DIB Trade Country Profiles Investing

United Arab Emirates: Investing

FDI in Figures

According to the UNCTAD's World Investment Report 2022, the UAE saw its FDI inflows increase by 11% from USD 19.8 billion in 2020 to USD 20.6 billion in 2021, confirming its role as the leading destination for FDIs in the Arab world (and 19th globally). Over the same period, the stock of FDI reached USD 171 billion (around 41.8% of GDP). The bulk of FDI is concentrated in the sectors of trade, real estate, finance and insurance, manufacturing, mining and construction. The main investors are the United Kingdom, India, the United States, France and Saudi Arabia. According to Investment Monitor, in 2021, Dubai ranked first globally in terms of number of FDI projects, recording 441 projects, an 87% increase year-on-year. The U.S. was the main investor (87 projects), followed by the UK (71) and India (60). 26% of these projects were in the software and IT services sector, 17% in business and professional services, and 8% in tourism. Furthermore, Dubai attracted a record 492 FDI projects during H1/2022 (+80.2% year-on-year), with greenfield projects accounting for a 56% share of the total (official governmental figures).

The strengths of the UAE include its political and economic stability, easy access to oil resources, low energy costs, a willingness to diversify the economy and high purchasing power. The absence of direct business taxation (excluding banks, oil companies and telecommunications operators – see after) 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. In addition, the UAE further liberalised its FDI regime with the promulgation of the FDI Decree 2020, which further facilitated foreign investment by extending some of the free zone incentives to the wider economy. A decision of the Federal cabinet allowed up to 100% foreign ownership for 122 economic activities across 13 industry sectors. The government also launched 50 economic initiatives aimed at making the country more competitive and attracting USD 150 billion into domestic projects by 2030. A slew of 40 laws covering trade, online security, copyright, residency, narcotics and other social issues was implemented, and government entities shifted to a four-and-a-half-day working week (Oxford Business Group). 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. Furthermore, the UAE introduced a federal corporate tax on business profits starting in 2023, with a headline rate of 9% (for incomes exceeding a particular threshold). Several exemptions are available for businesses operating across strategic sectors (e.g. exploitation of UAE natural resources, Government-controlled entities, pension or social security funds, certain investment funds, etc.). The UAE ranks 24th out of 82 countries in the Economist Business Environment ranking and 12th in the 2022 World Competitiveness Index.

Foreign Direct Investment	2020	2021	2022
FDI Inward Flow (million USD)	19,884	20,667	22,737
FDI Stock (million USD)	150,896	171,563	194,300
Number of Greenfield Investments*	389	541	997
Value of Greenfield Investments (million USD)	8,069	6,631	11,086

Source: UNCTAD, Latest data available.

Note: * Greenfield 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.

FDI INFLOWS BY COUNTRY AND INDUSTRY (Available data for Dubai)

Main Investing Countries	2019, in %
United States	21.0
France	16.0
Japan	11.0
United Kingdom	7.0
Germany	6.0

Main Invested Sectors	2019, in %
Accommodation and food services	40.0
Electric power generation	13.0
Other information services	8.0
Healthcare and social assistance	4.0
Retail and wholesale trade	4.0

Source: Dubai FDI Monitor (Department of Economic Development), Latest data available.

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.

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

Some of the disadvantages for FDI include :

Heavy dependence on hydrocarbons
Reliance on imports of lots of manufactured goods
A lack of flexibility in monetary policy
Inadequacy of the national statistical system
Degradation of the regional geopolitical environment
Legal obstacles to foreign investment.

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. In free zones, foreign investors may hold 100% of a company's shares. The primary benefits of setting up a business in the free zone include exemptions from import and export tax, corporate tax and personal income tax.

Abu Dhabi and Dubai have also implemented a dual licensing regime: entities located in the free zones may be authorised to carry out commercial activities outside the free zone in selected sectors specifically authorised by the Department of Economic Development for that emirate.

The UAE issued Decree Law No. 19 on Foreign Direct Investment (FDI) in September 2018, which grants authorised foreign investment companies the same treatment as domestic companies, to the extent permitted by current legislation.  A negative list of economic sectors limited by 100 per cent foreign ownership includes 14 large industries. The Council of Ministers approved on 3 March 2020 a positive list of economic sectors eligible for 100% foreign ownership.  This list includes activities in 13 sectors, including renewable energy, space, agriculture, manufacturing, transport and logistics, hospitality and food services, information and communication services, professional and scientific and technical activities, administrative and support services, education, health care, art and entertainment and construction.
Despite these projects, the regulatory and legal framework still favours national investors. There is no national treatment for investors in the United Arab Emirates and foreign ownership of land and shares remains limited. Foreign investors underline the weakness of the arbitration proceedings, the weakness of intellectual property rights and the lack of transparency.

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).

Abu Dhabi Investment Office (ADIO) is the government hub supporting investment in the emirate of Abu Dhabi. Dubai FDI offers essential information and invaluable support to foreign companies who intend to invest in Dubai.

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: The ISDS Navigator contains information about known international arbitration cases initiated by investors against States pursuant to international investment agreements. UAE is involved in 12 cases as Home State of claimant and in 4 cases as Respondent State.
Organizations Offering Their Assistance in Case of Disagreement: ICSID , International Centre for the Settlement of Investment Disputes
ICCWBO , International court of arbitration, International chamber of commerce
Member of the Multilateral Investment Guarantee Agency: UAE is a signatory to the Convention of the MIGA.

Country Comparison For the Protection of Investors	United Arab Emirates	Middle East & North Africa	United States	Germany
Index of Transaction Transparency*	10.0	6.4	7.0	5.0
Index of Manager’s Responsibility**	10.0	4.8	9.0	5.0
Index of Shareholders’ Power***	4.0	4.7	9.0	5.0

Source: The World Bank - Doing Business, Latest data available.

Procedures Relative to Foreign Investment

Freedom of Establishment: The UAE issued Decree Law No. 19 on Foreign Direct Investment (FDI) in September 2018, which grants authorised foreign investment companies the same treatment as domestic companies, to the extent permitted by current legislation. Nevertheless, in practice, increased foreign ownership is limited to a few sectors and linked to costly requirements. Therefore, the cases in which it will be possible and feasible for a company to increase its foreign shareholdings beyond 49% remain rare.
Acquisition of Holdings: The Council of Ministers approved on 3 March 2020 a positive list of economic sectors eligible for 100% foreign ownership. 
Obligation to Declare: There is no special obligation to declare.
Competent Organisation For the Declaration: World Association of Investment Promotion Agencies
Requests For Specific Authorisations: Foreign ownership is restricted in companies that perform certain regulated activities. In the sectors of banking, insurance, health, maritime transport, education, media, and telecommunications, specific authorisations from the ministries in charge are required.

Office Real Estate and Land Ownership

Possible Temporary Solutions: Temporary facilities in the UAE.
The Possibility of Buying Land and Industrial and Commercial Buildings: The Civil Code of the United Arab Emirates (Federal Law no. 5 of 1985, Civil Code) does not provide for any express prohibition against the ownership of foreign land. However, each Emir is entitled to adopt its own laws to regulate the ownership of property.
Risk of Expropriation: Until now, no foreign investor has been concerned by expropriation. There are no fixed federal rules governing compensation for expropriations, and each emirate would probably treat expropriations differently. 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

The incentives are granted to foreign investors in free zones. The primary benefits of setting up a business in the free zone include exemptions from import and export tax, corporate tax, personal income tax, repatriation of capital and profits, multi-year leases, easy access to sea and airports, buildings for lease, energy connections (often at subsidized prices), and assistance in labour recruitment.

Privileged Domains

No special aids.

Privileged Geographical Zones

The free trade areas in the United Arab Emirates are areas that have special tax, customs and import regimes, and are regulated by their own regulatory framework for foreign investment.

Free-trade 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 nor corporate or income taxes. The UAE has more than 40 free zones, including the:

Jebel Ali Free Zone.
Dubai Multi Commodities Center.
Dubai Airport Free Zone.
Dubai South.
Dubai Intl Financial Centre.

In general, the free zones focus on different business areas, including shipping, commodities, media, financial services and telecommunication, and have their own regulator.

Public aid and funding organisations

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.

Investment Opportunities

The Key Sectors of the National Economy: The FDI in the UAE is mainly in the sectors of: wholesale and retail trade, real estate activities, financial services and insurance, manufacturing, mining and quarry exploitation.
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: Abu Dhabi has launched a policy of attracting foreign direct investment and has planned to accelerate the privatisation of ten state-owned companies. Among the relevant sectors are electricity, water and road and air transportation.
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 powerful in the United Arab Emirates. SOEs are present in a number of sectors, including construction, hospitality, transport, banking and telecommunications (e.g. 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: Visit Dubai Portal
UAE Free Zones Directory
Doing Business Guides: Guide to Doing Business in the United Arab Emirates (Baker McKenzie)
Doing business in the UAE (KPMG)
United Arab Emirates - Market Overview (U.S. Department of Commerce)

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