As the economic crisis becomes a distant memory in the region, foreign businesses are keen to reinvest in due to a combination of geography, world-class services and a high income population, 84 per cent of who are expatriates, according to an expert.
“The UAE has recently seen a boom in business as foreign investment floods back to the region. This is supported by recent International Monetary Fund (IMF) research which predicted economic growth in the Emirates will jump from 3.9 per cent to 4.4 per cent in 2014,” Sarosh Zaiwalla, a global legal expert in a statement said.
“During this time, the UAE has done a lot to ensure that foreign businesses continue to invest in the region. For example, it only takes eight days to set up a business and firms have very little paperwork to file as much of the legal documentation has become available online for even greater convenience. In fact, according to data published by The World Bank, the UAE comes 23rd out of 189 countries for the ease of doing business.
“A new law was introduced on April 13th 2014 which was designed to promote smaller businesses and give them greater access to contracts and loans. However, this has been met with criticism by local business leaders, who believe it still fails to solve problems currently hampering investment in the region.
“Such problems for foreign business owners in the UAE include a lack of a proper insolvency regime. This is a problem in that it does not make clear the role of a firm’s directors or the rights of its creditors if it hits financial trouble. This is supported by research from the Gulf Cooperation Council (GCC) which ranks the UAE in 101st place in terms of resolving insolvency.
“Investor protection is another issue affecting foreign business owners in the UAE. Progress has been made in this area as UAE courts are increasing recognising the decisions of foreign arbitral tribunals. But enforcing contracts can be tricky and the new law does not provide much assistance in this area.
“Similarly, it is difficult for foreign businesspersons to have full ownership of a company in the UAE and the proposed legislation does little to address this. Currently, international businesses that set up local limited-liability companies can only own 49 per cent of them. Consequently, they must find local partners whom they feel they can trust to own the majority share. The exception to this rule is Dubai which has created “free” zones where full foreign ownership is allowed. Recently, Dubai Investments, the largest investment company listed on the Dubai Financial Market (DFM), has raised the foreign ownership limit in the company from 20 per cent to 35 per cent. The news was met with much approval from the international business community.
“The UAE promises further legislation on the subject of foreign business ownership in the region. However, when the region is economically strong as it is currently, the authorities tend to lose interest in reforms. Still, many in the business community argue that the UAE’s advantages outweigh its disadvantages and it is for this reason, despite the legal complications, that the UAE will continue to be a popular destination for foreign business ownership,” he added.