DUBAI, 15 July 2003 — The United Arab Emirates yesterday took a giant step toward the creation of the Middle East’s “first truly world-class” international financial center.
The federal Cabinet of the UAE government approved a decree that will allow the full establishment of the Dubai International Financial Center (DIFC) as a capital market directly modeled on the City of London and Wall Street. Under the UAE constitution, the Cabinet decision needs to be ratified by the Supreme Council of the Federation. But the UAE now appears to be well on course to have its own financial capital market equal in quality to London, Tokyo, Hong Kong and New York before it hosts the annual meetings of the World Bank and the IMF in Dubai in September.
This will be the most important economic summit ever staged in the Middle East and the latest federal Cabinet decision ensures the UAE’s own bold initiative will be one of the central features of the annual meetings.
The final steps on the DIFC journey are likely to be completed within weeks. This will mean that the vision first expounded as recently as February 2002 by Dubai Crown Prince and UAE Defense Minister Sheikh Mohammed ibn Rashid Al-Maktoum will have resulted in the drafting and completion of an entire legal and regulatory environment based on global best practice in record time.
The federal decree is an unprecedented constitutional innovation because it will allow DIFC a remarkable degree of sovereignty. This will give the DIFC a unique position in the global economy — comparable to centers outside the UAE — and one that is designed to make it a magnet to attract business from the world’s leading banks and financial institutions.
It is a “generic” decree, allowing financial free zones to be established in the UAE. Thus, as well as approval by the UAE Supreme Council, the DIFC also needs a specific decree to establish it as a Financial Free Zone.
The DIFC will also require the enactment of its Regulatory Law and Company Law before it has the basis to grant operating licenses to financial institutions. The Regulatory Law and the Companies Law are now complete and about a dozen further laws are now in the final stages of preparation and will be introduced over the next few months.
Already more than 30 of the world’s biggest financial institutions have expressed an interest in setting up in the DIFC. Four have put in applications for operating licenses — even before the process has been put in place — and many more are now expected to follow suit.
“We’re soon to open for business. By the time the UAE hosts the IMF/World Bank annual meetings in Dubai in September, we’ll have in place all the main building blocks for our region’s first international financial center equal in quality to the world’s best. It will be a proud moment,” said DIFC Chief Executive Officer Naser Nabulsi.
“No international financial center of this stature has ever been launched so speedily. By taking this bold step, the UAE government has empowered us to crate a world-class regional exchange that will generate wealth and jobs not just for the federation but also for the wider region. That is why the decision taken today is of such historic importance,” he added.
“The entire legal and regulatory framework for an international financial center has never before been created from scratch — and never at such speed. We’ve been free to draw on the best practice of all the world’s major financial centers — and to avoid their drawbacks.
The result is that the DIFC legal and regulatory environment will offer financial institutions the transparency, certainty and ease of use that they require — and will also give confidence to other jurisdictions and international bodies that the DIFC will be an entirely trustworthy addition to their ranks,” Phillip Thorpe, CEO of the DIFC’s Regulatory Authority, said.
