The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world. They analyze a variety of economies that are or could be markets for U.S. businesses. The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption. The reports cover topics including Openness to Investment, Legal and Regulatory Systems, Protection of Real and Intellectual Property Rights, Financial Sector, State-Owned Enterprises, Responsible Business Conduct, and Corruption.
Executive Summary
The Government of the United Arab Emirates (UAE) is urgently pursuing economic diversification and regulatory reforms to promote private sector development; reduce dependence on hydrocarbon revenues; and build a knowledge economy buttressed by advanced technology and clean energy.
The UAE serves as a major trade and investment hub for the Middle East and North Africa, as well as increasingly for South Asia, Central Asia, and Sub-Saharan Africa. Multinational companies cite the UAE’s political and economic stability, excellent infrastructure, developed capital markets, and a perceived absence of systemic corruption as factors contributing to the UAE’s attractiveness to foreign investors. The UAE seeks to attract foreign direct investment (FDI) by i) not charging taxes or making restrictions on the repatriation of capital; ii) allowing relatively free movement into the country of labor and low barriers to entry (effective tariffs are five percent for most goods); and iii) offering FDI incentives.
The UAE in 2021 launched broad economic and social reforms to strengthen pandemic recovery, respond to growing regional economic competition, and commemorate its 50-year founding anniversary with a series of reforms.
The UAE and the country’s seven constituent emirates have passed numerous initiatives, laws, and regulations to attract more foreign investment. Recent measures include visa reforms to attract and retain expatriate professionals, a drive to create new international economic partnerships, major investments in critical industries, and policies to encourage Emirati entrepreneurship and labor force participation. These economic development projects offer both challenges and opportunities for foreign investors in the coming years. In 2022, UAE changed its work week for government bodies from Sunday to Thursday to Monday to Thursday with a half day on Friday in order to more closely align with world markets.
Additionally, the UAE approved a comprehensive reform of the national legal system, which, among other aims, developed the legal frameworks around data privacy, investment, regulation and legal protection of industrial property, copyrights, trademarks, and residency. The first-ever federal data protection law regulates how personal data are processed across the UAE, with separate laws on government, financial, and healthcare data to follow. The new Commercial Companies law removes restrictions to facilitate further mergers and acquisition activity. The federal trademark law further expands the scope of legal protection for companies’ trademarks, products, innovations, and trade names by protecting non-traditional patterns of trademarks. These legal reforms are broadly considered to be positive by U.S. companies, but investors will need to carefully consider how these broad changes affect their operations.
The Ministry of Finance announced in January 2022 that the UAE will introduce a federal corporate tax on business profits starting in 2023 as part of its membership in the OECD Inclusive Framework on Base Erosion and Profit Shifting. Companies await further guidance on how the new tax policy will be implemented, but it is expected to have a broad and significant impact on companies operating both inside in the UAE and “offshore” in the country’s many economic free zones.
The UAE announced in October 2021 that it would pursue net zero greenhouse gas emissions by 2050, to include an investment of $163 billion in renewable energy.
To access the ICS, visit the U.S. Department of State Investment Climate Statements website.