Abu Dhabi goes head-to-head with Dubai to be MENA hub

Abu Dhabi stepped up its rivalry with Dubai to be the financial hub of the Middle East and diversify from oil production on Wednesday.

Abu Dhabi Global Market (ADGM) — a financial zone in the emirate — announced that two international institutions, Macquarie Capital and Aberdeen Asset Management, would base their hubs for the Middle East and North Africa there, rather than the longer-established Dubai International Financial Centre (DIFC).

The ADGM went live in October and is an attempt to imitate the success of its equivalent in Dubai, which has attracted some of the biggest names in finance over the past decade and positioned itself as a gateway between East and West.

Reasons why institutions should locate in Abu Dhabi include its political stability and security, world-class infrastructure and growing middle class, Richard Teng, CEO of the financial services regulatory authority at ADGM, said on Wednesday.

"Abu Dhabi is a natural place for international institutions," Teng told CNBC from the emirate's Global Financial Markets Forum.

The former chief regulatory officer of the Singapore Exchange joined ADGM in March 2015, with a remit to recreate the regulatory framework that made DIFC appeal to international investors.

Teng said ADGM could complement the success of DIFC, drawing parallels with the rise of successive hubs in Asia.

"All these centers will coexist and complement each other and in this region there is a lot more need for financial intermediation," he told CNBC.

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Abu Dhabi is one of the seven states, including Dubai, which make up the United Arab Emirates (UAE) and is the federation's capital.

In common with other states, it is seeking to diversify its economy away from oil, with growth threatened by government spending cutbacks in response to low energy prices.

"What is interesting is that the government initiative to diversify really worked," Philippe Ghanem, CEO of ADS Securities, an Abu Dhabi-based brokerage and trade services provider, told CNBC.

"The bridge of being positioned in Abu Dhabi allows you to serve not only the East and the West. But also, real estate continues to grow, (there is) demand for schools, hospitals and other activities and the country is really working in terms of being a business platform and a high-lifestyle platform for individuals," he added.

Moody's Investors Service estimates that real economic growth in Abu Dhabi will slow to 3.1 percent in 2016 from 3.4 percent in 2015, with the deficit seen widening to 14 percent of gross domestic product.

"The non-oil economy and expanding oil sector have so far allowed Abu Dhabi to avoid a recession, but lower government spending on infrastructure projects is likely to dampen non-oil growth," the credit ratings agency said in a report on February.

Standard & Poor's also warned in February that Abu Dhabi's government balance would worsen further because of low oil prices, but held the emirate's credit rating at AA/A-1+.

— By CNBC's Katy Barnato at the Global Financial Markets Forum in Abu Dhabi.