< Previous10 Vol. 24/12, 16–31 October 2023 COMMENT ZAHABIA SALEEM GUPTA, DIRECTOR, SOVEREIGN RATINGS – S&P GLOBAL RATINGS Expanding BRICS could have only limited economic bene ts There’s a risk that the diverse economic and political priorities of BRICS member states could potentially undermine the group’s effectiveness The UAE values the BRICS group, especially given its world-scale signi cance in supporting peace, security and prosperity globally Considering the absence of new group trade agreements, and based on the track record of economic relation- ships between existing BRICS coun- tries, we do not expect materially higher trade and investment ows for new joiners. The prospective new members are at varying developmental levels and face different economic chal- lenges. This is highlighted by their GDP per capita, which ranges from $1,220 in Ethiopia to $51,456 in the UAE. Moreover, the economy of one member state, China, is larger than those of all the other members combined, highlighting potential di erences in the power to in uence policy within the group. Common economic goals of an expanded BRICS grouping appear to be to enhance cooperation among emerging markets, provide an alter- native to developed-country-domi- nated forums such as the Group of On August 24, 2023, the original BRICS countries – Brazil, Russia, India, China, and South Africa – invited Saudi Arabia, the UAE, Iran, Egypt, Argentina, and Ethiopia to join the group. While the new BRICS group (assuming all invited countries join) would comprise approximately 30 percent of the world’s GDP and 45 percent of its population, few factors unite the members economically or politically. COMMENT arabianbusiness.com 11 The prospective new BRICS members are at varying developmental levels and face different economic challenges reserve arrangement in 2014 to relieve balance-of-payments crises. However, this has yet to be utilised by the member countries. Furthermore, some members have more political aspirations for the new BRICS than others. Countries like China, Russia, Argentina, and Iran see it as a geopolitical challenger to the West. Oil-rich producers like Saudi Arabia and the UAE are seeking to expand their reach beyond the Middle East and Africa. Meanwhile, West- ern-sanctioned Russia and Iran could hope to circumvent restrictions on trade and financial transactions, which if agreed to by the group may damage relations with the West. Competition and conflicts among members will likely hinder cohesive political dialogue and cooperation. China and India face disputes on border issues, Saudi Arabia and Iran have historically had a tense relation- ship, and Ethiopia and Egypt disagree over access to the Nile waters. However, the geopolitical land- scape is changing. For example, recent talks between Saudi Arabia and Iran, brokered by China, could signal increasing rapprochement between them. Depending on the will of the participant countries, and backed by their combined economic clout, BRICS may eventually become a more impactful political grouping. Depending on the will of the participant countries, and backed by their combined economic clout, BRICS may eventually become a more impactful political grouping Seven (G7) or the Organisation for Economic Co-operation and Devel- opment (OECD), and reduce the dominance of the US dollar in inter- national trade. In our view, however, the diverse economic and political priorities of the member states could potentially undermine BRICS' effectiveness. Real GDP growth has been varied for the original BRICS members over the past decade. The relatively strong economic performance of China and India contrasts with the results in Brazil, Russia, and South Africa, re ecting individual policy-making decisions, and geopolitical and idio- syncratic factors. The original BRICS members have increased trade and investment among themselves but mostly with China. Trade with China averaged 25 percent of the total for Brazil, South Africa, and Russia, and 12 percent for India in 2022. Overall though, intra-BRICS exports only represented 10 percent of members’ total volumes, up from 8 percent in 2010. Intra-BRICS investment rose more than 500 percent between 2010 and 2020; however, this re ected just 5 percent of total foreign direct invest- ment for the group, and about 90 percent of the increase was invest- ment into China. While BRICS countries have mulled establishing a common currency in the long term, this would be di cult given the di erent levels of economic development among members. A currency zone would also require members to give up monetary policy exibility and open up capital accounts, which may not be politically agreeable for some. In the near term, BRICS countries plan to increase direct transactions in local currencies and bypass the US dollar to reduce dependence on the US financial system. This partly reflects the currently constrained access to external financing in US dollars for some sovereigns and a broader trend of rising alternative payment systems. The Chinese yuan will probably be the primary bene - ciary of increasing trade in local currencies because it represents the biggest trading nation in the bloc. However, the key constraint on the yuan's potential as a reserve currency remains the absence of full capital account convertibility. Access to wealthier BRICS members and the NDB for conces- sional funding is likely one of the key reasons for lower-rated countries to join. The NDB was established by BRICS in 2014 to fulfil demand for infrastructure investment in member countries. The UAE and Egypt joined the bank in 2021, along with Uruguay and Bangladesh. However, the NDB’s outstanding loan portfolio is currently small at about $15bn, relative to over $400bn at the World Bank and $144bn at the Asian Development Bank as of year-end 2022. Future funding growth will depend on higher capital contri- butions from members. The BRICS countries also established a $100bn foreign currency fund as a contingent $27.6TR The expected combined GDP of the original six BRICS member countries in 202312 Vol. 24/12, 16–31 October 2023 COMMENT JEFF HADEN, KEYNOTE SPEAKER, CONTRIBUTING EDITOR, LINKEDIN INFLUENCER AND AUTHOR OF THE MOTIVATION MYTH How the best advice you can give isn’t actually advice People who ask for advice regarding complex or important decisions rarely want you to tell them what to think If a friend is considering leaving a great-paying job to start a company, don’t tell her it’s a good or bad idea. Help her nd the right questions to ask herself When asked, Je Bezos’s boss at a hedge fund tried to discourage him from resigning to start Amazon, saying his idea was “probably a better idea for someone who doesn’t have a good job.” When asked, Walt Disney’s brother (and business partner) Roy tried to talk him out of making Snow White. When asked, Warren Buffett’s father told him it was a bad time to enter the securities industry. Hold that thought A few years ago, a real estate devel- oper trying to decide whether to buy a certain apartment complex asked me for advice. I thought for a second COMMENT arabianbusiness.com 13 No matter how smart we may like to think we are, our friends' answers are the only answers that matter is always his favourite deal. (Until the next next deal, of course.) “Then you have to decide how much time you have available,” I said. “And are you better o doing the bare minimum, so you have time to complete the other projects you have going, or is optimising this property’s cash ow and bottom line worth a few delays on other buildings?” I asked other questions. Like whom he considers to be his ideal tenants. Like his long-term plans for the property. Like how this building would t into his overall portfolio. Because there was no way for me to know what is right for him, I tried hard not to steer him in a particular direction; instead, I just tried to help him determine the right questions to ask himself. If a friend is considering leaving a great-paying job to start a company, don’t tell her it’s a good or bad idea. Help her nd the right questions to ask herself. Because no matter how smart we may like to think we are... their answers are the only answers that matter. What we can do is help the people who ask for advice work through the process of making the right decision for themselves and said, “The area seems over-built. Interest rates are falling, and the tenant demographics make them more likely to want to purchase homes rather than rent. And based on the age of the property, the maintenance costs are likely to accelerate rather than stay relatively at. If it was me, I wouldn’t do it.” Did that sound like good advice? Or at least relatively intelligent advice? Maybe. But that doesn’t matter People who ask for advice regarding complex or important decisions rarely want you to tell them what to think. Usually they’ve already thought too much; they’re so lost in data, analysis, and the pros-versus-cons weeds that nding clarity is almost impossible. At that point, the last thing they need are answers. Instead, they need non-leading questions they should ask themselves. Unfortunately, that’s not what I did with my friend. I told him what I thought he should do, even though I had no way of knowing what he should do. I didn’t know his nancial situation. I hadn’t sifted through all the data he had gathered. I hadn’t spent time studying market trends, rental capac- ity and demand, other apartment proj- ects that might be in the works, etc. Even more importantly, I’m not him. My level of risk aversion, my desire for capital preservation, and my willingness to spend the hours required to manage a 100-plus unit apartment complex is surely di erent than his. Who was I to tell him what to do? When asked for advice, who are we to tell anyone what to do? We’re us. We’re not them What we can do, though, is help the people who ask for advice work through the process of making the right decision for themselves. Not long ago, the same friend asked for advice about a commercial property he just purchased. He couldn’t decide whether to lease as-is, or spend the money to convert the entire building to mixed use, or reno- vate one oor of the building and wait until he has su cient funds to reno- vate the second oor.... I knew what I thought, but what I thought didn’t matter. Instead, I asked him a few ques- tions. “How do you feel about your capital reserves?” He felt a little exposed in terms of cash, so I said, “One thing you have to decide is how much you want to tap into that. And at what point maximising this opportu- nity is worth possibly not being able to jump on another opportunity in the next six or 12 months.” “You’re the only person who can answer that,” I said. He nodded. He loves his properties, but the next deal What we can do is help the people who ask for advice work through the process of making the right decision for themselves 14 Vol. 24/12, 16–31 October 2023 ECONOMICS Saudi-UK relations are entering a new chapter Innovation, polarisation, accessibility and collaboration colour a $900bn opportunity Not least, as Saudi’s Public Invest- ment Fund had announced, some 24 hours earlier, one of the most auda- cious sporting combinations of recent history – the merger of the PGA Tour, DP World Tour and LIV Golf. More investment. More opportunities. More innovation. And more golf in the King- dom it would seem. Not just another networking event Discussions split neatly between the political – and movements towards a UK-GCC Free Trade Agreement, more on that later – and practical - how can UK firms practically access and contribute to the skills, technology and knowledge transfer needed to deliver on Saudi’s Vision 2030. UK rms have always been at the forefront of leading - and solving - complex challenges. But Saudi has – for many, sat in the ‘too difficult’ realm of either entering into, navigat- ing through or succeeding in. Can you afford, today, to not be active in the kingdom? Global rms now seek access to the kingdom, not only because of the nancial incentives and opportuni- ties, but because it is becoming a centre for innovation. In the face of some of the highest global investment into solving unique climate, energy and social infrastructure challenges, KSA will shift over the next decade from being an importer to an exporter BY ANDREW NICHOL, PARTNER, LUMINA CAPITAL ADVISERS The level of government and private sector engagement reflected the importance of the KSA-UK relationship $22.3BN The value of the UK trade with Saudi Arabia in 2022 ECONOMICS When discussions at London’s Mansion House turn to the possibility of renaming the beautiful Egyptian Hall, which includes statues from the mid-nine- teenth century, to the Saudi Arabian Hall, you know a trade and partner- ship forum has been a success. I was recently part of a delegation at the UK Saudi Business, Trade and Partnership Forum, which included government o cials, sovereign wealth fund heads and business leaders. Prince Khalid bin Bandar Al Saud, Saudi Ambassador to the UK, Neil Crompton, UK Ambassador to Saudi Arabia, Sir William Russell, Lord Mayor Locum Tenens, Dr Majid Al Kassabi, Minister of Commerce, Saudi Arabia, Lord Dominic Johnson, Minister of Investment, United Kingdom and Rt Hon Grant Shapps, Secretary of State for the Department for Energy Security and Net Zero were all in attendance. Organised by the Saudi British Joint Business Council and the Saudi National Competitiveness Centre, the level of government and private sector engagement re ected the importance of the KSA-UK relationship. And while the soundbites – rightly – focussed on the myriad of collaboration opportu- nities, for me, if ever there has been a ‘Saudi Moment’ this felt like it.arabianbusiness.com 15 ECONOMICS Saudi’s $900bn investment programme, across social and hard infrastructure, travel and tourism, renewables and specialty chemicals has and will continue to transform the kingdom Nichol believes KSA will shift over the next decade from being an importer to an exporter of innovative solutions of innovative solutions. This is very different to a decade ago when the kingdom was very much a net-im- porter of both skills and talent. Polarisation of attitudes towards KSA At Lumina, where we match capital and transactions between the Middle East and the UK, we are seeing a polarisation of attitudes and approaches to the kingdom. Firms with positive experiences, or who were previously in the ‘too-di cult’ category but remained open-minded to the possibilities presented in the kingdom are reviewing, engaging, re-investing and seeking out new partnerships. That was certainly the attitude of participants at the forum. The converse does also apply, and we do still speak to rms who haven’t, and won’t, seek opportunities in the kingdom no matter the investment case. This is a shame, but a perfectly reasonable reality. What is the opportunity? Saudi’ s $900bn in v estment programme, across social and hard infrastructure, travel and tourism, renewables and specialty chemicals has and will continue to transform the kingdom. It is one of the – if not the - largest single country investment programmes globally. This is a ‘di er- ent Saudi Arabia’ as articulated by Dr Majid Al Kassabi, Saudi Arabia’s Minister of Commerce. And it is just ‘Phase 1’ of KSA’s Vision, which will be followed by Visions 2040 and 2060, after 2030, as we were emphatically reminded by Jerry Todd, PIF’s Head of National Development. Renewable energy is no longer the fringe sector of the power industry in the region. There is, today, some $34bn of renewables linked projects at pre-execution stages in KSA. From SEC, to NEOM Green Energy, Renew- ables Project Development Office, ARAMCO, ACWA and PIF. 8 of the top 20 power projects are renewables focussed and these account for 74 percent of all power project spending in the kingdom. Arabia, Neil Crompton, a lifelong Sunderland supporter) and Savvy Gaming Group (PIF) into FACEIT (Esports). Where the public sector has led, the private sector has followed – Al Fanar, a leading KSA group, recently acquired Lighthouse Green Fuels, another specialty chem- ical focused transaction. Going forward, we expect funds and corporates to not only set up and expand across KSA, but also to start making acquisitions, as they gain con dence in navigating and operat- ing across the kingdom. Addressing the issue of the kingdom’s accessibility While a regional KSA-based head- quarters will be required from 1 January 2024 in order to contract with government agencies, for those anticipating, or currently doing, business with private entities we will see a variety of approaches. Ulti- mately regional office location deci- sions won’t be ‘either Dubai, Abu Dhabi or Riyadh’ but will become a combination of some or all of Dubai, Abu D habi, Riy adh, Jeddah, Dammam, connecting a firm’s sources of growth and opportunities with the location of the talent required to deliver. Reaching a GCC free trade agreement On the political side there was some discussion of the UK-GCC free trade agreement, of which KSA is a corner- stone. The importance of this agree- ment cannot be understated. Last year, UK trade with KSA grew to GBP17.5bn ($22.3bn), or a 20 percent year on year increase. A free trade agreement is expected to result in a further 16 percent, or c.GBP2bn ($2.55bn), increase in annual trade. Despite talks of ambitions and enthu- siasm, this agreement can’t come soon enough. And if the positivity, con dence and collaboration seen at Mansion House last month is anything to go by, perhaps a signing would be apt in a newly named Saudi Arabian Hall? I wouldn’t bet against it. There are, ultimately only a hand- ful of key project owners, making their respective markets reasonably acces- sible. Most were represented at the forum personalising the stratospheric dollar values around the investment opportunities. Record levels of FDI – re ecting two-way capital ows Foreign direct investment into KSA could well exceed $20bn this year, the highest regional FDI in over a decade. It will, in all likelihood, exceed that of the UAE for the rst time since 2012. Investment had, historically, been one-way, from the kingdom into UK funds and prime real estate. Saudi deals have now proliferated across the UK – not just London - as access is sought to the skills and technolo- gies needed to execute Vision 2030. From SABIC’s investment into Teeside (specialty chemicals, green hydrogen), PIF into Aston Martin and Newcastle United (much to the chagrin of UK Ambassador to Saudi 16 Vol. 24/12, 16–31 October 2023 SUSTAINABILIT Y A guide to navigating the status of rms within the DIFC Even if a rm is authorised, it is important to know which nancial services that rm is licenced to provide The Dubai International Financial Centre (DIFC) is home to over 4,300 active registered compa- nies. However, just because a company is registered in the DIFC does not mean it can provide nancial services. In order to conduct Financial Services in or from the DIFC, rms need to become authorised and obtain a licence from the Dubai Financial Services Authority (DFSA), the inde- pendent regulator of nancial services in the DIFC. The key to understanding what a company can provide, and to whom, BY MATTHEW HAMMOND, ASSOCIATE DIRECTOR, ENFORCEMENT, DUBAI FINANCIAL SERVICES AUTHORITY (DFSA) FINANCE There are currently over 649 companies (authorised rms) who hold a DFSA licence to carry on one or more of the 32 different nancial services activities permitted in the DIFCarabianbusiness.com 17 FINANCE When choosing a nancial service or product it is important to know whether the rm is regulated is knowing whether they are author- ised by the DFSA and, if so, what they are permitted to do. Here is how to nd that out. Authorised rms There are currently over 649 compa- nies (authorised firms) who hold a DFSA licence to carry on one or more of the 32 di erent nancial services activities permitted in the DIFC. When choosing a nancial service or product it is important to know whether the rm is regulated. Only rms who are authorised by the DFSA can provide nancial services in, or from, the DIFC. If a company wants to o er one of the nancial services regulated by the DFSA, they must become authorised and hold a licence for the financial services they wish to provide. Di er- ent nancial services require di erent degrees of regulation. For example, a bank taking deposits requires more comprehensive regulation than a Representative Office, whose only activity is to market nancial services o ered by its parent rm (or another group member) licenced in an over- seas jurisdiction. Even if a rm is authorised, it is important to know which financial services that firm is licenced to provide. A list of the di erent types of nancial services for which authori- sation is needed, and a de nition of each nancial service, can be found in the DFSA’s Rules. The Regulatory Law provides for a range of sanctions that can be imposed on a person who carries on a nancial service in or from the DIFC without a DFSA licence. For example, the DFSA can impose a fine on the person, censure the person, direct them to compensate a customer or direct them to take other action. A person carrying on an unlicenced business can, as a result, also be subject to civil legal action from a person they were dealing with. DNFBPs In addition, there are other types of businesses that are registered with the DFSA that do not provide financial The DIFC Public Register, oper- ated by the Registrar of Companies, lists details of a company’s status, its location, directors and shareholders, whether it is a regulated or non-reg- ulated company and whether it is registered as a DNFBP. The DFSA Public Register can be searched to find out whether a company is an authorised rm and whether they can provide particular nancial service. It also gives details about exactly which nancial services a rm can provide and if there are any restrictions in place on those services, such as what type of clients the rm can deal with. There is also informa- tion about the authorised firm, including the names of all the author- ised individuals (past and present) within that rm, and whether there has been any Regulatory Action taken against them. The Register allows for search by name, legal status, nancial service, or endorsements. Endorsements are important; for example, only firms with a “retail client” endorsement can o er nan- cial services to retail clients. Occasionally, a firm may have a restriction on the particular nancial service it can o er e.g. advising might be restricted to certain fund types. Summary • The fact that a company is incor- porated in the DIFC, does not mean that it is able to provide financial services. • Over 85 percent of DIFC-incor- porated companies cannot provide any nancial services at all, as they do not hold a nancial services licence from the DFSA. • The fact that a company is an authorised rm doesn’t tell you what nancial services it is able to provide, or who it can provide those services to. • To understand if a company is lawfully able to provide you with a particular nancial service, you have to know what it is authorised to do, including what endorsements it has. • The relevant information is available and easily searchable on the DFSA Public Register. The fact that a company is incorporated in the DIFC, does not mean that it is able to provide nancial services, Hammond says services. These companies are classi- fied as Designated Non-Financial Businesses and Professions or DNFBPs. These companies are required to be registered because of the risk that their businesses might be used for the purposes of financial crime (eg, money laundering or terrorist nancing) due to the kinds of goods or services they provide. These businesses are required to have certain procedures in place, and have reporting obligations, but are not regulated by the DFSA in the same way that Authorised Firms are. They are not permitted to provide financial services. They are regulated by the DFSA to the extent necessary to make sure that they are complying with anti-money laundering or counter terrorist financing requirements. However, the DFSA does not regulate their main business activity, for exam- ple, their real estate, legal, accounting or jewellery business. Finding out more There are resources available to guide about entities in the DIFC and what they are permitted to do. 18 Vol. 24/12, 16–31 October 2023 SUSTAINABILIT Y How Dubai is revolutionising stem cell technology Dubai’s journey to revolutionise stem cell technology is a testament to the city’s commitment to innovation and progress In recent years, Dubai has emerged as a global hub for innovation, attracting attention not only for its iconic skyscrapers and luxury lifestyle but also for its commitment to cutting- edge scientific research. One field where Dubai is making significant strides is stem cell technology. Stem cell research and therapy have the potential to revolutionise medicine, and Dubai is at the forefront of this transformative journey. Stem cells are undifferentiated cells that have the remarkable ability to develop into various specialised cell types in the body. This unique char- acteristic holds immense promise for regenerative medicine, where BY AHMAD AL AHMAD, FOUNDER OF CORD BLOOD BANK UAE AND FUTURE HEALTH BIOBANK GCC HEALT HCARE Dubai’s investment in stem cell technology is bearing fruit in various medical applicationsarabianbusiness.com 19 HEALT HCARE Dubai’s remarkable ascent in stem cell technology is a testament to human ingenuity, reminding us that the pursuit of scienti c knowledge knows no bounds damaged or diseased tissues can be repaired or replaced. Dubai recognised the potential of stem cell technology early on and has invested heavily in research and development. Many have praised Dubai’s visionary approach as it is now estimated that as many as one in three people will bene t from stem cell based regenerative therapies. Today, cord blood stem cells alone are used in the treatment of over 85 diseases and there are over 300 clin- ical trials underway. Dubai’s commitment to stem cell technology extends to its healthcare infrastructure, making the city a magnet for medical tourists seeking advanced stem cell treatments. The city boasts world-class research centres and institutions for advancing stem cell technology. For example, The Mohammed Bin Rashid Unversity of Medicine and Health Sciences is a leader in stem cell research, focusing on both basic science and transla- tional research to develop innovative therapies while private institutions. The rst of its kind in the region, the Dubai Healthcare City (DHCC) is a designated free zone that specialises in healthcare and medical research. It houses state of the art clinics and hospitals, which o er stem cell stor- age and therapy to families dedicated to protecting their future health. In 2023, it opened the rst and only good manufacturing practice (GMP), clean- room graded facility in the UAE with the ability to duplicate and manufac- ture stem cells, as well as storage in a state-of-the-art cryogenic bank. To ensure the safe and ethical use of stem cell technology, Dubai has imple- mented a robust regulatory framework. The Dubai Health Authority (DHA) closely monitors and regulates stem cell research and therapy in the city. This regulatory oversight ensures that all research and treatments adhere to the highest ethical and safety standards, instilling confidence in patients and researchers alike. Dubai’s investment in stem cell technology is bearing fruit in various medical applications. One notable to create functional organs and tissues for transplantation, addressing the global organ shortage crisis. This break- through has the potential to save count- less lives and reduce the dependency on traditional organ donation. Future Health Biobank GCC is proud to be the first and only stem cell bank in the Middle East with a history of successful autologous and allogenic transplants. Dubai’s journey to revolutionise stem cell technology is a testament to the city’s commitment to innovation and progress. Through investment in research, world-class healthcare facilities, a robust regulatory frame- work, and international collabora- tion, Dubai is equipped to shape the future of medicine. The advance- ments in stem cell technology are not only advancing the lives of its resi- dents but also contributing to global healthcare solutions. As Dubai continues to lead the way in this eld, we can anticipate more groundbreaking discoveries and innovative treatments that will trans- form the landscape of medicine worldwide. Dubai’s remarkable ascent in stem cell technology is a testament to human ingenuity, reminding us that the pursuit of scientific knowledge knows no bounds. $53.5BN The estimated value of the global medical tourism market in 2028 Future Health Biobank GCC is the rst and only stem cell bank in the Middle East with a history of successful autologous and allogenic transplants, according to Ahmad area is the treatment of degenerative diseases. Stem cell therapy offers hope to individuals suffering from conditions like Parkinson’s disease, Alzheimer’s disease, and multiple sclerosis. By harnessing the regener- ative power of stem cells, researchers are exploring innovative ways to slow down or even reverse the progression of these debilitating diseases. Stem cell technology is also trans- forming the eld of tissue engineering and transplantation. Dubai has seen remarkable success in using stem cells Next >