The UAE Cabinet’s announcement to adopt a new entry visa system that will allow international investors full ownership of companies and grant long-term visas to residents who work in certain professions, including medicine and engineering, as well as to innovators and entrepreneurs, will increase business competition and benefit the wider economy, experts have told Zawya.
The announcement was made in a series of tweets by Sheikh Mohammed bin Rashid Al Maktoum, the UAE’s vice president and prime minister and Dubai ruler and was carried out by the local media including the state’s news agency WAM late on Sunday.
“At today’s Cabinet meeting, we decided to allow 100 percent foreign ownership of companies in UAE, with a 10-year visa for investors, scientists, doctors, engineers, entrepreneurs and innovators,” Sheikh Mohammed said in one tweet.
In a follow-up message, he said that the decision “will be enforced by third quarter this year”.
“Our open society, tolerant values, excellent infrastructure and flexible legislation offer the best environment for international investment and exceptional talent.”
Commenting on the likely impact on the UAE economy, Bilal Khan, a senior economist at Standard Chartered Bank, said in an email to Zawya: “As policymakers in the region push for economic diversification, we are likely to see greater competition for financial and human capital.
“Depending on the timing and scope of implementation, this should prove positive for the UAE’s medium-term macro outlook by boosting demand. The timing is particularly significant given capacity expansion plans in a range of sectors ahead of Expo 2020,” Khan added.
The UAE, like other countries in the Gulf Cooperation Council (GCC) had been working hard over the past couple of years to generate new sources of income and encourage foreign investment after the sharp fall in oil prices in 2014, which has impacted its economy. The six Gulf Arab states of the GCC agreed in 2016 to introduce a new five percent value-added tax, which the UAE and Saudi Arabia both introduced at the start of this year.
Last night’s announcement did not clarify if the new visa rules with regards to the foreign ownerships of companies will be applied to international firms, or investors with foreign nationalities, or both. It also did not define exactly which types of engineers or doctors will gain visas, or list the professions it will include. It also did not say exactly when the law will be applied.
“Based on the information that was announced, the 100 percent ownership is for the UAE-based enterprises, for the international investors. So it is for foreign investors - that could be a foreign company or national investing in a company based in the UAE. We don’t know if it is for specific sectors, areas or types of businesses. We are to wait for clarifications to be announced,” Priyesh Kapadia, partner in BDO consultancy firm told Zawya.
“Based on what is announced it (the new visa rule) is expected to be enforced by end of 2018,” Kapadia said.
The UAE’s Ministry of Economy was not immediately available for comment.
Currently, the UAE’s commercial law requires companies based in the country to have 51 percent local ownership, although 100 percent ownership is allowed within designated free zones. Last November, the UAE also amended its commercial law to allow the government to exempt certain companies and sectors from the 51 percent local ownership rule.
Rabih Khoury, partner and chief exit officer of the UAE’s Middle East Venture Partners, told Zawya in an interview earlier this month that the 51 percent local ownership rule restricts the establishment and growth of local companies in the UAE.
(Reporting by Yasmine Saleh; Editing by Michael Fahy)
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