The global economy needs to design and move to an architecture of networked financial markets, which will create a more stable and sustainable “spider-web” model instead of the ‘hub-and-spoke' model that has so far dominated the world financial system and led to the creation of systemic risk, according to Dr. Nasser Saidi, chief economist of the DIFC Authority. Speaking at the plenary debate of the MENASA Forum focused on the topic “MENASA Capital Markets Going Forward”, Dr. Saidi said: “In 1976, the world's economic centre of gravity was at a point between London and New York. However, in the 30 years since then, that centre of gravity has moved away towards the East and is now located somewhere between Dubai and Shanghai.” He said the global economic crisis will contribute to eradicating the hub-and-spoke model centered on London and New York and provide the impetus for a transition to a polycentric, ‘spider web' model. “In a spider web model, instead of a small number of financial centers intermediating and reallocating the entire world's savings, there will be numerous international financial centers -including the prominent examples of Dubai-Mumbai and Shanghai- across the globe that have the capital market depth and regulatory sophistication to absorb excess capital from their own regions and elsewhere. Such a model will prevent the enormous accumulation of savings in just one or two financial centers. The GCC countries need to invest in financial services capacity in order to locally manage and control their rapidly growing financial wealth. This is happening in DIFC,” he added. He further said that the world's new economic geography is reflected in the evolution of capital markets across the world. While the United States accounted for 46 percent of global capital markets in 1999, its share dropped to 28 percent in 2009. In comparison, Emerging Markets increased their share of global capital markets from 8 percent in 1999 to 32 percent in 2009 while the BRIC (Brazil, Russia, India and China) economies increased their share from 2 percent in 1999 to 19 percent in 2009. Meanwhile, the GCC increased its share from 0.3 percent to 1.2 percent in the same period. Dr. Saidi also emphasized the vital need to develop local currency debt markets in the GCC region. “Well functioning debt markets will help reduce dependence on bank finance at a time when the banking sector is in a process of de-leveraging as well as provide governments with an alternative source of funding to smooth out volatile revenues will diminish macroeconomic and financial vulnerability from energy price fluctuations.” Other participants in the plenary debate focused on MENASA Capital Markets included Ivor Dunbar, co-head of Global Capital Markets, Deutsche Bank and Sameer Al Ansari, CEO of Shuaa Capital. All the speakers stressed the importance of further developing the region's market infrastructure in order to promote capital market growth. Talking about IPOs in the GCC region, Ansari announced that an IPO led by Shuaa Capital will be floated in Abu Dhabi soon. In order to attract more institutional investors who drive capital markets, it is critical to improve regulatory frameworks and other aspects of the market infrastructure that will raise standards of transparency and corporate governance, he said.
