Financial Services Sector

An Expert's View about Banking, Finance and Insurance in the United Arab Emirates

Posted on: 25 Aug 2012

Dubai has the largest and most sophisticated financial services industry in the region being home to many banks, insurance, financial and legal services firms.

Financial Services Sector in the United Arab Emirates Within the UAE, financial services activity is focused in Dubai. Market overview Dubai has the largest and most sophisticated financial services industry in the region being home to many banks, insurance, financial and legal services firms. Abu Dhabi and Dubai are growth markets in their own right, and continue to be of interest to the UK financial services industry. Many UK firms have already set up in the region, serving a significantly growing market. There are effectively two financial services markets in the UAE. In Dubai there is the free-zone of the DIFC, regulated by the DFSA on Anglo-Saxon lines and with access to common law in the form of the DIFC Courts. The world outside the DFSA, regulated by Federal authorities, is the second market. British companies are extremely active in both. The Dubai International Financial Centre (DIFC) is a financial free-zone opened in September 2004. The DIFC seeks to position itself as a global financial centre situated between London/New York and Hong Kong. H.H Sheikh Maktoum Bin Mohammed Bin Rashid Al Maktoum, Deputy Ruler of Dubai, is the President of the DIFC. The DIFC focuses on several sectors of financial activities where financial institutions may apply for licenses: Banking Services including Investment Banking, Corporate & Private Banking (223AED billion is the size of British banks finance in UAE); Capital Markets (Equity, Debt Instruments, Derivatives and Commodity Trading); Asset Management and Fund Registration; Insurance and Reinsurance; Islamic Finance & Professional Service Providers. Abu Dhabi is home to several sovereign wealth funds (SWF), including the government owned Abu Dhabi Investment Authority (ADIA), which has estimated reserves of between US$500-900 billion. The emergence of Al Maryah Island in Abu Dhabi as a central business district is a key development to the sector, and a major part of the capitals 2030 economic vision. The new headquarters of the Abu Dhabi Securities Exchange (ADX) will be the anchor of the island’s commercial centre. Similar to DIFC in Dubai, Sowwah Square of Abu Dhabi is attracting many leading banks, insurers and law firms, all to serve a significantly growing market. Key opportunities Opportunities for UK Financial, Legal and professional services companies in the UAE are growing - key areas are detailed below: ξ Public Private Partnership (PPP) - In 2011, Dubai’s Roads and Transport Authority (RTA) stated that it will seek private funding for almost a third of its infrastructure projects over the next five years, and have selected 4 projects to which they would like to apply a tailor made PPP model. The priority of the Dubai Government up to year 2012 was delivery of mass transport projects handled by the RTA followed by Power and Water (as longer term issues) delivered by DEWA. The ambitious level of growth in Abu Dhabi 2030 Plan requires public private partnerships to ensure delivery of its objectives. Opportunities exist around transport, infrastructure and education. ξ Education Training & Qualifications - The UK is regarded as a partner of choice, and many local universities and institutions have a presence in the UAE. Such organisations include the Institute of Chartered Accountants in England and Wales, Association of Chartered Certified Accountants, and the Chartered Institute for Securities and Investment. ξ Insurance - Many London based and Lloyds syndicates and brokers are present in DIFC and service the UAE and wider region. With room for more growth in capacity and need to be closer to the regional market to service and better understand local risk; DIFC represents a possible platform for UK companies in this discipline. Takaful (Islamic insurance) accounts for a small share of the business, but is seen as the driver for future growth. The healthcare regulations made 2008 an important year for non life insurers when compulsory health insurance law was introduced in Abu Dhabi. The market entry for new insurers, however, is somewhat restricted as the Emirates Insurance Authority is currently not issuing new insurance licenses for foreign companies. ξ Asset Management – Managing private wealth also leads to corporate banking opportunities as relationships are established and or strengthened. ξ Legal and Professional Services - The UAE is based on secular law sourced from Egyptian, French and Roman law. Though Shari’ah law has primacy in the constitution, in practice, Shari'ah courts are used to settle cases of family law, and some criminal appeals. Commercial law is dealt with by the secular courts. ξ Accounting and Auditing Services - International Accounting Standards are applied in the UAE and the sector is regulated at federal level. Accountants, provided they obtain the relevant professional license and approvals, benefit from free movement within the UAE. This enables them to operate in an emirate other than the one in which they are registered without requiring a special licence Latest export opportunities – Financial & Professional Services Latest export opportunities – UAE Getting into the market The free zones, which operate through an exemption to the CCL, offer a variety of valuable benefits to businesses and a degree of flexibility, including: ξ 100% foreign ownership through branches, single or multiple shareholder companies (known as FZEs, FZCOs or FZ-LLCs) ξ no National Agent required for branch offices of foreign companies ξ no customs duties on imports and re-exports (except re-exports into onshore UAE) ξ special assistance in obtaining work permits for staff ξ guaranteed exemptions from corporate taxes. Although not strictly classified as a free zone, Dubai International Financial Centre (DIFC) bears various similar features. DIFC is a separate jurisdiction within Dubai aimed at the financial services sector. It has its own independent financial regulator and laws based upon international standards. Companies seeking to set up within DIFC are offered a variety of available corporate forms and their activities need not necessarily be limited to financial services. As with the free zones, it allows 100% foreign ownership and offers a streamlined business environment. In addition, it is the home to Nasdaq Dubai, an international exchange which opened in September 2005 for companies seeking to access international investors. DIFC also has its own courts and arbitration centre. The Dubai Financial Market and the Abu Dhabi Securities Exchange have been established and trading for some years. Each market is regulated by its own laws. Advice should be sought prior to commencing any new activity in the UAE financial services sector to ensure compliance with federal and local laws and UAE Central Bank regulations. Emirates Security and Commodities Authority (ESCA) was established in early 2000 in order to regulate and monitor the licensing of securities in the market. ESCA's role includes determining the conditions which should be met when launching securities. More about doing business in UAE Contacts Market intelligence is critical when doing business overseas and UKTI can provide bespoke market research and support during overseas visits though our chargeable Overseas Market Introduction Service (OMIS). To commission research or for general advice about the market, get in touch with our specialists based overseas - or contact your local international trade team. ξ Amy Burnett British Embassy Dubai. Tel: +971 4 309 4317 or email: ξ Adam Bowery British Embassy Abu Dhabi. Tel: +971 2 610 1160 or email: Contact your local international trade team UKTI Events UKTI runs a range of events for exporters, including seminars in the UK, trade missions to overseas markets and support for attendance at overseas trade shows. Latest events – Financial & Professional Services Major Events Islamic Finance in a Changing World Date: 14 – 16 October, 2012 Power, Utilities, Infrastructure Finance & Investment MENA Conference Date: 16-17 October, 2012 Useful links More about OMIS and other UKTI services for exporters
Posted: 25 August 2012

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