Abu Dhabi is putting finishing touches to plans to establish a financial free zone that could resemble, and therefore compete with, the Dubai International Financial Centre, sources familiar with the matter said.
A federal decree was passed by the United Arab Emirates' President Sheikh Khalifa bin Zayed al-Nahayan in February to create the area, known as the Abu Dhabi World Financial Market, on Al Maryah island, the sources told reporters.
Detailed regulations covering the zone will be outlined shortly, an Abu Dhabi government source said, declining to be named under briefing rules.
"It will have all the offerings of a financial free zone - 100 percent foreign ownership, tax and capital repatriation, internationally accepted laws and regulations and other things," the source said.
The UAE's free zones are areas in which foreign companies can operate under light regulation, and where foreign investors are allowed to take 100 percent ownership in companies; outside the zones, they generally need to have local partners.
One of the country's most successful free zones is the Dubai International Financial Centre (DIFC), established in 2004 with its own civil and commercial laws, its own courts and a financial exchange, NASDAQ Dubai.
It has become the Gulf's top financial centre, housing regional headquarters for many of the world's biggest banks and finance firms. Others have tried to emulate its success; the Qatar Financial Centre was set up in 2005 in Doha, and the Bahrain Financial Harbour opened in 2009.
Unlike neighbouring Dubai, Abu Dhabi has huge oil reserves, so it has less economic need to develop as a financial centre. But Abu Dhabi is keen to develop its economy beyond oil and make its mark on the global stage.
Al Maryah island, formerly Sowwah island, is close to downtown Abu Dhabi and has an area of about 114 hectares. It has been developed by Abu Dhabi state fund Mubadala since 2007, and some 50 local and international firms have set up offices on the island.
Because of its oil wealth and the monetary resources of its banks and sovereign wealth fund, Abu Dhabi will have some strengths as a financial centre, but it is not clear whether it can draw much business away from Dubai, which has a well-entrenched position and a more freewheeling business culture.
"The challenge for Abu Dhabi would be to find a niche, a competitive edge for how to compete with Dubai, Qatar and Bahrain and capture its market share," said Tariq Qaqish, head of asset management at Al Mal Capital.