1. DIFC: A Gateway of Opportunities to the MEASA Region Presentation at the Inaugural Australia Arab Business Forum & Expo Dr. Nasser Saidi, Chief Economist & Head of External Relations, DIFC Authority 5 th May, 2011

2. Agenda GCC Banking and Financial Sector Outlook DIFC: Gateway to the MEASA region Global Two-Speed Recovery Trade & Investment Relations GCC Economic Outlook

3. Decoupling: A Two- Speed Recovery is Evident Source: IMF WEO, Apr 2011

4. Shift in Global Economic Geography: 1990-2010 Source: IMF WEO, Apr 2011 GDP based on purchasing-power-parity (PPP) share of world total

5. Shift in Global Financial Geography: 1999-2010 Source: S&P, 2010 Market Capitalisation: share of world total

6. Middle East Outlook: Macro View Source: IMF WEO, Apr 2011 Having weathered the global crisis relatively well, the recovery is now proceeding. The level of economic activity is still below but getting closer to potential. High unemployment, growing social unrest, and rising food prices are dampening growth prospects, especially in oil- importing economies. Current account surpluses in oil-exporting economies are expected to widen again as the recovery continues.

7. Food prices remain a significant component in CPIs Source: UN FAO

8. GCC: Growth & Inflation Outlook Source: REO Apr 2011 Consumer Price Inflation (Year average, %) 2000– 05 avg20062007200820092010f2011f Bahrain 0.7 2.03.33.52.82.03.0 Kuwait 1.7 3.15.510.64.04.16.1 Oman 0.1 3.45.912.63.53.33.5 Qatar 3.5 11.813.815.0-4.9-2.44.2 Saudi Arabia -0.1 2.34.19.95.15.46.0 UAE 3.6 9.311.112.31.60.94.5 GCC 1.14.66.611.03.03.25.3 Real GDP growth (Annual change, %) 2000–05 avg.20062007200820092010f2011f Bahrain6.06.78.46.33.14.13.1 Kuwait7.15.34.55.0-5.22.05.3 Oman3.35.56.712.91.14.24.4 Qatar8.718.626.825.48.616.320.0 Saudi Arabia4.03.22.04.20.63.77.5 UAE8.18.86.55.3-3.23.23.3 GCC5.55.95.87.20.25.07.8

9. GCC’s Major Export Partners – Asia’s increasing share in exports Major Trading Partners of the GCC Source: IMF DOTS, DIFC Economics GCC’s Major Import Partners – the EU and Asia dominate

10. FDI in the Middle East FDI declined significantly in both 2009 and 2010. In 2010, 675 FDI projects were located in the Middle East with an estimated $44.21bn capital investment creating an estimated 76,795 jobs. Dubai and Abu Dhabi (UAE) and Doha (Qatar) are top three most attractive cities for FDI in the Middle East in 2010, even with projects into these cities declining by 20%, 13% and 44%, Globally, Dubai ranked as the fourth leading city in the world. Demographics (young growing population), location, oil & infrastructure development are key to investment growth Source: fDi Intelligence from the Financial Times Ltd.

11. GCC: Monetary & Financial Scenario Source: GCC Regional Overview, IIF, Oct 2010

12. Financial Crisis – Impact on the MENA & Gulf MENA, especially the Gulf region, was not severely hit by toxic assets and financial turmoil thanks to Small stock of outstanding securitised/structured products Limited expertise in managing structured investment products Growing importance of and compliance with Shari’a Fiscal discipline and sizeable stock of foreign assets Contagion came from the equities slump as a result of deleveraging, the ensuing global credit crunch, and a drop in commodity prices: later trickling into the real estate sector However, there are no bankruptcies Banks adequately capitalised though credit to private sector is still an issue The government has been willing & able to fill the capital shortfall where needed; Real activity has relied on bank financing (MENA capital markets are dominated by bank assets and equities: Debt securities make up just 10% of Middle Eastern capital markets (GFSR Apr ’11).

13. GCC Banks Remain Well-Capitalised GCC banks remain well capitalized & profitable with system wide capital and liquidity cushions that helped them weather the global financial turmoil. Average capital adequacy ratio was above 15% for every banking system in GCC although with variations among individual banks. There have been no bankruptcies, but profitability has declined. There has been high government participation in banks, ranging between 13% in Kuwait and 52% in the UAE. An increase in NPLs is evident, but is still lower than historical highs. Source: “GCC Regional Overview”, Oct 2010, IIF

14. Top SWFs by Assets Source: Sovereign Wealth Fund Institute, update as of Mar 2011. CountryFund NameAssets $BnInceptionOrigin Linaburg- Maduell Transparency Index UAE – Abu DhabiAbu Dhabi Investment Authority$6271976Oil3 NorwayGovernment Pension Fund – Global$556.81990Oil10 Saudi ArabiaSAMA Foreign Holdings$439.1n/aOil2 ChinaSAFE Investment Company$347.1**1997Non-Commodity2 ChinaChina Investment Corporation$332.42007Non-Commodity6 China – Hong Kong Hong Kong Monetary Authority Investment Portfolio $292.31993Non-Commodity8 SingaporeGovernment of Singapore Investment Corporation$247.51981Non-Commodity6 KuwaitKuwait Investment Authority$202.81953Oil6 ChinaNational Social Security Fund$146.52000Non-Commodity5 SingaporeTemasek Holdings$145.31974Non-Commodity10 RussiaNational Welfare Fund$142.5*2008Oil5 QatarQatar Investment Authority$852005Oil5

15. The total value of projects planned, under way or completed in the Gulf region was US$2.6 trillion (MEED Project Tracker, Feb 2011) It was reported at the end of Apr 2010 that total of $624 bn worth of projects were put on hold across the GCC. Gulf Infrastructure Projects by Sector & Country Source: MEED Project Tracker

16. The GCC network will have two rail lines: One that will connect all GCC countries and Qatar via a bridge and another that will stretch between Kuwait, Saudi Arabia, the UAE and end in Oman. Kuwait is planning a 1,500- km railway line linking its border with Iraq down the Gulf coast to the Omani port of Salah on the southern tip of the Arabian Peninsula. Bahrain is planning a $8 billion railway project stretching 184 km. GCC Rail Network

17. GCC to Invest AED 220bn in high-speed railway projects

18. “Dubai Model” of Economic Growth & Development Diversification Low dependence on oil High contribution of Service sector to GDP (annual growth rate: 21% since 2000) Pro-business Government Dynamic Business environment Infrastructure & Demographics Young fast-growing population Liberal labour migration policy Major emphasis on Infrastructure (more than 30% of budget expenditure) World-class infrastructure & logistics Economic Clustering Free Zones resulted in: Competition, FDI & Economies of Scope & Scale 18 operational Free Zones (including the DIFC) Advantageous Time Zone Openness & Reform Business Climate: One of the top 10 reformers in WB’s Ease in Doing Business 2010 Property law reform Favourable Tax Structure 100% foreign ownership in Free Zones

19. 18 Operational Free Zones in Dubai

20. 8 hour time zone Why Create A New International Financial Centre? The DIFC region: 42 countries ; Population: 2.25 bn Nominal GDP: $5.4trillion(2010f) Exports: US$ 1.3 trillion (2010f) Imports: US$ 1.3 trillion (2010f ) Shanghai Dubai is 4 hours ahead of Greenwich Mean time (GMT) 9am Dubai = 1pm Hong Kong1pm Dubai = 9am London5pm Dubai = 9am New York DIFC Region Deployment channel for the new wealth & Support regional economic growth A regulated fully transparent financial centre compliant with international standards Internationally- accepted common legal framework A link to the international markets

21. DIFC Structure I

22. DIFC Structure II Over 30 laws & regulations have been enacted establishing the basis for regulatory framework and allowing financial institutions to carry out activity in the DIFC. Tailor-made based on the best laws available in leading jurisdictions (e.g. Regulatory Law based on Common Law, Insurance Regulations based on Bermuda Law, Trust Law similar to Singapore and US regulations) DIFC issued a Data Protection Law, compliant with EU Directives, the first regime in the region to ensure the protection of all personal information. Other laws in the pipeline: intellectual property law, electronic transactions law, statistics law among others. Sole financial regulator within DIFC, AML co-regulation with UAE Central Bank Administrative and civil rule making and enforcement Bilateral MOUs with host of jurisdictions IOSCO, the BOCA Declaration (including multilateral MOUs), IFSB, IAIS (Technical Committee) etc Develop overall strategy and provide direction to the Centre Develop laws and regulations governing non-financial services activities Promote DIFC and attract licensees to operate in the Centre One stop shop service for visas, work permits etc An independent court system responsible for administering and enforcing the civil and commercial matters at the Centre Based on Common Law- offering institutions and companies the legal clarity and predictability

23. Dubai Mercantile Exchange  The Dubai Mercantile Exchange was launched on 1 st June 2007. It is a joint venture between the Dubai Government, New York Mercantile Exchange and Oman Investment Fund.  The Exchange has emerged as the premier international energy futures and commodities exchange in the Middle East, providing price transparency and market liquidity for crude oil from the world’s foremost oil producing and exporting region.  The DME’s new shareholding structure (from Oct08) will include Goldman Sachs, Morgan Stanley, JP Morgan, Vitol, Concord Energy, Casa Energy Trading, and a Shell Company.  Currently, the Exchange lists the Oman Crude Oil Futures Contract, addressing the growing market need for price discovery of Middle East Sour Crude. Total Number of DME Oman Crude Oil Futures Contracts traded since launch: 2,034,834 (as of 17 th Apr, 2011)  DME is authorised and regulated by the DFSA and all trades executed on the Exchange are cleared through, and guaranteed by, NYMEX’s AA+ rated clearinghouse.  DME has 57 members as of Apr 17 th 2011 and the number is expected to grow. (For more information, please visit: http://www.dubaimerc.com/)http://www.dubaimerc.com/

24. Dubai Financial Market (DFM)  DFM was created in 2000.  DFM became part of Borse Dubai in 2007.  DFM operates as a secondary market: For trading of securities issued by public joint-stock companies; For bonds issued by the Federal Government or any of the Local Governments and public institutions in the country and; For units of investment funds and any other financial instruments, local or foreign, which are accepted by the Market.  As of Apr 28 th, 2011, 78 companies are listed on DFM. (For more information, please visit: http://www.dfm.ae/default.aspx)http://www.dfm.ae/default.aspx

25. Location :Location : Located in the business hub of the Middle East Transparency :Transparency : Global standards of regulation in a financial free zone International :International : Issuers from 5 different continents Exposure :Exposure : Worldwide coverage Valuation :Valuation : Markets determine value of the company Liquidity :Liquidity : Bridging international investment and local retail liquidity Product Choice :Product Choice : Equities, Structured Products, Equity Derivatives, Bonds/ Sukuk, ETFs* and REITs. Open to companies globally Dual Listings & Transfers Regulatory Requirements in-line with international best practices (For more information, please visit: http://www.nasdaqdubai.com/home/home.html)http://www.nasdaqdubai.com/home/home.html Nasdaq Dubai: Key Features * Subject to DFSA approval.

26. Nasdaq Dubai Legal Ownership Structure Source: DFM

27. DIFC Ecosystem

28. DIFC Entities Regulatory infrastructure DFSA Legal infrastructure DIFC Courts Arbitration Centre Registrar of Companies Registrar of Securities Registrar of Land Financial infrastructure Borse Dubai DFM Nasdaq Dubai Dubai Mercantile Exchange Payment infrastructure RAPID Human infrastructure Hawkamah Institute for Corporate GovernanceHawkamah Institute for Corporate Governance Mudara Institute for Directors Centre of Excellence

29. Development of DIFC as a Financial Hub Data as of March 31st, 2011 ; Source: DIFC Registrar of Companies DIFC Registered Companies Net No. of Companies Active DIFC registered a total of 1039 companies since inception 797 are active as of March end 2011

30. Areas for cooperation The DIFC has in place a sophisticated framework of laws, regulations & governance, modeled on international best practices. DIFC provides market infrastructure for GCC bloc to emerge as economic and financial hub for MENASA region Provides comprehensive platform for listing, IPOs, privatization, project finance, securitization Opportunity for companies to tap into regional liquidity Conglomerates can use regional capital markets to raise funds Establish vehicles (PE funds): give regional investors exposure to MENASA markets Lower access barriers to financial services Integration of financial markets: starting with DFM + Nasdaq-Dubai & possibilities of cross- lisitng Develop Local Currency Debt Markets Joint ventures for investment Infrastructure Development through Public-Private Partnerships Payment system infrastructure for $ and Euro payments Change in Global Economic Geography requires accompanying change in Global Financial Geography

31. Thank You! nasser.saidi@difc.ae