Dubai’s global status as a financial centre is at risk, as a result of the trade boycott of Qatar by a Saudi Arabian-led bloc, which includes the United Arab Emirates, according to the chief executive of financial giant Standard Chartered.
Standard Chartered chief executive Bill Winters told Reuters that he feels that it could become “increasingly difficult” for Dubai to act as a comprehensive regional hub for international companies’ Gulf operations if the tension in the region continued.
“There is a lot of benefit we get from having a Dubai hub, we are looking to see what the effect of this will be,” Winters told Reuters.
“There is a risk of turning away from the UAE.”
Dubai is the largest city in the UAE is seen by many as the region’s main banking hub. In 2004 it established a low or zero tax, independent zone known as Dubai International Financial Centre (DIFC).
Inside the DIFC there are now more than 400 financial services firms including 17 of the world’s top 20 banks, according to its website, with one of the numerous incentives on offer being a 50-year guarantee of zero tax on corporate income and profits.
But, according to Winters, the diplomatic problems with Qatar could now make it harder for global banks to base the vast majority of their coverage of the Gulf out of Dubai.
Winters told Reuters that Standard Chartered itself had no plans to change its Gulf operations, though it is “watching the situation closely”. The company currently receives about 20% of total revenue from its Africa and Middle East operations, with much of those being managed out of Dubai.
“Everybody is aware of the situation – what we don’t do is start pitching to UAE companies about deals in Qatar or doing business there, but we are not fundamentally changing the way we do business,” he said.
The UAE, Saudi Arabia, Egypt, and Bahrain announced on June 5 that they had cut ties with the state of Qatar over Saudi allegations that Qatar has been supporting Islamist groups. Officials from Qatar capital Doha have strongly denied the allegations, asking for evidence to support the claims to be brought forward.
The rift has prompted some banks from Saudi Arabia, the UAE and Bahrain to reduce their exposure to Qatar in various ways, including by delaying letters of credit and investment deals.
And since the trade boycott began, companies doing business with Qatar have faced disruptions such as longer travel times and having to find new suppliers.
The UAE central bank has also ordered local banks to stop dealing with a number of individuals and entities with alleged links to Qatar and to freeze their assets, while advising banks to apply enhanced due diligence for any accounts they hold with six Qatari banks, the Reuters report added.
Standard Chartered offers personal and corporate banking in Qatar and employs around 128 staff.
Winters added his bank does not handle a huge amount of cross-border business directly between Qatar and the United Arab Emirates, but that his staff are mindful of the situation.