Indian banks have a marked presence in the Dubai International Financial Centre and this will in the long run prove to be beneficial to them, says Arif Amiri, deputy CEO of DIFC:

DIFC allows Indian firms 100% ownership, guaranteed 0% tax on income or profits for 50 years, free flow of capital and profit repatriation and no exchange controls, he explains further.ndian firms setting up their offices in the Dubai International Financial Centre (DIFC) are crucial to the federal financial free zone, says Arif Amiri, deputy CEO of DIFC authority. Amiri, who recently led a high-level DIFC delegation to India, says with 20 companies represented, India has the largest presence at DIFC after the United States and the United Kingdom. “India also has the most banks – State Bank of India, Bank of Baroda, Bank of India, IDBI Bank, Axis Bank, ICICI Bank and HDFC Bank. Besides, several Indian financial services firms – Aditya Birla Sun Life Asset Management, IL&FS Global Financial Services, IIFL Private Wealth Management and Kotak Mahindra Financial Services – are also based at DIFC and these firms have benefitted from the Centre’s fixed-income portfolios, as well as rental yields on real estate holdings, an asset class favoured by the majority of Indian investors,” says Amiri.

Amiri maintains that the UAE and India had recently pledged to increase bilateral trade by 60% over the next five years, so the potential for Indian firms is enormous. “As part of our long-term growth strategy, we aim to host a total of 100 Indian firms by 2024. During our recent visit to Mumbai, we conducted 40 meetings with government authorities, private and public sector banks, law firms, wealth and fund management experts, insurance and reinsurance firms, and our existing clients. We also held discussions with 10 banks interested to set up operations at DIFC. A major Indian private

 

Arif Amiri points out that DIFC hosts 21 of the world’s top 25 banks, and 11 of the world’s top 20 money managers

sector insurance company has also shown an interest to establish a base at DIFC; it would be the first international private sector insurance company to expand out of India,” he adds.

DIVERSE HUB

He explains that as a diverse commercial hub, DIFC can help Indian financial and non-financial institutions to fully realize their growth potential. With 382 financial services firms and 750 non-financial services firms having established their presence, DIFC has attracted leading organizations from a variety of sectors, including wealth management, asset and fund management, and property. It offers 0% tax, 100% foreign ownership and no restriction on capital repatriation. It also offers an independent judicial system based
on English common law and a transparent regulatory environment inspired by leading international reporting regimes.

Amiri says DIFC has signed MoUs with more than 75 jurisdictions around the world, offering businesses the flexibility to model their corporate structure, opening a representative office, for example, or in some cases operating with a full banking licence. “With the ever increasing global connectivity of Dubai, DIFC is positioned as a gateway for Indian business to access the wider Middle East, Africa & South Asia (MEASA) region, representing a combined GDP of $7-9 trillion,” says he about the potential of the Centre.

REGULATORY FRAMEWORK

Amiri says DIFC’s regulatory framework, overseen by an independent risk-based body – the Dubai Financial Services Authority (DFSA) – offers a secure environment for banks to grow in sectors such as commercial banking, investment banking, trade and export finance, project and infrastructure funding, treasury services and correspondent banking. Its regulatory regime supports region-wide banking services – including securitization and asset-backed financing – without imposing multi-jurisdictional risks or regional restrictions on foreign financial institutions.

“The DFSA aspires to offer licensing standards that match or exceed those of competing international financial centres. Foreign financial institutions can choose from five distinct licence categories, allowing them to receive deposits, provide credit, conduct asset management, or operate a collective investment fund. The breadth of options helps banks to expand their reach locally and regionally. Although licence approval depends on the scale and complexity of the business concerned,

 

 

issuing licences generally takes between 50 and 90 days. The DFSA has a strong relationship with India’s Reserve Bank and Securities and Exchange Board of India, which has helped the integration of Indian firms into DIFC and improved the efficiency of application and approval procedures. Full hanking licences have been issued to more banks from India, a total of eight, than to any other country,” says Amiri.

BENEFITS

Dubai’s position as a global trading hub is, of course, a key advantage, explains Amiri. “Its air and seaports connect with more than 280 destinations around the world and the city’s integration with the global economy is improving all the time, with ongoing investment in transport links and infrastructure. Given the close proximity of India and the UAE, Indian firms are in an ideal position to access trade flows in the MEASAregion via Dubai and the increasing economy activity within MENA itself, which is widely expected to more than double over the next decade,” he adds.

He also points out that DIFC is a secure location for wealth and asset management firms to access trade and investment networks in emerging markets, private equity and Islamic funds, adding there is the vibrant business cluster itself that makes up DIFC: 1,327 active registered firms and a combined workforce of18,250.

“DIFC,” he says, “hosts 21 of the world’s top 25 banks, 11 of the world’s top 20 money managers, seven of the 10 largest insurance companies, and nine of the top 10 law firms.”

LEGAL FRAMEWORK

What is unique about DIFC’s legal framework?

“As an independent free zone, DIFC enjoys judicial independence, offering businesses the protection of English Common law, and issues judgements enforceable across the Arab world through the DIFC courts,” says Amiri. “In addition, with the creation of the Wills & Probate Registry in 2015, DIFC has become the first jurisdiction in the Middle East to
allow non-Muslims to register a will under English Common Law Principles.

DIFC’s regulatory and judicial environment is benchmarked against international standards and meets or exceeds the safeguards in place at other leading international financial centers, such as New York and London. The DFSA grants licences and regulates business activity, while our corporate governance body, Hawkamah, monitors ethics and standards. Both these institutions help to minimize legal and corporate risk.

At the same time, the DFSA and the Emirates Securities and Commodities Authority (ESCA) are working closely to increase operational efficiency, facilitating the ‘passporting’ of funds into the DIFC. For example, DFSA has amended its Collective Investment Fund Law to implement a new class of fund called the Qualified Investor Fund (QIF), streamlining the fund registration process and reducing costs.

UNIQUE EXPERIENCES

Amiri recounts some of the unique experiences of financial services institutions setting up their units in DIFC.

“One example is Gulf Petrochem, which recently launched India’s first real estate fund under DIFC’s Exempt Fund regime, a fund that provides professional inevestors with ready access to a diversified portfolio of ‘Grade A’ real estate assets. Another is BankMed, one of Lebanon’s fastest growing banks, the first MENA-based financial institution to receive a Category-1 licence when it opened at DIFC. Similarly, Bae, Kim & Lee (BKL) and BDO Unibank became the first Korean law firm and the first Philippine bank, respectively, to set up at DIFC when they opened offices with us earlier this year. ”

GROWTH STRATEGY

He says as part of the Centre’s 10-year growth strategy, it plans to allocate more resources to emerging markets such as India and China, complementing its existing relationships with developed economies in the West. The objective,
according to him, is to strengthen its position as a bridge between the East and West and to stimulate trade and investment flows in the South-South economic corridor, a geographical region encompassing MEASA, southern Africa and Latin America.

“Family business and SMEs in particular will be a major focus for us, representing as they do around 80% of companies in the Middle East and $500 billion in value terms. We are eager to play a full part in the UAE’s success story and to establish itself as one of the world’s foremost financial centers, increasing the financial services sector’s share of UAE GDP to 18% from around 12% today. In addition, we are also playing a major role in Dubai’s ‘Smart City’ initiative and are continuously working towards developing an integrated DIFC Client Portal, for example, and introducing smart-phone applications, such as one to help track client applications,” says Amiri.

The soon to be launched Client Portal will offer a range of administrative services including online payments, registration and licensing, certification, an option to amend company profiles and various employee services such as visa applications. This will reduce the amount of client time spent on administration by nearly 80%.

DIFC has also extended wi-fi access to its residents, tenants and visitors, and it has consolidated its digital services into a single, self-contained network to offer more cost-effective solutions for the trading desks of financial firms.

mohan@bankingfrontiers.com

 

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