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Since the foundation of the UAE in 1971, Dubai has developed rapidly from an oil- and gas-based state into a diversified market economy. A 30-year development plan providing for substantial investment in education and infrastructure (transport and telecommunication) has led to rapid growth in trade and inward investment. Oil and gas account for one-third of the UAE gross domestic product (GDP). Successful diversification efforts have reduced Dubai’s reliance to about 4% of its GDP.
The intention to establish Dubai International Financial Centre (DIFC) was announced in February 2002. It was envisioned as a financial marketplace to serve a region that extends across the time zones between the financial centers of London and Hong Kong.
In the last six years, this vision has become a reality. Since September 2004, more than 215 firms have been licensed to conduct financial services activities in the DIFC. The list includes most of the largest global financial services companies as well as significant regional players from the Middle East and North Africa, the subcontinent and East Asia. Additionally, a stock exchange — the Dubai International Financial Exchange (DIFX) — and an oil futures market have been established.
The DIFC offers clear, precise and business-oriented rules and regulations. It is predominantly a wholesale center, although recent policy implementation now permits some retail clients where certain criteria are met. Transactions are primarily in US dollar and dealing in the UAE dirham is prohibited, as is deposit taking. Zero tax guaranteed for 50 years and renewable for another 50 is a significant advantage. One hundred per cent ownership is allowed, which is not the case outside the DIFC.
The DIFC has three core parts: DIFC Authority, which provides overall direction for the development and marketing of the center; DIFC Judicial Authority, which is responsible for the independent and transparent administration of justice in the DIFC; and the DFSA, which is the independent integrated regulator for all financial services in the DIFC.
DFSA is expecting to have about 300 licensed firms operating through the DIFC by year’s end, from the current 215. Meanwhile, DIFX is a listing venue that can be utilized for Sukuk from all over the world, including Southeast Asia. The total value of Sukuk listed on the DIFX currently is almost US$17 billion.
The DIFC has achieved considerable success but there are still significant prospects for growth and opportunities to take advantage of by offering financial services to firms from other developing markets, particularly in East Asia.
Michael Zamorski oversees supervision of authorized firms within the Dubai International Financial Centre. He joined the Dubai Financial Services Authority in April 2006, following a 29-year career with the US Federal Deposit Insurance Corporation.
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