The long-anticipated and highly coveted full business ownership for expats has finally become a reality in the UAE. The latest amendment eliminates the need to have UAE nationals as sponsors and deregulates FDIs significantly. Although the idea was brewing up for a while, with individual Emirates granting whole ownerships on a case-by-case basis, I believe the latest initiatives are monumental, even by UAE’s unparalleled standards.
This move is a reminder of the pre-UAE era, when anyone could come and set up shop. Except this time, one can do so in a competitive economy, with regulatory backing and security. We are about to witness a sea change across the business landscape. Not only is this a shot in the arm for post-pandemic economic revival, but also a long-term vision with macroeconomic implications.
What can we expect from the latest amendments?
I believe FDI amendments will lure massive investments from overseas, particularly from venture capitalists. There will be some churn, but in a good way, with buy-out opportunities for sponsors, and buy-in opportunities for expats and foreign entities. Companies looking to increase liquidity could be eager to go for IPOs, with the possibility of now offering up to 70% of stakes. And there will be a great opportunities for global companies to acquire controlling stakes in leading local businesses. I believe some of the most significant changes will include:
- More room for foreign businesses and entrepreneurs to operate in the UAE.
- A shift in power dynamics in the boardroom.
- More autonomy, which will incentivize big global companies to expand within the UAE.
- The tech startup space, which benefits from flexibility in shareholding and operational control, will flourish.
But most importantly, I believe the new laws will give impetus to the entrepreneurial ecosystem and spur healthy competition, particularly among SMEs, which can now tap into more capital. That said, the pragmatic approach now is to bide time, let the new laws take shape, allow authorities to work out the final details and attain greater clarity on grey areas such as the criteria for specific sectors and for non-freehold zones.
Macroeconomic implications
While I expect short-term upheaval in the financial markets, I’m more invested in the bigger picture that these new laws present. Firstly, the timing is perfect — during a juncture when competitive markets in the West are witnessing volatility on the back of the pandemic and the vaccine race. Institutional investors are looking for alternatives and the UAE offers a stable growth market with diversified investment opportunities.
This brings us to the next strategic step: Sectorial emphasis. The new laws are accompanied by a “positive list” of sectors, where the scope for investments is significant. Among other sectors, the list primarily includes manufacturing, services and agriculture. This is a major stride towards economic diversification into non-oil sectors, which bodes well for food security, balance of trade and localization.
By the next economic cycle, we can expect to see the UAE’s ascent up the global economic indices, particularly in terms of competitiveness and ease of doing business. In the meantime, the recruitment sector could experience a ripple effect, with more job creation, hiring activity and expansion of the talent pool. UAE’s natural geographical advantage, as a strategic conduit between the East and the West, and its pre-eminence as the investment safe haven, also play well into these likelihoods. All in all, the future of UAE looks promising, and in good hands.
