global Capital
The region’s transformation has turned the six GCC states into attractive destinations for international financial institutions and FDI.
In a global landscape characterised by sluggish growth, soaring interest rates, and inflationary pressures, the six Gulf Cooperation Council (GCC) states—Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Oman, and Bahrain—stand out for their remarkable resilience. According to consulting firm PwC, the GCC’s growth is expected to reach 3.7% this year, significantly outpacing the global average of 2.9%.
This resilience has caught the attention of Western lenders and financial institutions, who are increasingly strengthening their presence in the GCC while scaling back elsewhere. Antoine Chemali, CEO of BNP Paribas Wealth Management Middle East, highlights the growing appeal of the region, stating, “The rise of the financial sector in the region creates demand not only for individual needs but also corporate banking and financial solutions.”
Strategic Expansion by Western Banks
Western financial institutions are strategically expanding their footprint in the GCC, capitalising on the region’s economic vigor. Rola Abu Manneh, CEO of Standard Chartered UAE, Middle East, and Pakistan, underscores the significance of the GCC in her bank’s strategic expansion and operating income growth. “We are strategically targeting all markets across the GCC, tailoring our approach to leverage our strengths and meet the unique financial needs of our clients,” she notes. The primary focus lies on markets like Saudi Arabia, the UAE, and Qatar, which are leading the region’s economic diversification with abundant opportunities in infrastructure, tourism, and the digital economy.
Dubai: The Pioneer Financial Hub
The transformation of the UAE, particularly Dubai, into a financial powerhouse began two decades ago with the establishment of the Dubai International Finance Center (DIFC) in 2004. Today, DIFC hosts over 2,000 companies, including international banking giants such as HSBC, Royal Bank of Scotland, and JPMorgan Chase. In 2023 alone, the Dubai Financial Services Authority registered 117 new firms, marking a 25% increase from the previous year.
Dubai’s allure extends to asset managers and hedge funds, with a 125% year-on-year increase in applications from these groups. Notable newcomers include US-based Millennium Management, Wellington Management, and Hong Kong-based WRISE Wealth Management.
Abu Dhabi’s Financial Magnetism
Just an hour from Dubai, Abu Dhabi has emerged as a new magnet for international finance. The Abu Dhabi Global Market (ADGM) saw a 32% increase in registered companies in 2023, attracting Wall Street giants like Morgan Stanley and Goldman Sachs. Private wealth management firms, family offices, and fintechs are also eyeing investment opportunities as the region transitions from an oil-rich desert to a global financial hub.
Oualid Lahsini, MENA CEO for Brevan Howard, one of the world’s largest hedge funds, emphasises the strategic importance of the GCC, stating, “Engagement with Abu Dhabi and the broader GCC region is a key part of our long-term strategy.”
Saudi Arabia: The Next Big Financial Frontier
Saudi Arabia, the largest market in the Arab world, is rapidly transforming its financial sector. Consolidation among firms has created some of the region’s largest lenders, and new legislation is easing entry for foreign players. A notable strategy is requiring foreign firms to establish regional headquarters in the kingdom to sign deals with government entities. This approach is yielding results, with Goldman Sachs establishing a presence in Riyadh and other major players like BlackRock, the Edmond de Rothschild Group, and Deutsche Bank following suit.
The GCC’s commitment to economic diversification is exemplified by ambitious infrastructure projects. Saudi Arabia’s $500 billion Neom city, the UAE’s vast solar farms, Qatar’s North Field gas expansion, and the Gulf Railway are just a few examples of the region’s infrastructural ambitions. These projects are crucial for creating jobs and long-term opportunities across the region.
Rola Abu Manneh of Standard Chartered notes, “Financing infrastructure projects is key to creating jobs and opportunities across the region in the long run.” International developers remain engaged, with Standard Chartered among the lenders providing diversified funding for projects like Neom and the North Field gas expansion.
The Role of Sovereign Wealth Funds
The transformation of the GCC economies is heavily supported by their substantial sovereign wealth funds. Saudi Arabia’s Public Investment Fund, Abu Dhabi Investment Authority, Mubadala Investment Company, ADQ, and Qatar Investment Authority are among the world’s largest and most active SWFs. According to GlobalSWF’s 2024 annual report, the combined assets of the GCC’s 19 sovereign funds are projected to reach $7.6 trillion by 2030, doubling from 2023 levels.
Deep financial-sector reforms are making the GCC more attractive to global investors. Structural changes to capital markets have led to a surge in initial public offerings (IPOs). In 2023, the MENA region saw 48 IPOs, raising $10.7 billion, with significant debuts like Saudi oil and gas drilling firm ADES raising $1.2 billion.
Beyond energy, financial-sector reforms are spurring investment in tourism, new technologies, and artificial intelligence. Saudi Arabia plans to create a $40 billion fund for AI investments, and Microsoft has committed $1.5 billion to G42, an Emirati AI firm partnered with OpenAI. This activity promises robust non-oil sector growth, which stood at 4.3% in 2023.
Future Prospects and Market Development
Despite significant progress, there is still work to be done. Lahsini points out that local capital markets are predominantly equity-driven, suggesting that more development in fixed income and credit markets could provide local actors with greater growth options. Nevertheless, the GCC states are solidifying their position as a prime destination for foreign capital. Consistent government support and substantial financial resources are paving the way for a growing influx of international financial institutions, ensuring the region’s continued economic resilience and growth.
