New Investment Law in UAE to Boost FDI

 

On Monday, 30th October, Sultan bin Saeed Al Mansouri, Minister of Economy of the United Arab Emirates made an announcement that the country will make changes to its foreign investment law by early 2018. This new law will allow foreign investors more than 49 percent ownership in some business sectors.

The final draft of the landmark law is awaiting the approval of the UAE Federal National Council before it becomes a law by the beginning of 2018.

 

The reformed law will attract more foreign direct investment. The FDI will come particularly in non-oil sectors. This will create significant growth opportunities for the country. In addition, the law will allow 100 per cent foreign equity ownership in certain sectors. The current Commercial Companies Law allows a maximum of 49 per cent of a locally incorporated company to a foreign investor. The change is part of an effort to increase economic diversification to meet the objectives of the UAE Vision 2021. The Commercial Companies Law requires that every foreign company that is established in the UAE must have one or more UAE national companies as partners holding at least 51 per cent of the established company’s capital.

 

The Minister told that new rules are designed for the liberalisation of the investment environment of the UAE. The new set of rules are to go through the Federal National Council soon.

 

The impending reform is expected to drastically change the investment landscape of the UAE. It is widely expected to create significant growth opportunities by attracting more foreign direct investments. The FDI is expected especially in the non-oil private sector.

 

The law will allow foreign equity ownership up to 100 per cent in certain sectors. The recently introduced UAE Commercial Companies Law, contrary to the expectations of the global investor community, did not amend the 49 per cent limit on foreign ownership. Under the new CCL, a foreign investor can only own a maximum of 49 per cent of a locally incorporated company. However, the companies incorporated in a free zone can own a complete 100 per cent. In a public joint stock company, there is no 51 per cent UAE ownership needed. But, there is a requirement of 51 per cent GCC stake-holding.

 

For the past several years, the UAE government is implementing a wide number of bold reform initiatives. This includes the bankruptcy law. It will boost the confidence of the investor. The UAE bankruptcy law, which allows companies in financial distress to restructure, came into effect last year.

 

The UAE’s economic diversification policy has been a main factor in the country’s resilience amid various economic challenges. UAE has increased the GDP contribution of the non-oil sector to over 77 per cent. Manufacturing, construction, retail, real estate, logistics, transportation, telecommunications, and tourism – all of which, along with strategic policies and programs, continue to drive the growth.

 

 

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