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Mon 14 Sep 2009 01:01 AM

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UAE ponders change in foreign ownership rules - report

Maximum ownership for foreigners setting-up businesses in UAE would rise from 49% to 100%.

Legislation is expected to be submitted to the UAE Cabinet within two months allowing for a change in ownership rules for firms set-up in the UAE by foreigners.Under the initiative, international companies would be allowed to hold 100 percent ownership of businesses they establish in the UAE, the National reported on Sunday.

At present, foreigners must have a UAE national as a sponsor and are limited to a maximum 49 percent stake, except in free zones.

''A lot of industries worldwide are very interested to move here to the UAE, providing there are certain terms and conditions they would like to see in the industrial law,'' Sultan al Mansouri, the Minister of Economy, said, according to the newspaper.

"The law to allow 100 percent foreign investment is ready, but still under study and should be finalised within the next two months. We are especially looking into certain sectors such as hi-tech and hi-value," the minister told Gulf News during an inspection visit to the Abu Dhabi Co-operative Society. 

No indication regarding the possible limit of foreigners' stakes in private companies was given, the paper added.

The move, if implemented, would pave the way for technology firms to make large capital investments in the UAE and in the longer term diversify the economy away from its present over reliance on hydrocarbon revenues.

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Mohamed AlHashemi 11 years ago

Does this mean local agencies for services and products (e.g. cars) will be abolished! If so it is welcomed because I want to see better customer services and products.

Ahmed K 11 years ago

This is potentially great news but don't come up with a half-baked plan just to make the headlines. The law should cover all sectors, not one or two. If properly implemented, it could deliver a huge boost to the economy. Needless to say, the next important steps to attract foreign capital are to scrap the employment sponsorship system and reform the legal and regulatory system to bring it up to a decent standard.

Jochen 11 years ago

I agree to Mohamed AlHashemi! Customer Service is non existent here in Dubai - this will give a boost as more companies would open (I would open one more immediatly!), the one with best customer service would win - gold-rush and better for all of us!

Sandjockey 11 years ago

...so as to believe that the 100% ownership rule will be such a boon. I believe that this will be limited in scope and just don't see the opening of business doors that others might. I also know that unless other barriers to entry, such as high rents and ridiculous visa / employment laws, are removed that this is just a tiny step that will solve little.

ahmed 11 years ago

'possibility'..'maybe'...'planning to'...this has been going on for years...and this time is no different...nothing will change...just wishful thinking

Barak 11 years ago

Has anyone thought of the effects this would have, apart from the positive . what about tax? this will follow , if this goes through. At the moment companies are all local companies owned by emiraties 51%, how can we tax them. Once this changes , then we can tax expats.

shehryar 11 years ago

History shows that many times the rules of doing business in the U.A.E has changed without any prior intimation. A short story...my wife opened up a small business in International city as we were 2 years ago that International city shops comes under JAFZA.To our surprise once the first year finished and when it was time to renew, without any prior info or intimation we were send to entirely a new authority and once there the Local gentleman behind the counter was not even sure if we still remain under Free zone or if we need to open a LLC which requires local partnership.After much wait of around 6 months we were told that our License will be renewed for one more year under the same free zone status. On my asking what will happen after the tenure expires.....His answer was ''I am not sure''. So basically we have to do guess work everytime we go for our License renewal which is a business we started after much hardwork and commitment. This is not the only incident that has left a bad taste in the mouth but there are several other incidents that i go on. Anyways after having this exposure we have decided to close our business and move to another country where at least we have assurance that we dont have to do ''Guess work'' everytime we start up a new venture in which we have placed our hard earned savings and put all our heart and soul. Honestly i am very disappointed and its very difficult to have my trust reinstated in doing business here again. Kind regards.

Bob 11 years ago

Can they be serious? It's way to late for that. "A lot of industries worldwide are very interested to move here to the UEA". What am I missing. I see more companies leaving (including the company I work for) than coming.

paul 11 years ago

I wonder if the UAE government is aware of its 'free zones'? These are locations where companies can start businesses that are 100% foreign owned. It is not credible to suggest that there are a huge number of international companies holding off coming because of the ownership rules - those that want to be here, and want to own 100%, can already do so. If the government wants an influx of businesses, it could start by making free zones more attractive. And that means reversing the huge rent increases made during the peak of the boom. Ultimately the primary factor in keeping business away is the bottom line - costs too high, economy weak.

Behrooz 11 years ago

1- Dear Paul; Of course free zones already exist with %100 ownership for non-locals, but the business regulation for free zone companies are basically different to those operating in the city. This covers and includes their branches, offices and their allowed trading foot print. Legally speaking they are very restricted to operate with other emirate as well. Companies in the city (Economic Development Department) are much less restricted and can operate national wide. For instance a free zone company can not sell goods directly to the city market, legally. 2- The law would not be clear and this sort of legislation always is a recipe for headache. Hi-Tech and hi-value? where are the boundaries? who define if one business is exactly falling into these categories or not? Is it enough to mention hi-tech in the list of your activities? etc. 4- What happens to older companies who established their brands and reputation over years and have %49 of their company? Will they automatically be %100 owner? if yes then what about the %51 ownership of the local sponsor? If no, how to justify the injustice? If they need to dissolve the old company and establish the new one, what is happening to the history of the company? who decides about the ownership or division of the assets and profits at the time of dissolve, between the local sponsor and the real owner if thing not going into the right path? 5- For many locals, being companies sponsor is a main source of income for many years. Many from Al Ain, RAK, and other less developed places are sponsoring others for money, and they would not be happy of this regulation. I think this law must be published and reviewed by business owners and if the government is serious about recovery, they should listen to real people advises and suggestions, before going on-air with new things, as they did and failed several times.