geopolitical risk ratings firm

United Arab Emirates – New Investment Law Promised

The UAE continues to pursue an increasingly muscular foreign policy, actively participating in two separate military campaigns (in Iraq and Yemen), engaging in saber-rattling with Iran, and intervening financially to fortify the cash-strapped government in Egypt. Meanwhile, on the home front, the government is reported to be putting the finishing touches on a new investment law that is seen as a linchpin of an ongoing effort to reduce the federation’s dependence on oil income, the danger of which has been highlighted by the steep fall in global prices since mid-2014.
In late March, Economy and Planning Minister Sultan Bin Saeed Al Mansouri announced that the government is nearing completion of a revised investment law that will permit 100% foreign ownership of firms in targeted sectors. Currently, the foreign share of a local enterprise other than those operating in special free zones cannot exceed 49%, and tighter restrictions apply in some sectors, including insurance (maximum foreign ownership of 25%), financial services (40%), and commercial agencies, where foreign ownership is prohibited.
Hopes that a revised Companies Law would include an easing of restrictions on foreign ownership were dashed in February 2013, when the sections of the draft dealing with that issue were removed from the bill in response to objections raised by the local business community. However, Mansouri specifically cited the pressure created by recent external developments, including the fall in oil prices, in support of his assurances that the government will not retreat a second time.
The economy minister did not specify which sectors would be affected, but he has previously suggested that the government is keen to attract investment in the tourism, real estate, and financial sectors, and he indicated that the rules will favor investment that supports the federation’s goals of enhancing the UAE’s technological capacity and promoting green projects. As for when the changes might actually take effect, it is worth noting that Mansouri has been talking up the new law since the spring of 2014, when he suggested it should be in place before end of the year. That said, his more recent remarks had a tone of urgency, and the government has made some recent progress on other legislation, including final approval of the long-awaited Companies Law, which is set to take effect before the end of June.

PRS INSIGHTS

Moving beyond current opinions, a seasoned look into the most pressing issues affecting geopolitical risk today.

EXPLORE INSIGHTS

Interested in More Information?

The form is loading