UAE's market cap is simply not enough

I am in New York, the primary financial centre in the world, visiting asset managers. The smallest of these managers has a total of about US$500 billion under management. According to the World Bank, the total market capitalisation of domestic listed companies in the UAE was about $195bn at the end last year. The UAE has two primary stock markets, a federal level market regulator in the SCA and at least two offshore financial centres in the DIFC and ADGM, each of which is regulated independently of the other and the SCA.

Maybe looking at total numbers doesn’t make sense as different countries have different GDPs. Fortunately for us the World Bank provides market size as a percentage of GDP. For the UAE, the total market cap of domestic listed companies is 53 per cent of GDP as of the end of last year; for the US it was 140 per cent. For Singapore, a country often held up as a model for the UAE to learn from if not emulate, market cap is 219 per cent of GDP. For Saudi Arabia, who many assume lags the UAE in fin­ancial innovation, the number is 65 per cent. What saddens me is that the world average is 99 per cent and in terms of the size of our markets relative to GDP we are roughly half the global average.

I am sure that there are many indicators that would cast a more positive light on the development of the UAE’s capital markets. I find it difficult to believe, however, that the above analysis can be completely explained away by positive arguments. Something is seriously wrong between the picture that we are presented, usually involving looming skyscrapers, and real­ity. A famous journalist thinks that DIFC stands for Dubai International Food Court, meant not as a derogatory statement but as an assessment that the retail hospitality sector seems to do more business in the DIFC than the financial services sector. To be even-handed, ADGM seems to be going in the same direction, although the five-star hotels came earlier and it boasts a world-class hospital.

Worse, the DIFC Court’s expansion law harmed the local economy by allowing an asymmetrical conduit of enforcement of UK court judgments by using the DIFC as a conduit into the local Dubai court system, bypassing the local courts while not allowing for a reciprocal system to directly enforce ­Dubai court judgment in the UK. Thankfully, Justice Al Madhani of the DIFC Courts ruled that enforcement could happen only within the DIFC.

The problem is, why was such a loophole allowed to exist? There is no problem in introducing laws and subsequently realising that they might need adjustment. There is a serious issue when we see foreign entities use a loophole to enforce foreign court rulings blindly and then do nothing about it. When we connect to the global economy it should be to our benefit, or at least an equitable relationship should exist. We’re going backwards – it’s like December 2, 1971, never happened.

Back to the financial sector. CNBC published a ranking of the world’s largest asset managers as of the end of last year. You may have heard of the No 1 spot, the Vanguard Group, with $3 trillion under management. You might not have heard of the No 2, Pacific Investment Management, with $1.7tn under management, or of the No 3, Capital Research and Management, with $1.4tn. How are we even going to get close?

Let’s go back to Singapore with a GDP of $293bn and population of 5.5 million versus our GDP of $371bn 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. And a large part of their GDP doesn’t come gushing out of the ground. They have to work for it, efficiently and effectively.

I am a big believer in dreaming big. But here’s a little secret. We have to work with discipline, focus and, most of all, effectiveness if we are to even take a single step towards our goals.

Sabah Al Binali is an active investor and entrepreneurial leader with a track record of growing companies in the Mena region. You can read more of his thoughts at

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