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Dubai is one of the seven emirates within the United Arab Emirates (UAE), with Abu Dhabi as the capital of the UAE. It is also the wealthiest emirate amongst them. Dubai is a city of skyscrapers, ports, and beaches where big business takes place alongside sun-seeking tourism.
Dubai no longer has an oil-based economy. The oil wealth it enjoyed between 1960s and 1990s was used to enhance other sectors of its economy by building infrastructure. Today, trade forms the core of the country’s economy. The UAE’s economy projects growth of 4.2% in 2022, with Dubai accounting for 3.4% of it. Its economy is now one of the most diversified in the world, with oil accounting less than 1% of GDP. The city has reported 6% growth in non-oil external trade at US$373 billion in 2019 and free zones accounting for US$161 billion. Dubai’s strategic location, combined with its business-friendly policies and future-forward infrastructure, have shaped the city into a leading global trade, finance and an e-commerce powerhouse.
Foreign Investment Outlook
Foreign Direct Investments (FDI) into the UAE achieved a growth of 44.2% during 2020 compared to 2019 – reaching US$19.88 billion making it the world’s 15th biggest recipient of FDI. Despite the ongoing pandemic, Dubai maintained a high level of investor confidence in 2020. The city is ranked 1st in the Middle-East & North Africa region for top global FDI locations. This could be attributed to the city remaining open for business and making investments in smart infrastructure.
Establishing a Company in Dubai
There are two major jurisdictions that any investor or entrepreneur should know prior to registering their company in the UAE. They are – Mainland and Freezone, and these influence certain criteria such as Business Ownership, Scope of Business, Office Space, Visa Eligibility, Company Audit just to name a few.
A mainland company is an onshore company which is registered under the government authority of the respective Emirate. The trade license is issued by the Department of Economic Development of that Emirate. A UAE mainland company is mainly characterized by the restriction-less trading opportunity and is authorized to trade in the UAE local market as well as outside of the UAE.
A free zone company is a company formed within a special jurisdiction that comes under the respective Emirate. Free zone jurisdictions have their own regulations and have a government regulatory body called the Free Zone Authority which oversees trade license issuance. A UAE free zone is characterized by the benefits of 100% foreign ownership and tax concessions. A free zone company is only authorised to trade within the free zone and outside of the UAE.
Incentive for Foreign Investors
There are many incentives for investors in the UAE, and these are aimed at increasing the number of small and medium enterprises (SMEs) and start-ups. The government is also actively reducing and eliminating entry barriers for foreign investments. Some of these incentives include:
- Up to 100% foreign company ownership
- More than 40 freezones for company incorporation
- Investing in all economic activities
- No minimum capital
- 100% profit repatriation
- Effective visa system with renewable durations from 5 – 10 years
- Low custom tariffs
Market Opportunities in Dubai
The top five sectors for FDI Capital into Dubai in 2020 are the following: Accommodation & Food Services (40%), Electric Power Generation (13%), Other Information Services (8%), Healthcare & Social Assistance (4%) and Wholesale Trade (4%). These 5 sectors account for 69% of total estimated FDI capital inflows in 2020.
Dubai’s efforts to simplify regulation, reinforce innovation and digitization, provide world-class logistics and infrastructure, and developed human capital have made the city a preferred destination for FDI, especially withing the Middle East region.
And while UAE offers an attractive long-term market, there are still some near-term challenges brought about by the ongoing pandemic. Despite that, the UAE cannot be overlooked as your next FDI location due to its forward-looking outlook, ambitious vision, and healthy balance sheet, thanks to its significant sovereign wealth.
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