Dubai is poised to bolster its image of being the perfect hub for setting up businesses with the announcement of the Foreign Direct Investment Law (FDI). Announced in 2019, the FDI law allows 100% ownership for companies in the Dubai mainland.
Earlier, the foreign investors were allowed to hold up to 49% ownership in the mainland. However, they can now buy shares of their local partners following the FDI reform.
FDI Law A Game-Changer To Bring In The Foreign Investment
The FDI law has already led to an upbeat mood in the market and is likely to lead the corporate landscape in 2020 rather than business mergers and company acquisitions.
This positive trend in the domain of company formation became more visible the other day as news broke out that Aster DM Healthcare has secured formal clearance from the Dubai Department of Economic Development for 100 per cent ownership of its businesses in Dubai mainland.
Global chocolate maker Mars was the first company to avail 100% ownership in 2019. The stories of both Mars and Aster have created much optimism in the Dubai market. It is believed that more and more companies are likely to follow suit and buy shares of their local partners.
Sectors That Benefit From Foreign Investment Law
After the enactment of the UAE Federal Law No. 19 of 2018 on Foreign Direct Investment (FDI Law), the UAE Cabinet released a list of activities benefiting from Article 7 of the FDI Law.
Approval has been granted for 122 economic activities across 13 sectors that could avail up to 100% foreign ownership in Dubai mainland. These sectors include:
- Transport and storage
- Manufacturing industry
- Renewable energy
- Hospitality and food services
- Information and communication
- Professional, scientific and technical activities
- Administrative and support services
- Educational activities;
- Art and entertainment
The sectors that are eligible for 100 % ownership will open new doors of economic opportunities for international investors who get attracted to Dubai for setting up businesses. Global investors who want to set up a business in Dubai mainland might be looking forward particularly on projects involving e-commerce, research laboratories, advancement in biotechnology, logistics, and supply chain, production of solar panels, hybrid power plants, and green technology.
Dubai is Leading the Switch to 100% Ownership in Mainland
Market observers have pinpointed that the FDI law will usher in big changes in the business landscape of Dubai. Reports suggest that more companies are pushing for the switch into 100% ownership.
The existing business owners in Dubai have filed applications to make the switch into 100% ownership. Foreign companies are likely to grab this golden opportunity to set up their businesses in Dubai.
How the FDI Law will have Positive Impacts on the Economy?
The FDI law is largely viewed as a big policy measure that helped to spread optimism among foreign investors. A statement from the Department of Dubai Economy states that the law has led to a surge in the number of investors.
The statement from the Department of Economic Development (DED) further added that FDI Law also provides the framework for luring foreign investment in key sectors, which would help the emirate to set up a competitive economy rooted in knowledge and innovation.
Reports suggest that there has been a spurt in the number of new business licenses issued in Dubai in 2019. The 38,377 new licenses stand as a testimony to the confidence that investors put in the resilience of Dubai’s economy. In 2019, there has been a decrease in the number of licenses cancelled (from 5,037 in 2018 to 4,949 in 2019).
FDI Law on the Edge of Expo 2020 – A Smarter Move by UAE
Dubai has unleashed many economic stimulus packages ahead of Expo 2020 to boost the economic condition. The FDI law that was announced along with these measures has given a shot in the arm for the businesses in Dubai.
Following the FDI law, there is a visible appetite among foreign investors to set up businesses in Dubai mainland. On the edge of expo 2020, this will attract and promote foreign direct investment, which will bolster the domestic capital for increased growth in Dubai.
All these reforms coincide with the EXPO 2020, which is viewed as one of the biggest events meant to accelerate growth in Dubai. The FDI will ensure that the UAE will enjoy growth before and beyond the EXPO 2020.