Abu Dhabi has announced a new Financial Free Zone on its Al Maryah Island just an hour and half away from its older brother Dubai International Financial Center.
Foreign financial firms and local investors have anticipated a free zone on Al Maryah since Abu Dhabi’s government-owned Mubadala Development began building a financial district there several years ago. The Arabian Gulf hosts a number of Free Zones with a large majority of them being located in the United Arab Emirates (UAE). The Free Zones allow majority company ownership by foreign nationals including foreign companies.
According to the Federal Decree which established the new zone, the Free Zone will be called Abu Dhabi World Financial Market. A separate ministerial resolution specified Al Maryah, an island northeast of Abu Dhabi’s city center, as the location of the free zone.
The federal law and the ministerial resolution are seen as the groudwork for the creation of a free zone similar to the DIFC, with its own laws, regulations and court system.
So what would be its impact on various stake holders?
Dubai International Financial Center (DIFC)
Dubai Internatonal Financial Center (DIFC) is home to over 900 companies; one third of them being in financial services. A new center in Abu Dhabi can take significant number of clients away from DIFC. Whether UAE is a big enough market to host two major financial free zones. Possibility of both competing for the same customers cannot be ignored.
Those who argue for multiple financial centers point out the European model where London focuses on asset management, Ireland on administration and Luxembourg on domiciling the funds. But it is to be seen if the GCC or the Middle East market can repeat that model considering the differences in market size and maturity levels.
Customers will have the advantage of an alternative in a market that is currently dominated by DIFC. Investors and foreign financial institutions are eagerly waiting for the regulatory framework of the new free zone to be finalised.
The next step will likely be emirate-level decrees by the Abu Dhabi government that establish regulatory and administrative bodies to oversee it. Those structures could be modeled after the DIFC’s – or could be entirely unique to the Abu Dhabi World Financial Market.