Economy

Investment in the UAE

The UAE is wisely making investment more appetizing, by opening the door to full foreign ownership, with a caveat.

Investment is a sufficient commitment in itself, but having to share ownership by law rather than intention has served to dissuade many a potential deal.

The UAE is in the throes of a major economic transformation not seen since the initial exploitation of the black stuff.

Diversification and the development of local skill and entrepreneurship are the basis of the nation’s economic fortune in the 21st century.

Yet this in itself requires FDI and the further arrival of know-how and innovative companies that have proven themselves on the international stage. In the midst of the COVID-19 pandemic while much of the world’s economy was in suspended animation, the UAE upped the game dramatically.

The government of the UAE has in fact legislated profound policy shifts to welcome FDI, and elsewhere in this publication we explain how that works for the residency component. In short, the country intends to become a regional hub of high-tech and industry and acknowledges that this is not a solo endeavor.

Are You on the List?

On June 1, 2021, the UAE Companies Law lifting the all-important curb on foreign ownership of onshore companies in the UAE came into effect; that is, not companies registered in the UAE’ Free Trade Zones, an entirely separate economic model.

Accordingly, foreigner nationals became entitled to set up companies with 100% ownership—with the exception of industries of “strategic impact”—as enshrined in the provisions of Federal Decree-Law No. 26 of 2020 amending the provisions of Federal Law No. 2 of 2015 on Commercial Companies.

The Abu Dhabi Department of Economic Development issued a comprehensive list of foreign ownership activities, known as the FOA List of businesses, that can be 100% foreign owned. The FOA List covers over 1,100 activities across diverse sectors ranging from agriculture, manufacturing, contracting, to healthcare and retail.

No longer do commercial firms require a minimum 51% Emirati shareholder or an agent in the case of branches of foreign companies. Firms can also take the IPO route should they wish to become joint stock companies, selling up to 70% of the firm, as compared to the previous 30%.

Meanwhile, the decree ceded authority to relevant local authorities to determine a specific percentage of Emiratis in the capital allocation and boards of directors of companies, approving requests to establish companies, excepting joint stock companies, and stipulating fees and charges in step with the policies of the UAE Cabinet.

One might argue that the abovementioned classification of “strategic impact” is somewhat of a get-out clause. And indeed, the latest legal amendments grant each Emirate’ssssss Department of Economic Development (DED) the power to impose minimum UAE National shareholding levels and board participation for companies incorporated within their jurisdiction.

This immediately begged the question of whether Emirates would follow Abu Dhabi’s lead, although they have individually pledged to do so.

In truth though, carte blanche ownership would have been a bigger surprise yet, and the limitation should not be an encumbrance for many business concerns.

Those strategic impact sectors, according to the Strategic Impact Resolution, UAE Cabinet Resolution No. 55 of 2021m are: security, defense and military activities; banks, exchange houses, and finance companies; insurance; currency printing; communications; haj and umrah services; Quran centers; and services related to fish traps.

Are They Game?

Yes, it seems so, and off the bat, various Emirates pledged commitment to the new normal. For one, the Sharjah Economic Development Department (SEDD) announced that, starting June 2021, it would be implementing the full foreign ownership policy.

Indeed, SEDD Chairman Sultan Abdullah Al Suwaidi commented at the time that his Department’s list of economic pursuits open for foreign ownership confirmed, “Sharjah’s eagerness to attract more foreign direct investment and highlights its efforts to enhance its competitive business environment.”

Meanwhile, His Highness Sheikh Ahmed bin Humaid Al Nuaimi, Representative of the Ruler of Ajman for Administrative and Financial Affairs and Chairman of the Ajman DED also observed at the time that, “This decision is an important step that translates the new government’s policy and strategic visions by providing a competitive infrastructure for investment, [that will increases] the attraction of foreign direct investment to various vital sectors in the emirate of Ajman.”

His message again was of the need for creating the right investment climate for sustainable and diversified development.

Of course, while radical in its scope, the foreign ownership initiative is but a reflection of the broader Abu Dhabi Vision 2030. A comprehensive program devised to achieve the government’s immediate economic priorities.

Priorities that, providing a welcoming address for foreign participation, include building an open, efficient, effective and globally integrated business environment, while pursuing a disciplined fiscal policy responsive to economic cycles.