By TBY | UAE | Feb 07, 2023
Progressive changes to the economic policy of the UAE reaffirm its position as the de facto business capital of the Middle East for at least another generation.
As one of the mightiest economies of the region, the UAE will see GDP of just under USD500 billion by the end of 2022, up from USD405 billion the year before.
Although the country has at times tapped into its hydrocarbon reserves in Zakum oil field, a notable portion of the nation’s revenue is now generated following a business-centered economic model developed in the 1990s and 2000s in Dubai, Sharjah, and Abu Dhabi.
Dubai’s economy, for instance, is truly unique in the region, given that oil exports account for less than 1% of the Emirate’s GDP.
Dubai’s diversified economy relies on a mix of sectors ranging from retail and maritime transportation to banking, which make the city the de facto business capital of the Middle East. Other notable sectors include tourism, aviation, and real estate.
All the other Emirates in the union are similarly moving toward diversification, aiming to transform the UAE into a mature economy fit for the 2020s.
The seven Emirates of the UAE are making a joint effort to ramp up the contribution of sustainable and future-proof sectors to their GDP. The world, however, has evolved and changed a lot since the formation of the UAE in 1971, and a new set of economic polices is needed to accelerate the process of economic diversification now.
The Ministry of Economy launched the Fifty Economic Plan in 2021, marking the 50th anniversary of the UAE’s foundation. The plan sums up the best strategies available to the nation in “shaping the country’s economic outcomes by 2030” as part of “the UAE’s preparations for the coming 50 years,” according to the ministry. The economic plan sets out to achieve an “integrated economy,” “entrepreneurship at the SMEs,” “tourism,” “FDI,” and “talent retention.”
A set of enabling factors is needed for the realization of these five objectives and the solidification of the UAE’s place as the business hub of the Middle East. Foreign nationals, regardless of whether they are tourists, investors, or foreign talent, should be able to travel to the UAE with maximum convenience, namely the UAE’s Golden Visa initiative. Golden visas will enable foreigners to live and work in the UAE for the long term.
The Golden Visas will simply pave the way for the arrival of the right people in the country. The visa initiative particularly targets investors, entrepreneurs, exceptional talents, scientists, and humanitarians, offering them a 10-year residency with no need for a sponsor or employer.
Each group is defined carefully to only let in the genuine applicants. Exceptional talents, for instance, are defined as those with a documented reputation for innovation in areas such as “culture, art, sports and digital technology,” regardless of their education or current employment status. Attracting the true talents is of utmost importance, as people play a critical role in the UAE’s human-centered model of development.
Those who apply as scientists or academics, on the other hand, must hold at least a master’s degree or preferably a PhD “in one of the disciplines of engineering, technology, life sciences, and natural sciences from the best universities in the world, as well as substantial research achievements,” according to the Emirati government.
Investors are selected based on their potential to inject no less than AED2 million (roughly EUR500,000) into the economy—but preferably more. The applicants will have the liberty to freely choose the target of their investment. To boost the UAE’s real-estate sector, purchasing “properties of no less than AED2 million from approved local real estate companies,” will also count as investment.
Within the new framework, any partners in “a start-up registered as a SMEs in the UAE” whose annual turnover is at least AED1 are regarded as entrepreneurs. A separate policy meanwhile is beginning to make the ownership of SMEs more attractive than ever for entrepreneurs, namely the amendment to the Commercial Companies Law. Thanks to a federal decree issued in 2020, now expats can have the full (100%) ownership of a UAE-based company, whereas their maximum share was limited to 49% previously.
The 100%-ownership law, as it is sometimes called, will work as a huge incentive for foreign nationals to establish their companies in the country, enjoying the country’s conducive business ecosystem as well as all ownership rights specified in the law. Such foreign-owned businesses can even through an initial public offering (IPO) to become a joint stock company, selling up to 70% of the company to shareholders.
The mix of incentives that the UAE government is setting the stage for the launch of high-potential businesses across the nation, while attracting more human capital than ever. Such progressive economic policies are currently the Gulf nation’s best bet to foster economic growth and true economic diversification at the dawn of a new era for the UAE.