The 2020 Kearney Foreign Direct Investment Confidence Index, an annual executive survey conducted with more than 500 multinationals ranks the UAE amongst the top 20 most attractive countries in the world for foreign direct investments through new company formation.
The UAE Government has been proactive in attracting foreign direct investments and has developed a fertile legislative environment conducive for foreign business entities. A forward-looking and reform-ready economy, the UAE in its continuous endeavour to pull foreign investment is all destined to taste unprecedented success.
Besides all other advantages such as growing industrial diversification, increase in free trade zones, accessibility to world-class PRO services etc. a favourable tax climate and business-friendly regulatory conditions are the two primary reasons for positioning UAE as the preferred business destination. Over the past few years, the UAE has successfully proven its commitment to becoming the leading business hub and attracted more than 32% share of foreign investments in the MENA region during 2018 and 2019.
When the entire world is grappling with the economic fallout of the pandemic, the UAE in its bid to attract foreign investments has been relentlessly working on economic, political and social policy reforms.
The Seven Key Factors that will attract Foreign Direct Investments in the UAE during 2021 and the following years be summarized as
1. Easing of Restrictions on Foreign ownership
100% Foreign Ownership of companies in mainland UAE has been a long-anticipated and widely discussed issue in the UAE. On November 23rd 2020, the President of the UAE His Highness Sheikh Khalifa Bin Zayed Al Nahyan finally approved and announced the abolition of the mandatory requirement for an Emirati shareholder for several sectors.
As per the current Commercial Companies Law (CCL) No.2 of 2015, foreign shareholders were restricted to owning up to 49% in a mainland limited liability company, LLC.
This has come as fantastic news for all foreign investors and entrepreneurs desirous of setting up a company in the UAE and expected to skyrocket foreign direct investments in the coming years.
2. The Abraham Accord
The UAE and the State of Israel officially signed the ” Abraham Accords Peace Agreement: Treaty of Peace, Diplomatic Relations and Full Normalization Between the United Arab Emirates and the State of Israel “on September, 15th 2020 denoting a fundamental shift in the regional geopolitical landscape. Besides being a diplomatic breakthrough of historical significance, the Abraham Accord also presents huge opportunities in business, trade and commerce between the two countries and across the region.
The UAE with a business-friendly investment climate is now considered as the most favoured hub for most multinational companies doing business in the GCC region, Africa and wider Middle East.
3. Removal from EU Blacklist
The UAE was initially blacklisted in December 2017 by the EU as a non-cooperative jurisdiction as the country was considered facilitating offshore structures for attracting overseas profits and not reflecting real economic activity in the jurisdiction.
The UAE was removed from the EU Blacklist by the Code of Conduct Group on Business Taxation in October 2019 after the Sheikhdom announced the enactment of Economic Substance Regulations and the Specific Guidance on the regulations by the UAE Ministry of Finance.
The removal from the EU Blacklist reinstated the trust of international investors community and financial institutions and paved the path for increased foreign investments.
The removal from the Blacklist has also become doubly beneficial for the UAE considering other high profile and attractive business destinations including Mauritius, Panama and Seychelles remain in the EU Blacklist.
4. Effective Pandemic Preparedness, Alert and Response
In comparison to other countries in the world, the UAE instituted a swift and strong coordination among logistics management, deployment of medical teams and ramping up of test facilities during the COVID-19 pandemic. Under the vision of the UAE’s wise leadership, the response from the government was relatively prompt.
Airlines were shut down for 15 days to restrict the spread of the virus and the covid test facilities were ramped up over 10,000 tests per million population, only second to Germany in the world.
In a move to rejuvenate the covid affected slowing economy, the Central Bank of the UAE approved economic support package amounting to 20% of the nation’s GDP.
The proactive measures taken by the government had resulted in much lower deaths and the number of active cases and in possibility, the nation’s economy would be back on track more quickly than that of other nations. Early economic recovery will surely ensure an upsurge of foreign direct investments.
5. Strong and Bright Digital Future
The UAE has unquestionably transformed itself into a leading technological hub.
As per the E-Government survey 2020 conducted by the UN, the UAE ranked among the top 25 countries in the world. It was also ranked first in the Arab World by the IMD World Digital Competitiveness ranking.
Globally praised for a progressive approach to Smart Technologies, the UAE will invariably attract higher FDI inflow to its economy.
6. Newly Amended UBO Laws
In the pursuit of evolving into a more transparent and reliable economy, the UAE has implemented new regulations for business entities incorporated in the country.
Agreements between countries at international level need certain information to be shared in compliance with the corporate transparency laws and the UAE data privacy regulations relating Ultimate Beneficiary information have been a matter of mistrust between the UAE and other countries recently.
The newly introduced UBO laws specify maintenance of private UBO register, not to be shared publicly and struck a careful balance as some foreign companies prefer not to divulge all UBO information to the common shareholders.
Newly amended UBO laws is the welcome move in dissipating mistrust between the UAE and other developed countries promoting foreign direct investments in the UAE.
7. DIFC and Dubai FDI Pact
The Dubai International Financial Centre (DIFC) has recently reached an agreement with Dubai Investment Development Agency (Dubai FDI) to promote foreign investments in the Emirate. The two government bodies will work together and launch new industry initiatives and will participate in roadshows and information exchange jointly.
The visionary UAE Government is propelling its economy to new highs through social, political and economic reforms and the reasons mentioned here are only a few testimonies.
The UAE is reputed for PRO and Accounting Services providers of International Standard and it is always advocated for a new investor to outsource these professional services to save time and money.