By Dr Habib Al Mulla
Dr Habib Al Mulla says more can be done to improve the UAE's status on all fronts
In the past two years, we have seen the UAE vigorously develop its legislation. There was the enactment of the long awaited companies law and bankruptcy law, though the latter has not been used as much as most hoped it would be. In 2018 alone, we witnessed significant amendments in laws and regulations dealing with residency, allowing, for the first time in the history of the UAE, long-term residency for expats in certain criteria.
The foreign investment law was also issued, permitting full ownership of certain business activities subject to certain qualifications, while a new anti-money laundering law which complies with US regulations was implemented to allow the concept of ‘control delivery,’ whereby a suspicious transaction is processed in order to help catch offenders. Moreover, the long awaited arbitration law finally saw the light, and arbitration practitioners are content that they no longer face criminal liability previously imposed on them.
The UAE needs a capital markets law to improve initial public offerings
The scope of bribery and corruption has been widened in the amended penal code, which now has exterritorial reach if the crime impacts the UAE. And finally, a new law regulating the UAE Central Bank was issued. To appreciate the significance of the change, one has to be reminded that the law had not been amended since 1980.
The enactment of all these laws in a short period of time indicates how active the UAE has been on the legislative front. The question is, will this trend continue in 2019? I have no reason to doubt that. Considering that the UAE’s cabinet under the leadership of Sheikh Mohammed Bin Rashid Al Maktoum is continuously raising the country’s ranking in the competitiveness index, we can only expect more initiatives to improve the UAE’s status on all fronts, particularly when it comes to commercial law. And while the UAE has done much in this regard, I believe there is still room for improvement. And so I predict a further relaxation of residency laws through minor alterations in order to make them more appealing, once the new regulations find their way into implementation.
We can only expect more initiatives to improve the UAE’s status on all fronts, particularly when it comes to commercial law
The same would apply to foreign ownership laws. In my view, the current changes, although highly welcomed, remain insufficient in attracting serious and large foreign investments, particularly with the incentives that other countries in the region are offering. Investors will demand, rightly so, further activities to be subject to the foreign ownership exemptions.
Naturally, with more exemptions, free zones will feel the pressure and will struggle to compete unless they manage to change their modus operandi, although competition is healthy and can only benefit the economy.
I predict a further relaxation of residency laws through minor alterations
What I wish to see, however, is a different story. I will try to be modest in my wish list. What I think the country needs, and soon, is a capital markets law, in order to properly regulate and ultimately improve initial public offerings (IPOs), and prevent irregularities experienced in the past.
A properly regulated market will send a signal of confidence to investors and will help, together with improved liquidity, to push the markets upward.
A properly regulated market will send a signal of confidence to investors
What I also hope to deal with is the issue of criminal sanctions on the issuance of bounced cheques. There have been few moves in this direction, such as no imprisonment for cheques under $54,450 in value, limited protections as per the bankruptcy law and the waiving of criminal charges if the value of the cheque is paid.
But we need to make a bold decision to deal with this taboo once and for all, in order to benefit the economy as a whole, particularly when we are heading towards a tough year according to many economic commentators.
Whether this is going to happen in 2019 is uncertain, but I am a firm believer that progress will be made.