Free Zones in the UAE
Financial free zones (FFZ) play a pivotal role in shaping and boosting the economic landscape of a country by contributing significantly to its Gross Domestic Product (GDP). These specialized areas, often located within major cities or strategic locations, are designed to attract local and international financial institutions, international businesses, and investors by offering a range of incentives and regulatory advantages. By leveraging the advantages of financial zones, governments seek to position themselves as global financial hubs, drive economic diversification, and enhance their competitiveness in the global marketplace.
The United Arab Emirates has a well-defined and comprehensive strategy for financial free zones, which aligns with its vision of becoming a global financial hub. The strategy encompasses several key elements aimed at attracting international businesses, boosting investment, and fostering innovation within the free zones.
By providing a conducive ecosystem for financial activities, these zones attract substantial foreign direct investment (FDI), enhance employment opportunities, and generate substantial revenue, all of which contribute to the overall GDP of the country.
Creation of ADGM
Established by UAE Federal Decree in 2015, ADGM’s jurisdiction is located on Al Maryah Island in Abu Dhabi combining three independent authorities – the Registration Authority (RA), the Financial Services Regulatory Authority (FSRA) and ADGM Courts. The free zone operates under English common law, providing legal certainty and a familiar legal system for international investors. Its independent financial services regulator, the Financial Services Regulatory Authority (FSRA), ensures compliance, transparency, and investor protection.
Since its launch in 2015, Abu Dhabi Global Market (ADGM) has emerged as a highly competitive player on the international stage, positioning itself as a leading global financial center, earning recognition from international bodies and agencies, enhancing its reputation and trustworthiness among investors. As an international financial free zone, ADGM offers a range of unique advantages and opportunities that make it an attractive destination for international investors – robust regulatory framework, strategic location, commitment to innovation.
One of the primary reasons international investors consider ADGM is its business-friendly environment and strong regulatory framework. ADGM operates on a principles-based approach, providing a flexible and adaptive regulatory framework that encourages innovation while ensuring investor protection. The transparent and efficient regulatory system instills confidence in investors, mitigating risks and enhancing the overall investment climate.
ADGM’s strategic location in the heart of Abu Dhabi, the capital of the United Arab Emirates (UAE), further adds to its appeal. The UAE’s has showcased political stability, commitment towards robust infrastructure and innovative technologies, employment opportunities for large spectrum of human talent and strategic geographical position make it a gateway to the wider Middle East, Africa, and South Asia regions, which is a major attraction for investors in leveraging the free zone’s connectivity to expand their business horizons.
The rapid growth of ADGM and the increased investors’ interest is the reason behind the recent announcement made and the issuance of the UAE Cabinet Resolution No. (41) for 2023 to expand the jurisdiction of ADGM from its current location at Al Maryah Island (area of 1,680,323) sq. m) to encompass Al Reem Island, the combined geographic area of ADGM has increased to almost 14,377,774.9 sq. m, or nearly 1,438 hectares – 10 times greater than ADGM’s current footprint. According to ADGM, it is now set to become one of the world’s largest International Financial Districts. The contribution of Al Reem Island is a wide range of office spaces and world-class residential, educational, medical and lifestyle facilities, enhancing the total competitive edge of ADGM.
In addition to its regulatory framework and strategic location, ADGM offers a range of business incentives that make it a competitive choice for international investors. These incentives include tax exemptions, full foreign ownership, and simplified company registration processes. Such benefits allow investors to establish a presence quickly and cost-effectively, enabling them to focus on business expansion and achieving their goals.
Furthermore, ADGM’s commitment to fostering innovation and technological advancements makes it an ideal destination for investors seeking to capitalize on emerging trends. The free zone actively promotes fintech, digital assets, and sustainable finance initiatives, attracting innovators and entrepreneurs from around the world. ADGM’s Regulatory Laboratory (RegLab) provides a controlled environment for testing innovative financial products and services, facilitating their market entry and growth withing a vibrant ecosystem.
ADGM’s commitment to fostering ecosystem is evident through its numerous initiatives, events, and collaboration opportunities. The free zone actively encourages knowledge sharing, networking, and collaboration among its diverse community of financial institutions, professional services firms, and startups. Events such as the R.A.C.E (Regulation, Awareness, Collaboration, Ecosystem), part of Abu Dhabi Finance Week (ADFW) 2022 and the fifth edition of Abu Dhabi Sustainable Finance Forum (ADSFF) is what offers to this ecosystem and investors an access to a wide range of expertise, resources, and potential partnerships, further enhancing their prospects for success.
Conclusion
In conclusion, ADGM’s competitive edge on the international scale is indisputable. Its robust regulatory framework, strategic location, commitment to innovation, and array of business incentives make it the FFZ of choice for international investors.
As ADGM’s global presence and impact continue to grow and be recognized, we highly recommend and encourage our clients and international investors to consider the distinctive benefits it provides. By selecting ADGM, investors gain access to the fastest growing financial center that offers political and legal stability, growth opportunities, and a platform for innovation, collaboration in the next chapter of a digitally transformed financial system.
Important Notes
- ADGM is one of the two UAE FFZs, established following an amendment to Article 121 of the Constitution in 2004, which enabled the creation of FFZs in the UAE.
- ADGM is governed by Federal Law No. (8) of 2004 Concerning Financial Free Zones, along with Cabinet Resolution No. (28) of 2007 on the Implementing Regulations of Federal Law No. (8) of 2004, as amended, and Abu Dhabi Law No. (4) of 2013 Concerning Abu Dhabi Global Market, as amended.
- Abu Dhabi Global Market (ADGM), a Financial Free Zone (FFZ) in the Emirates of Abu Dhabi, established pursuant to Federal Decree No. (15) of 2013 and Cabinet Resolution No. (4) of 2013, has announced its expansion.
