Dubai International Financial Center (DIFC) is one of the fastest growing international financial centers in the world, aiming to acquire an international stature. DIFC mainly serves the Middle East. Established in 2004, the DIFC has been attracting many financial firms of international repute. NASDAQ Dubai, formerly the Dubai International Financial Exchange or DIFX, has been opened in the DIFC in September 2005. This functions as the state of the art stock exchange.
The 110-acre free zone has been set up to create an environment for progress and economic development in the UAE. The DIFC offers many sectors of financial activity: Banking and Brokerage (Investment Banking, Corporate Banking & Private Banking); Capital Markets (Equity, Debt Instruments, Derivatives and Commodity Trading); Wealth Management (Asset Management, Fund Registration and Family Office); Reinsurance and Captives; Islamic Finance & Ancillary Services.
Financial institutions desirous of doing business in any of these sectors can apply for license. These investors get many financial benefits like zero tax rate on profits, 100 per cent foreign ownership, no restrictions on foreign exchange or repatriation of capital, operational support and business continuity facilities. Its hallmarks are integrity, transparency and efficiency.
Financial services in the DIFC are regulated to international standards by the Dubai Financial Services Authority (DFSA). DIFC provides its investors a dollar denominated and transparent operating environment with high standards of rules and regulations.
DFSA provides strict supervision and enforcement of money laundering laws, through most modern technology. The facility offers ready to use, sophisticated office accommodation, cutting edge technology, excellent infrastructure and integrated data protection/security, with all kinds of operational support and business continuity facilities of uncompromisingly high standards. Unlike ‘offshore’ tax havens, the DIFC is a full-fledged ‘onshore’ capital market
The Dubai International Financial Centre (DIFC) and the Multilateral Investment Guarantee Agency (MIGA) of the World Bank have come together to establish the DIFC-MIGA Political Risk Guarantee Program, to support foreign financing in the MENA region through mitigation of political risk.
The program is driven by the objective of DIFC to promoting economic growth and development in the region, and MIGA’s mandate of promoting foreign direct investment (FDI) in emerging markets.
Foreign Direct Investment has been identified as the critical element to the sustainable development of the private sector in emerging markets. These investments support many crucial projects which are essential for the economic growth but are beyond the ability of local governments.
Emerging markets in MENA today offer huge opportunities for foreign direct investors. However, various concerns about the safety and stability of the investment environments and perceptions of political risk often hinder the investments and discourage the foreign direct investment. The political risk and the unviable economic environment are the biggest constraints for investing in emerging markets, leading to concentration of investments and neglect of large emerging markets.
The DIFC MIGA Program helps the foreign enterprises manage and mitigate these concerns by offering risk insurance. This insurance covers political and other non-commercial risks during the start up phase of the businesses and projects. There are many case studies available to understand the program.
By providing political risk insurance (PRI) instruments, the DIFC MIGA Program drives cross boarder financing for both the public and private enterprises in the MENA region. This program also helps reduce risk ratings or improve credit ratings, giving investors access to wider funding sources with better terms and conditions and business assurance as well as investment protection. The DIFC MIGA Guarantee Program has helped in improving market confidence and has driven infrastructure development through FDI and has promoted growth of capital markets through various guarantees.