The UAE’s announcement of 100 per cent foreign ownership across the board effective June 1, is touted as game changing and a master stroke. This was the biggest demand from various business councils for decades. The current system requires 51 per cent local sponsorship along with majority representation in the board with the Chair being Emirati. In a country where more than 80 per cent of the population are expats and where the economy is fairly better diversified than their GCC counterparts, opening the ownership gates cannot be timed better.
With increasing efforts by the Government to bring back UAE to pre-covid levels of hustle and bustle, the economy is responding positively as things begin to stabilize with businesses on the uptick. Also, with Expo 2020 around the corner, a further boost is expected as such.
A business reform like 100% foreign ownership across the board can really be the icing on the cake as it improves investor confidence and also reduce cost of operations, which is a key business requirement. With a visa-friendly regime now in place, the business environment is now at its compelling best.
On the flip side though, the business model of free zones will come under intense pressure where it used to be the only place where 100 per cent foreign ownership is allowed. There are over a dozen free trade zones in the UAE and they have been fairly successful compared to other free zones in GCC.. It is worth noting that 100% ownership is an added advantage for investors, who can now choose apart from free zones also.
It will be interesting to see if other GCC countries, especially Saudi Arabia will follow suit. While the need to attract FDI can be important for all GCC countries, many of them have ring-fenced their local population in an attempt to improve employment opportunities for locals.
Source: Khaleej Times