- UAE: the case for business
The UAE economy rose by 20.8% in 2012 to US$360 billion supported by diverse sector strength, ranking it third in the Middle East and 30th in the world.
Key industries within the UAE include real estate and construction, hospitality, education, healthcare and retail. Foreign investors are attracted by the lack of corporate or income tax, no personal income tax, no foreign exchange controls and 100% repatriation of capital and profits. The business environment within the UAE is lucrative and fluid and has been bolstered by the recent Expo 2020 win. It is estimated that this will add $24 billion to the UAE economy and increase demand in leisure and tourism (with an estimated 25 million visitors expected to arrive), construction and logistics.
There are many options open to international companies seeking to establish a business in the UAE. Having a presence is also important in the context of the commercial culture of the Middle East. Business owners and people in the region prefer to deal with someone they know and trust by building a personal relationship. Additionally, some countries served by the UAE are unpredictable, so there is a need for locally sourced market intelligence.
The business environment
The UAE is a constitutional federation of seven emirates; Abu Dhabi, Dubai, Sharjah, Ajman, Umm al-Qaiwain, Ras Al Khaimah and Fujairah. The federation was formally established in December of 1971. The term of elected office for the Vice President is five years, with the current Vice President of the UAE being Sheikh Mohammed bin Rashid Al Maktoum. The UAEs political system, which is a unique combination of the traditional and the modern, has underpinned this political success, enabling the country to develop a modern administrative structure, while ensuring that traditions are maintained, adapted and preserved. Economic restructuring has been underpinned by efforts to strengthen the business climate, boost investment and foster the emergence of a more vibrant private sector which continues to ensure that Dubai is seen as the emerging leader in re-export, following the likes of Hong Kong and Singapore.
UK and UAE relationship
The United Kingdom and the UAE share high rates of mutual trade and investment, along with having a good rate of migration between the countries with a number of UAE citizens frequenting the UK and vice versa, which has assisted in further developing key business relationships.
The UK has a long history with the UAE and long before the UAE was formed in 1971, the emirate was once part of the Trucial States with independent sheikhdoms allied with the United Kingdom. The political ties in both countries also have a long-standing historical connection in relation to law enforcement, training, military technology and defense.
Doing business in UAE
The introduction of free zones has transformed the economic market of the UAE within the past 20 years and there are now more than 38 free zones. Investors operating within a free zone can benefit from 100% foreign ownership, no customs duty, 0% income and corporate tax, no labour restrictions and no currency restriction (each free zone offers differing incentives so it is imperative to assess each one individually). The rapid growth of free zones has also provided a powerful economic inspiration to the other emirates, which have set up their own free zones to attract investment.
International companies wanting to trade directly with the UAE by supplying goods and services from abroad should appoint a commercial agent who is already established in the market. The agent must be a UAE national, or a company solely owned by a UAE national. The foreign principal and the agent in the UAE are required to enter into a commercial agency agreement specifying the products and the territories to be covered by the contract.
The view from UAE by Hisham Farouk, Managing Partner of Grant Thornton UAE
The outlook for business
‘The message from UAE business leaders is overwhelmingly positive. Growth in 2013 was expected to be the fastest since the financial crisis at 4.3% and this is forecast to accelerate in 2014 with retail demand, tourism numbers, infrastructure investment, the stock market and the property sector all on the up, which has been significantly supported by the recent Expo 2020 win.’
‘Investment in the UAE reflects the continued growth of the region. Economic restructuring has been underpinned by efforts to strengthen the business climate, boost investment and foster the emergence of a more vibrant private sector. The UAE aims to be a regional financial hub and the present market conditions, external market feedback and optimism indicate a positive change in trends.’
How UK companies should approach market
‘Companies from the UK looking to do business in the region should ensure they consider the traditional elements which vary between countries that impact business such as personal relationships and ensuring you seek the relevant government approvals.’
As featured in the Strategies for Growth Magazine published by Grant Thornton UK