The UAE is easing rules on the foreign ownership of companies as the country seeks to attract investment and boost an economy battered by lower oil prices.
Under the new rules, non-Emiratis will be able to control a company outright, and specialists in medical, scientific, research and technical fields as well as top students will be able to get a residency of up to 10 years.
Officials hope that the moves will attract new businesses to the country, driving future growth, and giving a much-needed boost to its real-estate market. Still, many questions remain about how exactly the new laws will work and the benefits they will bring.
1. What’s changing?
Currently, expatriates who want to set up a business outside of a free zone have to partner with an Emirati or local entity. UAE citizens must own 51% of the joint venture and receive an annual fee or share of the profit. The changes will help start-ups and entrepreneurs set up businesses by cutting costs, according to Khaldoon Tabaza, founder of technology investment firm iMENA. The moves will boost growth by attracting more foreign direct investment, mainly into non-oil sectors, said Ehsan Khoman, head of Middle East and North African research at Mitsubishi UFJ Financial Group Inc.
2. Why now?
A plunge in oil prices in 2014 squeezed Gulf countries’ budgets and spurred efforts to reform economies and become less dependent on crude. While prices have recovered and are now close to $80 a barrel, nations are planning for a post-oil era. “The region as a whole has been grappling with this issue for many years, but when oil was at $100 a barrel for several years, there wasn’t that much need to attract foreign investment,” said Khatija Haque, head of Mena research at Emirates NBD. “Clearly, that has changed now.”
3. Are other Gulf countries making similar moves?
The UAE amendments follow similar changes in Saudi Arabia and Oman. Saudi Arabia announced a plan for a green card-like programme in 2016 to be implemented over five years and Oman is studying proposals for expatriates to set up a business without a local partner.
4. How will this impact property prices?
The moves are “very positive” for real estate, according to Ali Adou, head of asset management at Daman Investments. A downturn in the property market is lasting longer than expected. S&P Global Ratings said in February that it doesn’t expect a recovery before 2020, when Dubai hosts the World Expo. The new visa changes “will certainly mean a turnaround is on the cards, perhaps sooner than we first envisaged,” said Faisal Durrani, global head of research at Cluttons.
5. Is this the first step towards more taxes?
Many expatriates are drawn to the UAE – not only for its year-round sunshine – but also for tax-free salaries and low corporate tax. But things are changing. In January, the country introduced a 5% valued-added tax. “After years of austerity and economic slowdown, the emphasis in on supporting growth and providing a boost to the next phase of development,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. “At this stage, it seems about supporting the economy.”
6. What’s been the initial reaction?
The changes could be a long-awaited trigger for investors looking at stocks in Dubai and Abu Dhabi, with the real-estate sector benefiting the most, according to investors and analysts. Real-estate and financial stocks represent almost 70% of Dubai’s main index, and about 65% of the gauge in Abu Dhabi. Emaar Properties and Damac Properties Dubai contributed the most to the increase of Dubai’s benchmark yesterday.
A view of the Burj Khalifa tower is seen in downtown Dubai (file). The UAE is easing rules on the foreign ownership of companies as the country seeks to attract investment and boost an economy battered by lower oil prices.
The International Energy Agency expects some of the biggest oil-producing nations to step in to ease any supply shortfall should shipments from Venezuela or Iran collapse.
“I expect that the major oil producers do contribute to the solution of this looming problem in the markets,” IEA executive director Fatih Birol said in a Bloomberg Television interview. The assurance comes as geopolitical tensions in the Middle East, the renewal of US sanctions on Iran and plunging output in Venezuela push crude prices toward a third monthly gain.
The IEA has been “discussing with key oil ministers from the major oil-producing countries” about their ability to “make up the loss from Venezuela or elsewhere,” Birol said in Istanbul. The Paris-based agency, as an energy security organisation, is “following the developments in the oil markets very closely and we are ready to act if and when it is at all necessary.”
Oil production in Venezuela, which holds the world’s biggest known crude reserves, has tumbled amid an escalating economic crisis. At the weekend, President Nicolas Maduro won another six-year term despite calls from the US to halt elections amid the threat of further sanctions on the nation’s stricken oil industry.
Supply concerns are compounded by US President Donald Trump’s withdrawal from the global nuclear accord with Iran, which raises the prospect of reduced shipments from the third-largest producer in the Organization of Petroleum Exporting Countries. Meanwhile Opec continues to tighten global inventories with output cuts due to last until the end of the year.
Opec members and their allies, including Russia, are scheduled to meet next month in Vienna to discuss the supply curbs and the state of the oil market.
“Oil and geopolitics are coming far too close to each other,” Birol said yesterday.
By Archana Narayanan
© Gulf Times Newspaper 2021