As is the case of any offshore financial centre, secrecy has been synonymous with the Channel Islands of Jersey. But the reason for the strong relations between the self-governing British dependency and the United Arab Emirates – still not known to many – is not confidentiality alone. It has not been so long since they met and shook hands but the changing times have brought them close.
Offshore tax haven
Since the early ’50s, Jersey has attracted banks, fund management firms and trusts, which channelled trillions from around the world to the island, which has a population of 95,000. The politically and economically stable Jersey, with its low or non-existent taxes on financial transactions, has since become the favourite financial destination for many of the UAE’s ultra-high-net-worth individuals and families as well as banks and companies.
Realising its potential in the Islamic banking sector, Jersey structured Sharia-compliant vehicles and banks took interest. Emirates NBD Trust Company (Jersey) Limited was set up in 2001, while Abu Dhabi Commercial Bank (ADCB) launched its Jersey branch in 2011 to offer commercial offshore banking products to its mostly expatriate customers.
Meanwhile, National Bank of Abu Dhabi, which has been present on the island for many years, will soon close down its NBAD Trust Company (Jersey), it revealed to AMEinfo last month without giving further details.
High level visits
In 2001, the island opened the GCC representative office of Jersey Finance in Abu Dhabi to promote its financial services sector.
Ever since Senator Pierre Horsfall, First Minister, States of Jersey, led the first government delegation to the UAE in 2002, several top officials have visited the country to bolster economic and trade relations and to sign several agreements, the most recent of which was in April.
Double tax avoidance agreement
Most recently on April 20, The UAE and Jersey signed a double-taxation avoidance agreement, which had been on the cards since January 2015.
The UAE said the move was part of its efforts to establish cooperation with tax legislations to curtail the evasion of income tax, as well as to provide full protection to companies and individuals from direct or indirect double taxation.
Al Ain Zoo
Interestingly, much of the world only knows the tiny island for Jersey cattle, originally bred on the island and known for their rich, creamy milk. But a whole range of wildlife in Al Ain Zoo links the UAE and Jersey. Durrell Wildlife Conservation Trust on the island has long associated with the zoo for the protection and conservation of wildlife, and has trained zookeepers on taxonomy and animal husbandry.
The trust also associates with the Mohamed bin Zayed Species Conservation Fund on several initiatives.
Everything was well on the tax haven island until the 2007 financial crisis. Many banks closed, deposits shrank and tax pressures mounted. The government’s deficit budget is projected to be £145 million by 2019 and S&P, the credit rating agency, recently lowered Jersey’s rating to double A from double A-plus. Also, the Panama papers revelations have renewed the calls for abolishing tax havens.
On the other hand, the UAE’s economy has been hit by the major rout in crude oil prices since June 2014. The IMF cut growth projection for the UAE to 2.6 per cent this year, the slowest growth rate the country has seen since 2010.
Now, both are not leaving any stone unturned to diversify their economies as much and as swiftly as possible.
Jersey wants to revive its tourism and agriculture sectors, which were once dwarfed by financial services sector. It wants to market its potatoes, oysters and craftsmanship more than ever.
Meanwhile, the UAE is steadfast in its goal of creating a sustainable economy, focusing on industrial production and renewable energy, and opening its doors to foreign and private investors. The two have already identified significant areas of cooperation, and the rest is “secret”.
When asked about his vision for the bilateral relations, Chief Minister Senator Ian Gorst said: “We value the political, economic and cultural links we have forged with the UAE. For more than a decade, the Emirati and Jersey governments have been working together and we have built a level of mutual confidence that I am sure will continue long into the future.”