Dubai International Financial Centre to open in next 2 months
(25/7/2004)
The Dubai International Financial Centre is set to launch within the next two months and hopes to become a major gateway for investment to the Middle East. The centre aims to grow steadily, and though not concentrating efforts at first in attracting retail investors, it will begin to license firms and incorporate companies when it opens. What is interesting in Dubai’s case is watching how a new financial centre kicks off from scratch.
Much interest has been expressed by financial institutions and high-net worth investors who foresee the centre carving a key role in the region. The nearest major centres to Dubai are thousands of miles away in Europe and Asia, so the UAE is in a great position to capitalise on all the potential investors around its borders and further afield.
Far from being limited to attracting investment from countries in the Gulf, the DIFC’s scope will reach out to the Indian subcontinent, the northern Gulf, Caspian states, the Levant and north and east Africa. That, according to the DIFC, equates to something like 1.6 billion people. With the right framework in place and an attractive investment environment showcased by Dubai, it is feasible to see the region seeing vast expansion in the coming years.
The DIFC’s Regulatory Authority has endeavoured to ensure that there is a solid regulatory framework in place. Chief executive, Phillip Thorpe, says: “When things happen in Dubai, they happen fast. It was really only a short time ago that the DIFC was just a concept and perhaps just 18 months on it will start operating. This is obviously only the start of it though and there’s plenty more to be getting on with.”
Thorpe was initially contacted by the government in Dubai who lured him to come and head up the team in the UAE. “What we first asked ourselves was ‘What do we need to create such a centre in the Middle East?’, and the answers seemed to be the right regulatory environment, the right legal environment and then getting the institutions over here.” In Dubai, it seems, they have no problem in finding or hiring from overseas the most capable people to begin constructing all this initial framework.
Thorpe says he has relished the opportunity of creating the authority’s framework as it has been possible to start things from the ground up. “I often to say to the staff here that it’s a blessing that in terms of financial centres there is no history here in Dubai so we are starting everything with a clean sheet.”
The Regularity Authority is said to be modelled on frameworks similar to those in place in London, New York and Hong Kong. “We definitely have been quite inventive thieves in this regard. We have looked at the most established and well regulated systems there are and added to those. Some part of our legislation is based on the FSA, one of the most advanced legislatory regimes there are. But we have also looked at wherever the most recent and rigorous regulation has been introduced and aim to either equal or better these.”
The centre also works closely with the UAE Central Bank on areas such as money laundering compliance, but also has the flexibility to formulate its own rules to make for a more comprehensive regulatory solution. The centre will also seek to ensure that it is totally compliant with the OECD, among with other global financial standards.
They are now ready to start bringing in institutions, mainly said to be blue-chip across a variety of industry sectors with a primary focus on wholesale markets. Although the centre has not as yet been actively marketed, it has already attracted a lot of interest. “We expect to award around 20 licenses in the first year and we will aim to encourage institutional investors. Hopefully we will attract the same number the year after as well, but it is too hard to say at this early stage.”
The Middle East is clearly lacking a major financial centre and the DIFC hopes to fill that void. It will be interesting to see if its seemingly well structured regulatory system will along with an already rich region in terms of assets make it the natural place for investors’ capital.
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