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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. The country’s seven emirates have implemented numerous initiatives, laws and regulations 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. Multinational companies cite the UAE’s political and economic stability, rapid population and Gross Domestic Product (GDP) growth, fast growing capital markets, and a perceived absence of systematic corruption as positive factors contributing to the UAE’s attractiveness to foreign investors.

While the UAE implemented an excise tax on certain products in October 2017 and a 5 percent Value-Added Tax (VAT) on all products and services in January 2018, many investors continue to cite the lack of corporate and personal income taxes as a strength of the local investment climate, relative to regional options.

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 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 indicate that these zones tend to have stronger and more equitable frameworks than exist outside of the free zones. 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. Commercial transactions in most free zones are now subject to the 5 percent VAT. These free zones form a vital component of the local economy, and serve as major re-export centers to the Gulf region, South Asia, and East Africa.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2017 21 of 175
World Bank’s Doing Business Report “Ease of Doing Business” 2017 21 of 190
Global Innovation Index 2017 35 of 128
U.S. FDI in partner country ($M USD, stock positions) 2016 13.4 billion
World Bank GNI per capita 2016 USD 40,480

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The UAE is generally open to 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 some 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. Each emirate has its own investment promotion agency. For example, the Sharjah Investment and Development Authority, Shurooq, is an independent agency that assists investors in finding partnerships in the northern emirate of Sharjah.

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. Mission UAE has not received any complaints from U.S. investors that they have been disadvantaged or singled out relative to other non-GCC investors.

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: .

Business Facilitation

UAEG officials 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 . 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.

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.

2. Bilateral Investment Agreements and Taxation Treaties

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:
. 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.

The U.S. Department of State 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.

3. Legal Regime

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, 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 beforehand, although the press will occasionally report 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 coordinates 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, the UAE conducted 28 of the notifications jointly 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. 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.

The Dubai International Financial Center (DIFC) courts maintain a wills and probate registry, allowing non-Muslims to 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.

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, Umm 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 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 % 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 companies 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, two American technology companies have secured permission to open stores outside free zones without any local partners in the past three years, 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: .

To obtain an investor number for trading on the Dubai Exchanges, go to: .

Competition and Anti-Trust Laws

The Competition Regulation Committee under 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 Center 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 and commercial 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 might 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 (the Convention) 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 is not aware of any U.S. firms attempting to use arbitration under the UN convention on the recognition and enforcement of foreign arbitral awards. While recognizing progress in compliance with this convention, some market watchers have raised concerns about delays and other obstacles encountered by firms seeking to enforce their arbitration awards in the UAE.

In February 2018, the Federal National Council (FNC), the UAEG’s legislative style council, approved the Federal Law on Arbitration, based on a United Nations Commission on International Trade Law Model Law on International Commercial Arbitration. Observers report that the law removes all incompatible legislation in the UAE and provides a structured procedural framework for domestic and international arbitration, in particular with regard to enforcement of awards. The law is expected to be promulgated and published later in 2018.

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 and their owners in default more than 30 days to initiate insolvency procedures rather than face fines and potential imprisonment. However, observers allege that the law offers little protection to individual investors, and non-payment of debt generally remains a criminal offense.

In April, 2017, the UAE Federal Government’s Al Etihad Credit Bureau began issuing credit scores to UAE citizens and residents, according to local media reports. The bureau has been issuing credit reports to foreigners since 2014.

4. Industrial Policies

Investment Incentives

All free zones provide some incentives to foreign investors. Outside the free zones, the UAE provides no incentives, although the ability to purchase property as freehold in certain favored projects could be considered an incentive aimed at attracting foreign investment.

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 ports 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

The Emiratization initiative is a federal incentive program 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 five percent in 2014 to eight percent by 2021. Most Emirati citizens are employed by the government or one of its many government-related entities (GREs). A guest worker system currently in place, 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 and 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 USD 10 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).

5. Protection of Property Rights

Real Property

The UAEG 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. The UAE does not have a securitization process for lending purposes.

Intellectual Property Rights

Intellectual property rights (IPR) holders face four main challenges in the UAE: counterfeit goods, pharmaceutical patent protection, royalty payments for copyrighted music, and burdensome trademark fees. The practice of fining importers 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, but is now spreading to other emirates. As to royalty payments for copyrighted music, although UAE police and investigators have generally been responsive when encountering pirated physical CDs, DVDs, and software, the lack of approval for the establishment of a copyright collecting society, which is allowed for under UAE’s existing copyright law, is a major obstacle to adequate protection and enforcement of IPR.

The Global Competitiveness Report 2017-2018 issued by the World Economic Forum (WEF) ranked the UAE 21st globally on IPR protection, up from 24th in the 2016-2017 report, with the UAE ranking second regionally after Qatar. The UAE’s legal framework for intellectual property (IP) is generally considered fair and in compliance with international obligations. Emirate-level authorities such as economic development authorities, police forces, and customs authorities enforce IPR-related issues, while Federal authorities manage IPR policy. However, many of these laws are inconsistently implemented or enforced at a federal or emirate-level.

In April 2017, UAE officials allowed domestic manufacture of generic versions of a pharmaceutical product still under patent protection in the United States. The UAE claimed that previous measures providing reliable protection for pharmaceutical products with valid country of origin patents, namely Circular no. 34/2003, were no longer valid. It is also unclear whether the UAE intends to continue to recognize patents granted by the GCC Patent Office.

Another long-standing weakness in the UAE’s IPR enforcement is the refusal of the Ministry of Economy to issue a business license allowing for the establishment of an organization with the authority to collect copyright royalties on behalf of rights-holders (commonly referred to as collecting societies), despite the provision for this in the UAE’s 2002 Copyright Law and Ministerial Decision No. 133 of 2004.

Dubai Police announced a total of 212 trademark violation cases and 11 copyright cases in 2017, comparable to the 230 trademark violation cases and 16 for copyright in 2016. Enforcement authorities in the UAE’s northern emirates also conducted inspection campaigns during 2017. As many counterfeit products in the UAE are now promoted via social media, the UAE Telecommunication Regulatory Authority (TRA) has also been active in tracking and blocking these accounts. In 2017, the TRA blocked 167 websites selling counterfeit products, up from the 122 websites blocked in 2016.

Concerns also exist over the high trademark filing fees in UAE. The fees are the highest in the world and considered cost-prohibitive to protecting trademarks in UAE.

The UAE did not enact any new laws related to IP protection in 2017. The UAE was listed in the U.S. government’s 2018 Special 301 report  on governments that fail to provide adequate and effective IP protection and enforcement. Two marketplaces in the UAE were included in the USTR 2017 Notorious Markets report with both locations being cited as important markets for China-sourced counterfeit goods.

6. Financial Sector

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), classifies 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 820,000), 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 367,000).

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 UAEG 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, the UAEG requires any company carrying out banking, insurance, or investment for a third party to 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 can access local credit markets. There have been complaints that GREs crowd 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.

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

Foreign Exchange and Remittances

Foreign Exchange Policies

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 the UAEG’s unique electronic salary transfer system called the Wages Protection System, designed to ensure workers are paid according to the terms of their employment. 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 two sovereign wealth funds—the Abu Dhabi Investment Authority (ADIA), and Mubadala Investment Company (formed from the merger of the International Petroleum Investment Company and the Abu Dhabi Investment Council (ADIC) into the Mubadala Development Company)—with purported total assets of approximately USD 1 trillion. Each Abu Dhabi fund comprises a chair and board members 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, is purported to have assets of about USD 15 billion. The Investment Corporation of Dubai (ICD) is Dubai’s primary sovereign wealth fund, with an estimated USD 219 billion of assets according to ICD’s June 2017 financial report.

UAE funds vary in their approaches to managing their investments. ADIA generally 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. 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 the Emirate 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). Comprising representatives from 28 countries, the IFSWF 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.

7. State-Owned Enterprises

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, such as the influential 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 have competition. In a number of cases, these firms compete 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, these firms are integrated to leverage synergies among entities they control 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 in a number of sectors, including construction, hospitality, transport, banking, logistics, and telecommunications.

Sectoral regulations in some cases address governance structures and practices of state-owned companies. 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 projects.

8. Responsible Business Conduct

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. In February 2018, the UAE issued Cabinet Resolution No. 2 for 2018, regarding Corporate Social Responsibility (CSR), which encourages voluntary contributions to a National Social Responsibility Fund. The Emirate of Ajman has made annual CSR contributions of AED 1,500 (USD 417) mandatory for all businesses. Many companies maintain 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 UAEG actively supports such efforts through official government partnerships, as well as through 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 UAEG 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.

9. Corruption

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, 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% ownership. The UAE has ratified the United Nations Convention against Corruption. There are no civil society organizations or NGOs investigating corruption within the UAE.

Resources to Report Corruption

Contact at government agency or agencies are responsible for combating corruption:
Dr. Harib Al Amimi
State Audit Institution
20th Floor, Tower C2, Aseel Building, Bainuna (34th) Street, Al Bateen, Abu Dhabi, UAE
+971 2 635 9999

10. Political and Security Environment

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

11. Labor Policies and Practices

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 comprises 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 most situations requires the prior approval of the Ministry of Labor.

In 2017, the UAE Ministry of Human Resources and Emiratization created a new classification system for companies, revising work permit fees for foreigners based on the diversity and skill-level of a company’s workforce. The new work permits, renewable every two years, range in cost from AED 300 – 3,200 (USD 80 – 800), with the most expensive reserved for companies with low-skilled workers where over 50 percent of the workforce is from a single foreign country.

In 2016 and 2017, the government implemented three new labor reforms intended to reduce forced-labor practices among foreign workers in the private sector by ensuring consistency between initial job offers and final contracts and increasing the ability of employees to leave their jobs and seek new ones. The June 2017 passage of Federal Law No. 10 on domestic workers, aimed at tightening regulations on recruiting agencies and contracts, allowing for inspection of workplaces, and mandating timely dispute resolution. Once fully implemented, law No. 10 will offer increased protections and rights for domestic workers. There is no minimum wage for domestic workers.

Although UAE federal law prohibits the payment of recruitment fees, many prospective workers continue to make such payments in their home countries. In March 2017, the UAEG announced plans to replace recruitment agencies with “Tadbeer Centers” that are publicly regulated but privately operated. The first center opened in Dubai in September 2017. 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. 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 Emiratization and local police forces maintain telephone hotlines for labor dispute and complaint submissions. Disputes not resolved by the Ministry of Human Resources and Emiratization move to the labor court system.

The Ministry of Human Resources and Emiratization 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 Emiratization also enforces a mid-day 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 percent of the total private sector workforce).

Following the promulgation of similar legislation in Abu Dhabi, Dubai’s government fully implemented Law No. 11 in May 2017, mandating employers provide basic health insurance coverage to their employees or face fines. Dubai’s mandatory health insurance law covers 4.3 million people, also applicable to employees residing in other emirates but working in Dubai.

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. The UAE continues to participate in the Abu Dhabi Dialogue, engage in the Colombo Process, and partner with other multilateral organizations such as the International Organization for Migration (IOM) and International Labor Organization (ILO) in regard to labor exploitation and human trafficking.

Section 7 of the Department of State’s Human Rights Report ( describes more information on worker rights, working conditions, and labor laws in the UAE. The Department of State’s Trafficking in Persons Report ( details the UAE government’s efforts to combat human trafficking.

12. OPIC and Other Investment Insurance Programs

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. The UAE is a Very High Income country as defined by OPIC’s statute, and as a development finance agency, OPIC gives priority to financing projects in middle and low income countries.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

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) 2016 348,71 2016 $348,743 

Economic Report: Ministry of Economy

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 2016 $13,400 BEA data available at
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2016 $2,800 BEA data available at
Total inbound stock of FDI as % host GDP N/A N/A 2016 3.84% N/A

Table 3: Sources and Destination of FDI

Data from the Annual Report of the Ministry of Economy (2017) indicates that the GDP estimates for 2016 in real prices (base year 2010) amounted to approximately 1391.1 billion dirhams (USD 378.7 billion) at the level of the State, while the estimated GDP at current prices was about 1280.8 billion dirhams (USD 348.7billion) at the end of 2016.

According to the UAE Federal Competitiveness and Statistics Authority (FCSA), FDI in the UAE increased during 2016. The United Kingdom was the biggest investor with 16.5 percent of the total investments, followed by India with 5.5 percent, the United States with 4.3 percent, and France with 4.1 percent. The FCSA did not announce specific amounts, however. The UAE does not provide information to the IMF, but the figures in the table below are from the IMF Outward Direct Investment Positions tables provided by the United States, UK, India, Japan, and France as of end 2016. It is unclear why the IMF data differs from the FCSA data.

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 N/A 100% Total Outward Amount 100%
United States 13,355 N/A N/A
United Kingdom 6,066 N/A
India 5,385 N/A
Japan 564 N/A
France 452 N/A
“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment

Data not available.

14. Contact for More Information

Eva D’Ambrosio
Economic Officer
First Street, Umm Hurair -1, Dubai UAE
+971 (0)2 414 2449

2018 Investment Climate Statements: United Arab Emirates
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