Foreign Direct Investment in the U.A.E.

Overview by

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.


Country Comparison For the Protection of Investors

  United Arab Emirates Middle East & North Africa United States Germany
Index of Transaction Transparency* 4.0 6.3 7.0 5.0
Index of Manager’s Responsibility** 7.0 4.6 9.0 5.0
Index of Shareholders’ Power*** 2.0 3.4 9.0 5.0
Index of Investor Protection**** 4.3 4.8 8.3 5.0

Source: Doing Business

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

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

Source: UNCTAD

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.

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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.
Bilateral Investment Conventions Signed By the United Arab Emirates
UAE has signed 32 bilateral agreements on investment. See the list of countries provided by the UNCTAD.

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Procedures Relative to Foreign Investment

Freedom of Establishment
It is limited since it is mandatory to have a local agent for creating an establishment in the UAE and that the foreign shareholding in this company cannot exceed 49%.
Acquisition of Holdings
The majority capital acquisition of a local company is limited to 49%.
Obligation to Declare
There is no special obligation for declaration. Foreign capital in a company can anyway be more than 49% except for free zone.
Competent Organization For the Declaration
World Association of Investment Promotion Agencies
Requests For Specific Authorizations
In the sector of banking, insurance, health, maritime transport, education, media, and telecommunications, specific authorisations are required by the concerned Ministries.
Find Investment Service Providers in the United Arab Emirates on

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Investment Opportunities

Investment Aid Agency
Abu Dhabi Investement Authority
Tenders, Projects and Public Procurement
Tenders Info, Tenders in United Arab Emirates
DgMarket, Tenders Worldwide
Other Useful Resources
Emirates Free Zone, directory of the free zones with a presentation of UAE.

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