UNITED ARAB EMIRATES: An Introduction
A) General overview
The UAE is a country located in the Arabian Gulf and has seen remarkable and unprecedented growth, particularly during the last 20 years. The UAE has an open economy with a high per capita income and a considerable annual trade surplus. With Abu Dhabi and Dubai as its dual financial centres, the UAE has long enjoyed economic superiority in the region.
The country’s fortunate location allows it easy access not only to other regional countries, but also to the Far East, Africa and Europe. Due mainly to its strategic geographical location, the UAE and particularly the city state of Dubai is regarded as a major global commercial hub.
The UAE is a federation of seven emirates, namely the emirates of Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah and Umm al-Quwain. The official language is Arabic, however English is not only widely spoken, it is the preferred language in terms of business and commerce.
B) Economic overview
The UAE is the second largest economy in the Middle East and North Africa. It has also impressively undertaken successful efforts at economic diversification in trade, logistics, banking, tourism, real estate and manufacturing. These efforts have reduced the country’s oil-based GDP significantly in recent times.
The UAE economy has, of late, shown promising growth, following a slump due to the aftermath of the COVID-19 pandemic. The non-oil based sectors of the UAE economy continue to rely heavily on industries such as hospitality, real estate, tourism, retail and travel. Hosting the World Expo between October 2021 and March 2022, Dubai saw record hotel occupancy figures as well as a surge in real estate prices. The expectation is that Dubai’s economy will grow around 4.5% in 2022 within its core sectors.
Despite the significant difficulties associated with the COVID pandemic of late, the UAE economy has within the last 12 months regained substantial positive momentum due to investor-friendly laws and regulations, strong oil prices and COVID restrictions easing.
C) Doing business and investing in the UAE
The UAE currently ranks 16th out of 183 countries for the overall ‘ease of doing business’ benchmark. Recent legislative developments that now allow foreign nationals to fully own and operate companies onshore, in addition to the presence of the UAE’s famous 'offshore' free trade zones allowing 100% foreign ownership, a very minimal 5% VAT tax, no income tax whatsoever, world-class infrastructure and a very favourable geographical location continue to represent attractive points for FDI and foreign investments generally.
The vast majority of the world's largest and most prominent companies have established a presence in the UAE, meaning that the UAE attracts a highly skilled workforce, which is employed by the rising number of international companies and financial institutions. The overall legal framework continues to look outward and support the free trade zones, which are governed by an independent regulatory authority. The respective rules and regulations of each free zone are industry focused, pro-business and tailored to specific industries.
The regulations for establishing and operating a business in these zones are extremely straightforward. Businesses are quick to set up and the process is cost effective in comparison to many jurisdictions. The registration requirements within these free-zone areas are simple and similar from zone to zone. The initial stage would be to obtain initial approval from the relevant free trade zone authority and subsequently to then apply for a trade licence. The capital requirements differ among numerous free trade zones.
D) Future challenges and opportunities
The UAE is one of the most dynamic and well-known countries in the world, especially when it comes to doing business. The country’s is recognised internationally for its modern and technology-focused economy. The UAE has benefitted significantly from its recent legislative reforms in commercial companies’ law, its onshore labour law and its FDI legal regime.
The COVID-19 pandemic was challenging for the UAE as it has been for all. The economy of the UAE was severely impacted. As mentioned earlier, things are on the up in terms of GDP and the economy is expected to grow by 2.2% according to IMF projections in 2022. The UAE’s domestic market however will continue to face robust challenges in the direct aftermath of COVID, particularly in relation to less-than-robust demand by businesses and locally based consumers, in addition to a negatively affected real estate market.
Innovation in general and innovation in technology are major facets of the UAE and are seen as top of the list of priorities of the UAE Government. In 2020 the UAE joined the ‘agile nations’ network, a group of seven countries that aims to foster government innovation, create a regulatory environment to support innovation and adopt innovative solutions to prepare for future challenges.
The UAE Government strongly proposes and puts into place policies that promote good practices when setting new rules, ensuring that regulation is technology-neutral and that any guidance or industry standards allow for the introduction and scaling up of new technology. It also encourages methods to allow businesses to pilot and test innovations.
Law firms like ours are constantly looking at ways in which we can improve efficiency and transparency with the utilisation of technology. With the growth in popularity of fintech and cryptocurrencies both globally and regionally, there is a growing tendency by all in the legal industry to adopt innovative tools to better serve clients.