The UAE, led by Dubai, earlier created a number of offshore business parks dubbed “free zones,” which permit 100% foreign ownership.
A surge of FDI could light up the United Arab Emirates after new law allowing for 100% foreign ownership of onshore companies went into effect on June 1. The amended Commercial Companies Law, first announced last year, overturns a longstanding requirement for a majority Emirati shareholder in mainland companies.
Critics, however, argue the updated law is open to interpretation and cedes final say about company structures to local governments. Details on the process to obtain 100% foreign ownership, such as share capital requirements and the conditions under which existing UAE companies may convert to 100% foreign ownership, have not been disclosed. “Power to issue decisions on the contribution of UAE nationals to the capital of companies has been assigned to governments of individual emirates,” commented corporate consultants PRO Partner Group in a prepared statement. “We expect to see differing guidelines for Dubai, Abu Dhabi and the wider UAE.”
The new legislation follows a raft of initiatives by the government, as the UAE seeks to bounce back from Covid-19 and the drop in oil prices that saw the nation’s economy contract by approxi-mately 6% last year, according to the UAE Central Bank. Other measures by the government also aim to liberalize the economy, like pathways to citizenship and visas for remote working, which are the region’s most imaginative measures, according to analysts.
Still, sectors such as banking, utilities, telecom and closely held energy assets likely will remain off-limits to foreign ownership. Last month Abu Dhabi released a list of 1,029 activities that are eligible for 100% foreign ownership, noted the PRO Partner Group.
The UAE, led by Dubai, earlier created a number of offshore business parks dubbed “free zones,” which permit 100% foreign ownership. Yet, onshore ownership could lure free-zone companies, allowing them to bid on government contracts by garnering a higher In Country Value (ICV) score, which measures a company’s contribution toward the local economy.
The UAE witnessed 44% growth year on year, to 73 billion dirhams (approximately $20 billion) in FDI in 2020, noted Sheikh Mohammed bin Rashid, vice president of the UAE, in a recent tweet.