Middle East business-friendly reform praised as money transmission proposed

Out-Law News | 26 Nov 2019 | 12:23 pm | 2 min. read

The World Bank has commended the number of business-friendly reforms being undertaken by Middle Eastern countries, with four of the 10 countries that have made the most improvements in the past year located in the region.

In its annual report measuring the ease of doing business (149 page / 1.9MB PDF) around the world, the World Bank named Saudi Arabia, Bahrain, Jordan and Kuwait among the top 10 countries which have improved their regulations. Economies in the Gulf region have been particularly active in the past year when it comes to business-friendly reform, carrying out 35 changes to regulation.

The United Arab Emirates (UAE) is the most business-friendly jurisdiction in the region and the World Bank said successful reforms in the country had "served as an inspiration" to neighbouring nations.

The UAE's recent reforms have included reducing the fees for business incorporation, providing for disqualification of directors in cases of conflict of interest and introducing VAT.

Corporate law expert Mohammad Tbaishat of Pinsent Masons, the law firm behind Out-Law, said reform would continue in the Middle East.

"The latest report highlights the ease of setting up business here based on regulatory reforms to date. However, more reforms are on the horizon which are likely to make the region even more attractive to foreign businesses," Tbaishat said. 

"In particular, the new UAE foreign direct investment law will be a great boost to companies and investors looking to establish a presence in the country, without having to worry about the local ownership restrictions which previously may have dissuaded companies from setting up here" Tbaishat said.

New Zealand remains top of the list of countries ranked by their ease of doing business, with Singapore second and Hong Kong third.

One example of a move designed to improve the ease of doing business in the Dubai International Financial Centre (DIFC) - one of the UAE's two main financial freezones - is the proposal by the Dubai Financial Services Authority (DFSA), the financial regulator of the DIFC, to allow the provision of money services in relation to money transmission to take place in and from the freezone.  Such activities are currently prohibited under the existing DFSA regulatory regime. The DFSA has published a consultation paper (32 page / 684KB PDF) outlining the plans, with the consultation due to end on 15 December 2019.

The DFSA's proposals only cover money transmission and the regulator is not proposing to lift the prohibition on currency exchange as a standalone service.

The regulator is proposing that the definition of 'providing money services' should be expanded to cover the provision of a payment account and performing transactions on a payment account held by another person. No physical cash transactions would be permitted under the current proposals in order to minimise anti-money laundering risk.

The consultation also suggests the introduction of arranging and advising on money services as a new regulated activity.

Financial services expert Marie Chowdhry of Pinsent Masons said the consultation paper had been long-awaited and many market participants have previously urged the regulator to consider removing its blanket prohibition on providing money services in and from the DIFC.

"This consultation paper reflects months of internal work undertaken behind the scenes at the regulator and demonstrates that the DFSA is listening to market forces. Interestingly the regulator now feels better equipped and able to supervise firms undertaking money services activities - a stance which it has previously not been comfortable to take," Chowdhry said.