Authority figure

Once you start the cycle, even if you lose something, it will continue as long as you maintain your rhythm," insists Dr Habib Al Mulla, former Chairman of the Dubai Financial Services Authority (DFSA).

When we meet, a week before Al Mulla steps down from a position he has held since the DFSA's inception three years ago, there is no doubt that his departure is a great loss to the Dubai International Financial Centre (DIFC). Al Mulla is justly proud of his tenure at the head of the DFSA - after all, with his appointment, the financial centre's cycle of success began.

"We managed to complete the legal and regulatory structure and environment of the DFSA and DIFC, and that's one of the main components," Al Mulla explains.

"Today all the regulations are in place, and while naturally there will be some modifications, those are part of the ongoing process," he continues. "The main legislations are there, and everyone knows what the legislations are, and what the criteria for authorisations are.

"Secondly, the DIFC has established itself as a recognised regional financial centre - you can't talk about financial centres in the region without mentioning DIFC," he adds. "Most of the major financial institutions have migrated to the DIFC, and actual business is going on. I think that it's established now, and moving forward, the role is to take it to an entirely new level."

That role, as of June 1, belongs to Abdulla Saleh, the former deputy chairman of the DFSA. While Al Mulla has now elected to focus his efforts upon his legal practice, it seems his successor will have to overcome a series of challenges, if he is to maintain the rhythm created by his Harvard and Cambridge-educated predecessor.

"The main challenge for DIFC now is for it to institutionalise its processes," Al Mulla explains. "It has come to the stage where it is a regional centre, but if we need to have it as a truly international centre, we need to institutionalise it.

"We need to give it more freedom of activity, in the form of lifting the restrictions that exist in the federal law," he continues. "We need to have a decision-making process in order for the entities of the DIFC - whether it's the Dubai International Financial Centre Authority (DIFCA), whether it's the DFSA, or whether it's the courts - and a very clear scope defining what each of these entities is doing, and how the decision-making process is taking place."

Such key decisions, according to Al Mulla, include succession plans, as well as strategic development plans.

"I think it's the time now for Dubai and the UAE to upgrade their commercial laws, so that the level of competition goes up," he argues. "It shouldn't be just that DIFC is competing with a huge market like Saudi Arabia; it should be that the whole of the UAE is competing."

Al Mulla admits that such a move will not be easy. However, he cites the example of Qatar, which is taking the plunge and will, he believes, reap the benefits.

"Recently, Qatar announced that they are envisaging expanding the umbrella of the financial centre and its commercial laws to the whole of the country," he says. "So the whole country will have modern commercial laws, which gives Qatar a stronger added-value for international companies."

According to Al Mulla, the federal "restrictions" which currently operate in the UAE are particularly important in terms of the legislation that governs financial free zones, and the remit of the DIFC.

"The DIFC can only do re-insurance, it cannot do direct insurance business," Al Mulla offers by way of example.

"There are also certain restrictions with regard to the banking activities," he continues. "There is some kind of uncertainty and lack of clarity with regard to whether IPOs can be done through the Dubai International Financial Exchange (DIFX), and whether companies established in the DIFC can own assets outside the DIFC.

"There is a great deal of uncertainty, and if it was possible, I would have liked to have dealt with these areas in a more clear way," he adds.

"During the time when we were negotiating the Financial Free Zones law, that was the best achievable product at the time," says Al Mulla. "Now I think because people have more confidence in DIFC, they have seen that it's not just an offshore, kind of a backdoor, activity. It should be given the opportunity to exercise more opportunities."

Given the chance, Al Mulla explains, he would modify the Financial Free Zones law to enlarge the scope of activities the DIFC can undertake, and lift a number of the restrictions within that law. Also important are the issues of whether DIFC companies are treated as UAE national companies, dealing in dirhams, and accepting deposits with regard to banking transactions.

Moreover, according to Al Mulla, the UAE needs to work hard not only to improve its current legislation at a federal level, but also to readdress its priorities in terms of the base constituents of the nation's booming economy.

"I think everyone earlier was focusing on economic development - projects, infrastructure - and no one really focused on the legal system. But now, when you have that in place, the legal system is needed to cement all that has been done," he explains.

"For example, let's talk about real estate. You can announce a project, and people can like the idea, but once they have bought, then people will start to ask how their rights are being protected," he continues. "They want to know what kind of recourse they have against the developers, or what happens in case they pass away. Here, you need the legal system to come and cement this, and to give confidence to people."