Foreign ownership laws to remain tight in the UAE

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Aerial view of Dubai Internet City.
Aerial view of Dubai Internet City. Dubai Internet City (DIC) is Middle East and North Africa’s largest Information and Communication Technology (ICT) Business Park, hosting both global and regional companies; with free zone benefits of 100% business ownership. A new draft law was rejected which had proposed to give UAE cabinet the authority to allow foreign parties own up to 100 percent in companies outside the free zones. Photo-DIC

A draft legislation to ease the existing tight controls on foreign ownership of companies in UAE has been rejected by a government body on grounds of security fears and threats to local businesses.

The draft of new companies law was reviewed by Federal National Council (FNC), a partly elected body with a mainly consultative role. The current laws were framed in 1984, a time when the UAE did not exist on the map of global investors and expatriates did not form a large chunk of the population. Under these laws, foreign firms usually operate from “free zones” by entering into a partnership with a local entity. Foreign owners are only allowed to hold a minority stake in these entities. Currently, local Emiratis make up only about ten percent of the country’s 8.3 million population.

The new draft law had proposed to give UAE cabinet the authority to allow foreign parties own up to 100 percent in companies outside the free zones. However, this plan was rejected on the fears of a loss of identity and control over the country’s economy. According to FNC deputy Ahmed al-Zaabi, “this situation is very bad. These clauses are completely contradictory and could lead to foreign investments being outside the control of the state and its supervision, and this, in turn, could lead to destabilization of security”.

However, an agreement has been reached to include the debatable clause on foreign ownership in a draft foreign investment law. As the new foreign investment law will encompass terms and conditions of ownership, it was believed that this clause will be more suitable in that legislation. This will also help quell concerns of the representatives on how the clause will impact local Emirati businessmen and competition in the industry. The draft foreign investment law is currently being reviewed by a technical committee at the Ministry of Justice.

The UAE remains an investment hotspot in the region, attracting an estimated 30 billion dirhams (USD 8.2 billion) direct foreign investment last year.

 

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