Executive Summary

The Government of the United Arab Emirates (UAE) is pursuing an economic agenda that focuses on diversification and seeks to promote the development of the private sector as a complement to the historical economic dominance of the state. There have been numerous initiatives, laws and regulations throughout the seven emirates of the UAE that aim to develop a more conducive environment for foreign investment.

The UAE maintains a position as the major trade and investment hub for a large geographic region, which includes not only the Middle East and North Africa, but also South Asia, Central Asia, and Sub-Saharan Africa. The country ranked 17th of 143 economies in the World Economic Forum’s 2015-2016 overall Global Competitiveness Index, and 31st of 189 on the World Bank’s 2016 Ease of Doing Business report. Multinational companies cite the UAE’s political and economic stability, rapid population and Gross Domestic Product (GDP) growth, fast growing capital markets, an absence of corporate and personal taxes, and the absence of evidence of systematic corruption, as positive factors contributing to the UAE’s attractiveness to foreign investors.

The UAE continued to attract foreign direct investment (FDI), with inflows of FDI reaching USD 10.9 billion in 2015, largely focused on construction, finance, and wholesale and retail trade. FDI outflows from the UAE reached USD 9.2 billion in 2015 (the most recent information available). The FDI recovery coincided with economic growth driven by both oil and non-oil activities (including manufacturing), led by aluminum and petrochemicals; tourism and transportation; and real estate.

While foreign investment continued to grow, the regulatory and legal framework in the UAE favors local over foreign investors. There is no national treatment for investors in the UAE and foreign ownership of land and stocks remains restricted. The UAE maintains non-tariff barriers to investment in the form of restrictive agency, sponsorship, and distributorship requirements. In order to do business in the UAE outside one of the free zones, a foreign business in most cases must have a UAE national sponsor, agent or distributor, with at least a 51 percent ownership interest of the business. Foreign investors also expressed concern over weak dispute resolution mechanisms and insolvency laws, spotty intellectual property rights protection, and a lack of regulatory transparency. Labor rights and conditions, although improving, continue to be an area of concern as the UAE prohibits both labor unions and worker strikes.

The UAE is home to a large number of free zones, and U.S. and multinational companies report that these zones tend to have stronger and more equitable frameworks. For example, in the free zones, foreigners may own up to 100 percent of the equity in an enterprise; have 100 percent import and export tax exemption; have 100 percent exemption from commercial levies; and repatriate 100 percent of capital and profits. These free zones form a vital component of the local economy, and serve as major re-export centers to the Gulf region.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2016 24 of 175 http://www.transparency.org/
World Bank’s Doing Business Report “Ease of Doing Business” 2016 26 of 190 doingbusiness.org/rankings
Global Innovation Index 2016 41 of 128 https://www.globalinnovationindex.org/
U.S. FDI in partner country ($M USD, stock positions) 2015 $15,622 http://www.bea.gov/
World Bank GNI per capita 2015 $43,090 http://data.worldbank.org/

Policies towards Foreign Direct Investment

The UAE is generally open to foreign direct investment (FDI), citing it as a key part of its long term economic plans. The UAE Vision 2021 strategic plan aims to achieve FDI flows to the UAE of five percent of Gross National Product (GNP), a number one rank for the UAE in the global index for ease of doing business, and a place among the top 10 countries worldwide in the Global Competitiveness Index. UAE investment laws and regulations are evolving in support of these goals. However, current frameworks still favor local over foreign investors. While recently updated laws validate the practice of foreign-owned free zone companies operating “onshore” in some instances, and permit majority-Gulf Cooperation Council (GCC) ownership of public joint stock companies, there remains no national treatment for investors and foreign ownership of land and stocks is restricted. Non-tariff barriers to investment persist in the form of restrictive agency, sponsorship, and distributorship requirements. Investment promotion agencies exist based on the emirate. For example, the Sharjah Investment and Development Authority, or Shurooq, is an independent government agency that assists investors in finding partnerships in the emirate.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign companies or individuals are limited to 49 percent ownership/control in any part of the UAE not in a free trade zone, pursuant to law. There have been waivers of the application of this law granted on a case-by-case basis. The 2015 Commercial Companies Law allows for full ownership by GCC nationals.

Other Investment Policy Reviews

The UAE government (UAEG) underwent a World Trade Organization (WTO) Trade Policy Review in 2016. The full WTO Review is available at: https://www.wto.org/english/tratop_e/tpr_e/s338_e.pdf 

Business Facilitation

UAEG figures generally emphasize the importance of facilitating business, and tout the broad network of Free Trade Zones as being attractive to foreign investment. The UAE’s business registration process varies based on the emirate. The business registration process is not available online. Generally registration happens through the particular emirate’s Department of Economic Development. Links to information portals from each of the emirates are available at https://ger.co/economy/197 . At a minimum, a company must generally register with the Department of Economic Development, the Ministry of Labor, and the General Authority for Pension and Social Security with a required notary in the process. The time it takes to start a business was eight days in 2016, according to the World Bank.

Outward Investment

The UAE is an important participant in global capital markets, primarily through its various sovereign wealth funds, as well as through a number of emirate-level, government related investment corporations.

UNCTAD lists the UAE as currently having 48 bilateral investment treaties, of which 34 are in force, and 14 other international investment agreements (IIAs), of which seven are in force. There is currently no bilateral investment treaty between the United States and the UAE.

In March 2004, the United States signed a Trade and Investment Framework Agreement (TIFA) with the UAE to provide a formal framework for dialogue on economic reform and trade liberalization: https://ustr.gov/sites/default/files/uploads/agreements/tifa/asset_upload_file305_7741.pdf. As a member of the GCC, the UAE is also party to the U.S. – GCC framework agreement for trade, economic, investment, and technical cooperation, signed in September 2012.

State Department negotiated and signed a Memorandum of Understanding creating an Economic Policy Dialogue (EPD) with the UAE Ministry of Foreign Affairs in 2012, to address a variety of topics, including but not limited to trade, investment, sector-specific cooperation, competitiveness, and entrepreneurship. A CEO Summit process for the EPD was established in 2013, bringing recommendations from the private sector directly into the EPD discussions. The most recent meeting of the EPD was in December 2014.

Transparency of the Regulatory System

As indicated elsewhere in this report, the regulatory and legal framework in the UAE is generally more favorable for local investors than for foreign investors.

The Commercial Companies Law requires all companies to apply international accounting standards and practices when preparing their accounts, generally International Financial Reporting Standards (IFRS). The UAE has never had local generally accepted accounting principles.

Legislation is only published when it has been enacted into law and is not available for public comment before that, although the press will occasionally report on some details of high-profile legislation. Final bills are published in an official register, usually only in Arabic, although there are private companies that specialize in translating laws into English. Regulators are not required to publish proposed regulations before enactment, but they share them either publicly or with stakeholders on a case-by-case basis.

International Regulatory Considerations

The UAE is a member of the GCC, along with Bahrain, Kuwait, Oman, Qatar, and Saudi Arabia. It maintains regulatory autonomy, but does coordinate efforts with other GCC members through the GCC Standardization Organization (GSO). Although not a member of the GCC, Yemen also participates in the GSO, with the same rights and obligations as GCC member states. During 2012-2015 the UAE made 207 notifications to the WTO Committee on Technical Barriers to Trade under Article 10.6 of the TBT Agreement. Of these, 28 were joint notifications made along with the other GCC states plus Yemen, according to the 2016 WTO Trade Policy Review of the UAE.

Legal System and Judicial Independence

French and Egyptian legal systems heavily influence the UAE legal structure, but its foundation is in Islamic (Shari’a) law. In the constitution, Islam is identified as the state religion, as well as the principal source of law. The legal system of the country is generally divided between off shore free trade zones, which use a British-based system of common law, and domestic law cases, which are governed by Shari’a – the majority of which has been codified into black letter law. The mechanism for enforcing ownership of property through either court system is generally considered to be both predictable and fair. As is the case with civil law systems, common law principles, such as adopting previous court judgments as legal precedents, are generally not recognized in the UAE – although lower courts typically apply higher court judgments. Judgments of foreign civil courts are typically recognized and enforceable under the local courts.

In April 2015, Dubai International Financial Center (DIFC) courts announced a wills and probate registry, making it the first jurisdiction in the region where a non-Muslim can register a will under internationally recognized common law principles. The United States District Court for the Southern District of New York signed a memorandum with the DIFC courts that provides companies operating in Dubai and New York with procedures for the mutual enforcement of money judgments. A properly executed last will and testament will take precedence over Shari’a law, however, and is recommended by local attorneys as the best way for expatriates to ensure that the default inheritance laws of the UAE are not applied unless so desired.

The constitution stipulates that each emirate can decide whether to set up its own judicial system (local courts) or use federal courts (courts administered by the federal government) exclusively for cases involving both federal and non-federal cases. The Federal Judicial Authority has jurisdiction for all cases involving a “federal person,” with the Federal Supreme Court in Abu Dhabi, the highest court at the federal-level, having exclusive jurisdiction in seven types of cases: disputes between emirates, disputes between an emirate and the federal government, cases involving national security, interpretation of the constitution, questions over the constitutionality of a law, and cases involving the actions of appointed ministers and senior officials while performing their official duties. Although the federal constitution permits each emirate to have its own judicial authority, all emirates except Dubai, Ras Al Khaimah, and Abu Dhabi have incorporated their local judicial systems into the Federal Judicial Authority. In doing so, the federal government administers the courts in Ajman, Fujairah, Um al Quwain, and Sharjah, including the vetting and hiring of judges there, and payment of salaries. Judges in these courts apply both local and federal law as warranted by the case. Dubai, Ras Al Khaimah, and Abu Dhabi emirates, on the other hand, administer their own local courts, hiring, vetting, and paying their own judges and attorneys. A slight anomaly, however, is that Abu Dhabi is the only emirate that operates both local (the Abu Dhabi Judicial Department) and federal courts in parallel. The local courts in Dubai, Ras al Khaimah, and Abu Dhabi have jurisdiction over all matters that the constitution does not specifically reserve for the federal system.

Laws and Regulations on Foreign Direct Investment

There are four major federal laws affecting foreign investment in the UAE: the Federal Companies Law, the Commercial Agencies Law, the Industry Law, and the Government Tenders Law.

The Federal Commercial Companies Law (Law No. 02, 2015) was issued in April 2015 and applies to commercial companies operating in the UAE. The new law, with which all companies had to come into compliance before July 1, 2016, provides a stronger, more up to date basis for corporate regulation. Companies established in the UAE are currently required to have a minimum of 51 percent UAE national ownership. Profits and management control may be apportioned differently and often are negotiated at fixed amounts. Branch offices of foreign companies are required to have a national agent with 100 percent UAE national ownership, unless the foreign company has established its office pursuant to an agreement with the federal or an emirate-level government. The new commercial law allows companies to offer between 30 and 70 percent of shares upon undertaking an initial public offering (IPO) and eliminates the requirement to issue new shares at the time of the IPO. The law also eases the process for forming a limited liability company by requiring between 1 to 75 shareholders (the prior requirement was between 2 to 50 shareholders). Public joint stock company are required to have 51 percent GCC ownership at the time of listing, and UAE nationals must chair and be the majority of board members of any public joint stock company. A provision to allow 100 percent foreign ownership outside of free zones requires Cabinet approval on a case-by-case basis. For example, in 2015, a prominent American technology company secured permission to open stores outside free zones without any local partners, having secured permission to do so on an exceptional basis via a decree from the Ministry of Economy.

The Commercial Agencies Law’s provisions are collectively set out in Federal Law No. 18 of 1981 on the Organization of Commercial Agencies as amended by Federal Law No. 14 of 1988 (the Agency Law), and apply to all registered commercial agents. Federal Law No. 18 of 1993 (Commercial) and Federal Law No. 5 of 1985 (Civil Code) govern unregistered commercial agencies. The Commercial Agencies Law requires that foreign principals distribute their products in the UAE only through exclusive commercial agents who are either UAE nationals or companies wholly owned by UAE nationals. The foreign principal can appoint one agent for the entire UAE or for a particular emirate or group of emirates. The Ministry of Economy handles registration of commercial agents. It remains difficult, if not impossible, to sell in UAE markets without a local agent. Only UAE nationals or companies wholly owned by UAE nationals can register with the Ministry of Economy as local agents.

The Federal Industry Law stipulates that industrial projects must have 51 percent UAE national ownership. The law also requires that projects either be managed by a UAE national or have a board of directors with a majority of UAE nationals. Exemptions from the law are provided for projects related to extraction and refining of oil, natural gas, and other raw materials. Additionally, projects with a small capital investment or projects governed by special laws or agreements are exempt from the industry law.

To obtain an investor number from the Abu Dhabi Securities Exchange, go to: http://www.adx.ae/FormsAndApplications/InvestorNumberApplication.pdf

To obtain an investor number for trading on the Dubai Exchanges, go to: http://www.nasdaqdubai.com/assets/docs/NIN-Form.pdf 

Competition and Anti-Trust Laws

The Ministry of Economy reviews transactions for competition-related concerns.

Expropriation and Compensation

The Mission is not aware of foreign investors involved in any expropriations in the UAE for at least the last five years. There are no set federal rules governing compensation if expropriations were to occur, and individual emirates would likely treat expropriations differently. In practice, authorities would be unlikely to expropriate unless there were a compelling development or public interest need to do so, and in such cases compensation would likely be generous in order to maintain foreign investor confidence.

Dispute Settlement

ICSID Convention and New York Convention

The United Arab Emirates is a contracting state to the International Centre for the Settlement of Investment Disputes (ICSID convention) and a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral awards (1958 New York Convention).

Investor-State Dispute Settlement

The Mission is aware of several substantial investment disputes during the past few years involving U.S. or other foreign investors and government and/or local businesses. There have also been several contractor/payment disputes, with the government as well as local businesses. Some observers have characterized dispute resolution as difficult and uncertain.

Disputes generally are resolved by direct negotiation and settlement between the parties themselves, recourse to the legal system, or arbitration. Small, medium, and some larger enterprises continue to fear being frozen out of the UAE market for escalating payment issues through civil or arbitral courts, particularly when politically influential local parties are involved. Some firms may feel compelled to exit the UAE market as they are unable to sustain the pursuit of legal or dispute resolution mechanisms that can add months or years to the dispute resolution process. Arbitration may commence by petition to the UAE federal courts on the basis of mutual consent (a written arbitration agreement), independently (by nomination of arbitrators), or through a referral to an appointing authority without recourse to judicial proceedings. There have been no confirmed reports of government interference in the court system that could affect foreign investors, but there is a widespread perception that domestic courts are likely to find in the favor of Emirati nationals over foreigners.

International Commercial Arbitration and Foreign Courts

The UAEG’s accession to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards became effective in November 2006. An arbitration award issued in the UAE is now enforceable in all 138 states that have acceded to the Convention, and any award issued in another member state is directly enforceable in the UAE. The Convention supersedes all incompatible legislation and rulings in the UAE. The Mission does not yet have any experience with U.S. firms attempting to use arbitration under the UN convention on the recognition and enforcement of foreign arbitral awards. Concerns have been raised about delays and other obstacles encountered by firms seeking to enforce their arbitration awards in the UAE despite the recognition of progress in compliance with this convention.

Bankruptcy Regulations

A new bankruptcy law, Federal Decree Law No. 9 of 2016, came into effect in December 2016. The law covers companies governed by the Commercial Companies Law, most free zone companies, sole proprietorships, and civil companies conducting professional business. It allows creditors that are owed AED 100,000 (USD 27,225) to file insolvency proceedings against a debtor, thirty business days after notification in writing to the debtor.

The law decriminalized “bankruptcy by default,” requiring companies in default more than 30 days to initiate insolvency procedures rather than face fines and potential imprisonment, as under the old law. Non-payment of debt, for example through “bounced checks,” remains a criminal offense in many cases.

Investment Incentives

Incentives are given to foreign investors in the free zones. Outside the free zones, no incentives are given, although the ability to purchase property as freehold in certain favored projects in Dubai could be considered an incentive aimed at attracting foreign investment. The federal government and the governments of the individual emirates promote a business environment largely free of taxation and exchange controls, although the UAEG has announced it will introduce a Value Added Tax (VAT) in 2018.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are numerous duty-free import zones throughout the UAE. Foreign companies generally enjoy the same investment opportunities within those zones as Emirati citizens. Free zones, which are home to more than 20,000 companies, form a vital component of the local economy, and serve as major re-export centers to the Gulf region.

The chief attraction of the free zones is the waiver of the requirement for majority local ownership. In free zones, foreigners may own up to 100 percent of the equity in an enterprise. All free zones provide 100 percent import and export tax exemption, 100 percent exemption from commercial levies, 100 percent repatriation of capital and profits, multi-year leases, easy access to sea and airports, buildings for lease, energy connections (often at subsidized prices), and assistance in labor recruitment. In addition, free zone authorities provide significant support services, such as sponsorship, worker housing, dining facilities, recruitment, and security.

Free zones have their own independent authority with responsibility for licensing and helping companies establish their businesses. Investors can register new companies in a free zone, or license branch or representative offices. Free zones have limited liability and are governed by the laws and regulations of free zones. Companies in free trade zones seeking to operate within the UAE may be governed by the new Commercial Companies Law, if the laws of the relevant free zone permit companies to operate outside of the free zones.

Performance and Data Localization Requirements

There is a federal incentive program called Emiratization that aims to increase the number of jobs available for Emirati citizens within the private sector. Exact requirements vary by industry, but the Vision 2021 national strategic plan aims to increase the percentage of Emiratis working in the private sector from 5 percent in 2014 to 8 percent by 2021. Most Emirati citizens are employed by the government or one of its many GREs. There is a guest worker system in place, which generally guarantees transportation back to country of origin at conclusion of employment. There have been no reports of excessively onerous visa, residence, work permit, or similar requirements inhibiting mobility of foreign investors and their employees. There are government/authority-imposed conditions on permission to invest, in the form of a general 49 percent limitation of ownership/control by foreign individuals or corporations. The UAE does not force foreign investors to use domestic content in goods or technology or compel foreign IT providers to turn over source code.

All foreign defense contractors with over USD 10 million in contract value over a five year period must participate in the Tawazun Economic Program, previously known as the UAE Offset Program. This program also requires defense contractors that are awarded contracts valued at more than USD10 million to establish commercially viable joint ventures with local business partners, which would be projected to yield profits equivalent to 60 percent of the contract value within a specified period (usually seven years).

Real Property

The UAE allows each individual emirate to decide on the form in which ownership of land may be transferred within its borders. Generally, Abu Dhabi has limited ownership to Emirati or other GCC citizens, who may then lease out the land to foreigners. The property reverts back to the owner at the conclusion of the lease. Although Dubai has identified such restricted areas within its borders, traditional freeholds, also known as outright ownership, are also available. Freeholders of land own the land. Subject to very few regulations, freehold owners may sell on the open market. The contract rights of lienholders, as well as ownership rights of freeholders, are generally respected and enforced throughout the UAE, which in some cases has employed specialized courts for this purpose.

Mortgages and liens are permitted, with restrictions. Each emirate has its own system of recordkeeping. In Dubai, for example, the system is considered extremely reliable, being mainly centralized within the Dubai Land Department. Land not otherwise allocated or owned is the property of the emirate, and may be disposed of at the will of its ruler, who generally consults with his advisors prior to disposition.

The World Bank Ease of Doing Business Report notes that not all privately held land plots in the economy are formally registered in an immovable property registry. Much of the country is unregistered desert; such land is generally owned by the emirate government.

Intellectual Property Rights

With respect to intellectual property rights (IPR), the UAE’s legal regime is generally considered fair and in compliance with international obligations. Enforcement of IPR takes place generally at the emirate level. In 2016, a Dubai government agency, the Intellectual Property Rights Protection Division of the Dubai Department of Economic Development (DED), reported that it had seized counterfeit goods worth over USD 435 million within the emirate of Dubai. The Dubai Police, Dubai Customs, and the Dubai Department of Economic Development share the power to search for and seize counterfeit products. Dubai Customs has authority to do so at the emirate’s borders and in free trade zones, while Dubai Police and DED authority only applies to non-free trade zone areas. A 2014 law combatting commercial fraud strengthened the UAE’s legal framework for IPR protection and enforcement, but implementation of the law has heightened concerns about whether an adequate distinction has been made between defective or substandard goods (which may be returned to their point of origin) and counterfeit goods (which must be destroyed to prevent resale). The law offered tougher sentences for selling counterfeit goods, with increased fines of up to USD 272,000 (AED 1 million). Each emirate works with individual stakeholders regarding counterfeits of its brands, and the government publicly reports only the largest seizures of counterfeit goods. The UAE is not currently listed in the United States Trade Representative’s (USTR) Special 301 report, or in its Notorious Markets report.

The two main challenges IPR holders face in the UAE are in the areas of counterfeit goods and royalty payments for copyrighted music. The practice of fining shippers of counterfeit goods and permitting re-exportation of those goods subjectively deemed too hazardous to destroy has occurred regularly during the reporting period, primarily in the emirate of Dubai. As to royalty payments for copyrighted music, although the UAE has generally been responsive when encountering pirated physical CDs, DVDs, and software, the lack of a copyright collecting society, which is allowed for under UAE’s existing copyright law, is a major obstacle to adequate protection of IPR. An operator requested a license in 2016 under legislation passed 15 years ago, but has not received a response.

In the UAE, the government has long recognized country of origin patents per a 2000 decree. However, the UAEG recently approved two generic versions of Cialis just prior to the expiration of their foreign patents. As 90% of pharmaceutical products in the UAE market do not have locally-registered patents, the government should provide a transition period and a clear path toward a local patent law, or simply require filing under the GCC patent law.

Capital Markets and Portfolio Investment

The UAEG is focused on building infrastructure to create an environment conducive to economic growth and outside investment. It is also collaborating with its partners in the GCC to support ventures in the region. UAEG efforts to create such an environment for investments resulted in: i) no taxes or restrictions on the repatriation of capital; ii) free movement of labor and low barriers to entry (effective tariffs are five percent for most goods); and iii) an emphasis on diversifying the economy away from oil, which offers a broad array of investment options for FDI. Drivers for the economy include real estate, tourism, manufacturing, and financial services.

The UAE has three stock markets: Abu Dhabi Securities Exchange, Dubai Financial Market, and NASDAQ Dubai. The regulatory body, the Securities and Commodities Authority (SCA), raised capital requirements to operate a brokerage house from AED 20 million (USD 5.5 million) to AED 30 million (USD 8.2 million) and in July 2014 classified brokerages into two groups: “those which engage in trading only while the clearance and settlement operations are conducted through clearance members” and “those which engage in trading clearance and settlement operations for their clients.” Under the regulations, trading brokerages require paid-up capital of AED 3 million (USD 820k), whereas trading and clearance brokerages need AED 10 million (USD 2.7 million). Bank guarantees required for brokerages to trade on the bourses are AED 1 million (USD 367k).

The UAE issued investment funds regulations in September 2012, known as the “twin peak” regulatory framework. The framework is designed to further govern the marketing of investment funds established outside the UAE to investors in the UAE and the establishment of local funds domiciled inside the UAE. This regulation set forth several key changes such as giving the SCA, rather than the Central Bank, authority over the licensing, regulation and oversight of the marketing of investment funds. The marketing of a foreign fund (including “offshore” UAE-based funds, such as those domiciled in the DIFC) now requires the appointment of a locally licensed placement agent. Other restrictions contained in the regulations, such as limitations on funds investing more than 15 percent in any one underlying issuer, have led fund managers to question whether the UAE is seeking to attract international or regionally focused investment funds to be domiciled in the country. The federal government has also encouraged certain high-profile projects to be undertaken via a public joint stock company in order to allow the issue of shares to the public. Further, any company carrying out banking, insurance or investment for a third party must be a public joint stock company.

The UAE has no restriction on the making of payments and transfers for current international transactions, according to the IMF, except for those restrictions for security reasons that have been notified by authorities. There are no restrictions on the transfer of funds into or out of the UAE and currencies are traded freely at market-determined prices.

Credit is generally allocated on market terms, and foreign investors are able to access local credit markets. There have been complaints that the large number of GREs has sometimes crowded out private sector borrowers.

Money and Banking System

The UAE has a robust banking sector, with 46 banks currently listed on the website of the Central Bank of the UAE (CBUAE), many of them foreign banks. Non-performing loans made up 5.3 percent of total loans in 2016, according to the World Bank, and one local bank estimated that banking sector assets totaled USD 662 billion in the third quarter of 2016.

Local media reported that global financial institutions were increasingly terminating or restricting correspondent banking relationships with remittance companies and smaller local banks (so-called “de-risking”).

There are no restrictions on a foreigner’s ability to establish a bank account, although legal residents and Emiratis can access a wide array of account types with more favorable terms than non-residents.

Foreign Exchange and Remittances

Foreign Exchange

The UAE has no restriction on the making of payments and transfers for current international transactions, according to the IMF, except for those restrictions for security reasons that have been notified by authorities. There are no restrictions on the transfer of funds into or out of the country and currencies are traded freely at market-determined prices. The UAE dirham has been de jure pegged to the dollar since 2002. The mid-point between the official buying and selling rate for the dirham (AED or Dhs) is fixed at AED 3.6725 per 1 USD.

Remittance Policies

The UAE Central Bank initiated the creation of the Foreign Exchange & Remittance Group (FERG), made up of various exchange companies, which is registered with the Dubai Chamber of Commerce & Industry. Unlike their counterparts across the world that deal mainly in money exchange, exchange companies in the UAE are the primary channels for transferring large volumes of remittances through official channels. It is estimated that more than USD 30 billion (AED 110 billion) is transferred annually by expatriate workers in the UAE to home markets. Exchange companies are important partners in a unique Wages Protection System of the UAE Government. They also handle various ancillary services ranging from credit card payments, national bonds, and traveler’s checks.

Sovereign Wealth Funds

Abu Dhabi is home to three sovereign wealth funds—the Abu Dhabi Investment Authority (ADIA), the Abu Dhabi Investment Council (ADIC), and Mubadala Investment Company (formed from the merger of the International Petroleum Investment Company and Mubadala Development Company)—with total assets of approximately USD 1 trillion. Each Abu Dhabi fund is comprised of a chair and board members who are appointed by a decree of the Ruler of Abu Dhabi. President Khalifa Bin Zayed Al Nahyan is the chair of ADIA, and Abu Dhabi Crown Prince Mohammed Bin Zayed Al Nahyan is the chair of ADIC and Mubadala. Emirates Investment Authority, the UAE’s federal sovereign wealth fund, has assets of about USD 15 billion. The Investment Corporation of Dubai (ICD) is Dubai’s primary sovereign wealth fund, with an estimated USD 70 billion of assets.

UAE funds are involved in their investments to varying degrees. ADIA does not actively seek to manage or take an operational role in the public companies in which it invests, while Mubadala tends to take a more active role in particular sectors, including oil and gas, aerospace, and infrastructure, among others. ADIA exercises its voting rights as a shareholder in certain circumstances to protect its interests or to oppose motions that may be detrimental to shareholders as a body. According to ADIA, the fund carries out its investment program independently and without reference to the government of Abu Dhabi.

ADIA in 2008 agreed to act alongside the IMF as co-chair of the International Working Group of sovereign wealth funds, which eventually became the International Forum of Sovereign Wealth Funds (IFSWF). The IFSWF, which is comprised of representatives from 28 countries, was created to demonstrate that sovereign wealth funds had robust internal frameworks and governance practices and that their investments were made only on an economic and financial basis.

State-owned enterprises (SOEs) are a key component of the UAE economic model. There is no published list of SOEs or GREs, either for the country as a whole or at an emirate level. Some SOEs, or GREs as they are referred to locally, such as the Abu Dhabi National Oil Company, are strategically important companies and a major source of fiscal revenues. Mubadala Development Company established Masdar in 2006 to develop renewable energy and sustainable technologies industries. A number of SOEs such as Emirates (the airline) and Etisalat (a large telecommunications firm) have in recent years emerged as internationally recognized brands. Some, but not all of these companies, compete, and in a number of cases against other state-owned firms (Emirates and Etihad airlines, for example, or Etisalat telecom against majority UAEG-owned du). While they are not granted full autonomy, they are integrated in a system where the state leverages synergies among entities it controls to foster national economic development. Perhaps the best example of such an economic ecosystem is Dubai, where SOEs have been used as a motor of diversification and are present in a number of sectors, including construction, hospitality, transport, banking and telecommunications.

Sectoral regulations in some cases address governance structures and practices of state-owned companies. For example, the Dubai Real Estate Regulatory Agency (RERA) developed a code of corporate governance for real estate developers in 2011. In doing so, RERA has considered that the peculiarity of the real estate sector, which includes many actors such as developers and promoters, merits specific guidelines. The UAE is not party to the WTO Government Procurement Agreement.

Privatization Program

There is no privatization program. There have been several listings of portions of SOEs, on local UAE stock exchanges, as well as some “greenfield” IPOs that are focused on priority government projects.

There is a general expectation that businesses in the UAE adhere to responsible business conduct (RBC) standards, and the UAE’s Governance Rules and Corporate Discipline Standards (Ministerial Resolution No. 518 of 2009) encourage companies to apply social policy towards local society. Many companies maintain corporate social responsibility (CSR) offices and participate in CSR initiatives, including mentorship and employment training; philanthropic donations to UAE-licensed humanitarian and charity organizations; and initiatives to promote environmental sustainability. The UAE’s rulers actively support such efforts through official government partnerships, as well as their own private foundations.

The 2015 Commercial Companies Law requires managers and directors to act for the benefit of the company and makes any company provisions exempting a directors and managers from personal liability voidable.

In April 2015, the Pearl Initiative and the United Nations Global Compact (UNGC) held their inaugural Forum in Dubai. The Pearl Initiative is an independent, private sector-led not-for-profit organization working across the Gulf region to encourage better business practices. The UAE has not subscribed to the OECD Guidelines for Multinational Enterprises and has not actively encouraged foreign or local enterprises to follow the specific United Nations Guiding Principles on Business and Human Rights. The UAE government has not committed to adhering to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas nor does it participate in the Extractive Industries Transparency Initiative. The Dubai Multi-Commodities Center (DMMC), however, passed the DMCC Rules for Risk Based Due Diligence in the Gold and Precious Metals Supply Chain, which it claims are fully aligned with the OECD guidance.

The UAE has stiff laws, regulations and enforcement against corruption, and has pursued several high profile cases. For example, the UAE federal penal code and the federal human resources law criminalize the acceptance of bribes by public and private sector workers and embezzlement. The Dubai financial fraud law applies to persons convicted of a crime in Dubai and criminalizes receipt of illicit monies or public funds. There is no evidence that corruption of public officials is a systemic problem. The State Audit Institution (SAI) and the Abu Dhabi Accountability Authority investigate corruption in the government. The Companies Law requires board directors to avoid conflicts of interest. In practice, however, given the large number of roles occupied by many senior Emirati government and business officials, some conflicts of interest exist.

The monitoring organizations GAN Integrity and Transparency International describe the corruption environment in the UAE as low-risk, and rate the UAE highly with regard to anti-corruption efforts both regionally and globally. Third-party organizations note, however, that the involvement of members of the ruling families in certain businesses can create economic disparities in the playing field, and most foreign companies outside the UAE’s free zones must rely on an Emirati national partner who retains 51 percent ownership. The UAE has ratified the United Nations Convention against Corruption. There are no civil society organizations or NGOs investigating corruption within the UAE.

The Mission has not received any complaints from U.S. firms identifying corruption as an obstacle to FDI.

Resources to Report Corruption

Dr. Harib Al Amimi
President, State Audit Institution
20th Floor, Tower C2, Aseel Building, Bainuna (34th) Street
Al Bateen, Abu Dhabi, United Arab Emirates
+971 2 635 9999

There have been no reported instances of politically motivated property damage in recent years.

The UAE economy is robust, with low unemployment among the country’s citizen population. Expatriates, who represent over 85 percent of the country’s 9.24 million residents, account for more than 95 percent of private sector workers. As a result of this ratio, there would be large labor shortages in all sectors of the economy if not for the large number of expatriate workers. Most expatriate workers derive their legal residency status from their employment.

A significant portion of the country’s expatriate labor population is comprised of low-wage workers, primarily from South Asia, who work in manual labor industries such as construction, maintenance, and sanitation. In addition, several hundred thousand domestic workers, primarily from South and Southeast Asia and Africa, work in the homes of both Emirati and expatriate families. Federal labor law does not apply to domestic, agricultural, or public sector workers. In 2014, the federal government implemented a law mandating a standard contract for all domestic workers. Various regulations require businesses in certain sectors (i.e. financial services) to employ minimum quotas of Emiratis.

Under UAE labor law, employers must pay severance to workers who complete one year or more of service, except in cases of termination under certain conditions described in Article 120 of the federal labor law, which relate to misconduct by workers. Expatriate workers do not receive UAE government unemployment insurance. Termination of UAE nationals in certain situations requires the prior approval of the Ministry of Labor.

In January 2016, the UAE implemented three new labor laws that amend Federal Law No. (8) of 1980. The first law seeks to restrict employers from engaging in “contract switching;” it requires companies to provide job offers that mirror a standard employment contract in a language that prospective workers understand. Employers must then submit the signed contracts to the Ministry of Human Resources and Emiratisation (previously the Ministry of Labor) at the time of the workers’ visa applications. Workers sign the contract a second time after entering the UAE. The second and third laws concern the termination of an employment relationship, and are intended to increase the laborers’ job mobility. Under the second law, workers may seek a new job if an employer fails to meet certain contract terms, or if the worker reaches an agreement with the employer or provides stipulated notice. Under the third law, employees who legally terminate an employment contract may obtain a new work permit with a different employer in the UAE.

Although UAE federal law prohibits the payment of recruitment fees, many prospective workers continue to make such payments in their home countries. There are no minimum wages legally mandated by the UAE; however, some labor sending countries require their citizens to receive minimum wage levels as a condition for allowing them to work in the UAE.

Federal Law No. 8 of 1980 prohibits labor unions. The law also prohibits public sector employees, security guards, and migrant workers from striking and allows employers to suspend private sector workers for striking. In addition, employers have the ability to cancel the contracts of striking workers, which can lead to deportation. Despite this, some labor protests and strikes have occurred, though these are typically resolved through government mediation. According to government statistics there were approximately 30 to 60 strikes per year between 2012 and 2015 (the last year for which data is available).

Mediation plays a central role in resolving labor disputes. The federal Ministry of Human Resources and Emiratisation and local police forces maintain telephone hotlines for labor dispute and complaint submissions. Disputes not resolved by the Ministry of Human Resources and Emiratisation move to the labor court system.

The Ministry of Human Resources and Emiratisation inspects company workplaces and company-provided worker accommodations to ensure compliance with UAE law. Emirate-level government bodies, including Dubai Municipality, also carry out regular inspections. The Ministry of Human Resources and Emiratisation also enforces a midday break from 1230-1500 during the extremely hot summer months. The federally mandated Wage Protection System electronically transfers and monitors wages to approximately 4.5 million private sector workers (about 95% of the total private sector workforce).

The multi-agency National Committee to Combat Human Trafficking is the federal body tasked with monitoring and preventing human trafficking, including forced labor. Child labor is illegal and rare in the UAE.

Section 7 of the Department of State’s Human Rights Report (http://www.state.gov/j/drl/rls/hrrpt/) describes more information on worker rights, working conditions, and labor laws in the UAE. The Department of State’s Trafficking in Persons Report (http://www.state.gov/j/tip/rls/tiprpt/) details the UAE government’s efforts to combat human trafficking.

The UAE does not have a bilateral agreement with OPIC after having its agreement suspended in 1995 for not meeting statutory “taking steps” standards on worker rights grounds.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2015 370,545 2015 $370,296 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2015 $15,622 BEA data available at https://www.bea.gov/international/factsheet/factsheet.cfm?Area=513 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2015 $ 3,008 BEA data available at https://www.bea.gov/international/factsheet/factsheet.cfm?Area=513 
Total inbound stock of FDI as % host GDP N/A N/A 2015 2.38% N/A

*GDP sourced from Central Bank of the UAE Annual Report, 2016, Selected Macroeconomic Indicators, January 2017 Edition. This includes newly revised GDP figures for 2015.

Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 73,107 100% Total Outward N/A 100%
United Kingdom 9,688 13.3% N/A N/A
India 4,258 5.8% N/A N/A
France 4,084 5.6% N/A N/A
Japan 3,991 5.5% N/A N/A
United States of America 3,110 4.3% N/A N/A
“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment

The UAE does not report data to the IMF’s Coordinated Portfolio Investment Survey and does not publish data on foreign portfolio investment sources or destinations. FPI in the UAE in 2012 was USD 15.1 billion, according to official government statistics.

Sean S. Greenley
Economic Affairs Officer
U.S. Consulate General Dubai
PO Box 121777
First Street, Umm Hurair-1
Dubai, UAE

The alternate point of contact is:

Eva H. d’Ambrosio
Economic Officer
U.S. Embassy Abu Dhabi
PO Box 4009
Abu Dhabi, UAE

2017 Investment Climate Statements: United Arab Emirates
Build a Custom Report

01 / Select a Year

02 / Select Sections

03 / Select Countries You can add more than one country or area.

U.S. Department of State

The Lessons of 1989: Freedom and Our Future