Established in 2004, DIFC is undoubtedly the financial hub of UAE and the Middle East region at large. It serves the financial interests of many investors in the region and remains as one of the major landmarks of economic prosperity of the country. Indeed, DIFC was founded by the prime minister with an objective of steering economic growth within the country and the region (www.difc.ae). Besides, wooing investors in the arid country was an objective in the creation of the financial center.
The financial center offers myriads of services to their customers. They include banking services accruing all investors, corporations and individuals in the world (www.difc.ae). Besides, the center provides capital market services involving sales and purchase of equities, commodity trading just to mention but two (www.difc.ae). Moreover, it is in DIFC where asset management services are widely advanced in comparison to other financial institutions within the region. With aforementioned services, DIFC has attracted myriads of financial institutions that after acquisition of operating licenses have started offering their services and conduct business in UAE (Terterov, 67).
As an international financial center aiming to attract investors from all over the world, DIFC competes with world's major capital markets. To mention but a few, NASDAQ in New York, FTSE in London and Hong Kong's capital market (www.difc.ae). Nevertheless, due to its special features like its geographical location and absence of major competitive forces in region, the center has controlled the financial services in Middle East and parts of Africa shrugging any competition with ease (Terterov, 68). Additionally, it has used its ability to incorporate many financial services unlike other financial centers.
Competitors
Qatar Financial Center
The Qatar Financial Centre (QFC) is a financial and business centre established by the Government of Qatar and located in Doha. It has been designed to attract international financial services institutions and major multi-national corporations and to encourage participation in the growing market for financial services in Qatar and elsewhere in the region. The QFC operates to international standards and provides a first class legal and business infrastructure for those doing business within the QFC. The QFC was created by QFC Law No.(7) of Qatar and has been open for business since 1 May 2005. One of the business areas adopted by QFC is banking which highly competes with DIFC banking operations. It is a program of investment of more than $140 billion across the entire economy, supported by Qatar's increasing energy revenues, has created new avenues for a wide range of banking services including commercial and investment banking, project finance, Islamic banking, as well as asset management, private banking and wealth management. The increasing demand for banking services has created a market with strong potential for companies able to provide new capacity to the financial sector.
Ras Al Khaima Financial centre
The newly unveiled Ras Al Khaimah Financial City is expected to become a new generation offshore financial centre (OFC) combining the benefits of a free zone, an offshore financial centre and an offshore business centre. RAK Financial City, 3 rd major Financial Centre, after Qatar & Dubai, would cater various kind of businesses with easy procedures. While DIFC and Qatar Financial Centers are more focused on offshore financial services business, RAK Financial City will offer a complete package of offshore business solutions including financial services. International OFCs are well regulated and attract businesses from across the world. As companies become ever more multinational, they find it easier to shift their activities and profits across borders and into OFCs. As globalization becomes pervasive, OFCs are becoming increasingly relevant to all kinds of business activities.
Hong Kong Capital Market
The Banking and Capital Markets industry is one of the most important industries in Hong Kong supporting its status as one of the world's leading international financial centers and its role is vital to Hong Kong's continuing economic development. Hong Kong market participants face increasingly competitive pressure in a market shaped by both international trends and significant economic, market and regulatory change in both Hong Kong and Mainland China. Banking and Capital Markets practice brings together global financial services expertise and in-depth knowledge of the local market to provide workable and effective solutions for market participants in a wide range of professional service areas.
Bahrain Financial Center
In modern times, Bahrain was the first nation in the Gulf to discover oil - and the first to recognize the need to diversify its economy. Today, Bahrain's proximity to major oil producers and affluent markets has contributed to its successful development as an acknowledged international banking and financial centre of excellence.
Maintaining a regulatory environment that is, at once, business-friendly and adheres to international best practice is a key element of Bahrain's success as an international financial centre. It is no surprise that over the past three decades, Bahrain has built up the Middle East region's largest concentration of financial services firms, with over 400 firms at present, representing a good mix of international, regional and local players offering a very wide variety of services. The financial services sector is central to Bahrain's Vision 2030, the blueprint for the development of the country's economy, government and wider society over the coming decades. Bahrain is two years into the process, which the Economic Development Board (EDB) is leading under the guidance of His Royal Highness Prince Salman Bin Hamad Al Khalifa, the Crown Prince of Bahrain and Chairman of the EDB
SWOT Analysis
A SWOT analysis explicates the business environment in which the financial center operates. It shows the strengths, weaknesses, and opportunities of the capital market in addition to threats emanating from both external and in internal factors.
Strengths
DIFC is strong in many areas involving the registration, investments and operations. Foreign investors have derived myriads of benefits while doing business in UAE. The crucial and the prime benefit that accrues the investors is total foreign ownership. Moreover, all incomes and revenues attract no taxation from the federal government boosting investor's confidence (Terterov, 67). These are major strengths of DIFC.
Furthermore, foreign exchange and repatriation of profits earned by the foreign firm have no restrictions (www.difc.ae). The rationale is that DIFC operates in an environment where the dollar is the major currency besides the efficiency and transparency that typifies the center. Extensive connectivity facilitated by high-speed internet renders DIFC efficient in handling the investors' transactions (www.difc.ae). This is coupled with advanced infrastructure, high level and modern technology, excellent measures to secure financial data and prospective business continuity in the long term. All the above strengths have given DIFC a competitive advantage over its rivals making it one of the best financial centers in the world.
Opportunities
There are opportunity for growth and better performance for DIFC. Considering that the Middle East and the surrounding regions have never experienced modern and excellent center, it is one of a kind in the region giving it an enormous opportunity for growth. In fact, the region is a host to over two billion people, with average gross domestic product of the countries in the region culminating to over 5% (www.difc.ae). Hence, the opportunity for better performance in future is unsurpassed.
To capitalize on the opportunities DIFC encourages the attraction of liquidity to the countries to enhance improved economic success for the local economies. In addition, it facilitates opportunities where the public can benefit from the operations by initiating numerous IPOs for newly privatized companies (Terterov, 73). The people therefore benefits from the offers leading to more investors for the center. This is market liberalization within the region.
Weaknesses
The major weakness characterizes DIFC regards the registration procedures and legal regulations that the investors abide by. The process is usually hectic and requires a lot of paperwork that potentially scares away the investors (Boone and Kurtz, 19). Besides, the business environment in Dubai dictates that investors need to establish numerous connections and network of other investors in order to diversify their services. DIFC is also typified many foreign investors and it requires momentous trust for the business to run effectively.
Threats
The rise of stronger capital markets in East Asia like the one in Hong Kong and Nikkei in Japan represents the external threats that the financial center contends with in addition to rampant currency devaluation in China (Boone and Kurtz, 27). UAE is located in a region filled with political wars and instability, which leads to investors' pessimism. Countries like Pakistan, Iran and Iraq are constantly marred by violence and political instability - detrimental for any business.
Conclusion
Essentially, DIFC is among the fastest growing financial centers in the world comparable to Wall Street and other major financial centers. Besides, the center has potential for growth owing to its competitive advantage. However, it still have to deal with few weaknesses and both external and internal threats.
