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OECD – A torchbearer of tax transparency or a benefactor of western private enterprise?


By S C Tiwari, IRS (Retd) – The views expressed in the article are author’s own views.

The recent OECD publications outlining Pillar One and Pillar Two approach to  cross-border taxation of digital business has received an enthusiastic response in Indian tax circles. Since ecommerce activities present a significant taxation issue, do the options presented by OECD offer a fair and reasonable solution for cross-border ecommerce taxation?

The OECD, in July 2013, embarked on a very ambitious project to end Base Erosion and Profit Shifting (BEPS) and to improve tax transparency. It set out 15 BEPS actions aimed at rooting out BEPS. Most of these issues resonated with Indian tax officers as these were the issues causing significant loss of revenue. The OECD action generated considerable excitement as to how things were going to become tough for MNEs engaged in BEPS. Tax Heavens were expected to be a thing of past with transparency provisions. The OECD published its final reports on 5th October, 2015 along with a draft of multilateral instruments (MLI) required to be ratified by various states. The OECD and G20 countries continued further action through BEPS “Inclusive Framework or IF” group which brought together a much larger group of countries in the said project. The recent Pillar One and Pillar Two approach is a continuation of Action 1 on “Addressing the Tax Challenges of the Digital Economy”. In my view, the signing of the MLI and implementation of the BEPS suggestions has hardly resulted in any significant change in behaviour of MNEs.

Are OECD members, in cooperation with the G-20 and the IF group, actually desirous of ensuring total tax transparency and consequently eliminate BEPS? Can OECD act as a reliable global platform as far as  base erosion and tax transparency is concerned? The present plight of powerful multilateral institutions like EU, UN and UNSC and their abject failure to guard weaker countries against the excess of the powerful ones, reveals the impotence of such institutions in current environment. To understand the issue, it is necessary to analyse the past approach of OECD in dealing with tax heavens and BEPS.

The biggest hurdle which OECD faces is that it comprises of members many of which are tax heavens themselves. The role of tax heavens has been crucial in facilitating BEPS through illegal income transfer from high tax jurisdictions to low tax jurisdictions. The tax heavens, in addition to having a very low or nil taxation, facilitate the same through loose capital flow and tight data dissemination laws. Hence, if the BEPS has to be stopped, it is necessary that such tax heavens are clearly identified and forced to cease such activities. It would be revealing to note that it is the western countries, many of them a part of OECD, who either indulge in or facilitate such tax heavens. A report dated 3rd Sept., 2010 prepared by Congressional Research Service for members of US Congress gives a thoughtful insight on the role of tax heavens as well as the inability of the OECD to identify tax heavens. In its earlier reports prior to 2002, OECD relied on consensus to identify tax heavens rather than an objective yardstick. The result was a lopsided report which excluded tax heavens such as Ireland and Switzerland which were OECD members and Hongkong and Macau on China objections. Even US, an OECD member, in its own list contained in S 396, introduced in the 110th Congress (page 3 of the report) excluded British Virgin Islands, known world over as a tax heaven!

Even now, the OECD does not identify tax heavens on factual yardsticks like low tax rates and laws promoting base erosion but solely based on tax transparency commitments. In April 2002, the OECD’s Committee on Fiscal Affairs had identified seven jurisdictions (Andorra, The Principality of Liechtenstein, Liberia, The Principality of Monaco, The Republic of the Marshall Islands, The Republic of Nauru and The Republic of Vanuatu)  as un-cooperative tax havens. By May 2009, the Committee had decided to remove all these jurisdictions from the list of uncooperative tax havens in the light of their commitments to implement the OECD standards of transparency and effective exchange of information and the timetable they set for the implementation. As a result, no jurisdiction is currently listed as an un-cooperative tax haven by OECD. (Source – https://www.oecd.org/tax/harmful/ list-of-unco-operative-tax-havens.htm).  Really!! No tax heavens in the world! Congrats OECD.

The very premise of excluding Countries with  tax information exchange agreements (TIEAs) from the list of tax heavens is flawed. The TIEAs usually allow for information only on request after identification of tax evaders in advance. If the person is already identified as tax evader, where is the need for information! In addition, they generally do not override the Bank Secrecy Laws of the State which are quite strong in tax heaven countries. The laws of tax heavens are lax with reference to identity and significant transaction data and hence, they hardly have any useful data to share. In fact, the above referred US Congress Report observes that – “In some cases, the countries themselves have little or no information of value. One article, for example, discussing the possibility of an information exchange agreement with the British Virgin Islands, a country with more than 400,000 registered corporations, where laws require no identification of shareholders or directors, and require no financial records, noted: “Even if the BVI signs an information exchange agreement, it is not clear what information could be exchanged” The OECD categorisation of tax heavens is severely flawed and hardly serves any purpose. It also shows its lack of intent to root out such practices.

The studies by independent scholars reveal a very contrasting story. Such studies have identified Delaware, Nevada and Wyoming of USA, Campione d’Italia, an Italian Town located within Switzerland, major countries such as the UK, Netherlands, Denmark, Hungary, Iceland, Israel, Portugal and Canada as tax heavens. (Congressional Report on Tax Heavens dated 3-9-2010). This report also notes that in addition to Bahamas, Bermuda, BVI, Cayman Islands, Jersey, Liberia, Marshall Islands etc., the Tax Justice Network has identified some specific cities and areas as tax heaven which include New York and Uruguay in the Americas and Caribbean; Mellila, Sao Tome e Principe, Somalia, and South Africa in Africa; Dubai, Labuan (Malaysia), Tel Aviv, and Taipei in the Middle East and Asia; Alderney, Belgium, Campione d’Italia, City of London, Dublin, Ingushetia, Madeira, Sark, Trieste, Turkish Republic of Northern Cyprus, and Frankfurt in Europe and the Marianas in the Indian and Pacific oceans. No wonder that the global tax evaders seek refuge in Europe. If the OECD is not capable of even identifying a tax heaven, can it actually work as a sentinel of tax transparency?

The second issue is the voluminous ambiguous guidance published by OECD. The motto of the BEPS is – profits should be taxed where value is created or services are rendered.  However, in its effort to justify market practices of European MNEs, the OECD has made the reports ambiguous and contradictory, the ultimate effect being that the multinationals are able to wringle out of taxing situations. For instance, the OECD TP guidance requires an agreement between the parties for services to be final document for cost allocation in intra-group services, but in later discussion, it gives a huge leeway by talking about market practices making the entire guidance subjective and ambiguous. Such language has been successfully used by the MNEs before Indian Courts. Such ambiguous guidance, while being contrary to the local laws, also works against the local businesses who are required to pay higher taxes.

Similarly, the Report on Hybrid Structures is over 450 pages long and the scope of various rules, conditions under which they would apply and the exceptions to the Rule taken together make the Rule incomprehensible. In the recent report outlining Pillar One and Pillar Two concept, the OECD has excelled itself in creating a new level of complexity previously unimaginable. Read Article 6 to 9 to get a taste of such complexity. The recommendation to institute a panel mechanism (of tax administrators and MNE representatives) beats me. Will Chinese firms share the huge data demanded in this Report. The BVI ones will not have any data. The OECD has miserably failed to achieve the objectives with which it started this enterprise – a simple process, limited compliances and administrative burdens and a level playing field for all.

Taxation is a sovereign right and independent countries arrive at their own decision with regard to taxation of their residents. The OECD expects the multitude of countries, many of them being tax heavens complicit in the MNE’s tax planning scheme, to sit together and arrive at a multitude of variables contemplated in these Pillars. What the OECD has ultimately achieved is creating a utopian literature with fancy names which is impossible to implement by less developed countries while taking away the power vested in them for taxing the digital businesses based on processes best suited to them.   

OECD has created these reports keeping in view data available in western countries. Such tools and data are not available in other jurisdictions where capabilities of tax authorities to handle complicated tax guidance is seriously limited. Assessing Officers do not have access to historical corporate data. The Higher Courts have grimaced at failure of Revenue to avail of services of domain experts while deciding / arguing cases while MNEs marshal the best brains on the issue. These complicated and ambiguous reports, having no unique solutions to offer, are bound to  work against the State and local businesses and in favour of MNEs.

Do these Publications mean that OECD has turned into a tax crusader? While OECD has correctly identified the issues, the solution miserably fails to redress the Problems vis-à-vis developing countries. Complexities associated with these solutions clearly favour the US and European States / their MNEs which are resourceful enough to handle such complexity to their benefit, while the South East Asian countries and their MNEs are clearly at a disadvantage being resource deficient. It appears that such solutions are designed to dissuade the local MNEs of these countries from growing beyond a certain level as they do not have the level playing field on the global stage. Why has the OECD suddenly woken up to source-based taxation just when a significant number of Indian and Chinese Enterprises were looking up to challenge Western MNEs.

An unintended consequence of these hyper-technical reports on BEPS requiring maintenance of complex documentation by MNEs is the distinct advantage in favour of big multinational consultancy firms while discouraging local firms, even if competent. Not merely MNEs but even local enterprises feel comfortable in hiring  these bigger firms under a notion that these firms will be able to do a better job, being better exposed. Even competent local accounting firms have found it difficult to grow in the area of transfer pricing and international taxation because of this notion.

The sincerely of OECD in coming up with these complex guidances, in face of its failure to end tax-competition within its own members and failure to ensure that member countries  cease to act as tax heaven, is doubtful.  Historically, India has  charted its own course but has now aligned with the OECD. But it is not difficult to understand the hollowness of the OECD efforts as far as India is concerned. Global agreements are entered into not merely to close tax loopholes for non-residents but also to promote ease of global business for local businesses. The growing band of Indian MNEs would be at a huge disadvantage due to formidable compliance obstacles now being put in place through OECD induced binding processes. While cooperation with OECD for ensuring transparency and tax compliance is indeed welcome, India needs to develop its own systems and processes rather than blindly towing a suspect OECD line.

GIFT CITY Gandhinagar – How can we ensure its success as  International Finance Centre

Introduction

1. As India ascends the economic ladder becoming the fifth largest economy in GDP terms (the third largest by purchasing power parity), the cross-border financial transactions have increased in volume and complexity. The Indian investors have started investing increasingly in global markets. Global investors seek to hedge their financial risk and maximise profits by routing the funds through appropriate jurisdictions which offer high level of financial services as well as high degree of safety to their funds. Such jurisdictions have developed as International Finance Centers (IFCs) having highly evolved financial institutions and services, risk mitigation measures, own arbitration mechanisms to ensure prompt justice, effective and efficient trade bodies and capacity to handle massive funds.

2. Historically, Amsterdam boasts of as the first IFC while London has remained the most popular IFC through last hundreds of years. New York developed as an IFC with growth in US economy and domination of dollar as international currency. The other notable global FCs are Paris, Frankfurt, Tokyo, Singapore, Hong Kong, Berlin etc. It would be interesting to note how Amsterdam and Paris fell back behind London as most preferred IFC and how recent attempts by some countries to develop IFCs has not been successful. An IFC cannot succeed merely by catering to local requirements but it needs to grow beyond the country as Singapore and London have demonstrated. The economy of UK and the strength of pound have no relationship with success of London as IFC.  Against this background, it would be interesting to examine whether the GIFT City, being promoted by India as an IFC, can secure a place as a popular IFC for global investors and traders.

3. Indians have been historically great traders. Indians also have significant presence at all IFCs. However, various factors have worked together to deny development of an IFC in India. With India’s growth in its financial stature post-Independence, Mumbai established itself as the financial capital of India and a regional finance center (RFC). The setting up of Bandra Kurla Complex (BKC) in Mumbai in line with global requirements was a good effort towards setting up a world class Finance Centre in India and BKC was able to attract leading Financial Institutions to its campus. However, with restrictions of forex trading, restrictive trading and financial requirements, BKC was never meant to be an IFC but merely offered multinational companies to set up their India offices, catering to Indian fund requirements.

The Gift City

4. In 2007, Gujarat International Finance Tech-City (GIFT City) project was conceptualized by PM Narendra Modi, back when he was the Chief Minister of Gujarat, with a vision to create a globally-benchmarked financial centre which could compete with other renowned financial centers. Due to the global meltdown following the Lehman crisis in 2008, the project could start only in October 2011 when Gujarat Govt, through its SPV Gujarat Urban Development Company Ltd (GUDCL) and IL&FS set up a 50:50 joint venture Gujarat International Finance Tec-City Company Limited” (GIFTCL) which was mandated to execute ‘The GIFT City’. The beleaguered IL&FS recently sold its entire stake to GUDCL in 2020 making Gujarat Govt 100% owner of GIFTCL.  GIFTCL has six 100% owned subsidiaries for implementation of specialized scalable infrastructure including Power, Water, ICT (Information & Communication Technology), District Cooling and solid waste management.

5. On the banks of Sabarmati River, GIFT City is an integrated development on 886 acres of land in Gandhinagar, Gujarat with 62 mn sq. ft. of built-up area which includes office space, residential, schools, hospitals, hotels, clubs, retail and various recreation facilities which are divided into SEZ area and domestic tariff area. GIFT City attempts to be a pre-eminent, futuristic city built on the foundation of sustainability and offer an unprecedented ecosystem for crucial economic activities with globally benchmarked regulations, taxation, policies etc., supported by Govt. of India and Gujarat. A visit to the Tec-City offers a view of the waste water recycling plant, optical fibre communication ring, an Automated Waste Collection System, a dedicated power station, a city-level cooling system, a command center and a Tier-IV data centre so as to provide international living and working standards.

6. A single regulatory agency – International Finance Services Centres Authority (IFSCA) has been created to handle regulatory functions of the IFC. The Authority has already notified framework for shipping operations and aircraft leasing. Forex trading in all currency and trading in foreign scrips are allowed in the IFSC area. The Govt has announced setting up of an International Arbitration Centre in the IFSC. An India International Bullion Exchange (IIBX) has been opened which is expected to set world bullion prices.  IFSCA has also formed a committee comprising experts from various fields to encourage and guide Indian start-ups to redomicile to India and set up their base in the GIFT City. Various economic and fiscal benefits have been announced to lure foreign investors and institutions.

7. As of date, there are 142 SEZ units which are operational and international exchanges dealing with an average turnover of $4 billion daily (The Hindu, 29th August 2022). Banking businesses in IFSC amount to $ 28 billion as of 2020 and insurance businesses up to $ 30 billion. With over 200 companies setting shop in GIFT, key occupants in the SEZ area are – Bombay Stock Exchange (BSE), Brokers Forum and the National Stock Exchange (NSE); international banks like YES bank, Federal Bank, State Bank of India, Standard Chartered and insurance companies like Edelweiss, New India Assurance, and Life Insurance Corporation of India (LIC). American Express and IBM have their back-end operations being handled from here. International Universities have been allowed to open campus in GIFT City with an encouraging response. 8. Admittedly, a commendable world class infrastructure has been created at Gift City, Gandhinagar. A single regulatory authority has been created to handle permissions, clearances and disputes. Enabling frameworks have been created with liberal rules for global forex, share and commodity trading and facilities for multi-services.  With significant infrastructure in place, GIFT City is ready to offer a challenge to existing IFCs. Till now, the activity has been India-centric. Will the global financial institutions and traders start moving in? There are other IFCs like Singapore, Shanghai, Sidney, Dubai, Hong Kong which will offer stiff competition. It is necessary to examine the factors which have allowed global IFCs to succeed while many others have faltered.

Factors affecting development of IFCs

9. In a research paper[i] titled ‘The Rise-and-Fall of Leading International Financial Centers: Factors and Application’, Adam Church has analyzed the growth of many successful IFCs and identified various characteristics which lead to success of an IFC. The study offers an insight into the factors leading to success of London over New York as number one IFC in spite of global dominance of US dollar and economy. He identifies factors impacting success of an IFC as (i) Trust in financial center’s capabilities, (ii) the central banking and monetary policy systems of the home nation (iii) the nation’s landscape of financial policy and regulation and (iv) overall stability of the financial center itself.

10, Because investors look for safety of their investment, absolute trust in the IFC becomes the most important criteria and a basic requisite while deciding on an IFC. This includes trust in regulatory authority to respond in time and impartially. According to Church, such trust comes out of perception of the IFC’s experience, business connections of the IFCs to strong local and global markets, ability of the IFC to attract immigrants having complex trading experience and assimilate them so as to develop the technical capability of the Centre. An investor needs assurance that his investment would not be impacted by local financial policy changes. He gives an example of how Paris fell behind London in the race to be an IFC, noting that London enjoyed greater financial stability due to its relative independence from political involvement and instead, had greater reliance on commerce while Paris had high degree of political involvement. According to historical demographer Tony Wrigley, between 1650 and 1750, London saw arrival of 8,000 immigrants annually. The merchants of London established guilds and wielded considerable influence and power. They were able to secure autonomy and special freedoms and rights for the residents that businesses in the area enjoy to this day. London was able to offer the best financial and trading services to global trade which thrived there in a conducive ecosystem. The famous Lloyd Register of Shipping became a benchmark of reliability in maritime industry. This perceived independence of the IFC was a key factor in establishing London as the best IFC.

11. The rise of New York as an IFC as the dollar started dominating globally as currency of reserve and its subsequent fall below London post 2008 is also a lesson. As US grew as an economic powerhouse and pound fell against dollar as a currency of reserve post first world war, New York rose sharply as an IFC. US economy grew at blistering pace and dollar became the strongest currency of the world. All Banks and FIIs tried to get a foothold to this gateway to investment in USA. New York rose to no. 1 position. However, post 2008 melt down, introduction of tough local laws and lack of regulatory clarity between local and federal authorities became acute and New York fell below London as global investors became wary of new stringent local laws and lack of clarity on who implemented them. London remained attractive as a hub of financial innovation and also was able to import additional expertise through its relaxed immigration laws favouring traders/investors. As such, capacity to offer best financial services and regulatory trust enjoyed by the Traders at London ensured that it remained the most preferred location for FIs.

12. Church notes that with technological advances, significance of market connections to a strong domestic economy appears to have become less important relative to that of strong connections to foreign economies in determining relative prominence of an IFC. It is very important to note that although epitaphs had been written on London’s demise as an IFC post-Brexit, it appears that the financial services activity in London has only increased after Brexit reposing the confidence of traders and investors in the competence of London as an IFC.

13. Citing example of Bank of England, Church stresses the importance of Central Bank to be highly responsive to changing economic and financial demands. He also stresses the importance of state financial policy which takes into account the global situation. He observes that the Financial Services Authority (FSA) of London was more responsive with single point of supervisory contact than US system of overlapping federal and state regulators, giving London a distinct advantage. In this regard, his analysis of rise of Tokyo as IFC as the Japanese industry grew at a blistering pace post second world war is also engaging. He notes that while Tokyo’s ability to establish its own experienced financial sector base without an influx of foreign talent is impressive, the delay in FIIs branching into Japan was also on account of strict regulatory controls over flow of cross border capital and access to Tokyo’s financial sector. Further, according to him, an inward shift in state financial policy from focusing on international markets to domestic ones is a typical characteristic of an international financial IFC in decline. Hong Kong is an interesting case of an IFC in decline due to loss of trust.

14. For a IFC to generate trust in its procedures, it is necessary for the processes to be principle based and predictable. Citing example of FSA  which had implemented general policy guidelines regarding the ways in which the regulator itself would conduct its own activities which provided financial institutions with greater certainty as to the possible course of action the FSA might take under a certain scenario, Church notes that the FSA was perceived to be more flexible and industry friendly. Contrary to this, US regulators were found to be less flexible and having overly burdensome regulations.

15.  Creation of world class infrastructure and elaborate legal framework are basic requirements for  a great global city. Initial tax and other federal and state subsidies have created a favourable environment for GIFT City. However, these in itself do not give a city its character. Traders and FIIs will migrate to an IFC only if they have implicit trust in the consistency and objectivity of institutions and regulatory bodies, the monetary policy of the Central Bank and approach of the host Nation in letting the Centre run without interference. Such a trust is developed over decades and is keenly watched. It is essential that the global investors perceive the IFC to be independent of any bias towards the home nation. Singapore has been engaged in a systematic effort to establish itself as an IFC right from 1965  and has developed an efficient regulatory and legal framework. It has also shown its commitment to strict implementation of new global standards, leading to its rise as an IFC. If GIFT City is to develop itself as an efficient and reliable global trading centre, it is necessary that it takes correct steps to ensure its popularity amongst the investors and global traders.

Conditions for integrating with global financial system

16.  The GIFT City has taken significant initial steps to develop linkages with other trading centres. However, an IFC cannot develop merely with an eye on local demand for investment but it must be entwined in global financial systems. These actual linkages will have to be developed by the local trading institutions who have to work as agents of the IFC. It is necessary to positively motivate and encourage them by offering them a great experience at the Centre as well as a sense of ownership of the Centre. The IFSCA needs to develop a reliable, consistent and transparent framework of operation in various areas of IFSC which would also include a framework on the role of IFSCA and approach likely to be adopted by the Authority in various scenarios. The action of regulatory bodies and investigating agencies (Taxation / PMLA)  needs to be made transparent and predictable. As of now, the Indian Taxation laws have only grown in complexity leading to avoidable litigation specially in International Tax area. While countries like New Zealand, Singapore, Dubai and even UK have simple and predictable laws concerning income earned outside the country, the Indian Act does not offer a predictable solution. The approach of the authorities also leaves much to be desired while dealing with non-residents. In one instance, reopening notices were issued on interest accruing on NRE deposits (tax exempt) prompting the owner to repatriate the money offshore.

17.  Fear of political interference is the biggest factor contributing to loss of trust. For an IFC to succeed, it is necessary that it is shielded from political interference and independent local trade bodies are incubated to ensure fair play, quick grievance redressal and risk hedging mechanisms. One of the negative points noted by investors against Singapore as IFC is that the regulatory authority is headed by a political figure. In spite of the fact that Singapore allows high autonomy to the traders, the lurking fear of interference exists.

18.  If GIFT City is to function as incubation hub of financial innovation, the  trend of appointing senior bureaucrats at senior positions has to be eschewed in favour of top notch global personnel who have shown their worth in handling such assignments. Bureaucrats perpetuate status quo. They are wonderful as steel frame but not as flexible and responsive promoters of new ideas. Further, they function under a political leadership and their appointment would be seen as a clear political interference. In my visit to GIFT City, I have seen the fire and enthusiasm in persons associated with GIFT City as developers. People with necessary vision, drive and motivation to take GIFT to numero uno position need to be given the reins of the Centre. We need not fear that the wealth generators of the City would be non-residents as such people grow affinity to the place of wealth creation and the wealth percolates to the local populace.

19.  It is necessary that trade specific activities are overseen by bodies constituted out of specialists and traders within the broad framework developed by IFSCA with ultimate authority of regulation lying with IFSCA. Such bodies should be given sufficient power to regulate themselves with strict guidance as to when intervention of IFSCA would become necessary. It is not that investors hate regulation. In fact, objective and predictable regulation instils confidence in investors as noted by CSFI in its 2003 study[ii]. A competent regulator gives confidence to the traders that any situation will be handled swiftly and correctly. Post 2008, it was this confidence in London’s regulatory environment which ensured its number one position as an IFC.

20.  The GIFT City should encourage immigration of specialists in related fields and assist in incubating their endeavor in setting up centers of specialized services. Such persons would bring with them new ideas and processes assisting in growth of the Centre as a place of highly skilled financial services. The CSFI report o1f 2003 lists skilled labour, regulatory competence, tax regime, government responsiveness, regulatory “touch” and living environment as key factors in development of IFCs. The success of London as a place of financial innovation should give us a lesson to follow. Implementing such policy would lead to a self-sustaining IFC in the long run.

21.   It is necessary to ensure that religious or cultural preferences of the local government are not imposed on immigrant population. Such imposition may be perceived as an attempt to impose controls on the IFC and may lead to a trust deficit. India is a liberal country by nature. In a recent visit to Dubai during the holy month of Ramadan, it was heartening to see the way in which the administration has ensured that the immigrant population is not affected by the rigours of observance of religion by the local people and that trade and services are not affected by such personal religious activities in spite of the fact that Dubai is a part of UAE, an Islamic Country. We need to learn from the liberal attitude adopted by such countries.

22.   Delay in dispensation of justice, multiple appeals and delay in compliance with judicial orders is one of the weakest areas of this country. An investor needs to have the surety that his investment will be secure and the public institutions will work promptly to ensure justice to him. In global trade, justice delayed is justice denied as loss due to delay can never be compensated. Singapore and Dubai have developed highly efficient implementation systems with consequent rise in institutional trust in these FCs. The international FIs will watch closely as to how fast the Authority’s directions and Arbitration decisions are implemented and whether there is any bias in such implementation before they make a move to have a presence here.

Global Financial Cities – can Mumbai and GIFT city work together?

23.  Saskia Sassen describes global cities as specialized sites for global finance and third party services. These cities have flourished on account of their locational and financial advantages earlier. In their research[iii] on conditions required for setting up global city in Asia, the authors, while admitting inward investment as a vital advantage, notes the importance of political and economic stability, financial infrastructure and capability of the country.  The technical competence developed in Mumbai should be viewed as a capability which will aid the GIFT City in its advancement as an IFC. Mumbai and GIFT are not competitors but have to develop along with each other if India has to have her dream of IFC fulfilled.  There is a stiff competition among global cities to develop as a FC. Malaysia in Putrajaya and Vietnam in Ho Chinh Minh City have invested their own capital to develop them into IFCs. In addition, many other cities around India, including Dubai, Singapore, Shanghai, Hong Kong, Sidney, Auckland are already developed Financial Centres and GIFT will have to offer distinct advantages if it has to wean away FIs and traders from these Centres.


[i] The Rise-and-Fall of Leading International Financial Centers: Factors and Application by Adam Church published in Michigan Business & Entrepreneurial Law Review

[ii] Centre For The Study Of Financial Innovation, SIZING UP THE CITY–LONDON’S RANKING AS A FINANCIAL CENTRE 15–16 (2003)

[iii] Thang Cong Nguyen, Nhan Thien Nguyen & Duc Hong Vo | (2020) Necessary conditions for establishing an international financial center in Asia, Cogent Business & Management, 7:1, 1823597, DOI: 10.1080/23311975.2020.1823597