dubai international financial centre presentation ... - …
TRANSCRIPT
DUBAI INTERNATIONAL FINANCIAL CENTRE
PRESENTATION TOPRESENTATION TOFRASER INSTITUTE03 NOVEMBER 2008
MENA - ahead of the global economy• Emerging markets have contributed 2/3 of global growth since 2002. • EM Major beneficiaries of ‘Great Moderation’ - the large decline in the volatility
of inflation and real GDP - starting in the early 1980s . • Increased evidence of ‘de-coupling’ from US/EU business cycles • MENA countries have achieved above trend average real GDP growth (5.7%
over 2004-2007). • GCC have achieved average real GDP growth of 6.4% over 2004-2007 vs.
4.0% in 1998-2002, with increased diversification of economic activity, while in nominal terms growth has averaged over 25% p.a.nominal terms growth has averaged over 25% p.a.
• Continued high growth is forecast in 2008: MENA at (6.3%), GCC at (7.1%), oil exporters (6.4%) and Central Asia (7.7%).
• Growth is investment led with strong private sector participation and record FDI levels.
• Investment & infrastructure leading to an increase in productivity growth, economic diversification and absorptive capacity.
Source: EIU, IMF & DIFC Economics
Gulf Projects by Sector & Country
Oil&Gas 21%
Petrochemicals 7%
The total value of projects planned or under development in the Gulf exceeds US$2.4 trillion (MEED Project Tracker, 2008)
UAE38%
Saudi Arabia23%
Industry 4%
Water & Wastew ater 2%
Pow er 7%Construction 59%
Source: MEED Project Tracker, 2008
Bahrain2%Iran
10%Iraq2%
Kuw ait13%
Oman3%
Qatar9%
Diversification Strategy
3
Source: EIU, IMF & DIFC Economics
UAE - Solid Economic Performance v Non-Oil sector’s contribution to the GDP
has been on the rise, enablingdiversification of the economy.
v Inflation has accelerated in the past twoyears, as the surge in domestic demand ledto price pressures, particularly in real estateand some services.
Macro Indicators 2005 2006 2007 2008f
Population (mil) 4.0 4.3 4.6 4.9Real GDP growth (%) 11.9 9.7 8.2 9.4Nominal GDP (US$bn) 132.2 170.1 198.7 225.4 of which Financial Sector (%) 5.8 6.0 6.1 6.3
CPI Inflation (% change) 3.1 7.0 12.5 13.5Total debt/ GDP 27.4 29.1 26.4 27.3
Budget balance (%GDP) -4.5 -0.4 8.1 11.6
v UAE has strong Balance of Payments andFiscal Surpluses and one of the highestNet Foreign Asset positions in the world
v Both the Dubai Financial Market and Abu-Dhabi Securities market have witnessedcontagion effects, but economic & financialfundamentals will underlie recovery
Source: EIU, IMF & DIFC Economics
Budget balance (%GDP) -4.5 -0.4 8.1 11.6Public debt (%GDP) 17.3 18.2 17.7 19.8
Government consumption (%GDP) 14.3 12.6 11.1 9.3Private consumption (%GDP) 49.6 51.4 48.1 43.5Domestic demand (%GDP) 87.5 86.3 79.7 73.2
Domestic credit growth (%) 22.9 27.1 46.2 41.1M2 (%pa) 15.5 23.8 30.5 23.2Money market interest rate (%) 1.2 1.6 3.5 5.2
Trade balance (%GDP) 24.7 26.8 23.4 25.6Current Account (%GDP) 18.3 22.0 21.6 27.5
Dubai: a Cluster Based Economy: 27 Free Zone Areas
• The strategy for economic diversification hinges on the Free Zones, i.e. designated areas where firms operate in a specific sector cluster under a special legal and regulatory regime- separate from legal system of the country.
• Free Zones offer a more business friendly environment to foreign investors. Among the incentives: 100% foreign ownership, open labour laws, 5% custom duties and zero taxation, with a zero rate for personal and corporate taxation
5
The Clustering Effect
Ø Strategic central locationØ Dynamic business environmentØ High quality of lifeØ Pro-business governmentØ Language skillsØ 100% foreign ownership
Dubai is a preferred location for regional and global HQs of many trans-national and multi-national corporations.
6
Ø 100% foreign ownershipØ Open labour market Ø 0% tax rate on personal & corporate incomeØ Wide network of double taxation treatiesØ Extensive foreign trade network Ø No exchange controlsØ Free capital movementØ Advantageous time zoneØ World-class InfrastructureØ Proximity to existing operation/production sites
Dubai Strategic Plan (DSP) 2015
TechnologyEnabled services
EducationEmerging Sectors
BiotechNanotechR & D
Higher impact on Knowledge Economy
7
TradeLogisticsTransplantationTourism
servicesTelecomMediaITEnergyHealthcareFinancial
Short Term Impact
Lower impact on Knowledge Economy
Long Term Impact
Dubai Strategic Plan 2015 - Objectives
Economic Development Plan (EDP) aims to:
v Sustain real GDP growth of 11% per annum for the next ten yearsv Increase real per capita GDP from $31,000 to $44,000 by 2015v Increase productivity by 4% per annum v Create new sectors of growth with sustainable competitive advantage
diversifying away from the energy sector
8
diversifying away from the energy sectorv Move existing sectors of strength to new frontiers, domestically and
internationally - Banking & Financial sector to contribute up to 15.1% of GDP v Creating an ‘Economic Development Authority’ to focus on DSP 2015
implementation
Dubai’s 2015 strategy expected to lead to GDP nearly tripling to USD $108 billion and the creation of 882,000 new jobs.
The Dubai International Financial Centre
9
DIFC Vision & Mission
• The vision of the Dubai International Financial Centre (DIFC) is to shape tomorrow's financial map as a global gateway for capital and investment.
• The mission of the DIFC is to be a catalyst for regional economic growth,
10
• The mission of the DIFC is to be a catalyst for regional economic growth, development and diversification by positioning the DIFC as a globally
recognized financial centre.
Why Create A New International Financial Centre
• Internationally-accepted common legal framework
• A regulated financial centre with full transparency
• Mechanism to centralise regional wealth for further
11
DIFC Region
wealth for further economic growth & development
• A deployment channel for the new wealth that’s being created
• A link to the international markets
DIFC – Time Zone Advantage
Dubai is 4 hours ahead of Greenwich Mean time (GMT)
9am Dubai = 1pm Hong Kong1pm Dubai = 9am London5pm Dubai = 9am New York
8 hour time zone
The DIFC Region
• 42 countries spanning the Middle East, North & Eastern Africa, the Caspian and the Subcontinent
• Population of 2.2 billion people (2007)
• US$2.5 trillion combined Real GDP (2007)1
• Financial wealth of high net worth individuals in the Middle East region isestimated to be growing at 17.6%, surpassing the pace of growth of that in North America, Europe and Asia Pacific.2
13
America, Europe and Asia Pacific.2
• Regional wealth invested abroad: $1.8 trillion
• DIFC Region Total Exports > US$1.2 trillion (2007)
• DIFC Region Total Imports > US$1.0 trillion (2007)1
1 Economist Intelligence Unit2 Merrill Lynch Capgemini World Wealth Report 2007
The DIFC Region
• The Region combined has approximately two third’s of world’s proven oil reserves• GCC oil revenues are currently $ 1.2 billion per day• Current account surpluses running at 17% of GDP, much of which is being
recycled back into regional economies.• Region's non-oil sectors are making sizeable contributions to GDP growth. • GCC countries are now ‘asset-based’ economies• Increased liquidity resulted in an investment driven boom, as witnessed by:
- Real estate boom and asset price appreciation
14
- Real estate boom and asset price appreciation• Stock market boom
- Credit market boom
• Growing Economic Regionalism: GCC Common market
• The total value of projects planned or under development in the Gulf Region exceeds US$1.8 trillion 3
3 MEED Projects
DIFC- Hierarchy of Laws
Federal
ConstitutionalUAE Constitution
UAE Federal Law No.8 of 2004
Federal Decree No.35 of 2004
Cabinet Resolutions
15
DIFC
Dubai
Dubai Law No.9 of 2004
DIFC Laws
Dubai Law No.12 of 2004
DIFC Regulations, DIFC Courts and DFSA Rules
DIFC Structure
Office of the President of the DIFC headed by DIFC Governor
(HE Dr. Omar Bin Sulaiman)
HH Sheikh Mohammed Bin Rashid Al MaktoumDIFC President
Dubai Financial Services Authority(DFSA)
Dubai International Financial Centre Judicial Authority
Dubai International Financial Centre Authority
Independent Body Independent Body Independent Body
(DFSA)Financial Centre Judicial Authority(DIFC Courts)
Financial Centre Authority(DIFC Authority)
Registrar of Security(ROS)
Registrar of Companies (ROC) DIFC Investments LLC
ReportingOwnership DIFC Investments -- Portfolio
Registrar of Real Property (RORP)
DIFC Legal & Regulatory Infrastructure
DIFC Law No. Law/Regulation DIFCA DFSA DJANo. 1 of 2004 Regulatory Law üNo. 2 of 2004 Companies Law üNo. 4 of 2004 Law Relating to the Application of DIFC Laws üNo. 5 of 2004 Limited Liability Partnership Law üNo. 6 of 2004 Contract Law üNo. 7 of 2004 Insolvency Law üNo. 10 of 2004 Courts Law üNo. 11 of 2004 General Partnership Law üNo. 12 of 2004 Markets Law üNo. 13 of 2004 Law Regulating Islamic Financial Business üNo. 4 of 2005 Employment Law üNo. 5 of 2005 Law of Obligations ü
Administrative Authority
17
No. 5 of 2005 Law of Obligations üNo. 6 of 2005 Implied Terms in Contracts and Unfair Terms Law üNo. 7 of 2005 Law of Damages and Remedies üNo. 8 of 2005 Law of Security üNo. 9 of 2005 Personal Property Law üNo. 10 of 2005 Law on the Application of Civil and Commercial Laws üNo. 11 of 2005 Trust Law üNo. 1 of 2006 Collective Investment Law üNo. 3 of 2006 Companies Law üNo. 4 of 2006 Limited Partnership Law üNo. 5 of 2006 Investment Trust Law üNo. 1 of 2007 Date Protection Law üNo. 4 of 2007 Real Property Law üNo. 5 of 2007 Strata Title Law üNo. 1 of 2008 Arbitration Law ü
Role of Financial Sector Development for the Region
• Invest, Manage and Control region’s financial wealth of $2.6 trillion and growing as a result of high energy prices
• Enable & support economic and financial reforms:
- Enable separation of oil revenue management from fiscal policy & investment
- Support privatization and private sector participation in infrastructure
• Financing Infrastructure & Regional Economic Integration
• GCC Common Currency will emerge as a global currency alongside US$, Euro
18
• GCC Common Currency will emerge as a global currency alongside US$, Euro
• DIFC building payment system infrastructure: RTGS for $ and Euro
• Change in Global Economic Geography requires accompanying change in Global Financial Geography
• DIFC aims to play a central role
DIFC - Ecosystem
Core Verticals For Overall Financial Services Industry
DevelopmentBan
king
Cap
ital
Mar
kets
Wea
lthM
anag
emen
t
Insu
ranc
e
19
Horizontals required for Centre Building
One Stop Shop Business Services
Islamic Finance
Financial Infrastructure (Exchanges, Payment systems etc)
Ancillary Services (Legal, Accounting, Technology, Professional services etc)
Soft Infrastructure (Government services, culture/art, business support etc)
Physical Infrastructure(State of art commercial, residential and retail)
Regulatory & Legal Environment
Financial Services Authorization Categories
Category 1 Category 2 Category 3 Category 4 Category 5
Accepting Deposits
Providing Credit
Dealing in Investments as Principal where it does so only as a Matched Principal asdefined in
Rule 1.3.2 (2)
Dealingas Agent
Operating a
Arranging Credit or Deals in Investments An Islamic
Financial Institutionwhose entire business is conducted in accordance with Shari 'a and which Manages a Profit Sharing Investment Account
Advising onFinancial Products
or Credit
Arranging Custody
InsuranceIntermediation
Dealing in Investments as
Principal, except where it does so
as a Matched Principal as
defined in Rule 1.3.2 (2)
20
ManagingAssets
Operating a Collective
Investment FundIntermediation
InsuranceManagement
Managing a Profit Sharing
Investment Account
Managing a Profit Sharing
Investment Account
Managing a Profit Sharing
Investment Account
ProvidingCustody and Trust
services
Acting as the Trustee of a fund
Operating an Alternative
Trading System
Providing Fund Administration
Dubai Financial Services Authority – Features
DomesticallySole financial regulator within DIFCRisk-based regulatorAML/CTF co-operation with UAE Central BankAdministrative and civil rule making and enforcement
(Criminal Enforcement conducted by the UAE)Internationally
21
InternationallyIOSCO (including multilateral MOU)IAIS (Technical Committee)Bilateral MoUs IFSBAAOIFI
Borse Dubai: DIFX and DFM• Borse Dubai is the holding company for Dubai Financial Market (DFM)
and Dubai International Financial Exchange (DIFX).• The purpose to create Borse Dubai in 2007was to consolidate the two
stock exchanges in Dubai (DFM & DIFX) as well as current investments in other exchanges to expand Dubai’s position as a capital market hub in the region.
• NASDAQ has strategic shareholding in DIFX and partnering with Borse Dubai to link and integrate the region’s financial markets Borse Dubai to link and integrate the region’s financial markets
• DIFX is a fully integrated electronic exchange and is now largest Bond/Sukuk Market in the ME
• The number of companies under Borse Dubai (Oct 2008): DIFX (23) & DFM (63) => Total = (86)
Dubai Mercantile Exchange
vThe Dubai Mercantile Exchange was launched on 1st June 2007. It is a joint venture between the Dubai Government, New York Mercantile Exchange and Oman Investment Fund.vDME is authorised and regulated by the DFSA and all trades executed on the
Exchange are cleared through, and guaranteed by, NYMEX’s AA+ rated clearinghouse.vThe Exchange has emerged as the premier international energy futures and
commodities exchange in the Middle East, providing price transparency and market liquidity for crude oil from the world’s foremost oil producing and exporting region. exporting region. vThe DME’s new shareholding structure (from Oct08) will include Goldman
Sachs, Morgan Stanley, JP Morgan, Vitol, Concord Energy, Casa Energy Trading, and a Shell Company. vCurrently, the Exchange lists the Oman Crude Oil Futures Contract,
addressing the growing market need for price discovery of Middle East Sour Crude. Total Number of DME Oman Crude Oil Futures Contracts traded since launch: 451,913 (as of 25th October, 2008)vDME has 69 members as of October 2008 and the number is expected to
grow.
DIFC - Value Proposition Value Proposition
A dedicated financial
Clear & TransparentLegislation
Window to a wealth of opportunities
Borse Dubai/DIFX: Liquid & Transparent
DFSA: World Class Regulations
24
DIFC Resource Centre:Business Support
Services
DIFC Courts: Independent
Judicial System
Hawkamah Institute for
Corporate Governance
financial services cluster
DIFC Education Strategy:
Access to Talent
Liquid & Transparent International Exchange
Hawkamah Vision and Mission
• Bridge the region’s Corporate Governance gap’
• Assist the countries and companies of the region in developing sound, ‘home grown’ and globally well integrated CG frameworks:- Coordinate and sequence the designing, and implementation of CG
reforms- Monitor the outcomes of CG policies at the public and private sector - Monitor the outcomes of CG policies at the public and private sector
level.
• “Hawkamah-ICG will serve as a platform for regional co-operation, based on a concrete agenda for measurable and time-bound action, aiming to raise awareness of national, regional and global initiatives and build a coalition for reform”, Joint Declaration OECD-UAE, 2005.
What Hawkamah Does:
• Provide technical assistance on regulatory and firm levels to develop the optimal corporate governance environment
• Conduct CG assessments and prepare CG improvement plans• Provide advisory services• Conduct consultations with various stakeholders• Develop and implement training programs: Board Development Programme,
Board Secretary ProgrammeBoard Secretary Programme• Serve as a knowledge centre and clearinghouse for corporate governance best
practices from the region and beyond.• Monitor & Report on the state of corporate governance• Regional Task Forces to address:
• Corporate Governance Banks• Corporate Governance Insurance sector• Corporate Governance State Owned enterprises• Insolvency & Creditor Rights
Strategic PartnersInternational Partners
• Organisation for Economic Co-operation and Development (OECD)
• World Bank-International Finance Corporation • WB Global Corporate Governance Forum• Center for International Private Enterprise• Institute of International Finance (IIF)• Financial Services Volunteer Corps (FSVC)• INSOL (Insolvency Professionals) • Information Systems Audit and Control
Association (ISACA) • Amsterdam Institute of Finance
Regional Partners
• Dubai International Financial Centre• UAE Ministry of Economy• Yemen Ministry of Finance• Emirates Securities and Commodities Authority• Oman Capital Market Authority• Union of Arab Banks• Abu Dhabi Chamber of Commerce and Industry• Dubai Chamber of Commerce and Industry• Jordanian Corporate Governance Association• Central Bank of Jordan• Jordan’s Insurance Commission• Arab Forum of Insurance Regulatory
Commissions• Amsterdam Institute of Finance• Institute for Internal Audit (IIA)
Other Institutions• Arab Monetary Fund • Dubai School of Government, Young Arab Leaders • American University of Sharjah
Founding Corporate Partners
Commissions• Egyptian Institute of Directors/Central Bank of
Egypt• Egyptian Banking Institute• Economic Research Forum• Oman Economists Association• Corporate Governance Association of Turkey• Lebanese Corporate Governance Task Force• Arab International Women’s Forum (AIWF)• CFA Emirates
Characteristics of the DIFCOnOnshore Capital Market / International Standardsshore Capital Market / International Standards
Onshore Capital Market / International Standards
Onshore Capital Market / International Standards
Designated as a Financial Free Zone
Foreign Currency Denominated / Zero Tax Rate*Onshore Capital Market / International StandardsForeign Currency Denominated / Zero Tax Rate*
Civil and Commercial Laws of UAE not applied
Tailor made laws for the DIFC
No local partner requirements
Annual Growth in Number of DIFC Registered Companies
500
709
500
600
700
800
YOY Growth +175%
YOY Growth +68%
Cumulative YOY Growth
YOY Growth +42%
158% CAGR
Development of DIFC as a Financial Hub
Data as of Sept 30, 2008 ; Source: ROC Data, DFSA Register
16
108
297
0
100
200
300
400
2004 2005 2006 2007 2008 YTD
+175%
YOY Growth +575%
DIFC Registered Companies
1%(2) Authorized Market Institutions
As of September 30, 2008 there were 709 companies registered at the DIFC.
100%
61% (436)
100%
17%(47) Ancillary Service Providers
Data as of Sept 30, 2008; Source: ROC Data, DFSA Register
Breakdown of Firms: Regulated versus Non Regulated
39%(273) Regulated Entities
(436) Non Regulated Entities
82%(224) AuthorizedFirms
Breakdown of Regulated Firms
Dubai’s Ranking as a Global Financial Centre
•• City of London’s City of London’s 2008 2008 Global Financial CentresGlobal Financial Centres IndexIndex
•• Dubai Dubai is ranked as the 5th leading centre in the world outside America and Europe, maintaining its status as the leading financial centre in the region between Zurich at one end and Singapore/Hong Kong at the other.
•• Dubai Dubai ranked # 1 again in the list of top 5 financial centres that might become significantly more important over the next two to three years.
•• DubaiDubai ranked # 1 again on the list of financial
31
•• DubaiDubai ranked # 1 again on the list of financial centres where organizations may open new operations in the next 2 to 3 years.
•• DubaiDubai (24) continues to lead BRIC (Brazil, Russia, India, China) and key ‘emerging’ centres Shanghai (31), Beijing (46) and Mumbai (48)
•• DubaiDubai is the clear leader in perceptions of potential growth as a financial centre
DIFC Capital Market Development Imperative
• GCC have become ‘asset-based economies’ with income from assets becoming more important than oil & gas revenue
• DIFC’s role is to Invest, Manage and Control region’s financial wealth of $2.6 trillion and growing as a result of high energy prices
• Financing Infrastructure & Regional Economic Integration
• Enable & support economic and financial reforms:
• Enable separation of oil revenue management from fiscal policy & • Enable separation of oil revenue management from fiscal policy & investment
• Privatization and private sector participation in infrastructure
• GCC Common Currency will emerge as a global currency alongside US$, Euro, Yen and Yuan
• DIFC building payment system infrastructure: RTGS for $ and Euro
32
Sheikh Zayed Road, Circa 1990
Sheikh Zayed Road, Circa 2002
DIFC District
35