Fast-Tracking Credibility As A Global Financial Centre

The Glory, And The Dream: Most city planning textbooks don’t have a chapter on convincing the global financial elite to give you vast sums of money, but perhaps it merits consideration in future editions. This is particularly valid for aspiring capitals/countries from the Global South who want to become a regional or pan-continental financial hub. 

 As far as cities go, few things could be considered better than being a global financial center: a small fortune in tax revenue from the finance industry, a vast professional class with high-paying work in everything from accountancy to legal services, and enough foreign exchange to make the central bank governor giddily with anticipation. As I mentioned previously, it is the case that London represents almost a quarter of the United Kingdom’s GDP and the New York State area’s USD 1.7 trillion is converging with Italy’s GDP of USD 2 trillion.  Meanwhile, in 2020 about 10% of tax revenue in the United Kingdom was generated solely from the finance industry directly.

 What is to be done? In my years of professional exchanges, I have scribbled down the following:  

1. Find a Financial Markets Niche
   Financial centres need finance.
   Most of the financial world is usually in high demand and it is unlikely that anybody can compete directly with established centres. But the aforementioned centres all got their start in competition with other financial centres which might have come across as indomitable in their own time. Amsterdam was once a backwater of Europe compared to the Medicis’ Florence but the expansion of colonial trade enabled it to flourish. Likewise for London, which quite openly copied Amsterdam and was backed by a more successful trading empire.

   Newer entrants built their status in similar ways. Hong Kong partially developed its reputation as a global financial centre on the back of Chinese industrialisation while Singapore established itself by becoming the prime hub for the ‘Asian Century’.  Even more recent arrivals such as Dubai were built partially on the back of the expansion of Global South to Global South trade. Consequently, I would advise any aspirant to find a trend in global finance and specialise for it – every current behemoth got started by hitching a ride on a trend others didn’t capitalise on.

2. Keep Everything Above Board
   Money of any sort loves clean places.
   It’s an open secret that some money flowing into London isn’t from the most pristine of sources – and UK regulators allow real estate to be purchased with suitcases of cash and a shell corporation. The same holds for most glowing financial centres. However, it’s important to remember that corruption is accepted from the counterparty, not the city itself – quite the contrary. That balance between having an above-the-board legal system while leaving loopholes that enable money – and money – to flow in is not something that can be covered in the scope of this article, but stability comes first to mind: make sure that a legal advisor can provide near certainty as to how any sums will be handled. Consequently, I would advise a stable, clear legal framework above its specific contents.
3. Ensure A Professional Class
   Which brings us to the third point: a professional class for international capital.
   Most financial centres had a pre-existing professional class of accountants, solicitors, tax advisers, surveyors and even art purveyors that were re-purposed to service international capital. London simply re-purposed its upper middle class as international finance’s butlers. New York drew the best and brightest from America and later the world. Hong Kong has become close to synonymous with expatriates and home-grown strivers alike. Dubai pays handsomely and looks the other way.
   Consequently, I would advise that, one way or another, any aspiring financial centre will have to copy one of these tactics to develop, attract and keep this class of service workers that grease the wheels of global finance.

 Takeaway 

These three aspects of building a global finance centre need to be taken together, if not as a blueprint then as essential elements of a financial centre. They could be fast-tracked or built on existing aspects of the city, be driven from above or emerge naturally but, irrespectively, they represent the clearest path to being a global financial centre.

Written by Radu Magdin, PhD.

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