United Arab Emirates: Investing

FDI in Figures

UAE is the primary recipient of direct foreign investments on the Arabian Peninsula. The main investors in the UAE are Great Britain, Japan and India. After reaching a record high in 2008, then failling in 2009, FDI flows stagnated in 2010 and 2011. FDI stocks are concentrated in hydrocarbons and water and electricity production. The advantages of the Emirates are the country’s easy access to oil resources, low energy costs, willingness to diversify the economy and high purchasing power. The absence of direct tax on companies (excluding banks, oil companies and telecom operators) and people, of exchange controls and any limitations on repatriation of capital, as well as the existence of a banking sector that is both solid and profitable and a large pool of expatriate workforce constitute its undeniable benefits. The country's main weakness is the small size of its domestic market.

Foreign Direct Investment	2008	2009	2010
FDI Inward Flow (million USD)	13,700	4,003	3,948
FDI Stock (million USD)	69,420	72,227	76,175
Performance Index*, Ranking on 141 Economies	58	90	-
Potential Index**, Ranking on 141 Economies	7	-	-
Number of Greenfield Investments***	486	394	-
FDI Inwards (in % of GFCF****)	26.7	15.4	-
FDI Stock (in % of GDP)	24.2	29.1	-

Source: UNCTAD - Last 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 Countries and Industry

Main Investing Countries	2010, in %
United Kingdom	45.9
Japan	17.8
Hong Kong	9.5
Switzerland	6.2
Kuwait	4.6
Quatar	3.5
India	2.8
China	2.0

Main Invested Sectors	2010, in %
Financial and insurance sector	45.3
Real estate and business services	25.1
Trade	13.7
Construction	7.9
Manufacturing sector	4.9

Source: Dubai Statistic Center - Last Available Data.

Form of Company Preferred By Foreign Investors: Limited Liability Company is the most preferred form of company for foreign investors. On one hand, it offers a flexible management structure and a protection for minority shareholders, on the other hand it is easy to form as it is governed by the company law, the Ministry of Economy has no substantial role to play in the issue of the licence.
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 and in both the cases 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 investments under different forms in the UAE.
Sources of Statistics: Dubai Statistics Center

Why You Should Choose to Invest in the United Arab Emirates

Strong Points: The strengths of the country are:
- Not directly taxing corporations (apart from oil, banking and insurance sectors) and individuals;
- absence of exchange control or of any constraint relating to repatriation of funds;
- a solid and profitable banking sector and favourable regulations for foreign investments;
- The geographical situation of the country makes it a potential platform to influence the whole of the Gulf, Iran, Asia and Middle-East;
- Lastly, the country has a cheap foreign labour force, very good transport and production infrastructures (financed by hydrocarbon income) and an access to low cost energy.
Weak Points: There are legal obstacles for foreign investments. Effectively, the interdiction (except for free zone) of more than 49% of shareholding of a local company for a foreign investor constitutes a significant hindrance. Moreover, the obligation for recourse to a local service agent for the branches and representative offices of foreign companies represents a limit.
Government Measures to Motivate or Restrict FDI: The government announced a certain number of measures, for example removal of the obligation of the capital holding of 51% by a national or even the opening of banking and insurance sectors for foreign investors. Till now not much progress has been made. However you can notice the flexibility of rules of access to real estate property for foreigners in Emirates of Dubai, Sharjah and Abu Dhabi.

Protection of Foreign Investment

Bilateral Investment Conventions Signed By the United Arab Emirates: UAE has signed 32 bilateral agreements on investment. 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 Center for settlement of Investment Disputes
Member of the Multilateral Investment Guarantee Agency: Yes

Country Comparison For the Protection of Investors

	United Arab Emirates	Middle East & North Africa	United States	Germany
Index of Transaction Transparency*	4.0	6.3	7.0	5.0
Index of Manager’s Responsibility**	7.0	4.6	9.0	5.0
Index of Shareholders’ Power***	2.0	3.4	9.0	5.0
Index of Investor Protection****	4.3	4.8	8.3	5.0

Source: Doing Business - Last 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: It is limited since it is mandatory to have a local agent for creating an establishment in the UAE and that the foreign shareholding in this 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 for declaration. Foreign capital in a company can anyway be more than 49% except for free zone.
Competent Organization For the Declaration: World Association of Investment Promotion Agencies
Requests For Specific Authorizations: In the sector of banking, insurance, health, maritime transport, education, media, and telecommunications, specific authorisations are required by the concerned Ministries.

Office Real Estate and Land Ownership

Possible Temporary Solutions: No temporary facility is provided in 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 emphyteutic leases. These are mainly for housings 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: Till now, no foreign investor has been concerned by export procedures. In fact, it is 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. Only 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 d).
Free Zones: Many advantages are given to foreign companies which are established in free zones. These are not subject to requirement of a local majority shareholder. Foreign investors can hold 100% of the Capital. Moreover, there is no customs duty on imports. Finally, waiver of corporate tax or income tax if the local authorities decide to create and ensure it.
Organizations Which Finance: The Arab Trade Financing Program whose mission is to promote Arabic exports proposes refinancing facilities, for pre-shipment export credit loans and buyer's credit. The foreign subsidiaries established in UAE held 51% by people of Emirates can benefit from these facilities.

Investment Opportunities

The Key Sectors of the National Economy: The gas and oil sectors remain the key sectors for foreign investments
High Potential Sectors: Real estate, services and agro produce are the booming sectors
Privatization Programs: Abu Dhabi Emirate has launched a policy for attracting foreign direct investment to organise and restructure certain public services like water and electricity distribution. It is in this context that companies attached to ADWEA (Abu Dhabi Water & Electricity Authority) and one or several foreign investors are included for construction or management of power stations or sea water desalinisation plants. This plan has also been retained for the collection and transport of household wastes.
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 Posts are monopolies. The oil industry is a protected national sector.
Sectors in Decline: Textile, agriculture and maritime transport are the sectors in decline.

Finding Assistance For Further Information

Investment Aid Agency: Abu Dhabi Investement Authority
Other Useful Resources: Emirates Free Zone, directory of the free zones with a presentation of UAE.
Doing Business Guides: United Arab Emirates Commercial Guide 2010 - Buy USA

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