Dubai International Financial Centre: Business Hub Connecting Emerging Middle Eastern Markets With The World

Thursday, February 23, 2012 - 14:52
Dubai International Financial Centre
Abdulla Mohammed Al Awar

Abdulla Mohammed Al Awar

The Editor interviews Abdulla Mohammed Al Awar, Chief Executive Officer and Chairperson of the Management Executive Committee, Dubai International Financial Centre.

Editor: Please tell our readers about the Dubai International Financial Centre (DIFC), including its mission and services to U.S. and multinational corporations.

Al Awar:  The Dubai International Financial Centre (DIFC) is the financial and business hub connecting the region’s emerging markets with the developed markets of Europe, Asia and the Americas. Since its launch in 2004, DIFC – a purposely built financial free zone – has been committed to encouraging economic growth and development in the region through its strong financial and business infrastructure. Currently, DIFC's client base comprises over 900 companies, including 18 of the top 25 global banks, 7 of the world’s 10 largest insurers, 6 of the 10 top law firms and 8 of the top asset managers in the world. More than 12,000 employees operate in an open environment, complemented by international legal and regulatory standards.

DIFC houses 49 regulated companies from the U.S., including Morgan Stanley, The Blackstone Group, Carlyle, Sun Global Investments and Marsh Management Services. The first U.S. company to register at DIFC was Franklin Templeton Investment Management Limited, which joined in November 2004.

DIFC has its own independent financial and ancillary services regulatory body, the Dubai Financial Services Authority (DFSA). It also has the DIFC Courts, which is an independent common law judiciary based in DIFC with jurisdiction over civil and commercial disputes in or relating to the Centre. DIFC is built upon a modern legal, regulatory and physical infrastructure, which makes it the destination of choice for financial services firms establishing a presence in the region.

Our current focus is on developing and implementing our new business strategy, which is focused on growing existing client partnerships as well as on attracting new members to the Centre. DIFC is the regional hub of choice for the world’s leading companies, which is underlined by the geographical diversity of regulated firms, with 16 percent from North America, 41 percent from Europe, 30 percent from the Middle East, 10 percent from Asia and 3 percent from the rest of the world.

Today DIFC is one of the world’s top 10 international financial centers, ranking eighth in both the Banker’s (FT Business) list of international financial centers and the Xinhua-Dow Jones International Financial Centres Development Index 2011.

Editor: What is the DIFC’s integrated platform? We understand that it includes an independent legislative framework.

Al Awar: As part of our commitment to support the growth of financial services and commercial activities in the region, DIFC is focused on continuing to build on its internationally recognized regulatory framework and legal system and to strengthen its offering to clients, both by fostering international cooperation with counterparties and by creating strategic partnerships with international jurisdictions. To support its growth, DIFC is equipped with modern infrastructure, free zone status and self-governing laws and courts, which also support its mission to continue to be a major contributor to the UAE and wider region economies.

One of the principal factors behind the success of DIFC is its independent risk-based regulator, the Dubai Financial Services Authority (DFSA), which grants licenses and regulates the activities of financial services conducted through DIFC. The DFSA’s regulatory regime was developed using principle-based primary legislation modelled closely on internationally accepted standards. Both the DFSA and DIFC Authority have introduced multiple regulatory changes in order to expand DIFC's offering and improve the ease of doing business and investing in the Centre.

DIFC also established Hawkamah, the first Institute for Corporate Governance in the region. It constitutes a groundbreaking development for institution building, corporate sector reform, good governance, financial market development, and investment and growth in the region. Hawkamah aims to promote corporate sector reform and good governance and to assist the countries of the region in developing and implementing sustainable corporate governance strategies – all with the goal of facilitating the economic and financial integration of the region with the rest of the world.

Editor: Please talk about the DIFC Judicial Authority. How was this system designed, and what dispute resolution options does it offer? Are decisions recognized by international business courts?

Al Awar: DIFC Judicial Authority (DIFC Courts), the independent judicial system within the financial district, constitutes another critical element of DIFC's offering to the financial industry. Created following extensive consultation and review of international best practices, DIFC Courts are an independent, common law judicial system with exclusive jurisdiction over all civil and commercial disputes within DIFC financial district, including bodies and companies registered in the DIFC.

In October 2011, the Dubai government widened the jurisdiction of DIFC Courts to allow companies based outside DIFC to bring their cases before the common law court. DIFC Courts have been engaged in a number of activities aimed at strengthening ties with other judicial bodies in the UAE and internationally

DIFC Courts have implemented numerous initiatives, such as a pro bono program to facilitate accessible justice to all and the Small Claims Tribunal – an electronic case management system that offers an increased speed of dispute resolution, with 90 percent of cases filed in this track being resolved in fewer than three weeks. DIFC Courts also have implemented the Lawyer's Code of Conduct as well as various training and educational programs. Each initiative is an example of the DIFC Courts adopting and implementing international best practice in the administration of justice.

DIFC Courts are recognized by local, regional and international courts, with numerous Memoranda of Understanding (MOUs) signed with leading bodies, such as the UAE Ministry of Justice and Dubai Courts. 

Editor: What is the current status of women professionals in the Dubai business community? We understand that the DIFC Courts were the first in the UAE to appoint a female judge.

Al Awar: The role of women in the United Arab Emirates has advanced greatly in recent years, making the UAE a leader in women's rights in the Arab world. This progress has been supported by the backing of the UAE’s leadership, with its constitution giving women equal rights.

Women's participation in both the private and public sectors is an important step towards boosting the economy through effective participation in different development fields. According to Dubai Women’s College, 50-60 percent of its 2,300 students seek employment upon graduation. Women account for 1-2 percent of the UAE’s high executive positions, and they hold 20 percent of administration positions and 35 percent of the national workforce in the UAE. Emirati women now account for about 28 percent of the national labor force.

In 2008, DIFC Courts appointed its first female judge. By this appointment, Tan Seri Dato Siti Norma Yaakob, a Muslim judge from Malaysia, also became the first female common law judge in the UAE.

Hawkamah Institute for Corporate Governance signed an MOU with Dubai Women Establishment in July 2011, announcing an initiative to engage more female business and political leaders to serve in regional  boardrooms. This initiative is aimed at increasing awareness on gender diversity in local and regional boardrooms; training women investors, directors, managers and other stakeholders on the foundations of good corporate governance; and mentoring the next generation of women leaders.

Editor: What insights for the business community are to be gleaned from recent political unrest in some Middle East countries? Are new investment opportunities arising from this turmoil?

Al Awar: In 2011, two developments affected the outlook of the region: political and social unrest following the surge of global oil and food prices. The immediate economic impacts of these developments have shown a clear difference between the oil importers and the oil exporters.

The Gulf Cooperation Council (GCC) continues to be the region’s main driver of economic growth, supported by its oil and gas reserves, economic diversification, population growth and globalization. The non-oil sector, especially the private sector, has in recent years established itself as the main source of growth. From 2000 to 2008, the non-oil sector grew at 7.2 percent annually, with oil-sector growth at 4.0 percent. The private sector – led by banking and financial services, real estate and retail sectors – will drive growth in coming years

Middle East and North Africa (MENA) governments should open up to public-private partnerships and private investments, particularly in infrastructure development, which is the foundation of future economic growth. Dubai is an example of how investment in infrastructure has gone a long way toward ensuring its competitive advantage as a place to do business.

Significant investments need to be directed towards the improvement of education to ensure synchronization between market demand and graduates’ skill sets. Investment in research & development is critical to build competitive knowledge-based economies, and there is a lot that could be done to truly stimulate a vibrant small and medium-sized enterprise (SME) culture and environment.

The IMF expects that the GCC GDP will grow by 7 percent in 2011 and that it will be the growth engine of the wider region, and the IMF sees 3.25 percent growth for the UAE economy this year – slightly above the 3.2 percent expansion projected previously.

Editor: What are some tax advantages for multinational corporations that use the DIFC to base or headquarter their operations?

Al Awar: DIFC exists to make doing business as easy as possible for its client companies, including operating within a tax-free environment. There are many facets of DIFC that made it an attractive financial center for the region, including high-quality office space; communications and connectivity; a reliable international legal infrastructure and courts; a 100 percent foreign ownership; and a zero tax rate, with no restriction on capital convertibility or profit repatriation.

Editor: We understand that financial services and regulatory regime other licensing processes can be very complex. Please talk about the process and how the DIFC works with the Dubai Financial Services Authority (DFSA).

Al Awar: DIFC’s licensing process is as you would expect for one of the world’s top-ten financial centers. The DFSA is the independent regulator of all financial and ancillary services conducted through the DIFC, a purpose-built free zone in Dubai. Its regulatory mandate covers a diversity of aspects, including asset management, banking and credit services, securities, collective investment funds, custody and trust services, commodities futures trading, Islamic finance, insurance, an international equities exchange and an international commodities derivatives exchange.

DFSA’s regulatory regime has been tailor-made to suit DIFC and conform to the highest international standards. The result is clear in the succinct legislation that is appropriate for a modern financial center.

The DFSA administers the Regulatory Law 2004, which is the cornerstone legislation of the regulatory regime. The Law establishes the constitution of the DFSA and enables the creation of the regulatory framework within which entities may be licensed, authorized, registered and supervised by the DFSA. Under the Law, the DFSA has the power to enforce the law and rules that apply to all regulated participants within the DIFC.

The DFSA also administers the Markets Law 2004, which governs the activities and conduct of financial and market participants, and it administers the Law Regulating Islamic Financial Business 2004, the Trust Law 2005, the Collective Investment Law 2006 and the Investment Trust Law 2006. The DFSA also strives to detect and prevent money-laundering activities within the DIFC and will work closely with the UAE Central Bank in this vital area

Editor: What is the DIFC’s interaction with U.S. authorities that administer and enforce economic sanctions in the Middle East?

Al Awar: The UAE complies with UN sanctions, and the anti-money-laundering units, including DFSA, closely monitor financial companies to ensure they comply with regulations. The DFSA has a range of supervisory tools available to diagnose and monitor risks and, where possible, to prevent them from occurring. DFSA also works closely with other international regulators, in particular with home regulators of entities and individuals. The focus of this cooperation is both to ensure that mutually satisfactory standards are maintained and to promote the exchange of information. One of the international entities the DFSA follows is the UN Security Council, implementing its resolutions and sanctions.

Editor: How does the DIFC partner with legal and business organizations, both in Dubai and internationally?

Al Awar: DIFC currently houses six out of the world’s top 10 law firms, including Clifford Chance, Linklaters, Latham & Watkins, Freshfields, Allen & Overy and Jones Day.

Strengthening its partnerships with existing clients is DIFC’s main priority, and we are fully committed to helping them grow their businesses and providing a competitive environment from which they may expand. DIFC has participated in different initiatives and high-level events launched by its clients, assisting them in their business and marketing efforts.

DIFC is also committed to growing the Centre’s community by attracting firms from different sectors and, in turn, building a complete ecosystem. In the first half of 2011, DIFC launched and completed its global business drive, targeting companies from different business and financial sectors in Brazil, the U.S., Europe, India, China, Malaysia and Korea.

DIFC has housed the Middle East office of the International Bar Association since early 2008. In 2011, the IBA’s annual conference was held in DIFC, which was the first time in the IBA’s history that its annual conference was held in the Middle East.

Editor: We imagine that trust is the cornerstone of the DIFC’s success. What are the DIFC’s values?

Al Awar: DIFC is playing a pivotal role in meeting the growing financial needs of the region while guided by its core values of integrity, transparency and efficiency. Client trust is key at DIFC. We are focused on expanding our existing client partnerships and attracting new players to drive the development of the financial services market in the region. This effort is reflected in the number of existing clients expanding their presence in the Centre and the strong pipeline of companies and applications currently being processed, and the results we have achieved would have not materialized without the strong clients relationship that are based on the DIFC’s reliability and credibility.

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