The ADFW Boardroom Abu Dhabi In the Global Economy

[Music] good afternoon everybody thank you so much for being here I'm really excited to talk about uh the uh topic that we're going to be getting into in the next half hour and uh the theme of our panel discussion is about Abu Dhabi in a global economy uh there's plenty to unpack not least at Abu dhabi's growing role as a financial hub on a global scale but then equally you talk about so many different events that could shape this the outlook for the global economy in the coming years and into 2025 so uh with that I'm going to start with you Ray if you don't mind um you know you look at everything that has happened in the past year and it feels like many things are happening at the same time lots of tectonic shifts when you think about the geopolitical dimension you know we don't have to go so far the events that have happened in this part of the world over the weekend uh you talk about the massive push into Ai and all of the hype that there is around that space and then you also talk about potential trade barriers going up next year possibly even more so with the return of the Trump Administration so when you think of all of these things going on concurrently how do you construct a narrative for where the global economy could be headed in the coming years well thank you for having me and um thank you for your question in my life I've been doing this for about 50 years and in my life many times that I've been surprised about things that happened I realized they just didn't happen in my lifetime but they happened many times in history and so there were three big things that Drew my attention to this pattern and then I think there are five big forces and the first of that is the debt money economy markets Force you know you create credit it creates buying power it also creates debt and then we have debt issues and so we have a government debt issue and you deal with these debt issues we all do and then the economic so there's a cycle and there's levels of indebtedness particularly government indebtedness are the highest since the 1930 to 45 period so that's number one second is that we have periods of internal order and disorder disorder when there are large wealth and values gaps that create populism of the right and populism of the left and internal conflicts internal conflicts which we can see happening in many of these countries we never had populism of the left and the right in developed countries in my lifetime third thing is the great power conflict the rise of a great power to challenge an existing great power and the existing World Order China particularly and the United States and the change in how the world order is working number four from research is acts of nature there have been more droughts floods and pandemics have killed more people than Wars and have toppled more orders than that and number five throughout history is technology the invention of new technologies and now with the inventions of AI and those new technologies we have the greatest technological changes those things those five forces are coming together and they're very interdependent like the cost of uh climate change is8 trillion dollar a year roughly and that's out of a hundred trillion dollar economy so when I look at this I see this consequence I think that if we take let's say the elections that have just happened and we're seeing different countries there's a left right um conflict and how that goes and then anyway I'll probably take too long in answer your question but I think that whatever we're going to talk about here will be under any one of those categories and the inter relationships that we're going to have with the other will determine the nature of what transpires Hanah I want to Pivot and turn to uh how some of the factors that Ray was just listing could influence and impact Abu Dhabi uh no no man is an island no country is an island we still live in a globalized world even though it's increasingly turning uh more and more de globalized or more fragmented I should say uh how do you see some of those shifts impacting the Abu Dhabi economy uh thank you and thank you for having me um we've seen Abu Dhabi play and all the morning sessions talk about how Abu Dhabi has positioned itself on the global uh front and position itself as really a financial Hub uh for the globe and um what we have seen is really Partnerships and economic ties with different countries to help you know develop and put investment programs in in various sectors is really important and we spoken about Ai and Technology that's one of the sectors that Abu Dhabi has been really focusing on and investing and pushing forward um as well as a renewable energy sector um on the AI front we have seen um how Abu Dhabi positioned itself collaborating with uh us and you know uh other technology firms in terms of building Partnerships and uh how we can evolve and play an important role establishing funds Investments that really focuses on investing in this sector and really taking Innovation forward and on a renewable energy sector there still a lot that has to do with Innovation when you talk about renewable and again since cop 28 we have seen an acceleration and a focus and investment in that area um Altera xrg and a lot of projects and Investments uh taken forward to really uh in solar energy nuclear wind energy and hydrogen uh really to take uh more on Green projects green Finance uh that's really driven uh by Abu Dhabi through those economic ties and Partnerships you find it here in the UAE as well as outside the UAE so TR have looked at developing those economic ties and Partnerships in different countries and really developing those development programs and investment to accelerate um you know some of the um sector development and the focus on specific Industries Sergio well taking it to the financial system um again when you're thinking about the Outlook you you have to be very cognizant of some of the macro risks and some of the geopolitical risks as well and I just wonder whether you think this fragmentation that we talk about or geoeconomic fragmentation as the IMF like to put it uh may lead to fragmentation of different sorts and uh eventually fragmentation of say rulem with different jurisdictions operating under different set of of regulatory regimes so does that actually create an opportunity or is it does it create a hindrance for the financial system around the world well both I I have to say that uh the fragmentation of course when you look at uh the geopolitical developments uh uh it means clients and people are looking for diversification and so you see for example the UAE and Abu Dhabi are most likely being a beneficiary of this if you think that around 7,000 people will come to this country in 2024 as a as a function of uh uh you know I'm talking about Millionaires and multi millionaires uh will migrate because of a need of diversification and the fragmentation and in in a sense is an opportunity but is also a threat uh you know the fact that we are most likely going to see an escalation of uh barriers tariffs uh uh sanctions coming uh will impact uh uh the flow of capitals and eventually make uh uh cost of capital more expensive and the one countries that are going to be under more pressure are going to be uh uh the developing countries so in a sense uh this can eventually also lead to an escalation on on the geopolitical front so you know I have to say that we need to look at this opportunities also in the eyes of potential threats and uh and and uh and uh some uh potential teroid on a micro level of course uh very much focus on the integration of of CED s right now but what would you say is at a macro level the biggest risk that that you worry about in the years to come on a macro from a macro standpoint of view I would say that financial markets uh uh got used to uh I mean I I could a level of complacency that is quite High uh in relation to geopolitical events but also in terms of uh uh macroeconomic and fundamental issues R just mention uh the the level of uh ineptness of governments and uh so everybody seems to feel comfortable that this can go on for forever and that can change and and particularly I would say that if tariffs goes uh uh too far in terms of uh bargain uh uh Power uh they may create a new inflation and that new inflation will eventually translate into higher rates and then then the sustainability of the debt that is out there is going to be posed into question both public but also PR private debt yeah so on the inflation that's a nice segue for my question to Jihad because it feels as though the the again what policy makers are focused on has shifted in the past two years it's been this fight against inflation inflation beating uh central banks got to a point I think a couple of months ago where they felt comfortable enough to start with an easing cycle but again the narrative may change because of upside surprises that are coming through the potential implementation of of tariffs which could be inflationary as well so in an environment where central banks are obviously focus on the price stability mandate politicians want to stimulate growth bringing it back to the UAE what role can the financial sector actually play in in helping to get to those outcomes thank you it's um it's a very interesting question Let Me Maybe follow up on what has been said okay major transformation uncertainty inclusion in a world where we still have Legacy the legacy of debt and the legacy of inflation when you aggregate all of this it brings you to an immediate conclusion the role of the financial sector is going to be more important than ever you need deep Market to finance all these large Transformations the acceleration of some of the trends both in terms of Technology environment you need to address Legacy issues high level of debt and work that is becoming more and more uncertain and where the risk of fragmentation is in fact going to impact the overall growth in the economy and you need more inclusion therefore the role of the financial sector is going to be key in the region the role of the financial sector still have a potential to grow because we still have huge set of Investments that we need to finance and this is where the deepening the market uh is very important in recent study we we showed that the productivity of capital is low in the r it's not only the productivity of Labor over the last two decades therefore we need to deepen financial markets we need to strengthen the role of um um the capacity of the market to channel resources which means that the role of the state has to change the role of the state in the region is still very present uh in the operations and therefore repositioning the state allowing more private sector to play deepen the markets strengthen the role of institution investors those are basic fundamentals but are very important going forward last element I think that technology will bring the capacity not only to address the issue of accelerating Trends but also Foster inclusion inclusion is very important access to finance still low and B uh for smmes and below is 5% of GDP while in other Emerging Markets is 15% only by catching up you will have huge impact on growth huge impact on financial potential therefore I think we are at um at an important moment and being here in this uh platform for Future Finance I think it's a it's a good way to Charter the future not only for the local market but also for how the region can can strengthen further its growth and inclusion through financial sect re I'd like to ask you a question about channeling Capital uh not a day goes by this year where I haven't talked aled about stock markets in the US making another record high I think today 57th record high for the S&P you talk about Bitcoin breaking through $100,000 you talk about some meme stocks coming back in fashion and Vogue again corporate credit spreads at the tights and it feels like there is well number one very tight valuations very rich valuations but also potentially a lot of froth in the market as well how do you Channel capital in an environment where most things seem to be trading rich on a historic basis most things can you say that last part again I didn't hear you most things are trading rich on a historic basis yeah I first of all I think um we have to distinguish between the nature of the markets that are succeeding and the markets that are failing and um so what we're really talking about is a concentration of stocks particularly technology stocks new development technology stocks if you look at a number of markets around the world a number of markets as a whole on a real dollar basis are down relative to 10 or 15 years ago so there's a big distinction between the new technologies but I think that we're um in an environment where um the locations and the Technologies are very different what I mean by location very different I think that Abu Dhabi for example is a Renaissance state that aadami is a um in periods of great conflict there are are countries that have are are not doing well that they have uh a fight between if you look at Wars there are winners and there are losers and there are neutral States and so Abu Dhabi has a is a neutral State basically a Renaissance state where it has basically those elements uh what are the elements put aside ababi and just think of what are the elements places where you raise your children well they're well educated and they're capable and they behave civil civil together and they also have a place where there's resources where you could be invented so when we're looking at the world I think the distinctions are enormous between what companies are doing well if and that has a big wealth impact for example in the United States you can the unicorns fantastic new inventions that make new unicorns but there's basically about three million people who are behind those companies in a country of 333 million people and so I think that one has to make the distinctions there are some countries that are rich and there are some places you look at Europe the situation in Europe is very discouraging because of the economic because of the debt the economic circumstances the cost of military the social fragmentation and so on so I don't think you can make a generalization that something is expensive or something isn't you have to pick where you're going to be in that environment I think you have to diversify well so you want to be in the places that have those fundamentals correctly I think yeah and Hannah I guess that leads nicely to uh to to to what I wanted to ask you which is essentially having the right conditions in place to allow for institutions and even a personal level for people to flourish uh I wonder how you see what Abu Dhabi has done in terms of steps the last couple of years in in terms of being able to attract wealth to attract asset managers new sources of of of capital into the Emirates and whether you think that actually momentum that can continue in the coming years given also in the region you're seeing competition from other areas as well yeah no I think I mean today is really a reflection and a result of many years of work to really position Abu Dhabi and the UAE as a financial h and really attract you know institutions to um you know base uh their operation here come to this region invest in this region and uh really be part of that economic growth um this has been years of uh development the UAE has always been open uh uh to financial institutions we have many players um competition has has always been part of our forte in this market you know uh more than 50 Banks and now on the rise you have uh adgm as a financial uh uh Hub that uh you know uh really incentivize many institutions to join we have seen a very big inflow of um uh fund managers asset management companies establishing themselves here to operate within the region because there are opportunities in this market and I think it's also because of the platform that has been invested in and created to enable them to operate in this market um the openness in terms of um the policies the regulation the ease of doing business uh that has been really a great Plus for institutions to come and operate here and then uh of course we see a lot of influx in terms of high net worth wealth managers moving into here it has been this region uh an attraction for many family offices for many uh uh wealthy institutions and individuals to base themselves here and that's because uh over the years there has been consistency stability you know a great platform to operate and uh you know to establish their offices here so um today is really a good result of you know the years of work and I think uh it doesn't stop here because as we move forward over the coming years this uh great uh uh objectives clear objectives in terms of what needs to be achieved the whole ecosystem is working towards that objective and there's very much Clarity in terms of what needs to be done and the execution really attracts many to come to this region and then of course the promising economic growth this region has to offer well Sergio onto a financial system that has existed for a very long time the Swiss banking system and it's gone through various phases there's been an evolution so to speak in you know 20 30 years ago Swiss banking you say the word Swiss banking and people would have a different connotation versus what Swiss banking is today there've been several shocks in the last few years uh going all the way back to GFC then obviously cedy SS happened as well what would you say are some of the biggest Les lesons that one can glean from the experience of what has happened to the Swiss banking system that a jurisdiction like the UAE like Abu Dhabi can take from it well first of all it's true that uh despite all these changes we have been fortunate it's uh we have been uh banking with in the Middle East for 60 years and with three four generations so we have a a lot of experience in that sense so I guess when when I look at uh it's very important to keep uh uh a good standard of uh regulation uh predictability around regulation around the legal system this one of the strength of Abu Dhabi uh the ability to attract people and combine um innovation technology uh will be important the connectivity with financial markets but also the infrastructure that we see now being developed here uh easy place to travel from and travel uh uh to new locations is very important I the lessons learn is is that don't underestimate how valuable predictability is so at the end of the day one of uh the biggest issue that is affecting Europe and maybe even Switzerland at this stage is the lack of predict predictability and so many changes also around uh the political landscape regulation so it's very important to have a predictable Frameworks and that will uh uh uh sustain uh uh growth over over over over the years do you see AI as uh significantly having an impact on the trajectory of the financial system in coming years yes like technology has been changing our business uh for the last 40 50 years in a quite dramatic way we don't realize but this what happened it will continue to be so uh you know of course this time it's probably going to be a little bit faster than we saw in the past but you know eventually I do believe that uh EQ EQ will continue to be important uh uh so uh IQ was always important but EQ is going to be important and then artificial intelligence may help us to become better more efficient but it's not going to take away the role of people so uh and it's and most likely it's go it's going to make our business and our jobs more interesting going forward some of the jobs we do today are quite uh I would say repetitive and not really adding a lot of value so technology can help us become more efficient and more effective yeah she had in the previous comments you were talking about the uh importance of of uh promoting a space Financial inclusion where does digitization actually fit into all of that and also just to take it one step further know do you see a potential for digital money in in that sort of landscape that you just described well I think in the future we will add to the EQ IQ the TQ the technology coefficient is going to be one of the elements that will Define who are the winners and who are the losers um in the region two3 of central banks have already envisaged to move into Central Bank digital CS which is something that we encourage and we believe that this a good step needs to be Amplified this is good because it will help in inclusion but also and crossb digital payment crossb digital payment for example could be a way for the GCC to increase financial integration we see for example for the GCC two key levers for growth financial integration that still have a way to go and trade facilitation or reducing trade bares this could those could be a way to allow the GCC for example to be one of the economic powerhouses in the world the second dimension is connectivity in the today's work connectivity is becoming a key element especially in the fragmentation all what can be done in order to remove barriers create corridors corridors of trade connectivity with for example with Asia new connectivity with Europe and so on are very important and with that technology has to accompany inclusion is very much a potential where sorry a very much an area where technology can play a great potential therefore we are encouraging countries in the region to accelerate we are monitoring this we're working with central banks in the region in order to make technology one of the key levers for that the state has a role to play uh and the state has to be the one who would conceive the overall architecture but again give the private sector the capacity to lead and to grow the region especially the GCC had a third type of economic actors the accelerators which are the Sovereign wealth funds and I think also there is a role that The Sovereign wealth funds could help in accelerating this transformation and make uh um what Ray was mentioning that we we are in a in a Renaissance era to have this Renaissance Era to even flourish more Ray I'm just going to give the final question to you given we are in some parts of the world in a Renaissance era and other parts perhaps not but we spoke about the rising debt profile especially in the US we talk about again the increase of debt more and more people are talking about the size of the US deficit but I do wonder if perhaps the biggest RIS is the one that's staring Us in the face and that is tff we could be sitting here in one year's time and the world could look very different if the new Trump Administration comes in and imposes these quite onerous T around the world how are you thinking about what the world could look like in an environment of much higher terrorists I'm sorry because of the noise that is he no the how am I shrinking higher tariffs the impact of higher tariffs as the administration I think I think we're oper operating in an environment which is very much like the 1930s and I don't want to use the word there there's a hard left and there's a hard right approach and the hard right approach is a nationalistic approach in which protectionism is a source of Revenue tax revenue not it's not much emphasized but it's going to bring in a lot of tax revenue then there's protectionism and that environment is because we are at a world at war in terms terms of an important part of this is the belief that China and the United States could get into a war so we have are also dealing with um the development of essential domestically produced items and that includes not only chips But it includes many essential items and that difference is very much like the 1930s so you have a right um of Center let's call it a hard right notion of uh uh also it will represent top- down uh not the classic free market free it's more of what industrial policy um in the 30s when you have a war a war kind of environment or certainly a threat of a war kind of environment as we have it's not exactly the free market it is that there are compelling Necessities for the government to achieve certain things um that self-sufficiency that power that military strength and all of that that all enters into the package so that there's a right left conflict in terms of you know in the 30s we called it fascism and communism there was that kind of conflict and then there is the top down management and so when we say the you know uh United America first type of policy it rep represents the fact that we have come from a world in which there was more globalization the IMF the World Bank the uh United Nations all coming together to be able to operate in a world Community it's now uh more a um individual interests at odds in a world that has greater internal conflict and also greater external conflict thank you very much and panelist thank you for your time [Music]