Invest in United Arab Emirates

After a slightly turbulent period between 2010 and 2013 owing to the global economic crisis and regional instabilities, FDI inflows have recovered considerably.  According to the UNCTAD’s World Investment Report 2020, the United Arab Emirates saw their inflows of FDI increase by 32% between 2018 and 2019, reaching USD 13,8 billion. In the same period, the stock of FDI reached USD 154 billion. The political and economic stability of the country attracts new investors fleeing from less stable countries in the region. The United Arab Emirates was the largest FDI recipient in the subregion of West Asia in 2019, thanks to major investment deals in oil and gas sectors. The bulk of FDI is concentrated in the sectors of trade, real estate, finance and insurance, manufacture and construction. The main investors are the United Kingdom, India, the United States, France and Saudi Arabia.

The strengths of the UAE include its easy access to oil resources, low energy costs, a willingness to diversify the economy and a high purchasing power. The absence of direct business taxation (excluding banks, oil companies and telecommunications operators) and direct income taxation, of exchange controls and of any limitations on the repatriation of capital, as well as the existence of a strong and profitable banking sector, plus a large pool of expatriate labour are the country’s undeniable assets. Moreover, in July 2019 a decision of the Federal cabinet allowed up to 100% foreign ownership for 122 economic activities across 13 industry sectors, including manufacturing; agriculture; construction; space; renewable energy; hospitality and food services; healthcare; transport and storage; ICT; professional, scientific and technical activities; administrative and support services; educational activities; art and entertainment. A new foreign investment law has also been approved recently (Federal Decree Law No. 19 of 2018), with the establishment of an FDI unit within the Ministry of Economy, with the mandate to propose and implement FDI policies. On the other hand, the country’s main weaknesses are the small size of its domestic market, the dependence on imports and on the international financial situation, as well as on the hydrocarbon sector. The UAE ranked 16th out of 190 countries in the 2020 Doing Business report published by the World Bank, losing 5 positions in a year.

Source: UNCTAD, Latest available data.

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country’s Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

FDI INFLOWS BY COUNTRY AND INDUSTRY

Source: UAE Bureau of Statistics – Latest available data.

Form of Company Preferred By Foreign Investors

The form of company for foreign investors is the Limited Liability Company. On one hand, it offers a flexible management structure and protection for minority shareholders. On the other hand, it is easy to form as it is governed by the Company Law, and the Ministry of Economy plays no substantial role in issuing of license.

Form of Establishment Preferred By Foreign Investors

A branch is the best form of company because it has proper receipts and can perform trading transactions contrary to a representative office. In both cases, a represetative agent is required.

Main Foreign Companies

Exxon Mobile, Total, Landmark Group, Carrefour,Unilever, Fedex, Citibank, Boeing…. Most of the large global companies have made different kinds of investments in the UAE.

Sources of Statistics

UAE National Bureau of Statistics

What to consider if you invest in the United Arab Emirates

Strong Points

The strengths of the country for FDI are:

• No direct taxation of corporations (apart from oil, banking and insurance sectors) or of individuals
• No foreign exchange control or constraints related to repatriation of funds
• Good-quality business climate
• Long-term political stability
• Dynamic and diversified economy
• Very rich hydrocarbons resources
• Solid and profitable banking sector with a powerful sovereign fund and favourable regulations for foreign investments
• Geographical location of the country, making it a potential platform of influence on the Gulf, Iran, Asia and the Middle-East
• Low-cost foreign labour force
• Good transport and production infrastructure (financed by hydrocarbon income)
• Access to low-cost energy

Weak Points

The disadvantages of the country for FDI are:
 

• Dependence on hydrocarbons
• The country imports a lot of manufactured goods
• Dependence on the international financial situation
• Risks of speculative bubbles
• A lack of flexibility in monetary policy
• Inadequacy of the national statistical system
• Degradation of the regional geopolitical environment
• Legal obstacles to foreign investment like the interdiction (except for free zones) of more than 49% of shareholding of a local company for a foreign investor and the obligation to use a local service agent for the branches and representative offices of foreign companies

Government Measures to Motivate or Restrict FDI

All seven Emirates have adopted measures to create a more favourable environment for foreign investors. Dubai, Sharjah and Abu Dhabi have very flexible rules concerning the acquisition of real estate property by foreigners. The Government of the UAE has also recently passed a new Companies Law. The strategic plan Vision 2021 promoted by the government intends to favour FDI. In free zones, foreign investors may hold 100% of a company’s shares.

Despite these projects, the regulatory and legal framework still favours national investors. Foreign ownership of land is restricted, non-tariff barriers to investment exist (outside the free zones, 51% of the shares of a company must be held by Emirates citizens). Foreign investors underline the weakness of the arbitration proceedings, the weakness of intellectual property rights and the lack of transparency.  

In 2015, the Federal Commercial Companies Law was published. It gives an improved regulatory framework for enterprises, facilitating business creation. The possibility to suppress the obligation for a company to be hold at 51% by a national was not approved. A new law on investment is still under review.

Finally, the regulatory framework for enterprises varies depending on the Emirate. The government of Abu Dhabi is particularly willing to improve the business climate in its emirate and is deploying Abu Dhabi Economic Vision 2030 to attract FDI in the non-oil sectors (industry, tourism, transport and logistics, financial services, real estate and telecommunications).

Protection of Foreign Investment

Bilateral Investment Conventions Signed By the United Arab Emirates

UAE has signed 50 bilateral agreements on investment, though not all of them have entered into force. See the list of countries provided by the UNCTAD.

International Controversies Registered By UNCTAD

Some cases of disputes concerned with foreign investments.

Organizations Offering Their Assistance in Case of Disagreement

ICSID , International Centre for the Settlement of Investment Disputes

Member of the Multilateral Investment Guarantee Agency

Yes

Source: Doing Business – Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

Procedures Relative to Foreign Investment

Freedom of Establishment

Freedom of establishment is limited since it is mandatory to have a local agent and since foreign shareholding in the company cannot exceed 49%.

Acquisition of Holdings

The majority capital acquisition of a local company is limited to 49%.

Obligation to Declare

There is no special obligation to declare. Foreign capital in a company cannot exceed 49% except in free zones.

Competent Organisation For the Declaration

World Association of Investment Promotion Agencies

Requests For Specific Authorisations

In the sectors of banking, insurance, health, maritime transport, education, media, and telecommunications, specific authorisations from the ministries in charge are required.

Learn more about Foreign Investment in the United Arab Emirates on Globaltrade.net, the Directory for International Trade Service Providers.

Office Real Estate and Land Ownership

Possible Temporary Solutions

No temporary facility is provided in the Emirates for companies who are keen to set-up.

The Possibility of Buying Land and Industrial and Commercial Buildings

In Dubai, Ras El Khaimah, Sharjah and more recently in Abu Dhabi, the access to property for foreigners is authorised under the form of long-term leases. These are mainly for housing located in the specific investment zones. Generally, it is not possible for a foreigner to buy landed property outside these zones in the Emirates.

Risk of Expropriation

Until now, no foreign investor has been concerned by expropriation. It is indeed clear that this type of procedure will be used only in case of very serious risks and the compensation would be generous.

Investment Aid

Forms of Aid

As it is, there are no incentive schemes for investments, though the proliferation of free zones can be perceived as a will to attract foreign capital.

Privileged Domains

No special aids.

Privileged Geographical Zones

The oil activity sector, ship yards and also restructuring of public sectors (water and electricity distribution).

Free Zones

Many advantages are given to foreign companies which are established in free zones. These are not subject to the requirement of having a local majority shareholder. Foreign investors can hold 100% of the capital. Moreover, there is no customs duty on imports. Finally, corporate or income taxes are waived should local authorities decide to levy these.

Organizations Which Finance

The Arab Trade Financing Program whose mission is to promote Arab exports proposes refinancing possibilities, credit loans for pre-shipment export and buyer’s credit. Foreign branches that are established in UAE and held at 51% by Emirati nationals can benefit from these possibilities.

Investment Opportunities

The Key Sectors of the National Economy

The oil and gas sectors remain key sectors of foreign investment. Other sectors include aviation, automotive, construction, information and communication technology, trade (logistics platform), financial services, luxury.

High Potential Sectors

Aeronautical equipment and services, defence, franchise, healthcare, education, electrical energy, equipment and services related to the oil and gas industries, renewable energies (huge photovoltaic potential), natural resources management (water treatment).

Privatization Programmes

The Abu Dhabi Emirate has launched a policy of attracting foreign direct investment to organise and restructure some public services like water and electricity distribution. In this context, companies attached to ADWEA (Abu Dhabi Water & Electricity Authority) and one or several foreign investors went into partnership to construct or manage power stations or sea water desalinization plants. This plan has also been retained for the collection and transport of household waste.

In 2017, the Abu Dhabi government announced that certain activities of the Abu Dhabi National Oil Company would be opened to the private sector. Other state-owned enterprises may also have their capital open to foreign investors.

Tenders, Projects and Public Procurement

Tenders Info, Tenders in United Arab Emirates
DgMarket, Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors

Telecommunications and post are monopolies. The oil industry is a protected national sector.
State-owned enterprises are numerous and powerful in the United Arab Emirates (eg Emirates Airline, Etihad Airways, Etisalat in telecommunications).

Finding Assistance For Further Information

Investment Aid Agency

Investment Corporation of Dubai
Abu Dhabi Investment Authority

Other Useful Resources

United Arab Emirates Ministry of Economy
Visit Dubai Portal
UAE Free Zones Directory

Doing Business Guides

Guide to Doing Business in the United Arab Emirates 2019 (Baker McKenzie)
Doing business in the UAE (KPMG, 2019)
Doing Business in the United Arab Emirates (Institute of Export & International Trade)
United Arab Emirates – Market Overview (U.S. Department of Commerce)