Abu Dhabi Global Market signs fintech deal with Hong Kong regulator

17 July 2018 Consultancy-me.com

The Abu Dhabi Global Market has signed a strategic cooperation deal with Hong Kong’s de facto central bank on providing reciprocal support for their developing fintech sectors.

As the global fintech industry continues on its course of mass disruption to traditional banking systems, leading financial centres across the world are scrambling to get ahead of the curve and establish themselves as regional and international hubs for financial technology, with cross-border cooperation between regulatory authorities a necessity for successful development.

In recent times, this has seen a string of announced cooperation agreements between fintech hubs and financial regulators on all points of the globe; the latest being the Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM) teaming up with the Hong Kong Monetary Authority (HKMA) to jointly promote fintech innovation and facilitate business expansion opportunities between their home markets.

In addition, the agreement will allow for the increased sharing of information and the potential for project collaboration, including the possible establishment of an international financial trade network based on based on distributed ledger technology (DLT – which digitally records transactions in a decentralised fashion), of which blockchain is the most prominent example.Abu Dhabi Global Market signs fintech deal with Hong Kong regulator“We are glad to further our partnership and collaboration with HKMA by way of this FinTech agreement,” FSRA Chief Executive Richard Teng said. “We look forward to working closely with the HKMA to support our FinTech start-ups and our innovative businesses, from regulations to adoption, in advancing and applying their solutions to each of our respective financial markets and jurisdictions”.

Nelson Chow, HKMA’s Chief Fintech Officer, responded in turn; “ADGM’s commitment to the pursuit of innovation resonates strongly with Hong Kong’s ambitions. The co-operation between the HKMA and the FSRA would strengthen the two authorities in their respective roles and initiatives in FinTech. We are particularly pleased to start a dialogue with FSRA on the opportunity to build a cross-border trade finance network using distributed ledger technology.”

The latest agreement follows an earlier similar announcement between the ADGM and The Hong Kong Securities and Futures Commission, while the HKMA already has a corresponding deal in place with Dubai Financial Services Authority (DFSA). Altogether, the latest deal is the 11th such statement of cooperation the ADGM has made with ‘like-minded international financial centres and jurisdictions to foster a robust and sustainable global FinTech ecosystem’.

These so-called ‘FinTech bridges’ between financial centres and regulators were one of the hot topics at the Innovate Finance Global Summit hosted in London earlier this year, attended by regulatory authorities from over 20 jurisdictions. The ADGM states: “We are committed to developing a vibrant, dynamic and sound international financial services centre. These cross-border partnerships enable ADGM to maintain a practical, open and inclusive global FinTech centre to continue serving the communities in Abu Dhabi and the greater MENA region.”

In related recent news, the Dubai International Finance Centre, ADGM's counterpart in the neighbouring Emirate of Dubai, has signed an MoU with global professional services heavyweight Accenture to collaborate on entrenching the city as a world leading hub for FinTech.

Do consultants have a legitimising effect in the Middle East?

19 April 2019 Consultancy-me.com

Do the often kowtowing international consultants operating in the Gulf simply grant legitimacy to local rulers? The answer’s not so simple says regional expert Calvert Jones, who has conducted a fascinating research study on the local consulting industry.

Now valued at $3 billion annually in the GCC alone, the Middle East management consulting industry has exploded since the global financial crisis, growing at a heady 20 percent clip up until 2014 when the dive in global oil prices and attendant austerity measures briefly applied the brakes; ‘brakes’, in this context, meaning growth which at its lowest point in 2015 dropped to around 6 percent.

The slow-down was brief. With the plummet in oil prices spurring regional governments to act on economic diversification – captured in a range of ambitious national transformation agendas – together with the emergence of a range of digital advances now sweeping the public and private sectors, fresh impetus was given to the local consulting market; this year forecast to return to double-digit growth.

Of that $3 billion consultancy price tag – with close to half of it handed over in Saudi Arabia – the public sector accounts for approximately a third of the take, the vast majority of that paid to foreign consultancies and in particular the advisory wings of the Big Four and global strategy giants such as McKinsey and BCG. Scrutiny of these practices – especially in the wake of the Khashoggi killing – has also increased.

Copping much of the media flak, McKinsey for its part has backed itself as a force for good in the region, contributing greatly toward local economic, education and healthcare development. But the question remains, even if making a positive difference, do international consultancies confer legitimacy on authoritarian governments – “helping to prop up and even strengthen repressive, illiberal regimes?”Does the Middle East consulting industry have a legitimising effect?One person well-placed to address that question is Calvert W. Jones, an Assistant Professor in the Department of Government & Politics at the University of Maryland and author of ‘Bedouins into Bourgeois: Remaking Citizens for Globalization’. Jones spent 19 months between 2009 and 2017 conducting field research in the region, including into the consulting industry and the notion of conferred legitimacy.

According to Jones, some of the consultants she interviewed themselves expressed this concern, particularly when due a range of market factors they may have grown less inclined over time to voice too strong of an opinion. Yet, whether this is indeed the case is not so clear. Among other findings and areas of research, Jones conducted several experiments on the subject of legitimacy at universities in Kuwait, involving some 650 students.

“Conventional thinking about experts in politics suggests not only that experts rationalise governmental decision-making, but also that they confer legitimacy – meaning that the public may be more likely to support government initiatives when experts with the relevant knowledge, training, and experience are involved. In the Gulf, both experts and ruling elites tend to think along these technocratic lines,” she states in an article for the Harvard Business Review.

Experiments

While not addressing potential international legitimacy or other geopolitical or business and trade issues, Jones sought to test the idea of conferred legitimacy as to public opinion in the local polity. For the experiments, she asked participants to imagine that their country’s leaders were launching a major reform to improve either education or infrastructure, exposing them to a variety of mock news articles outlining the likely benefits from the government initiative.

In the first experiment, half of the reports featured reference to a team of top international experts assisting with the hypothetical reform, including their credentials and extensive experience elsewhere, with this detail absent from the remaining half. She found that subjects who read that experts were involved were far less likely to support the reform – indicating the ‘involvement of experts’ may have led to a significant drop in legitimacy. The results, however, are somewhat murky.

In the second experiment, Jones explored the impact of nationality on opinion, with otherwise identical reports on expert-advised infrastructure reform referring to either American, Chinese, or Kuwaiti advisers. She found two surprising results. Support for the reform did not differ significantly whether led by Chinese or Kuwaiti experts, but did however for the American-led reports, with subjects expressing significantly lower support.

The Chinese were also considered far more capable than their American counterparts, which may in itself provide a clue. “It’s not necessarily evidence of profound anti-Americanism, let alone a new love for Chinese experts,” Jones cautions; “Most likely, it reflects Kuwaitis’ longer experience with American experts, which includes their frustration with the lack of progress on various reforms.” The Kuwaitis, she suspects, are just far less familiar with Chinese consultants.

“This experimental evidence raises doubts about the ability of experts to rationalise and legitimise authoritarian rule,” Jones concludes. “Indeed, my research suggests that international experts can actually undermine legitimacy, potentially reducing domestic support for autocrats and weakening their regimes… In my experience, residents of these countries are increasingly critical of their governments paying hefty fees to foreign experts and consultants for little in return.”