Abu Dhabi’s tax-free financial zone says open for business

ABU DHABI (Reuters): The Middle East’s newest financial center opened for business on Wednesday as the Abu Dhabi Global Market (ADGM) said it was ready to receive applications from financial institutions for operating licenses.

Aiming to diversify its economy beyond oil, Abu Dhabi is creating a financial free zone with its own administration, court system and zero tax incentives designed to lure banks and companies from around the world.

It has hired prominent figures from other centers to execute the project, including Hector Sants, former head of Britain’s financial services regulator, as an adviser and Richard Teng, former chief regulatory officer at the Singapore Exchange, as chief executive of the ADGM’s new regulator.

“Over the next few weeks and months, we will continue to closely engage financial institutions to help them understand our regulations and assist them with the application process,” Teng said in a statement. He did not specify when the first licenses might be awarded.

The ADGM is in the process of consulting the public on draft regulations for its courts and is about to appoint judges, it said.

Abu Dhabi will face tough competition from other financial centers, particularly the fast-growing Dubai International Financial Centre, just 130 kilometers away along a highway through the desert.

But its vast oil wealth - one of its sovereign wealth funds is estimated to have more than $700 billion of assets - and its status as the capital of the United Arab Emirates mean it will be difficult for some financial firms to ignore.

In the initial announcement of its plan in 2013, the Abu Dhabi government said the ADGM would host various types of bank, foreign exchange and commodity trading firms, brokerages, pension and investment funds, Islamic financial firms and many others. It said the zone would fill a gap in the global trading day between Tokyo and London.

Officials now say the center’s operations will at first be more modest, focusing on wealth management, asset management and private banking.

“However, we have the flexibility to grow into a broad-based international financial center, attracting a wide spectrum of financial institutions who will choose ADGM as their home,” the center’s chairman Ahmed Ali al-Sayegh said on Wednesday.