The UAE is a federation made up of seven emirates: Abu Dhabi, Dubai, Sharjah, Ras al-Khaimah, Ajman, Umm al-Quwain and Fujairah, with over six million of the 9.5 million population living in Dubai and Abu Dhabi.

From an economy once reliant on fishing and pearls to become a financial powerhouse accessible within an eight-hour flight by two thirds of the world’s population, UAE has come a long way ahead. With a diverse economy, stable political system, strong capital flow, favorable taxation environment and liberal trade regimes, UAE is now an attractive investment hub with a vision of becoming the economic, touristic and commercial capital for over two billion people. The United Arab Emirates aims to continue facilitating a hospitable, well-regulated and secure business ecosystem for all business types.

Features of the UAE’s stable economy

Despite recent fluctuations in oil prices and the global economic recession, the UAE enjoyed a stable economy. Some of the features of the UAE’s economy are:

Strategic location: The UAE enjoys a strategic location between Asia, Europe and Africa. Thousands of Chinese businesses use Dubai as a hub for trading in Africa. Indian traders use the emirate to access the world. Latin Americans see the country as a launching platform into South Asia. Western nationals use Dubai as a hub for the Middle East.

Strong financial reserves: The UAE maintains strong financial reserves and has a durable banking sector, which makes it safe for investment. According to a report in Khaleej Times, International Monetary Fund forecasts that the gross official reserves of the UAE would grow from USD 76.8 billion in 2015 to USD 118.4 billion in 2020. The current account surplus would grow from USD 17.6 billion in 2015 to USD 33.4 billion by 2020.

According to a report in The National, Standard & Poor’s, a financial services company, has rated Abu Dhabi AA indicating that its capacity to meet its financial commitment is very strong in the long term.

Sharjah and Ras Al Khaimah were rated A/A-1 indicating that their capacity to meet its financial commitment is strong in the short term.

Large sovereign wealth fund: According to the June 2016 figures of Sovereign Wealth Fund Institute, Abu Dhabi Investment Authority is the largest sovereign wealth fund in the Middle East and the fifth largest in the world with USD 792 billion.

Promising investor home economies: According to an UNCTAD World Investment Report of 2014, the UAE ranks 11th as the most promising investor home economies.

Consistent government spending: Government spending on infrastructure continues to receive a major injection of capital. Abu Dhabi continues to develop the infrastructure required for one of the wealthiest cities in the world.

Dubai is implementing new projects for hosting World Expo in 2020; AED 30 billion will be spent on infrastructure at the Expo site and the city.

The UAE plans to spend AED six billion on major infrastructure developments across the country, including road networks and federal buildings. Khalifa Initiative in the Northern Emirates is designed to ensure that inhabitants of these emirates enjoy the same facilities as those living in the larger emirates of Abu Dhabi and Dubai.

The UAE is also working on the Etihad Rail project, which will offer a significant leap in land transport by year 2021.

Progressive policy of economic diversification: The policy of economic diversification has led into impressive development in key sectors such as tourism, air transport, trade, financial services, manufacturing and alternative energy. The UAE has made progress towards ending its economic dependence on hydrocarbons. Oil industries accounted for around 30 per cent of GDP in 2014, down from 79 per cent in 1980.

Free zones: The UAE has several multi-specialty free zones which offer several economic incentives such as exemption from corporate taxes and import/export duties and full foreign ownership with 100 per cent profit repatriation. There are about 45 free zones in the UAE. According to a report in Gulf News, free zones contributed to 33 per cent of the UAE’s non-oil trade in 2014.

Increased foreign direct investment (FDI): According to the Economic Report 2018 released by the UAE’s Ministry of Economy, the UAE attracted about USD 10.4 billion of foreign direct investment during 2017 with an average growth rate of 1.6 per cent during the period from 2012-2017. The UAE was ranked first among the countries most attractive to foreign direct investment in the Middle East and Africa region. 

Benefits of doing business in the UAE

The UAE is a prime launch-pad for all companies wishing to access markets around the world.

Strategic Location: Its geographical location and time zone (GMT +4) give businesses wishing to access markets in Africa, Asia and Europe a regional and business-centric hub from which to operate.

The UAE’s digital economy: The strategic plans of the national economy are mainly based on the digital economy, as it contributes to creating real opportunities for foreign direct investment. Digital economy in the UAE is being implemented through the adoption of the UAE Strategy for the Fourth Industrial Revolution as one of its aims is to enhance economic security by adopting digital economy and blockchain technologies in financial transactions and service.

The UAE Strategy for the Fourth Industrial Revolution: In September 2017, the UAE Government launched the UAE Strategy for the Fourth Industrial Revolution (4IR) (PDF, 25 MB) during the Government’s Annual Meetings. The UAE Strategy for the Fourth Industrial Revolution aims to strengthen the UAE’s position as a global hub for the Fourth Industrial Revolution and to increase its contribution to the national economy by means of advancing innovation and future technologies. Read more about the UAE Strategy for the Fourth Industrial Revolution.

Enhancing the role of young people in UAE: The UAE also believes in enhancing the role of young people in achieving a digital economy as the youth are quick to adopt the latest technology. It is to be noted that the UAE is ranked first in the world in the use of information and communication technologies, government efficiency, and coverage of the mobile network in terms of percentage of population. The UAE is proud to have 100 per cent smart phone usage. Enhancing the role and skills of the youth is one of the ways in which the citizens contribute to a digital transformation.

Ease of doing business (World Bank Report): According to the World Bank report which measures the performance of 190 countries in “ease doing business”, the UAE was ranked first in the Arab world and 11^th globally.

It was ranked 1st globally in getting electricity, 2^nd in paying tax, 5^th in dealing with construction permits, 7^th in registering properties, and 9^th in enforcing contracts.

Anchor for your Import and Export Business: United Arab Emirates has successfully sustained its position as a strong trade center for more than two decades. According to a recent research, UAE is the 29^th largest exporter of the world and is quite famous for its trade in gold, diamond, cars, oil and aluminum. The population of UAE is increasing at a steady pace over the past few years due to which demand for imports and re-exports have increased thus leading to rise in an individual expenditure. Dubai widely known as shopping center of Middle East, leads the way for UAE and over the years the import and export business in Dubai has considerably increased.

Trade is one of the foundation stone that comprise Dubai’s economy. According to data released by Dubai Customs, foreign trade amounted to AED 1,276 billion in 2016. The total volume of traded goods increased year over year by 11%. The total imports in 2016 were valued at AED 803 billion, exports and re-exports were valued at AED 143 billion and AED 330 billion respectively.

Smart business houses use Dubai as their trade hub, dealing to and from via UAE and exporting products to any country around the globe without facing a lot of hassles that they might have faced from their home nation. This increases growth and profits which in turn improves the home economy as well.

Benefits for global business houses: A large incentive which attracts and enables businesses to flourish within the UAE is its strong network of international tax treaties. The UAE has more than 115 double taxation treaties (DTAs) in place with other countries, ensuring businesses and residents are not taxed twice on the exchange of goods, capital and services. This extensive network removes the difficulties relating to cross-border trade and investment flows.

There are several options available to foreign investors looking to undertake business in the UAE:

• Fly in and out
• Through a local agent or distributor
• Set up a local entity (either ‘onshore’ or ‘offshore’)
• Joint Venture
• Merger and Acquisition

From diversifying to burgeoning

In recent years and through a push from the Gulf Cooperation Council (GCC) – the regional inter-governmental economic and political union – the UAE has made a concerted effort to diversify its economy to become less dependent on oil and natural gas.

The portion of the UAE’s current GDP originating from non-oil industries is nearing 80% and growing at an average rate of 3.3%, highlighting the success in generating growth away from its once sole commodity of crude oil.

As the economy has diversified and industries have been subject to active promotion from the federal government, foreign investment has flooded into the UAE. All major Fortune 500 companies now have an established presence there, with a dedicated entity covering the Middle East and Africa.

Diversification has prompted an increase in the amount of foreign direct investment (FDI). In 2017, FDI increased by 8%, amounting to $10.4 billion. This growth is reflected in World Bank’s GDP estimate, with the UAE expected to see a rise from 2% (2017) through to 3.3% in 2019.

The promising growth figures despite the global economic problems are also a result of a substantial government focus on expanding industries. Trade, healthcare, logistics, banking, tourism, real estate and manufacturing are all reaping the benefits of a government targeting a shift to a diversified and knowledge-based economy making UAE one of the best countries in the world as outlined in their ‘2021 UAE Vision‘.

UAE today is a hot bed of business opportunities that keeps offering more and more to all that want to grow further. Starting a business in the United Arab Emirates would help your company reach global growth and acquire international clientele.

The economy of the United Arab Emirates (or UAE) is the second largest in the Middle East (after Saudi Arabia), with a gross domestic product (GDP) of US$354 billion (AED 1.3 trillion) in 2020. United Arab Emirates GDP Growth Rate is projected to trend around 1.50 percent in 2021 and 2.00 percent in 2022, according to our econometric models.

Growth International facilitates you in starting a new company in the UAE. Please get in touch with us for advice now!