Lissele Pratt: Capitalixe Cofounder, helping businesses navigate payments & banking solutions, honored by Forbes 30 Under 30 Europe 2021.
Dubai has already stated its clear intention to become one of the top four financial hubs in the world. Even ten years ago, this may have seemed like a ridiculous statement, but the emerging markets in Southeast Asia, Latin America and the Middle East and North Africa (MENA) show that investors are increasingly looking further afield from the traditional settlements of London, New York, Tokyo and Hong Kong.
The Dubai Economic Agenda (D33) revealed that the emirate is aiming for an FDI of over $176 billion by the year 2033. After all, Dubai is already 12th in the Global Financial Centre Index and rising. But what credentials does Dubai have to legitimately become the next global financial hub? Here is an exploration of the key factors driving Dubai’s rise and some practical advice on investing in this city.
Attractive Economics And Beyond
Over the past five years, Dubai has proved itself as one of the most stable investment hubs in the world—particularly during the Covid-19 pandemic when other cities struggled to keep their heads above water.
But of course, while financial business leaders are attracted by financial incentives, it would be naive to say that economics is the only factor at play here. In order to attract the biggest investors in the world, you must also make your city an attractive place to live for that demographic.
Over the last two decades, I believe Dubai has absolutely achieved this, offering elite schools, world-class dining, top-tier healthcare and more affordable luxury housing than even cities like London. Its strategic location (linking Switzerland and Singapore while anchoring the MENA region) helps make it a natural financial crossroads.
Overall, there are over 81,200 millionaires, 237 centimillionaires and 20 billionaires in Dubai. There is an estimated $966 billion in private wealth. I believe all of these point toward a brand-new global financial hub prepped and ready to join the heavyweights.
Finding Investment Opportunities
The number one rule to becoming a global financial hub is to provide attractive investment opportunities and incentives. Here are some factors to take advantage of when it comes to investing in Dubai:
• 100% foreign ownership in most sectors, something I see as rare when it comes to investing in foreign countries.
• 25 free zones offering tax benefits and operational flexibility.
• A progressive regulatory environment, including strong anti-money laundering laws and a dedicated virtual asset regulator.
• Attractive tax structures, including zero currency restrictions, full repatriation of funds and double taxation treaties with more than 130 countries.
Along with financial services and fintech, I believe there are other areas ripe for investment, including real estate, renewable energy and technology, particularly AI and blockchain.
Overcoming Hurdles
Despite these numerous benefits, money laundering has been Dubai’s biggest hurdle on the path to becoming a global financial hub. Let’s face it; it’s a big red flag to investors. When the Financial Action Task Force puts you on their grey list for strategic deficiencies in combating money laundering (even if since removed), investors tend to take note.
However, Dubai has been swift in addressing these concerns, investing heavily in new anti-money laundering laws and safeguards. Since then, the Middle East and North Africa Financial Action Task Force has upgraded three different recommendations to “compliant” or “largely compliant,” showcasing the efforts Dubai is making to squash its money laundering problem.
The key is to stay ahead of the regulations by integrating comprehensive anti-money laundering processes. If you’re in the high-risk payments space or dealing with cross-border transactions, for example, you need to have rigorous checks in place, especially given the complexities involved in these areas.
Having to navigate through an extremely complex regulatory environment is also a challenge that needs addressing. With different rules across federal, local and free zone jurisdictions, the process can be daunting for newcomers and you should absolutely consider working with a legal or compliance partner in this instance.
Additionally, there’s the matter of licensing delays. While I have seen Dubai make great strides in speeding up business setup, delays still crop up, particularly in newer or niche sectors like financial advisory services.
VARA Could Take Dubai Far
Building off its progressive regulatory environment, I think the country’s Virtual Asset Regulatory Authority (VARA) is proving to be the feather in the cap of Dubai’s bid to become the financial hub of tomorrow. I see only a few select jurisdictions across the world implementing such an extensive framework for cryptocurrency and virtual assets.
Even with other regions like the European Union and Hong Kong having made similar digital asset moves of their own, I think it is Dubai that is particularly attractive to firms in the United States because of the advantages I have outlined above.
If you want to capitalize on Dubai’s virtual asset momentum, I suggest you start by mapping its services against VARA’s licensing categories, then working with local legal counsel to guarantee full compliance prior to entering the market.
Final Thoughts
Despite Dubai’s impressive strides, the global financial world is extremely competitive. Cities like London, New York and Singapore have been at the top for a long time. They have the history, the infrastructure and they’ve weathered every storm that’s come their way.
So, Dubai’s got a fight ahead of it if it wants to achieve its goal of becoming a global financial center. However, that’s not necessarily a bad thing since competition drives growth.
For business owners, it’s not enough to just ride on the coattails of Dubai’s progress. You’ve got to stay nimble. Stay ahead. Adapt. The competition is fierce. But if you play it right, you have the potential to secure a prominent position in what could soon be one of the world’s most influential financial hubs.
Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?