The Qataris are not through with Nairobi

One of the major issues on the agenda in meetings Between President Uhuru Kenyatta and visiting Emir of the Qatar, Mr Tamin Bin Hamad Al-thani, was the proposed Nairobi International Finance Centre.

As we all know, we have been planning to establish such a centre since 2010. We wanted to build a physical financial district operating more or less as a special economic zone offering international financial services and accommodating a cluster of both international and selected local institutions.

Three years ago, a team from National Treasury visited Qatar to seek technical assistance and study Qatar’s own international financial sector. They also conducted bench-marking visits to the Dubai, Singapore, Mauritius and Malaysia.

Lessons learnt during these benchmark visits included the following:

That if you want to attract investors to your international financial centre, you must adopt international best practice.

For instance, you may need to put up a class ‘A’ real estate development project to host the cluster or financial district. From what I gather, the Qatari’s had expressed interest in building for us a modern centre.

Which is why it did not surprise that hardly 24 hours before the Emir of Qatar and his team hit town, news filtered out from State House that a cabinet meeting on Thursday last week had approved the Nairobi International Finance Centre Bill.

Where did the idea of a Nairobi International Finance Centre originate from? Are we building a tax haven or just another secrecy-based off- shore centre vulnerable to money-laundering activity as critics of this idea have opined.

Methinks that the idea originated from Vision 2030- our national economic blue print. Under the vision, the financial sector was identified as one of the priorities to drive the country to middle income status.

And, within the financial sector itself, the Nairobi International Financial Centre was listed as a priority flagship project.

We wanted to build a centre based on the idea of a cluster to accommodate international re insurance companies, international assets managers, captive insurance companies, exchange centres- carefully selecting them by making sure that the investors we would a attract were not likely to compete with domestic financial institutions.

Sweeteners to our centre would include financial centre incentives such 100 per cent ownership of the companies, 100 per cent profit repatriation and limited tax exemptions.

Along the way, we appear to have lost the plot completely. If you doubt what I say, grab Nairobi International Financial Centre Centre Bill and see for what yourself and see the extent it deviates from international best practice.

International experience has taught us that investors only get attracted to your financial centre when you have the following. First, and independent financial centre agency to market, develop and operate the centre, including licensing and hosting a company registry dedicated to licensees of the centre.

Second, an independent supervisory agency and regulator, operating more or less as a special financial sector regulator for this unique special economic zone.

In Dubai, the governor of the Central Bank doubles as the chairman of the Dubai International Financial Centre.

Finally, a court of arbitration specifically created to serve licensees of the international financial centre and with capability to adjudicate disputes and contracts based on foreign laws.

However, what emerges from reading through the bill is a framework that falls way below standards of international best practice.

Clearly, we lost the plot- completely. Instead of an independent supervisory agency, the bill proposes a national steering committee heavily-loaded by political appointees, including the President and Deputy President.

The agency proposes a board that top –heavy with civil servants.

Instead of a court of arbitration and a sound legal environment modelled in the City of London system, the bill proposes a low-key tribunal subject to the laws of Kenya.

What I know is that the Qataris are not through with us. In 2014, they expressed interest in arranging a Sukuk( sovereign bond) for us.

For the last three years, we have seen Qatar National Bank making financial statement disclosures in the local press. It is rare for an international bank to publish financial statement disclosures in a jurisdiction where it is under no obligation to do so.