HomeReportsBureau of Economic and Business Affairs2019 Investment Climate Statements...United Arab Emirates

# 					2019 Investment Climate Statements: United Arab Emirates			

 In this section										/

													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. OPIC and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## Executive Summary

The Government of the United Arab Emirates (UAE) is pursuing economic diversification to promote the development of the private sector as a complement to the historical economic dominance of the state.  The country’s seven emirates have implemented numerous initiatives, laws, and regulations that aim to develop a more conducive environment for foreign investment.

The UAE maintains a position as a major trade and investment hub for a large geographic region, which includes not only the Middle East and North Africa, but also South Asia, Central Asia, and Sub-Saharan Africa.  Multinational companies cite the UAE’s political and economic stability, rapid population and Gross Domestic Product (GDP) growth, fast-growing capital markets, and a perceived absence of systemic corruption as positive factors contributing to the UAE’s attractiveness to foreign investors.

While the UAE implemented an excise tax on certain products in October 2017 and a five percent Value-Added Tax (VAT) on all products and services beginning in January 2018, many investors continue to cite the absence of corporate and personal income taxes as a strength of the local investment climate, relative to other regional options.

While foreign investment continues to grow, the regulatory and legal framework in the UAE continues to favor local over foreign investors.  There is no national treatment for investors in the UAE and foreign ownership of land and stocks remains restricted. In September 2018, the UAE issued Decree-Law No. 19 on Foreign Direct Investment (FDI), which grants licensed foreign investment companies the same treatment as national companies, within the limits permitted by the legislation in force.  Sectors restricted from 100 percent foreign ownership appear on a negative list that includes 14 major sectors. The new law does not mention sectors on the positive list, but these details are expected to be issued in 2019. The Minister of Economy said publicly that increased foreign ownership would be permitted in sectors of strategic importance including technology, space, renewable energy, and artificial intelligence.

Foreign investors expressed concern over spotty intellectual property rights protection, a lack of regulatory transparency, and weak dispute resolution mechanisms and insolvency laws.  In March 2019, the Abu Dhabi Judicial Department oversaw the first restructuring of a UAE company under the bankruptcy law issued in 2016. Labor rights and conditions, although improving, continue to be an area of concern as the UAE prohibits both labor unions and worker strikes.

Free trade zones form a vital component of the local economy, and serve as major re-export centers to other markets in the Gulf, South Asia, and Africa.  U.S. and multinational companies indicate that these zones tend to have stronger and more equitable frameworks than the onshore economy. For example, in free trade zones, foreigners may own up to 100 percent of the equity in an enterprise; have 100 percent import and export tax exemptions; have 100 percent exemption from commercial levies; and may repatriate 100 percent of capital and profits.  Commercial transactions in most free trade zones are now subject to the five percent VAT.

*Table 1: Key Metrics and Rankings*

							1. Openness To, and Restrictions Upon, Foreign Investment					

**Policies Towards Foreign Direct Investment**

The UAE is generally open to FDI, citing it as a key part of its long-term economic plans.  The UAE Vision 2021 strategic plan aims to achieve FDI flows of five percent of Gross National Product (GNP), a number one rank for the UAE in the Global Index for Ease of Doing Business, and a place among the top 10 countries worldwide in the Global Competitiveness Index.  The Eight-Point Plan and the Fifty-Year Charter, issued by the ruler of Dubai, Sheikh Mohammed Bin Rashid Al Maktoum, stressed that Dubai is a politically neutral, business-friendly global hub and emphasized the importance of combating corruption.

UAE investment laws and regulations are evolving in support of these goals.  The long-awaited law on foreign direct investment was issued in 2018, and granted licensed foreign investment companies the same treatment as national companies, in certain sectors.

While some laws allow foreign-owned free zone companies to operate “onshore” in some instances, and permit majority-Gulf Cooperation Council (GCC) ownership of public joint stock companies, there remains no national treatment for foreign investors, and foreign ownership of land and stocks is restricted.  Non-tariff barriers to investment persist in the form of restrictive agency, sponsorship, and distributorship requirements, although several emirates have recently introduced new long-term residency visas in an attempt to keep expatriates with sought-after skills in the UAE. Each emirate has its own investment promotion agency.

**Limits on Foreign Control and Right to Private Ownership and Establishment**

Foreign companies or individuals are limited to 49 percent ownership/control in any part of the UAE not in a free trade zone.  These restrictions have been waived on a case-by-case basis. The 2015 Commercial Companies Law allows for full ownership by GCC nationals.  Neither Embassy Abu Dhabi nor Consulate General Dubai (collectively referred to as Mission UAE) has received any complaints from U.S. investors that they have been disadvantaged or singled out relative to other non-GCC investors.

**Other Investment Policy Reviews**

The UAE government underwent a World Trade Organization (WTO) Trade Policy Review in 2016.  The full WTO Review is available at:https://www.wto.org/english/tratop_e/tpr_e/s338_e.pdf 

**Business Facilitation**

UAE officials emphasize the importance of facilitating business and tout the broad network of free trade zones as being attractive to foreign investment.  The UAE’s business registration process varies based on the emirate. The business registration process is not available online, and generally happens through an emirate’s Department of Economic Development.  Links to information portals from each of the emirates are available at https://ger.co/economy/197  .  At a minimum, a company must generally register with the Department of Economic Development, the Ministry of Labor, and the General Authority for Pension and Social Security with a required notary in the process.  In 2017, the Department of Economic Development of the Emirate of Dubai introduced an “Instant License” valid for one year, under which investors can obtain a license in minutes without a registered lease agreement.

**Outward Investment**

The UAE is an important participant in global capital markets, primarily through its various well-capitalized sovereign wealth funds, as well as through a number of emirate-level, government-related investment corporations.

							2. Bilateral Investment Agreements and Taxation Treaties					

The United Nations Conference on Trade and Development (UNCTAD) lists the UAE as currently having 48 bilateral investment treaties, of which 34 are in force, and 14 other international investment agreements (IIAs), of which seven are in force. There is currently no bilateral investment treaty between the United States and the UAE.

In July 2018, the UAE and China signed four partnerships and investment agreements in multiple sectors.

In June 2018, the UAE signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Multilateral Instrument or MLI), to reinforce its position as a cooperative and transparent jurisdiction.  However, in March 2019, the European Union (EU) added the UAE to its list of non-cooperative tax jurisdictions, a list of 15 countries that refuse to engage with the EU on addressing tax-related governance shortcomings.

In March 2004, the United States signed a Trade and Investment Framework Agreement (TIFA) with the UAE to provide a formal framework for dialogue on economic reform and trade liberalization: https://ustr.gov/sites/default/files/uploads/agreements/tifa/asset_upload_file305_7741.pdf .  As a member of the GCC, the UAE is also party to the U.S.-GCC Framework Agreement on Trade, Economic, Investment, and Technical Cooperation, signed in 2012.

The U.S. Department of State negotiated and signed a Memorandum of Understanding creating an Economic Policy Dialogue (EPD) with the UAE Ministry of Foreign Affairs in 2012, to address a variety of topics, including trade, investment, sector-specific cooperation, competitiveness, and entrepreneurship.  A CEO Summit process for the EPD was established in 2013, bringing recommendations from the private sector directly into the EPD discussions. The most recent EPD was held in December 2014 with plans to restart the annual forum in the summer of 2019.

							3. Legal Regime					

**Transparency of the Regulatory System**

As indicated elsewhere in this report, the regulatory and legal framework in the UAE is generally more favorable for local rather than foreign investors.

The Commercial Companies Law requires all companies to apply international accounting standards and practices, generally International Financial Reporting Standards (IFRS).  The UAE does not have local generally accepted accounting principles.

Legislation is only published when it has been enacted into law and is not formally available for public comment beforehand, although the press will occasionally report details of high-profile legislation.  Final bills are published in an official register, usually only in Arabic, although there are private companies that translate laws into English. Regulators are not required to publish proposed regulations before enactment, but they share them either publicly or with stakeholders on a case-by-case basis.

**International Regulatory Considerations**

The UAE is a member of the GCC, along with Bahrain, Kuwait, Oman, Qatar, and Saudi Arabia.  It maintains regulatory autonomy, but coordinates efforts with other GCC members through the GCC Standardization Organization (GSO).  Although not a member of the GCC, Yemen also participates in the GSO, with the same rights and obligations as GCC member states. In 2017, the UAE conducted 58 notifications to the WTO committee, including on restricting the use of hazardous materials in electronic devices, and on a guide for the control of imported foods.

**Legal System and Judicial Independence**

In the constitution, Islam is identified as the state religion, as well as the principal source of law.  The legal system of the country is generally divided between the British-based system of common law used in offshore free trade zones, and domestic law governed by Shari’a – the majority of which has been codified.  The mechanism for enforcing ownership of property through either court system is generally considered to be predictable and fair. As is the case with civil law systems, common law principles, such as adopting previous court judgments as legal precedents, are generally not recognized in the UAE, although lower courts typically apply higher court judgments.  Judgments of foreign civil courts are typically recognized and enforceable under the local courts.

The Dubai International Financial Center (DIFC) and Ras Al Khaimah International Corporate Centre maintain a wills and probate registry, allowing non-Muslims to register a will under internationally-recognized common law principles.  The United States District Court for the Southern District of New York signed a memorandum with the DIFC courts that provides companies operating in Dubai and New York with procedures for the mutual enforcement of financial judgments.

The UAE constitution stipulates that each emirate can decide whether to set up its own judicial system (local courts) to adjudicate local cases, or use federal courts exclusively.  The Federal Judicial Authority has jurisdiction for all cases involving a “federal person,” with the Federal Supreme Court in Abu Dhabi, the highest court at the federal-level, having exclusive jurisdiction in seven types of cases:  disputes between emirates, disputes between an emirate and the federal government, cases involving national security, interpretation of the constitution, questions over the constitutionality of a law, and cases involving the actions of appointed ministers and senior officials while performing their official duties.  Although the federal constitution permits each emirate to have its own judicial authority, all emirates except Dubai, Ras Al Khaimah, and Abu Dhabi have incorporated their local judicial systems into the Federal Judicial Authority. The federal government administers the courts in Ajman, Fujairah, Umm al Quwain, and Sharjah, including the vetting and hiring of judges, and payment of salaries.  Judges in these courts apply both local and federal law, as warranted. Dubai, Ras Al Khaimah, and Abu Dhabi, on the other hand, administer their own local courts, hiring, vetting, and paying their own judges and attorneys. Abu Dhabi is the only emirate that operates both local (the Abu Dhabi Judicial Department) and federal courts in parallel. The local courts in Dubai, Ras al Khaimah, and Abu Dhabi have jurisdiction over all matters that the constitution does not specifically reserve for the federal system.

**Laws and Regulations on Foreign Direct Investment**

There are four major federal laws affecting investment in the UAE:  the Federal Companies Law, the Commercial Agencies Law, the Industry Law, and the Government Tenders Law.

The Federal Commercial Companies Law (Law No. 2, 2015) was issued in April 2015 and applies to commercial companies operating in the UAE.  The new law, with which all companies had to come into compliance before July 2016, provides a stronger, more current basis for corporate regulation.  Federal Law No.19 of 2018 eased restrictions on foreign ownership of companies incorporated “onshore”. The new law allows foreigners to own up to 100 per cent of the share capital in UAE companies operating in certain sectors, subject to licensing requirements.  The sectors covered by the new law will be set out in future legislation.

Branch offices of foreign companies are required to have a national agent with 100 percent UAE national ownership, unless the foreign company has established its office pursuant to an agreement with the federal or emirate-level government.  Existing commercial law allows companies to offer between 30 and 70 percent of shares in an initial public offering (IPO), and eliminates the requirement to issue new shares at the time of the IPO. The law also eases the process for forming a limited liability company by requiring between 1 to 75 shareholders (the prior requirement was between 2 to 50 shareholders).  Public joint stock companies are required to have 51 percent GCC ownership at the time of listing, and UAE nationals must chair and comprise the majority of board members of any public joint stock company. A provision to allow 100 percent foreign ownership outside free zones requires Cabinet approval on a case-by-case basis. For example, in 2015, Apple opened stores outside free zones without local partners, having secured permission to do so on an exceptional basis via a decree from the Ministry of Economy.

The Commercial Agencies Law’s provisions are collectively set out in Federal Law No. 18 of 1981 on the Organization of Commercial Agencies as amended by Federal Law No. 14 of 1988 (the Agency Law), and apply to all registered commercial agents.  Federal Law No. 18 of 1993 (Commercial) and Federal Law No. 5 of 1985 (Civil Code) govern unregistered commercial agencies. The Commercial Agencies Law requires that foreign principals distribute their products in the UAE only through exclusive commercial agents who are either UAE nationals or companies wholly owned by UAE nationals.  The foreign principal can appoint one agent for the entire UAE or for a particular emirate or group of emirates. The Ministry of Economy handles registration of commercial agents. It remains difficult, if not impossible, to sell in UAE markets without a local agent. Only UAE nationals or companies wholly owned by UAE nationals can register with the Ministry of Economy as local agents.

The Federal Industry Law stipulates that industrial projects must have 51 percent UAE national ownership.  The law also requires that projects either be managed by a UAE national or have a board of directors with a majority of UAE nationals.  Exemptions from the law are provided for projects related to extraction and refining of oil, natural gas, and select hydrocarbon projects governed by special laws or agreements are exempt from the industry law.

To register with the Abu Dhabi Securities Exchange, go to: https://www.adx.ae/English/Pages/Members/BecomeAMember/default.aspx  

To obtain an investor number for trading on the Dubai Exchanges, go to: http://www.nasdaqdubai.com/assets/docs/NIN-Form.pdf 

**Competition and Anti-Trust Laws**

The Competition Regulation Committee under the Ministry of Economy reviews transactions for competition-related concerns.

**Expropriation and Compensation**

Mission UAE is not aware of foreign investors involved in any expropriations in the UAE in the recent past.  There are no set federal rules governing compensation if expropriations were to occur, and individual emirates would likely treat expropriations differently.  In practice, authorities would be unlikely to expropriate unless there were a compelling development or public interest need to do so, and in such cases compensation would likely be generous to maintain foreign investor confidence.

**Dispute Settlement**

*ICSID Convention and New York Convention*

The UAE is a contracting state to the International Center for the Settlement of Investment Disputes (ICSID convention) and a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral awards (1958 New York Convention).

*Investor-State Dispute Settlement*

Mission UAE is aware of several substantial investment and commercial disputes over the past few years involving U.S. or other foreign investors and government and/or local businesses.  There have also been several contractor/payment disputes with the government as well as with local businesses. Some observers have characterized dispute resolution as difficult and uncertain.  Disputes are generally resolved by direct negotiation and settlement between the parties themselves, recourse to the legal system, or arbitration. Small, medium, and some larger enterprises continue to fear being frozen out of the UAE market for escalating payment issues through civil or arbitral courts, particularly when politically-connected local parties are involved.  Some firms might feel compelled to exit the UAE market as they are unable to sustain the pursuit of legal or dispute resolution mechanisms that can add months or years to the dispute resolution process. Arbitration may commence by petition to the UAE federal courts on the basis of mutual consent (a written arbitration agreement), independently (by nomination of arbitrators), or through a referral to an appointing authority without recourse to judicial proceedings.  There have been no confirmed reports of government interference in the court system that could affect foreign investors, but there is a widespread perception that domestic courts are likely to find in the favor of Emirati nationals over foreigners.

*International Commercial Arbitration and Foreign Courts*

The UAE government’s accession to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention) became effective in November 2006.  An arbitration award issued in the UAE is now enforceable in all 138 states that have acceded to the Convention, and any award issued in another member state is directly enforceable in the UAE.  The Convention supersedes all incompatible legislation and rulings in the UAE. Mission UAE is not aware of any U.S. firms attempting to use arbitration under the UN convention on the recognition and enforcement of foreign arbitral awards.  While recognizing progress in compliance with this convention, some market watchers have raised concerns about delays and other obstacles encountered by firms seeking to enforce their arbitration awards in the UAE.

In June 2018, Federal Law No. 6 of 2018 on Arbitration came into force.  It repealed and replaced Articles 203 to 218 of Federal Law No 11 of 1992.  The Federal Law on Arbitration is based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration.  Prior to this legislation, there was no federal law governing arbitration in the UAE.  The new law is expected to bolster confidence in the UAE’s arbitration regime.

**Bankruptcy Regulations**

A new bankruptcy law, Federal Decree Law No. 9 of 2016, came into effect in December 2016 and was used for the first time in February 2019.  The law covers companies governed by the Commercial Companies Law, most free trade zone companies, sole proprietorships, and civil companies conducting professional business.  It allows creditors that are owed USD 27,225 or more, to file insolvency proceedings against a debtor 30 business days after notification in writing to the debtor.

The law decriminalized “bankruptcy by default,” requiring companies and their owners in default more than 30 days to initiate insolvency procedures rather than face fines and potential imprisonment.  However, observers allege that the law offers little protection to individual investors, and non-payment of debt generally remains a criminal offense.

In April, 2017, the UAE Federal Government’s Al Etihad Credit Bureau began issuing credit scores to UAE citizens and residents, according to local media reports.  The bureau has been issuing credit reports to foreigners living in the UAE since 2014.

							4. Industrial Policies					

**Investment Incentives**

All free trade zones provide incentives to foreign investors.  Outside the free trade zones, the UAE provides no incentives, although the ability to purchase property as freehold in certain favored projects could be considered an incentive to attract foreign investment.

**Foreign Trade Zones/Free Ports/Trade Facilitation**

There are numerous free trade zones throughout the UAE.  Foreign companies generally enjoy the same investment opportunities within those zones as Emirati citizens.  The chief attraction of free trade zones is that foreigners may own up to 100 percent of the equity in a free trade zone enterprise.  All free trade zones provide 100 percent import and export tax exemption, 100 percent exemption from commercial levies, 100 percent repatriation of capital and profits, multi-year leases, easy access to ports and airports, buildings for lease, energy connections (often at subsidized rates), and assistance in labor recruitment.  In addition, free trade zone authorities provide significant support services, such as sponsorship, worker housing, dining facilities, recruitment, and physical security.

Free trade zones have their own independent authority with responsibility for licensing and helping companies establish their businesses.  Investors can register new companies in a free trade zone, or license branch or representative offices. Free trade zones have limited liability and are governed by special laws and regulations.  Companies in free trade zones seeking to operate within the UAE may be governed by the new Commercial Companies Law, if the laws of the relevant free trade zone permit companies to operate outside of the free zones.

**Performance and Data Localization Requirements**

The Emiratization Initiative is a federal incentive program that aims to increase the number of Emirati citizens employed within the private sector.  Exact requirements vary by industry, but the Vision 2021 national strategic plan aims to increase the percentage of Emiratis working in the private sector from five percent in 2014 to eight percent by 2021.  Most Emirati citizens are employed by the government or one of its many government-related entities (GREs). A guest worker system generally guarantees transportation back to country of origin at conclusion of employment.  There have been no reports of excessively onerous visa, residence, work permit, or similar requirements inhibiting mobility of foreign investors and their employees. There are government and government authority-imposed conditions on permission to invest, in the form of the 49 percent limitation of ownership/control by foreign individuals or corporations.  The UAE does not force foreign investors to use domestic content in goods or technology or compel foreign IT providers to turn over source code.

All foreign defense contractors with over USD 10 million in contract value over a five-year period must participate in the Tawazun Economic Program, previously known as the UAE Offset Program.  This program also requires defense contractors that are awarded contracts valued at more than USD 10 million to establish commercially viable joint ventures with local business partners, which would be projected to yield profits equivalent to 60 percent of the contract value within a specified period, usually seven years.

In February 2018, the Abu Dhabi National Oil Company piloted a new In-Country Value (ICV) strategy, which gives preference in awarding contracts to foreign companies that use local content and employ Emirati citizens.  UAE government officials have indicated plans to expand the ICV program to other sectors of the economy, and to other emirates, in the coming years.

							5. Protection of Property Rights					

**Real Property**

The UAE government allows individual emirates to decide on the form in which ownership of land may be transferred within its borders.  Generally, Abu Dhabi has limited ownership to Emirati or other GCC citizens, who may then lease the land to foreigners. The property reverts back to the owner at the conclusion of the lease.  Although Dubai has identified restricted areas within its borders, traditional freeholds, also known as outright ownership, are also available. Subject to very few regulations, freehold owners own the land and may sell it on the open market.  The contract rights of lienholders, as well as ownership rights of freeholders, are generally respected and enforced throughout the UAE, which in some cases has employed specialized courts for this purpose.

Mortgages and liens are permitted, with restrictions.  Each emirate has its own system of record-keeping. In Dubai, for example, the system is centralized within the Dubai Land Department, and is considered extremely reliable.  Land not otherwise allocated or owned is the property of the emirate, and may be disposed of at the will of its ruler, who generally consults with his advisors prior to disposition.

The World Bank Ease of Doing Business Report notes that not all privately-held land plots in the economy are formally registered in an immovable property registry.  Much of the country is unregistered desert; such land is generally owned by emirate-specific governments. The UAE does not have a securitization process for lending purposes.

**Intellectual Property Rights**

Intellectual property rights (IPR) holders face four main challenges in the UAE: the trade of counterfeit goods, unpredictable pharmaceutical patent protection, the absence of a collective management organization (CMO) for royalty payments for copyrighted music, and burdensome trademark fees.  While some UAE enforcement authorities periodically seize and destroy counterfeit goods within UAE, concerns related to the re-exportation of seized goods, significant copyright piracy, and trademark infringement persist. UAE police forces and investigators have generally been responsive when policing against pirated CDs, DVDs, and software, however the failure to grant the necessary operating license to establish a CMO, which is allowed under the UAE’s 2002 Copyright Law and Ministerial Decision No. 133 of 2004, is a major obstacle to adequate enforcement of IPR.

The 2018-2019 Global Competitiveness Report issued by the World Economic Forum ranked the UAE 26th globally on IPR protection, down from 21 in 2017-2018, with the UAE ranking second regionally after Oman.  The UAE’s legal framework for IPR is generally considered compliant with international obligations.  Emirate-level authorities such as economic development authorities, police forces, and customs authorities enforce IPR-related issues, while federal authorities manage IPR policy.  However, many of these laws are inconsistently implemented or enforced at federal and emirate-levels, criminal sentences are often non-deterrent, and enforcement actions require specific written complaints from right holders.

In April 2017, UAE officials allowed domestic manufacture of generic versions of a pharmaceutical product still under patent protection in the United States.  The UAE claimed that Decree no. 404, a measure providing reliable protection for pharmaceutical products with valid country of origin patents, is no longer valid.  It is also unclear whether the UAE courts will consistently recognize patents granted by the Gulf Cooperation Council (GCC) Patent Office.

Concerns also exist over the high trademark filing fees in UAE.  The fees are the highest in the world and considered cost-prohibitive for protecting trademarks locally.

Dubai Police announced a total of 264 counterfeit cases and six copyright cases in 2018, comparable to 212 trademark violation and 11 copyright cases in 2017.  Enforcement authorities in the UAE’s northern emirates also conducted inspection campaigns during 2018. Many counterfeit products in the UAE are now promoted via social media, so the UAE Telecommunication Regulatory Authority (TRA) has also been active in tracking and blocking these accounts.  In 2018, TRA banned 152 websites for IPR violations, compared to 167 in 2017.

The UAE did not enact any new laws related to IP protection in 2018.  The UAE was included in both the U.S. Trade Representative (USTR) 2019 Special 301 Report (https://ustr.gov/sites/default/files/2019_Special_301_Report.pdf ) and the 2018 Notorious Markets List (https://ustr.gov/sites/default/files/2018_Notorious_Markets_List.pdf ).  The latter mentions two physical marketplaces in the UAE, with both locations cited as important markets for local purchasers and as gateways to distribute Chinese-sourced counterfeit goods to other markets in the region, North Africa, and Europe.

							6. Financial Sector					

**Capital Markets and Portfolio Investment**

The UAE government is focused on building infrastructure to create an environment conducive to economic growth and outside investment.  It is also collaborating with its partners in the GCC to support ventures in the region. UAE government efforts to create such an environment for investments resulted in: i) no taxes or restrictions on the repatriation of capital; ii) free movement of labor and low barriers to entry (effective tariffs are five percent for most goods); and iii) an emphasis on diversifying the economy away from oil, which offers a broad array of investment options for FDI.  Drivers for the economy include real estate, tourism, manufacturing, and financial services.

The UAE has three stock markets:  Abu Dhabi Securities Exchange, Dubai Financial Market, and NASDAQ Dubai.  The regulatory body, the Securities and Commodities Authority (SCA), classifies brokerages into two groups:  “those which engage in trading only while the clearance and settlement operations are conducted through clearance members” and “those which engage in trading clearance and settlement operations for their clients.”  Under the regulations, trading brokerages require paid-up capital of USD 820,000, whereas trading and clearance brokerages need USD 2.7 million. Bank guarantees required for brokerages to trade on the bourses are USD 367,000.

The UAE issued investment funds regulations in September 2012, known as the “twin peak” regulatory framework designed to govern the marketing of investment funds established outside the UAE to domestic investors and the establishment of local funds domiciled inside the UAE.  This regulation gave the SCA, rather than the Central Bank, authority over the licensing, regulation and oversight of the marketing of investment funds. The marketing of a foreign fund (including “offshore” UAE-based funds, such as those domiciled in the DIFC) requires the appointment of a locally licensed placement agent.  Other restrictions contained in the regulations, such as limitations on funds investing more than 15 percent in any one underlying issuer, have led fund managers to question whether the UAE is seeking to attract international or regionally focused investment funds to be domiciled in the country. The UAE government has also encouraged certain high-profile projects to be undertaken via a public joint stock company in order to allow the issue of shares to the public.  Further, the UAE government requires any company carrying out banking, insurance, or investment services for a third party to be a public joint stock company.

The UAE has no restrictions on the making of payments and transfers for current international transactions, according to the IMF, except for those restrictions for security reasons that have been notified by authorities.  There are no restrictions on the transfer of funds into or out of the UAE, and currencies are traded freely at market-dictated rates.

Credit is generally allocated on market terms, and foreign investors can access local credit markets.  Interest rates are usually very close to those in the United States considering the local currency is pegged to the dollar.  There have been complaints that GREs crowd out private sector borrowers.

**Money and Banking System**

The UAE has a robust banking sector, with 49 banks, 27 of which are foreign institutions.  In January 2019, three UAE banks, Abu Dhabi Commercial Bank, Union National Bank, and Al Hilal Bank merged to create a bank with assets of USD 114 billion.

Non-performing loans comprised 6.4 percent of total loans in 2017, according to figures from the World Bank.  The Central Bank of the UAE recorded total sector assets of USD 733 billion as of December 2017.

There are some restrictions on foreigners’ ability to establish a current bank account, and legal residents and Emiratis can access loans under more favorable terms than non-residents.

**Foreign Exchange and Remittances**

*Foreign Exchange Policies*

According to the IMF, the UAE has no limitations on the making of payments and transfers for current international transactions, except for restrictions related to security reasons that have been notified by authorities.  Currencies are traded freely at market-determined prices. The UAE dirham has been pegged to the dollar since 2002. The mid-point between the official buying and selling rate for the dirham (AED or Dhs) is fixed at AED 3.6725 per USD 1.

*Remittance Policies*

The Central Bank of the UAE initiated the creation of the Foreign Exchange & Remittance Group (FERG), made up of various exchange companies, which is registered with the Dubai Chamber of Commerce & Industry.  Unlike their counterparts across the world that deal mainly in money exchange, exchange companies in the UAE are the primary channels for transferring large volumes of remittances through official channels. According to migration and remittance data from the World Bank, in 2017 the UAE had migrant remittance outflows of USD 44.4 billion.  The Central Bank reported migrant remittances totaling USD 46.1 billion in 2018. Exchange companies are important partners in the UAE government’s electronic salary transfer system, called the Wages Protection System, designed to ensure workers are paid according to the terms of their employment. They also handle various ancillary services ranging from credit card payments, to national bonds, and traveler’s checks.

**Sovereign Wealth Funds**

Abu Dhabi is home to two sovereign wealth funds—the Abu Dhabi Investment Authority (ADIA), and Mubadala Investment Company—with estimated total assets of approximately USD 1 trillion.  Each Abu Dhabi fund comprises a chair and board members appointed by the Ruler of Abu Dhabi. President Khalifa Bin Zayed Al Nahyan is the chair of ADIA and Abu Dhabi Crown Prince Mohammed Bin Zayed Al Nahyan is the chair of Mubadala.  Emirates Investment Authority, the UAE’s federal sovereign wealth fund, is modest by comparison with estimated assets of about USD 15 billion. The Investment Corporation of Dubai (ICD) is Dubai’s primary sovereign wealth fund, with an estimated USD 234 billion in assets according to ICD’s June 2018 financial report.

UAE funds vary in their approaches to managing investments.  ADIA generally does not actively seek to manage or take an operational role in the public companies in which it invests, while Mubadala tends to take a more active role in particular sectors, including oil and gas, aerospace, infrastructure, and early-stage venture capital.  ADIA exercises its voting rights as a shareholder in certain circumstances to protect its interests, or to oppose motions that may be detrimental to shareholders as a body. According to ADIA, the fund carries out its investment program independently and without reference to the government of Abu Dhabi.

ADIA in 2008 agreed to act alongside the IMF as co-chair of the International Working Group of sovereign wealth funds, which eventually became the International Forum of Sovereign Wealth Funds (IFSWF).  Comprising representatives from 31 countries, the IFSWF was created to demonstrate that sovereign wealth funds had robust internal frameworks and governance practices, and that their investments were made only on an economic and financial basis.

							7. State-Owned Enterprises					

State-owned enterprises (SOEs) are a key component of the UAE economic model.  There is no published list of SOEs or GREs, either for the country as a whole or at the emirate level.  Some SOEs, such as the influential Abu Dhabi National Oil Company (ADNOC), are strategically important companies and a major source of revenues for the government.  Mubadala established Masdar in 2006 to develop renewable energy and sustainable technologies industries. A number of SOEs, such as Emirates Airlines and Etisalat, a large telecommunications firm, have in recent years emerged as internationally recognized brands.  Some but not all of these companies have competition. In some cases, these firms compete against other state-owned firms (Emirates and Etihad airlines, for example, or Etisalat against majority UAE government-owned du). While they are not granted full autonomy, these firms leverage ties between entities they control to foster national economic development.  Perhaps the best example of such an economic ecosystem is Dubai, where SOEs have been used as a motor of diversification in multiple sectors, including construction, hospitality, transport, banking, logistics, and telecommunications.

Sectoral regulations in some cases address governance structures and practices of state-owned companies.  The UAE is not party to the WTO Government Procurement Agreement.

**Privatization Program**

There is no privatization program.  There have been several listings of portions of SOEs, on local UAE stock exchanges, as well as some “greenfield” IPOs that are focused on priority projects.

							8. Responsible Business Conduct					

There is a general expectation that businesses in the UAE adhere to responsible business conduct standards, and the UAE’s Governance Rules and Corporate Discipline Standards (Ministerial Resolution No. 518 of 2009) encourage companies to apply social policy towards local society.  In February 2018, the UAE issued Cabinet Resolution No. 2 regarding Corporate Social Responsibility (CSR), which encourages voluntary contributions to a National Social Responsibility Fund. The Emirate of Ajman has made annual CSR contributions of USD 417 mandatory for all businesses.  Many companies maintain CSR offices and participate in CSR initiatives, including mentorship and employment training; philanthropic donations to UAE-licensed humanitarian and charity organizations; and initiatives to promote environmental sustainability. The UAE government actively supports such efforts through official government partnerships, as well as through private foundations.

The 2015 Commercial Companies Law requires managers and directors to act for the benefit of the company and makes any company provisions exempting a directors and managers from personal liability voidable.

In April 2015, the Pearl Initiative and the United Nations Global Compact held their inaugural Forum in Dubai.  The Pearl Initiative is an independent, non-profit organization working across the Gulf region to encourage better business practices.  The UAE has not subscribed to the OECD Guidelines for Multinational Enterprises and has not actively encouraged foreign or local enterprises to follow the specific United Nations Guiding Principles on Business and Human Rights.  The UAE government has not committed to adhere to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas, nor does it participate in the Extractive Industries Transparency Initiative.  The Dubai Multi-Commodities Center (DMMC), however, passed the DMCC Rules for Risk-Based Due Diligence in the Gold and Precious Metals Supply Chain, which it claims are fully aligned with the OECD guidance.

							9. Corruption					

The UAE has stiff laws, regulations, and enforcement against corruption, and has pursued several high profile cases.  For example, the UAE federal penal code and the federal human resources law criminalize the acceptance of bribes by public and private sector workers and embezzlement.  The Dubai financial fraud law criminalizes receipt of illicit monies or public funds. There is no evidence that corruption of public officials is a systemic problem. The State Audit Institution and the Abu Dhabi Accountability Authority investigate corruption in the government.  The Companies Law requires board directors to avoid conflicts of interest. In practice, however, given the multiple roles occupied by relatively few senior Emirati government and business officials, myriad conflicts of interest exist.

The monitoring organizations GAN Integrity and Transparency International describe the corruption environment in the UAE as low-risk, and rate the UAE highly with regard to anti-corruption efforts both regionally and globally.  Third-party organizations note, however, that the involvement of members of the ruling families in certain businesses can create economic disparities in the playing field, and most foreign companies outside the UAE’s free zones must rely on an Emirati national partner who retains majority ownership.  The UAE has ratified the United Nations Convention against Corruption. There are no civil society organizations or NGOs investigating corruption within the UAE.

*Resources to Report Corruption*

Contact at government agency or agencies are responsible for combating corruption:

Dr. Harib Al AmimiPresidentState Audit Institution20th Floor, Tower C2, Aseel Building, Bainuna (34th) Street, Al Bateen, Abu Dhabi, UAE+971 2 635 9999Email: info@saiuae.gov.ae

							10. Political and Security Environment					

There have been no reported instances of politically motivated property damage in recent years.

							11. Labor Policies and Practices					

Despite an economic slowdown in 2018, unemployment among UAE citizens remains low.  Expatriates, who represent over 85 percent of the country’s 9.7 million residents, account for more than 95 percent of private sector workers.  As a result, there would be large labor shortages in all sectors of the economy if not for expatriate workers. Most expatriate workers derive their legal residency status from their employment.

A significant portion of the country’s expatriate labor population comprises low-wage workers, who are primarily from South Asia and work in labor-intensive industries such as construction, maintenance, and sanitation.  In addition, several hundred thousand domestic workers, primarily from South and Southeast Asia and Africa, work in the homes of both Emirati and expatriate families. Federal labor law does not apply to domestic, agricultural, or public sector workers.  In 2014, the federal government implemented a law mandating a standard contract for all domestic workers. In 2017, the UAE issued a domestic workers law, which regulates their rights and contracts. Various regulations require businesses in certain sectors such as financial services to employ minimum quotas of Emiratis.

Under UAE labor law, employers must pay severance to workers who complete one year or more of service, except in cases of termination under certain conditions described in Article 120 of the federal labor law, which relate to misconduct by workers.  Expatriate workers do not receive UAE government unemployment insurance. Termination of UAE nationals in most situations requires prior approval from the Ministry of Human Resources and Emiratization.

In June 2018, the UAE cabinet approved a revamped repatriation scheme to replace the USD 817 guarantee employers had to deposit per worker.  Under the new system, repatriation insurance will cost USD 16 per year per employee. In November 2018, the UAE cabinet approved five-year residence visas for investors who purchase property worth USD 1.4 million or more, and 10-year residence visas for individuals who invest USD 2.8 million in a business.  The government also introduced new visas for entrepreneurs, and specialized talent in the fields of science, medicine and specialized technical fields. In 2018, The Ministry of Human Resources and Emiratization introduced a part-time work visa, allowing employees to undertake part-time jobs and to work for multiple employers simultaneously.

Although UAE federal law prohibits the payment of recruitment fees, many prospective workers continue to make such payments in their home countries.  In March 2017, the UAE government announced plans to replace recruitment agencies with “Tadbeer Centers,” which are publicly regulated but privately operated.  The first center opened in Dubai in September 2017. There are no minimum wages legally mandated by the UAE; however, some labor-sending countries require their citizens to receive minimum wage levels as a condition for allowing them to work in the UAE.

Federal Law No. 8 of 1980 prohibits labor unions.  The law also prohibits public sector employees, security guards, and migrant workers from striking, and allows employers to suspend private sector workers for doing so.  In addition, employers have the ability to cancel the contracts of striking workers, which can lead to deportation. According to government statistics there were approximately 30 to 60 strikes per year between 2012 and 2015, the last year for which data is available.  In November 2018, Abu Dhabi Police defused a strike by hundreds of laborers who protested their company’s alleged failure to pay wages on time. The company settled the dispute, and no deportations related to this incident were reported.

Mediation plays a central role in resolving labor disputes.  The federal Ministry of Human Resources and Emiratization and local police forces maintain telephone hotlines for labor dispute and complaint submissions.  The Ministry of Human Resources and Emiratization manages 11 centers around the UAE that provide mediation services between employers and employees. Disputes not resolved by the Ministry of Human Resources and Emiratization move to the labor court system.

The Ministry of Human Resources and Emiratization inspects company workplaces and company-provided worker accommodations to ensure compliance with UAE law.  Emirate-level government bodies, including the Dubai Municipality, also carry out regular inspections. The Ministry of Human Resources and Emiratization also enforces a mid-day break from 12:30 p.m. – 3:00 p.m. during the extremely hot summer months.  The federally-mandated Wage Protection System electronically transfers and monitors wages to approximately 4.5 million private sector workers (about 95 percent of the total private sector workforce).

Following the promulgation of similar legislation in Abu Dhabi, Dubai’s government fully implemented Law No. 11 in May 2017, which mandates employers provide basic health insurance coverage to their employees or face fines.  Dubai’s mandatory health insurance law covers 4.3 million people, and applies to employees residing in other emirates but working in Dubai.

The multi-agency National Committee to Combat Human Trafficking is the federal body tasked with monitoring and preventing human trafficking, including forced labor.  Child labor is illegal and rare in the UAE. The UAE continues to participate in the Abu Dhabi Dialogue, engage in the Colombo Process, and partner with other multilateral organizations such as the International Organization for Migration and International Labor Organization in regard to labor exploitation and human trafficking.

Section 7 of the Department of State’s Human Rights Report (https://www.state.gov/reports/2018-country-reports-on-human-rights-practices/united-arab-emirates/) provides more information on worker rights, working conditions, and labor laws in the UAE. The Department of State’s Trafficking in Persons Report (https://www.state.gov/reports/2019-trafficking-in-persons-report-2/united-arab-emirates/) details the UAE government’s efforts to combat human trafficking.

							12. OPIC and Other Investment Insurance Programs					

The UAE does not have a bilateral agreement with OPIC after its agreement was suspended in 1995 for not meeting statutory “taking steps” standards on worker rights.  The UAE is a Very High Income country as defined by OPIC’s statute, and as a development finance agency, OPIC gives priority to financing projects in middle and low income countries.

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics					

*Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy*

* Economic Report: Ministry of Economy

*Table 3: Sources and Destination of FDI*

Data from the Annual Report of the Ministry of Economy (2018) indicates that the GDP estimates for 2017 in real prices (base year 2010) were approximately USD 387.2 billion, while the estimated non-oil GDP at current prices was about USD 297.3 billion in 2017.

According to the UAE Ministry of Economy’s Annual Economic Report 2018, the net annual FDI inflows to the UAE in 2017 were $10.4 billion, compared to $9.6 billion in 2016. The largest investors in the UAE were:  India, United States, UK, Japan, China, Saudi Arabia, Germany, Kuwait, France and the Netherlands.

*Table 4: Sources of Portfolio Investment*

Data not available.

							14. Contact for More Information					

Paul ProkopEconomic OfficerFirst Street, Umm Hurair -1, Dubai UAE+971 (0)4 309 4918Email: prokoppg@state.gov

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### On This Page

                    -  Executive Summary 
                    -  1. Openness To, and Restrictions Upon, Foreign Investment   
                    -  2. Bilateral Investment Agreements and Taxation Treaties   
                    -  3. Legal Regime   
                    -  4. Industrial Policies   
                    -  5. Protection of Property Rights   
                    -  6. Financial Sector   
                    -  7. State-Owned Enterprises   
                    -  8. Responsible Business Conduct   
                    -  9. Corruption   
                    -  10. Political and Security Environment   
                    -  11. Labor Policies and Practices   
                    -  12. OPIC and Other Investment Insurance Programs   
                    -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                    -  14. Contact for More Information   

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