Abu Dhabi’s plans to establish a financial regulator and a commercial court system for its new business and financial free zone on Maryah Island fall perfectly within the folds of the emirate’s Vision 2030.
It is a clear push towards developing the financial services sector, which supports the growth of many other segments of the economy, says Dr Giyas Gokkent, Head of Research, National Bank of Abu Dhabi.
The emirate’s Executive Council in a statement last week announced plans to put in place regulatory and legal infrastructure under a federal decree for the free zone, Abu Dhabi World Financial Market (ADWFM).
The statement mentions three independent authorities to oversee the free zone: a financial services regulations bureau, a court system to mediate commercial disputes and a registration bureau. Under the decree, commercial establishments and employees in the free zone are exempt from taxation for five decades and foreign companies or people who do not reside in the UAE would be allowed to fully own businesses.
Creating jobs
The Executive Council announcement follows the decree in February that paved the way for creating a business and financial hub at Maryah, reports add.
Dr Nasser Saidi, Founder and President, Nasser Saidi and Associates, believes the move is multidimensional. It not only allows diversification in a predominantly oil and gas-driven economy but it also opens up new avenues of employment for Emiratis.
The timing of the new decree is also significant. Shaikh Hazza Bin Zayed Al Nayhan, Adviser to the National Security Council and Vice-Chairman of the Abu Dhabi Executive Council, in a an interview with the Oxford Business Group pointed out economic diversification in eight key sectors as part of the second five-year economic plan for the capital. The first plan, 2008-2013, is coming to an end.
Dr Saidi, former Chief Economist, Dubai International Financial Centre (DIFC), the emirate’s onshore financial hub independently regulated by the Dubai Financial Services Authority, says ADWFM doesn’t necessarily have to compete with the DIFC. Maryah Island could carve its own niche in terms of what kind of financial and commercial business it attracts. Abu Dhabi is home to some of the world’s largest sovereign wealth funds including Abu Dhabi Investment Authority, International Petroleum Investment Company and Mubadala Development Company and the concentration of such high-profile names on Maryah could attract a lot of global assets and wealth managers, both Dr Gokkent and Dr Saidi point out.
Similar are the prospects of attracting oil and gas and petrochemical players to Maryah Island, considering Abu Dhabi’s global position in upstream and downstream businesses.
Dr Saidi believes ADWFM will likely take a global approach in terms of attracting business, rather than competing with local or regional hubs such as Qatar Financial Centre, Bahrain Financial Harbour and King Abdullah Financial District in Saudi Arabia.
Enough room
Dr Gokkent believes even if ADWFM has to compete with the other regional players, there is enough room for everyone. This is supported by the success of Abu Dhabi’s Etihad Airlines, which was a new entrant in the market where two regional players — Emirates Airlines and Qatar Airways — were already well established. All three regional aviation giants found their own growth strategies and became successful in their own right.
Dr Gokkent and Kai Schneider, a partner at Latham and Watkins, say not much is known about what ADWFM’s actual business model will be and it’s hard to predict what it will offer the global business and finance community. However, Schneider says the headlines in public domain suggest ADWFM’s legal and regulatory regime is pretty much similar to that of DIFC.
Schneider estimates it will take authorities at least a year, most likely longer, to draft and finalise the rules and regulations that will eventually govern ADWFM.
Despite the fact that the new business and financial hub at Maryah will not be fully operational for some time, there is lot of interest in the project from within the industry. Schneider says he is already receiving inquiries from people looking for early registration.
