The United Arab Emirates has become a byword for rapid growth and economic transformation as skyscrapers mushroomed, shopping malls sprawled and artificial islands rose from the waters of the Gulf.
It is a transformation that has in large part been facilitated by a vast army of foreign workers, who now outnumber the indigenous population by a factor of almost nine to one.
Throughout the process, however, the rulers of the seven-member federation have kept a relatively tight rein on foreign capital by restricting outside investors to minority stakes in local companies outside specified free zones.
Foreign investors have until now been required to have a local partner who would hold at least a 51 per cent stake in any business venture.
That barrier is about to end with a decision to allow 100 per cent foreign ownership of Emirati companies. The reform is scheduled to come into force towards the end of the year.
It is one of a series of measures taken to liberalise an economy that was badly shaken by the 2008 financial crisis and has since sought to diversify from its former dependence on oil and gas.
The investment reforms fit with the UAE’s Vision 2021 strategy to turn the federation into a skills-based economy. The programme was launched in 2010, in the wake of the international banking crisis, and focused in part on expanding economic, touristic and commercial activity in the UAE.
“There have been a number of announcements recently, including the investment reform,” said one Dubai-based expatriate. “Perhaps the one that has made the biggest impact locally is the decision to lift restrictions on expat visas.”
Twinned with the rule change on foreign investment, the government has decided to grant some expats 10-year residency visas that will no longer be tied to a specific job.
That means specialists in sectors such as science, medicine and research will be able to change jobs without reapplying for residence. Until now expatriates have needed a local sponsor to secure residency.
“Many people held back from investing here as they felt there was no long term tenure and they were dependent on a short term visa,” Chavan Bhogaita, the head of market insights and strategy at First Abu Dhabi Bank told Bloomberg. “Now, with a 10-year visa and 100 per cent permitted foreign ownership, investors and people looking to set up and grow businesses here will have more confidence.”
One additional effect of a strategy of retaining foreign talent and giving expatriates a bigger stake may be to revive the still ailing real estate sector. It will also allow foreigners to pursue freelance careers or launch start-ups.
The new rules also grant five-year visas for students and up to ten years for those regarded as exceptionally talented. It is a visa regime that will be closer to the European and US models.
“The UAE will remain a global incubator for exceptional talents and a permanent destination for international investors,” according to Mohammed bin Rashid Al Maktoum, UAE vice-president and prime minister and ruler of Dubai. “Our open environment, tolerant values, infrastructure, and flexible legislation are the best plan to attract global investment and exceptional talents,” the official news agency WAM quoted him as saying.
The detail of the new investment law has yet to be revealed and UAE officials have hinted it will not throw open all sectors to 100 per cent foreign investment. The speculation is that it will include industries vital to the government’s overall development strategy and exclude others, including oil and gas. A similar initiative in Saudi Arabia has also been limited to specified sectors.
Maybe now some foreign workers, used to heading home after a work contract expires, will have more reason to call the UAE their new home.