FDI in the U.A.E.
FDI in Figures
UAE is the primary recipient of direct foreign investments on the Arabian Peninsula. The main investors in the UAE are Great Britain, Japan and India. Although the FDI flow increased in 2007, it decreased in 2008 and especially in 2009. This trend continued in 2010.
FDI stocks are concentrated in hydrocarbons and water and electricity production. The advantages of the Emirates are the country’s easy access to oil resources, low energy costs, willingness to diversify the economy and high purchasing power. The absence of direct tax on companies (excluding banks, oil companies and telecom operators) and people, of exchange controls and any limitations on repatriation of capital, as well as the existence of a banking sector that is both solid and profitable and a large pool of expatriate workforce constitute its undeniable benefits. The country's main weakness is the small size of its domestic market.
|Foreign Direct Investment||2007||2008||2009|
|FDI Inward Flow (million USD)||14,187||13,700||4,003|
|FDI Stock (million USD)||55,720||69,420||73,422|
|Performance Index*, Ranking on 141 Economies||47||58||90|
|Potential Index**, Ranking on 141 Economies||8||7||-|
|Number of Greenfield Investments***||292||486||394|
|FDI Inwards (in % of GFCF****)||35.1||26.7||15.4|
|FDI Stock (in % of GDP)||28.0||24.2||29.1|
Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.
FDI Inflows By Countries and Industry
|Main Investing Countries||2006, in %|
|Main Invested Sectors||2006, in %|
|Financial and insurance sector||35.0|
|Construction and real estate||35.0|
|Selling and distribution||20.0|
Source: Dubai Statistic Center
- Form of Company Preferred By Foreign Investors
- Limited Liability Company is the most preferred form of company for foreign investors. On one hand, it offers a flexible management structure and a protection for minority shareholders, on the other hand it is easy to form as it is governed by the company law, the Ministry of Economy has no substantial role to play in the issue of the licence.
- Form of Establishment Preferred By Foreign Investors
- A branch is the best form of company because it has proper receipts and can perform trading transactions contrary to a representative office and in both the cases represetative agent is required.
- Main Foreign Companies
- Exxon Mobile, Total, Landmark Group, Carrefour,Unilever, Fedex, Citibank, Boeing.... Most of the large global companies have made investments under different forms in the UAE.
- Sources of Statistics
Dubai Statistics Center
Why You Should Choose to Invest in the United Arab Emirates
- Strong Points
The strengths of the country are:
- Not directly taxing corporations (apart from oil, banking and insurance sectors) and individuals;
- absence of exchange control or of any constraint relating to repatriation of funds;
- a solid and profitable banking sector and favourable regulations for foreign investments;
- The geographical situation of the country makes it a potential platform to influence the whole of the Gulf, Iran, Asia and Middle-East;
- Lastly, the country has a cheap foreign labour force, very good transport and production infrastructures (financed by hydrocarbon income) and an access to low cost energy.
- Weak Points
- There are legal obstacles for foreign investments. Effectively, the interdiction (except for free zone) of more than 49% of shareholding of a local company for a foreign investor constitutes a significant hindrance. Moreover, the obligation for recourse to a local service agent for the branches and representative offices of foreign companies represents a limit.
- Government Measures to Motivate or Restrict FDI
- The government announced a certain number of measures, for example removal of the obligation of the capital holding of 51% by a national or even the opening of banking and insurance sectors for foreign investors. Till now not much progress has been made. However you can notice the flexibility of rules of access to real estate property for foreigners in Emirates of Dubai, Sharjah and Abu Dhabi.
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