Forbes Middle East
Arif Amiri, CEO of the Dubai International Financial Center (DIFC), has led the economic zone through a prolonged period of growth, more than doubling its number of registered firms from 1,225 in 2014 to more than 2,500 in 2019. As competition increases, he’s determined to maintain its region-leading status.
November 2020, global Fintech company Ebury—which processed $26.5 billion of payments for over 49,000 companies worldwide in the 2019/20 financial year— became the first company to ever be granted a license to offer regulated money services from the Dubai International Financial Center (DIFC). This was just one highlight in a busy month for the 110-acre free zone. It also welcomed global payments platform and Forbes Global 2000 company, Adyen—a Netherlands-based listed company with a market value of $82.1 billion as of March 1— into its cluster in November, as well as signing an MoU with Israeli bank, Bank Hapolim. Technology company Ripple also chose DIFC for its regional base that same month.
DIFC is one of 45 free zones in the U.A.E. offering a favorable operating environment to businesses to encourage them to set up operations in the emirates. Since 2004 it's grown to become the largest financial center in Asia east of Singapore, and its latest diverse entrants are joining an already bulging catalogue of companies. By the end of 2019, DIFC had more than 2,500 registered companies, and the size of its wealth and asset management industry was $424 billion. By comparison, the Abu Dhabi Global Market has $85 billion in total assets under management according to its website. This is a sign of considerable growth in the last seven years— when DIFC set out its 2024 strategy in 2014 to triple its business in 10 years, the center had 1,225 registered entities and assets under management were worth $10.4 billion. "DIFC is the leading financial hub in the Middle East, Africa and South Asia,” says Arif Amiri, CEO of DIFC. “We are the perfect place for clients to access this region, which is made up of 72 countries, around three billion people and nominal GDP of $7.7 trillion.”
Even as the pandemic hit, the center registered 310 new companies in the first half of 2020, an increase of 20% on 2019. “It's been a challenging year globally,” admits Amiri. “However, for us in the DIFC, it has given us a renewed sense of purpose. We knew we had to be there for the community, for the industry.” It's a sign that, for now at least, the U.A.E. is still the business capital of the Middle East. All but two of the top 100 companies in the Forbes Global 2000 list from last year have their Middle East regional headquarters in the U.A.E. Half of the top 50 financial services companies on the list— including the top five banks in the world— have registered offices in DIFC.
Amiri's focus now is on ensuring that Dubai remains the top financial center in the Middle East, as well as one of the top financial centers globally. So far DIFC has managed to stay ahead of the competition, but keeping hold of this status may be getting tougher. Saudi Arabia announced in February that from 2024 it will only do business with international companies that have their Middle East headquarters set up in the kingdom. And according to the Global Financial Centre Index from Long Finance, which analyses and ranks 121 financial centers from across the world, Dubai has slipped nearly 10 spots in the last two years. It reached an impressive eighth place in 2018, but was ranked 17 in 2020. However, that still puts it considerably ahead of the rest of the region, with Tel Aviv at 45, Doha at 56, Bahrain at 83, and Riyadh at 107.
A potentially bigger challenge than getting companies to register with DIFC is convincing them to operate from there. Some of the key tools of persuasion here include lifestyle and infrastructure, including regulation. “The key things that anchor a center like us are being
in a city like Dubai that fosters talent, is quite diversified, and has a leading infrastructure globally, whether its soft or hard infrastructure,” explains Amiri.
In a bid to increase its appeal, in July last year DIFC was the first financial center in the region to launch a fully comprehensive payment and money services regulation, according to the CEO. Then in November it updated its data privacy law to put it on par with the data protection regimes of Europe. It also introduced the region's first defined contribution pension plan as an alternative to an end-of-service gratuity system.
However, while DIFC has the first mover's advantage, the rest of the region has been taking steps to catch up. When DIFC started operations in 2004, it was a unique economic zone in the GCC. It allowed for 100% ownership of companies and established its own legal jurisdiction and courts based on common law at a time when most GCC countries had laws mandating 51% local ownership and legal systems based on Islamic Sharia law. This coincided at the time with an economic boom in Dubai.
Fast forward to 2021, and the ambitious $10 billion King Abdullah Financial District in Riyadh is under construction, with Saudi Arabia planning to make Riyadh one of the 10 largest city economies in the world by 2030. Qatar's Financial Centre, which also allows 100% ownership and has separate courts, had approximately 800 registered firms by end-2019. Even Bahrain is now competing to become a regional financial hub by relaxing regulations and establishing free zones.
“DIFC has really served as a model financial hub for the region and set a blueprint for other countries. It has played a pivotal role in attracting foreign investment and advancing the region's economic diversification agenda,” says Joydeep Sengupta, McKinsey Senior Partner. “As a leading global financial
centre, it will always attract competition as countries across the Middle East continue their own journeys of economic transformation.”
Amiri's extensive experience in the corporate world has proven to be a good foundation in understanding the needs of the types of businesses that head to DIFC. The aviation graduate spent more than eight years working in corporate and institutional banking with HSBC before joining the investor relations and corporate affairs department at Emaar, the largest property developer in the Middle East. He went on to serve as chief commercial officer and CEO of the retail division before DIFC came knocking. He didn't hesitate in accepting the challenge. “Most importantly it's about being able to contribute sustainably to this smart city,” he says. “Being able to shape and take DIFC's journey forward made me excited to be part of this organization.”
Now the CEO is focusing on building a unique proposition through an ecosystem of innovation that brings together Fintech startups looking for investment with venture capitalists looking for opportunities. “We have the largest, deepest, and broadest cluster of financial institutions in the region, and the most impressive pool of talent for it,” explains Amiri. “It was only natural for us to actually link technology with finance.” The Middle East represents big opportunities for Fintech. The region is under-banked, but tech savvy. Financial inclusion in MENA is low at 20% compared to 76% globally, but mobile penetration is 70% compared to a global average of 66%, and 38% of MENA's population has already made or received digital payments.
Recognizing this, DIFC launched its Fintech Hive in 2017—an accelerator with a focus on startups creating technology for finance, insurance, regulation, and Islamic finance. In the same year, DIFC launched a $100 million Fintech fund, announcing its first investments into four startups in June 2020: FlexxPay, a cloud-based
B2B employee benefits platform; Go Rise, which helps migrants get access to financial services; NOW Money, a payroll services provider; and Sarwa, a robo-advisory wealth management firm. It has since invested in a further two businesses. As of November 2020, the Fintech Hive had received a total of 1,400 applications and more than 100 startups had been through the programme.
“We chose DIFC, and the Fintech Hive at DIFC as our launchpad because of the ease of business it offered,” says Mark Chahwan, Co-founder and CEO of Sarwa. “It made sense to us since you had everything in proximity; DIFC brought an entire ecosystem together. Not only do you get to be close to the regulators, but also to have a fantastic community of like-minded people that collaborate and continuously thrive to change the status quo.”
Amiri is betting big on future technologies in general. Last year, DIFC formed an alliance with Mashreq Bank and Norbloc to develop the region's first blockchain data-sharing platform. In January 2021, it also partnered with the U.A.E. Centre for the Fourth Industrial Revolution to launch a controlled regulatory environment to test digital assets and tokenization using blockchain technology. Then, in February, the DIFC Courts and the Dubai Future Foundation announced that they would be launching the world's first “Courts of Space” to reportedly explore space-related legal innovations and provide an outlook on potential outcomes of scenarios revolving around space-related disputes, as part of the Courts of the Future programme.
It's ambitious, but Amiri believes DIFC has all it needs to succeed. “It's because of strong foundations. Soft and hard infrastructure we're there; laws and regulations we're there; talent we're there; innovation and industry development we're there,” he emphasizes. There's no doubt that DIFC has an impressive resumé. Time will tell if it stays at the top of its game.