16

Doing Business 2020 ranking

2

Days needed to export

43k

GDP per capita (USD)

UAE’S EXPORT

Modern infrastructure

The United Arab Emirates is crucial for the global economy. Thanks to its geographical location, expansive projects for the diversification of the economy and focus on the international trade, UAE is a promising place for the investment, especially for those, who also wish to enter the markets of Middle East, MENA region and South Asia. Foreign investors in UAE enjoy modern infrastructure, varied consumers form different places of the world and good environment for the international trade. For those who want to learn more we recommend looking at our consulting options in UAE.

  • Dubai – the most known of the Emirates. Highly valued for its good environment for the investors thanks to its quick expansion, high reputation and focus on innovations and high technologies. Dubai is also offering various incentives and upholding its status of the international trade hub.
  • Abu Dhabi – the capital and second biggest city in the Emirates. Underwent quick industrialization in the 20th century, which made it a political, industrial and economical centre. Abu Dhabi provides 15% of UAE’s GDP and is known as the ‘most westernized Arab city’. It doesn’t offer quite as many incentives as Dubai, but it’s still luring many foreign investors with its expansive international programs.
  • Sharjah – the 3rd biggest Emirate. Offers low taxes and trade responsibilities to stimulate the investors. Introduced quick procedures for those who are trying to acquire licenses.
  • Ajman – focuses on the real estate sector and protective laws.
  • Umm al-Quwain – the least populated of the Federation. Similarly to Dubai, offers various tax and investment incentives.
  • Ras al-Khaimah – concentrated on the production of concrete and remains the biggest producent of it in the UAE.
  • Fujairah – is trying to attract investors by replicating Dubai laws. Allows free trade. Invests heavily on tourism.

Economic dependence on the oil trade

UAE’s economy is based on the various benefits tied to the oil trade and a massive influx of foreign workers. At the same time the country stays dependent of the oil prices, whereas cheap foreign workforce adds to the inflation, which is listed among the biggest of its long term problems. UAE is implementing education reforms and creating new jobs to mobilize its citizens to work in the private sector.

Diversification of the UAE’s economy is being carried out by various programs. Tourism, retail, trade and real estate sectors are benefiting the most. In November 2015 the government introduced a plan worth 81,7 billion USD meant to stimulate the economy of the innovation and new technologies, that will add up to the investments in education, healthcare, energy, transport, space travel and water resources. Till 2021 UAE wants to triple the workforce employed in the ‘economy based on knowledge’.

UAE is 16th in the global rankings of Doing Business 2020, but remains a leader in the Middle East and North Africa region. It’s known for its large infrastructure and construction projects. In 2016 it implemented the draft of the expansion of the Dubai metro for 2,9 billion USD, second phase of the construction of the Atlantis Hotel on Palm Jumeirah for 840 million USD and Palm Gateway beaches in Nakheel for 380 million USD.

Business opportunities in the construction and tourism sector

In 2013 UAE was chosen as a host for the World Expo 2020. The event was postponed till October 2021 due to the Covid-19 global pandemic. It will be held till March 31st, 2022. Large infrastructural projects connected to this event are tied to the issue of housing and feeding the guests.

Potential investors willing to start a company in UAE need to deal with the competition. Lures and incentives cause a major influx in the number of the foreign firms setting up in the country. Apart from Dubai, the rest of the Emirates are more bureaucratic and less open. They require more funding and often some kind of Arab affiliation.

Doing Business 2020 points out the most problematic aspects for the foreign investors in UAE:

  • International trade,
  • Getting credit and loans,
  • Issues of insolvency,
  • Setting up a business.

The delays in payments, changes in the contracts after signing and local influence can also prove problematic. Another set of challenges include difficulties in the termination of the contracts, especially if the investors are dealing with brokers. Some of the sectors are more vulnerable to the loss of money, time and resources needed to deal with those issues. Emirates offer different solutions for the resolution of conflicts.

UAE – ECONOMY

0%
Services
0%
Industry
0%
Agriculture

According to the data by the WTO, in 2018 UAE’s export was worth 316,8 billion USD. The Emirates imported goods worth 261,5 billion USD. The country was a 30th world’s biggest economy due to its GDP, 26th – due to its exports, and 21st – imports.
In 2018 main goods that were exported by the UAE were: oil (58,1 billion USD), gold (15,4 billion USD), jewellery (12,2 billion USD) and diamonds (10,1 billion USD). Its main partners were India (23,8 billion USD), Japan (21,7 billion USD), China (17,4 billion USD), Saudi Arabia (17,2 billion USD) and Oman (11,7 billion USD).

That year UAE imported goods that were worth more than 232 billion USD, mostly gold (27,3 billion USD), transmitters (15,5 billion USD), jewellery (13,4 billion USD) and cars (11,3 billion USD), mostly from China (32,1 billion USD), India (27,1 billion USD), US. (17,3 billion USD), Great Britain (9,96 billion USD) and Germany (9,68 billion USD).

UAE’s population is 9,3 million people, which accounts for roughly 0,07% of the world. In 2016 3,69% of the workforce wasn’t employed, less than in 2015 (3,81%). The highest rate of unemployment was registered in 2009 – 4,2%.

UAE’s currency is  dirham (AED), which is transferable and tied to the dollar (USD 1.00= AED 3,67). Central Bank of the United Arab Emirates is managing the policy towards the currency.

Dubai started the programs of the free trade zones. Now UAE manages over 40 of them, some tied to specific sectors such as finances, logistics, media, healthcare, textiles and cars. Foreign investors can have 100% ownership and the right to repatriation of the benefits, while taxes, custom duties, tariffs and other payments are often omitted or reduced.

Jebel Ali Free Zone (JAFZA) is one of the biggest and most successful free zones in the world. In 2016 it attracted 460 new companies. 21% of them were affiliated with Asia. Now JAFZA is a hub of 7,000 companies, including 100 from the Global Fortune 500 list.

UAE does not offer full foreign ownerships rights, although some discussions are being held to allow that for crucial sectors in the free zones. Legal framework favours local foreign investment.

Barriers and incentives

UAE is working towards simplifying the processes of the international trade, which is being reflected in the Doing Business records. The country is also a member of the WTO and tends to be liberal with the trade. Ammunition and weapons are prohibited, as well as the alcohol, pesticides, drugs and pork. Israeli goods are also exempt from the trade. All importers must submit for the license that strictly points out what is allowed to cross the borders.

Federal Customs Authority manages the administration and regulations for the international trade. The legal framework is based off the international agreements and standards. All emirates share the same obligations for the customs processes. General custom duty stays at 5%. The alcohol is taxed 50% and tobacco – 100%.

There are no special rules for the labelling of the products. Foodstuff has to be marked with the name of the brand, date of production, expiration date, country of origins, weight, list of ingredients and various add ins. All oils and fats need to be labeled as the ingredients. All labels must be in Arabic or English and Arabic.

UAE maintains strong relationship with GCC. In 1999 the organization implemented a customs union, and since 2003 most goods are taxed 5%. Products brought to the region can be transferred through the countries without additional fees.

UAE is a member of WTO since 1996. As a member state of the GCC and GAFTA, UAE maintains the trade agreements with Syria, Lebanon, Morocco, Iraq and Jordan. International agreements that implemented free trade with Singapore and New Zealand also followed.

In 2009 GCC signed an agreement with European Free Trade Association, i.e. with Iceland, Liechtenstein, Norway and Switzerland. Free trade agreements with Japan, China, India, Pakistan, Turkey, South Korea, Brazil, Argentine, Uruguay, Paraguay and European Union are being negotiated.

UAE – OPPORTUNITIES AND CHALLENGES

Opportunities

  • Varied and diverse consumer base,
  • Incentives and lures for the foreign investors,
  • Major opportunities in tourism and construction,
  • Over 40 free zones,
  • Regulations based on the international agreements.

Challenges

  • Lack of economical diversification,
  • Major business competition,
  • Licensing.
Are you planning on doing business in UAE?