The United Arab Emirates has always been rightfully seen as the gateway to international business. The country is known for its pro-business culture and conducive infrastructure for foreign investment. The UAE’s stable political climate and strategic location in the Middle East add to the desirability of a business hub. The economic and investment environment of the United Arab Emirates and Dubai has been steadily changing with progressive measures. The latest in a series of reforms that deal with foreign ownership of companies in mainland UAE is catching the public eye. Financial advisors say that the legislation that effectively liberalizes restrictions on foreign ownership is poised to enhance the appeal of the country’s investment and business destination credentials.
The Foreign Ownership Amendment Explained
Deviating from the long-standing general restriction (known as the “51/49 rule”), which requires a UAE company to have not less than 51 percent of its share capital owned by UAE nationals, the new regime allows foreigners to hold up to 100 percent of companies operating in specific sectors. The new regime adopts a sector-based approach to regulating levels of foreign investment in domestic companies. The sectors in the Positive List (issued by the Cabinet) will be open to higher levels of foreign investment, and they will be exempt from the usual restrictions. The Negative List will contain sectors that will continue to be under a higher degree of regulation. A new Foreign Direct Investment Unit to be established within the UAE Ministry of Economy will be responsible for setting policies and procedures for licensing FDIs. Another important change is that the new laws allow foreign entrepreneurs and investors to set up their own companies without involving local shareholders. This is a welcome development for the country’s many expatriates, who long had their ownership capped at 49 percent in firms outside free zones.
The Opportunities Offered By The Regime Change
The legislation is seen as the most recent of a larger policy to liberalize the country’s economy to make it more desirable to foreign investors and business owners. The law will help the UAE diversify its economy and decrease dependence on oil, and thereby enhance the sustainability of the economy. It makes the playing field equitable by treating companies with owners abroad at par with companies owned by domestic individuals. A 2020 amendment also allows existing companies in specified sectors to “adjust” their positions, that is, derive the benefits of the foreign ownership law. All in all, the legislation offers more extensive investment opportunities for entities looking to make headway in the United Arab Emirates.
There is a clear gradual shift in the Gulf region towards a knowledge-based economy. The UAE government has been proactive in recognizing this shift and coming up with various policy changes. All of these reformative measures put together will significantly add to the appeal of the country as a thriving center for international business and facilitate the country’s transformation into a robust, resilient, and reliable economy in the post-pandemic years.
