ABU DHABI — Abu Dhabi is starting to build a financial free zone on its Al Maryah Island that could pose a direct challenge to the nine-year-old Dubai International Financial Center, just an hour and a half's drive away. The project has been anticipated by foreign financial firms since Abu Dhabi's state-owned Mubadala Development began building a financial district on Al-Maryah several years ago, the Gulf Times said on Sunday. Free zones, which are common in the Gulf, typically exempt companies within them from rules forbidding foreigners from owning majority ownership. “Many foreign investment banks and financial services firms are not comfortable operating businesses they do not own outright,” Gulf Times said, quoting an unnamed banker. The free zone, to be called the Abu Dhabi World Financial Market, was started after a federal decree was issued in February, Gulf Times said, adding that the decree was just recently published in the UAE's official gazette. A separate ministerial resolution specified Al Maryah, an island northeast of Abu Dhabi's city center, as the free zone's location, it said. The free zone, like that in Dubai, will have its own laws, regulations and court system, it added. Since the creation of DIFC, Dubai's financial center, more than 900 companies have been set up there, employing over 14,000 people, according to recently-released figures. Abu Dhabi and Dubai are the largest of the seven emirates which make up the United Arab Emirates (UAE). A new center in Abu Dhabi could take away business from the DIFC, some bankers and executives say. Gulf Times said the creation of the free zone in the Dubai has raised question from at least one financial executive whether the UAE is big enough to host two financial free zones. Kai Schneider, a partner at the law firm Latham & Watkins in Dubai, said the free zones in Dubai and Abu Dhabi could be complimentary if they focus on different parts of the financial services to be offered. “If done appropriately I think it's a great step forward. I don't think it necessarily is a competition for the DIFC,” he said. “If you use Europe as a model, there's room for more than one financial center in a region and each financial center can focus on a separate sector of financial services. “London is asset management, Luxembourg is where funds are domiciled and Ireland is where they're administered.”— SG
