Decree takes DIFC closer to reality

Dubai’s dream of becoming an international financial hub and regional powerhouse came one step closer to reality after the UAE government passed a federal decree allowing the establishment of financial free zones in the UAE, paving the way for the creation of the Dubai International Financial Centre (DIFC).

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By  Massoud Derhally Published  July 16, 2003

Dubai’s dream of becoming an international financial hub and regional powerhouse came one step closer to reality after the UAE government passed a federal decree allowing the establishment of financial free zones in the UAE, paving the way for the creation of the Dubai International Financial Centre (DIFC).

Although the legislation has been slow evolving, DIFC officials see the new development as a milestone in the development of the centre. “When you go into uncharted waters like this it inevitably throws up a lot of issues,” Philip Thorpe, DIFC’s chief regulator told Arabian Business. “We had discussions with all of the federal authorities, the central bank, the stocks and commodities authority, the ministry of justice and so on to make sure what came out of this was robust. As you can imagine anything that involves so many parties takes some time. Yes there was some frustration but I think it’s been a price worth paying, we got a very good building block for the DIFC out of this.”

The new legislation enables DIFC to create a legislative and regulatory environment within the UAE. While Thorpe would not divulge information about what institutions have applied for licenses it is widely believed that Deutsche Bank, Julius Baer and two other institutions have already applied for licenses and thirty additional organisations have expressed interest. Thorpe’s goal is to begin issuing licenses in September to coincide with the commencement of the World Bank and IMF annual ministerial meetings held in Dubai September 23-24.

DIFC aims to draw financial institutions offering wholesale and corporate banking, Islamic finance, asset management, reinsurance services and a regional stock exchange. “We are looking at a complete cross section of financial services. We’ll have banks, insurers, advisors, securities houses and listed companies,” said Thorpe. “In terms of licenses of financial services companies, we have set up to cope with about 20-22 applications a year,” Thorpe added.

DIFC will have a separate jurisdiction from the UAE Central Bank and remain independent of that government body. “We are answerable on two levels. We are put together by the government of Dubai, but in respect of the federal decree we are answerable to the federal authorities—it means the government of the federation,” said Thorpe. “We are solely responsible for regulating the institutions in the DIFC. We are the ones who have to be accountable for that just as the central bank is accountable for regulating the institutions it regulates and answers to government.”

In 2000, the emirate of Abu Dhabi had plans to set up a similar venture named Sadiyat, which was abandoned.

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