DIFC as a gateway to growth for Indian companies
What is the DIFC?
The Dubai International Financial Centre, or DIFC, is a leading financial hub in the region for business, fintech, and lifestyle. Setup in 2004, the DIFC has grown to be one of the top 10 onshore financial centres in the world. It brought in a paradigm change in the region, by adopting a Common Law framework, with an independent regulator (DFSA) and an independent English language Common Law judiciary – DIFC Courts.
Since then, the DIFC District has matured into more than just a place to work – it is now a lifestyle destination, with retail outlets, cafes and restaurants, art galleries, residential apartments, public green areas and hotels dotting the landscape.
The India - UAE relationship
India and the UAE have shared warm relations going back centuries. The recent high-level visits of UAE and Indian leaders demonstrate the proactive nature of decision-making between the two countries. Another reason for the greater depth in relations is the rigorous structure of various committees that have been set up following the high-level visits.
In addition, there are enormous possibilities from the $75-billion fund announced in 2015 by Indian Prime Minister Shri. Narendra Modi and His Highness Shaikh Mohammad Bin Zayed.
With a 3.2-million-strong population, the Indian expatiate population in the UAE is the largest in the world, and is growing on a year-on-year basis. Over 1,000 flights operate between the two countries, and recent years have shown a significant increase in the number of tourists traveling from India to the UAE.
In 1982, foreign trade figures between the UAE and India were at around 180 million. In 2016-17, these numbers crossed $52 billion, thus making India the second largest trading partner of UAE, and UAE became India’s third largest trading partner.
At US$ 6.5 billion, India is the third-largest source of FDI in the UAE. Indians are the largest foreign investors in Dubai real estate, amounting to over US$ 5.7 billion, or 13% of the total.
Why setup in the DIFC?
The DIFC is one of the only two financial free zones in the UAE. It offers 100% foreign ownership, as opposed to establishing a financial services firm in the Dubai mainland, where only part foreign ownership is permitted. The DIFC is the preferred gateway for Indian investors to access the Middle East, Africa and South Asia (MEASA) markets on one side and Europe, Asia and the Americas on the other – a region worth an estimated USD 7.4 trillion in annual trade.
DIFC and Indian Companies
The DIFC has a long and successful track record of attracting and supporting Indian companies, and DIFC envisages a major role for India’s business community as it seeks to triple the size of its operations over the next 10 years. Indian business is core to the DIFC 2024 Strategy, with a target to increase the number of Indian firms to over 100 in the next ten years.
Indian firms have a large presence in the DIFC, with companies in wealth and asset management, banking and legal services choosing the DIFC as a strategic hub.
With a strong track record in issuing banking licences to Indian banks, a number of banks have opened in the DIFC, including State Bank of India, ICICI Bank, Punjab National Bank, Union Bank of India and Axis Bank.
The DIFC aims to provide a supportive platform for Indian businesses seeking new markets and territories. Indian companies would benefit from the DIFC’s robust business infrastructure and also gain access to the world’s largest non-resident Indian community, an estimated 3.3 million people.
Prominent Indian companies in the DIFC
Some of the prominent Indian companies that have set up in the DIFC include:
Aditya Birla Sun Life Asset Management Company Limited
Kotak Mahindra Bank Limited
Kotak Mahindra Financial Services Limited
IL&FS Global Financial Services (ME) Limited
IIFL Private Wealth Management (Dubai) Limited
Financial Service Companies
Firms that wish to engage in financial service activities, will find that the DIFC as a jurisdiction brings with it credibility and certainty. The laws and DFSA Regulations are comprehensive, robust, and clear. Prospective clients take comfort in the fact that DIFC-based companies are well regulated. Institutions and market counterparties find it easier to deal with DIFC firms, since they are onshore.
Financial firms that operate in markets around the world can use their DIFC setup to cover the time gap between London and Europe in the West, and Mumbai and Shanghai in the East.
There are over 2,000 firms that currently operate out of the DIFC. This in itself has created a financial ecosystem where firms can engage, discuss and make deals, hold events and conduct business. A strong network of service providers such as consultancies, audit and accounting firms, and corporate service providers further makes DIFC the jurisdiction of choice.
The following financial service activities can be carried out from the DIFC:
- Wholesale Banking – The DIFC hosts 20 leading Indian banks, including State Bank of India, ICICI Bank, Punjab National Bank, Union Bank of India and Axis Bank. With a 131% increase expected in MENA trade by 2026, there are significant opportunities for Indian banks in the region.
- investment banking
- Insurance Management – HDFC Life is one of the biggest Indian companies operating out of the DIFC in this sector.
- private banking
- fund management
- asset management - India’s largest asset management company, Reliance Capital Asset Management (RCAM), is set up in the DIFC.
- brokerage and
- investment advisory services
The world’s most successful financial centres create a broad base of economic activity. Non-financial firms provide the goods and services that core financial firms require in order to operate effectively. These include business consultancies, law firms, professional service providers and even businesses such as travel agencies and translation services.
Not everything revolves around work however. Professionals look for a holistic lifestyle, and personal services such as tailoring, salons, gymnasiums, retail outlets such as restaurants and coffee bars, and even fine dining options to entertain their clients.
The DIFC also offers a wide range of non-regulated activities, such as corporate offices, regional headquarters, family offices, holding companies and proprietary investment companies. Consultancies, service providers and product providers can also establish in the centre. These entities are not subject to regulation by the DFSA, and are authorised directly by the DIFC Registrar of Companies.
DIFC is situated in a prime location in Dubai, next to the iconic World Trade Centre and opposite Emirates Towers, parallel to the arterial road of Dubai - Sheikh Zayed road. Over 22,000 professionals live and work in the DIFC area. This presents a lot of opportunities for retail concepts, both high-end and bespoke. While there already exists a number of fine dining options, tailoring and shopping outlets and cafes, the upcoming Gate Avenue under the DIFC 2.0 master plan will provide a seamless, fully connected year-round walkable destination including an outdoor promenade.
Here are some specific advantages of establishing in the Dubai International Financial Centre.
LEGAL AND REGULATORY FRAMEWORK
- Legal framework supports cross-border activities
- 100% foreign ownership permitted
- No restriction on foreign talent or employees
- No restrictions on capital repatriation
- Zero tax for 50 years on profits, capital or assets from 2004
- Zero tax on employee income
- Highly regarded, independent regulator
- Independent, English-speaking, common law judicial system
- Distinct from the UAE legal system
- Risk-based regulatory approach
- Central to regional deal making
- High concentration of international firms, investment funds, wealth management firms, banks, and financial institutions
- World-class regional and international law and auditing firms, and other professional services
- The largest fund domicile in the region
- Management offices, holding companies and family offices are located closer to the assets they own or manage
- The Middle East, Africa and South Asia (MEASA) is increasingly the centre of gravity for the global economy
- Dubai plays a central role in the growing South-South trade, principally between Asia and Africa
- Well-positioned to harness the potential of emerging markets
The DIFC is a premier destination to live and work and brings with it several advantages and efficiencies. Setting up a company in the DIFC allows financial companies to have a base in Dubai and cater to the expanding MENASA market. It also helps service providers to have a presence in the heart of Dubai, and service multinational firms from the world over. And yes, retail concepts are able to get traction by attracting the attention of high-end clientele!
Indian companies have long operated in the region. The DIFC provides an excellent platform for financial, non-financial and retail companies from India to explore the MENASA region and provide services to the large Indian community, both in the UAE and in the GCC.