P 201244Z JAN 09
FM AMEMBASSY ABU DHABI
TO SECSTATE WASHDC PRIORITY 2023
INFO GULF COOPERATION COUNCIL COLLECTIVE
USDOC WASHDC
DEPT OF TREASURY WASHINGTON DC
DEPT OF COMMERCE WASHINGTON DC
CIMS NTDB WASHINGTON DC

UNCLAS ABU DHABI 000077 
 
 
STATE FOR EEB/IFD/OIA 
STATE PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: ECON EINV EFIN ETRD ELAB KTDB PGOV OPIC USTR AE
SUBJECT:  UAE INVESTMENT CLIMATE STATEMENT 2009 
 
Ref. 08 STATE 123907 
 
A.1 Openness to Foreign Investment 
--------------------------------- 
 
Investment laws and regulations are evolving in the United Arab 
Emirates (UAE) and are expected to become more conducive to foreign 
investment.  At present, the regulatory and legal framework favors 
local over foreign investors.  There is no national treatment for 
investors in the UAE, and foreign ownership of land and stocks is 
restricted.  The UAE maintains non-tariff barriers to investment in 
the form of restrictive agency, sponsorship, and distributorship 
requirements.  In order to do business in the UAE outside one of the 
free zones, a foreign business in most cases must have a UAE 
national sponsor, agent or distributor. However, the UAE Government 
(UAEG) is opening up its trade sectors in line with its WTO 
obligations.  The UAEG already has taken steps to cut red tape for 
foreign investors, and the Ministry of Economy has drafted a new law 
to facilitate foreign investment. 
 
There is no personal income tax in the UAE.  Foreign banks pay 20 
percent tax on their profits.  Foreign oil companies with equity in 
concessions pay taxes and royalties on their proceeds.  There are no 
consumption taxes, and the GCC states formally implemented a single 
import tariff of 5 percent on most goods January 1, 2003.  Companies 
located in multiple "free zones" in Dubai are exempt from the tariff 
on imports and re-exports that do not leave the zones.  The 
exceptions to the 5 percent tariff in the UAE are a fifty percent 
tariff for alcohol, a one hundred percent tariff for tobacco, and 
duty exemptions for 53 food and agricultural items.  Import tariffs 
are collected and retained by each Emirate.  Dubai imposes a rental 
housing tax on expatriates equaling five percent of the rental 
charges.  The UAE has said that it is considering passing a VAT 
averaging 7-12 percent on the federal level and has asked for 
assistance from the IMF.  Hotels and some restaurants/coffee shops 
charge ten to fifteen percent service charges. 
 
Regulation of the establishment and conduct of business in the UAE 
is shared at the federal and emirate levels.  The UAE has recently 
drafted a federal law for foreign direct investment (FDI) which is 
expected to enter into force during 2009, according to UAEG 
officials.  The draft law, which is not publicly available, is 
expected to facilitate FDI and improve transparency for investors. 
The proposed law may allow 100 percent foreign ownership in some 
sectors and projects, subject to Cabinet approval. 
 
Under the umbrella of the proposed foreign investment law, the UAEG 
created in 2008 a new department for foreign investment at the 
Ministry of Economy, which will facilitate foreign investments in 
the UAE.  The new department includes sections for local and 
international investment promotion, legal affairs, economic studies 
and customer service. It will coordinate with local entities and 
economic zones to facilitate business procedures for foreign 
investors. 
 
Currently, there are four major laws affecting foreign investment in 
the UAE:  the Federal Companies Law, the Commercial Agencies Law, 
the Federal Industry Law, and the Government Tenders Law.  These 
laws, especially the Federal Companies Law, are seen as the largest 
obstacles to foreign direct investment in the UAE. 
 
The Federal Companies Law applies to all commercial companies 
established in the UAE and to branch offices of foreign companies 
operating in the UAE.  Companies established in the UAE are required 
to have a minimum of 51 percent UAE national ownership.  However, 
profits may be apportioned differently.  Branch offices of foreign 
companies are required to have a national agent unless the foreign 
company has established its office pursuant to an agreement with the 
federal or an emirate government.  All general partnership interest 
must be owned by UAE nationals.  Foreign shareholders may hold up to 
a 49 percent interest in limited liability companies.  Foreign 
investors may purchase 99 of the 137 issues on the UAE stock 
markets, Abu Dhabi Securities Market (ADX) and Dubai Financial 
Market (DFM).  Under UAE law, foreign investors are allowed to own 
up to 49 percent of a company.  However, company by-laws in many 
cases prohibit foreign ownership.  The international financial 
crisis and foreign speculation contributed to significant declines 
in the values of local shares in 2008.  As a result, some UAE public 
shareholding companies have decided to reduce the percentage of 
shares available for foreign ownership. 
 
In April 2006, the UAE Cabinet amended the law regarding ownership 
of insurance companies.  The amended article states that 75 percent 
of insurance companies must be owned by a UAE national or 100 
percent by UAE national legal persons, i.e., a UAE corporation. 
 
The Commercial Agencies Law requires that foreign principals 
distribute their products in the UAE only through exclusive 
commercial agents that are either UAE nationals or companies wholly 
owned by UAE nationals.  The foreign principal can appoint one agent 
for the entire UAE or for a particular emirate or group of 
emirates. 
 
In 2006, the UAE announced substantial changes to the Commercial 
Agencies Law.  These amendments include:  1) requiring mutual 
consent to renew an agency agreement, 2) limiting an agency contract 
to a fixed time period, 3) allowing either party to file for 
damages, 4) eliminating the Ministry of Economy's Commercial 
Agencies Commission (which handles agency disputes), and 5) allowing 
the import of "liberalized goods" without the agent's approval.  In 
an effort to curb price manipulation and allow unrestricted imports 
of basic food products, the UAE eliminated trading agency 
requirements for basic food products in August 2006.  The food 
products covered by the decision include milk, frozen vegetables, 
baby formula, chicken, cooking oil, noodles, rice, flour, fish 
products, tea, coffee, cheese, pastries and diapers.  For some food 
products deemed non-essential, agency agreements in existence prior 
to this period are still recognized. 
 
The UAE Ministry of Economy has publicly discussed amending the 
Companies Law to provide for greater foreign ownership of companies 
in certain sectors.  Some of the sectors which may be liberalized 
are education, health, professional services and computer-related 
services. 
 
The Federal Industry Law stipulates that industrial projects must 
have 51 percent UAE national ownership.  The law also requires that 
projects either be managed by a UAE national or have a board of 
directors with a majority of UAE nationals.  Exemptions from the law 
are provided for projects related to extraction and refining of oil, 
natural gas, and other raw materials.  Additionally, projects with a 
small capital investment or projects governed by special laws or 
agreements are exempt from the industry law. 
 
The Government Tenders Law stipulates that a supplier, contractor, 
or tenderer for federal projects must either be a UAE national or a 
company in which UAE nationals own at least 51 percent of the share 
capital or foreign entities represented by a UAE distributor or 
agent.  Foreign companies wishing to bid for a federal project must, 
therefore, enter into a joint venture or agency arrangement with a 
UAE national or company.  Federal tenders must accompany a bid bond 
in the form of an unconditional bank bond guarantee for 5 percent of 
the value of the bid.  If goods and services are not available 
locally then UAE federal government entities often tender 
internationally. 
 
The UAE restricts foreign ownership of land, with rules varying from 
emirate to emirate.  In May 2002, the Emirate of Dubai announced 
that it would permit so-called free hold real estate ownership for 
non-GCC nationals by giving permission to three companies to develop 
and sell freehold properties on government-designated pieces of 
land.  The Emirate of Dubai codified its freehold and leasehold law 
in 2006.  The law allows non-GCC nationals to freehold or leasehold 
rights in designated areas of Dubai and does not give property 
owners permanent residence visas or an automatic right to work in 
the Emirate.  The Emirate of Ras Al Khaimah also offers free-hold 
land to offshore companies in designated areas. Individuals can 
establish a company in the Ras Al Khaimah Free Zone for the purpose 
of purchasing a free-hold for use by the company's owner.  However, 
because specific laws regarding "freehold" ownership remain to be 
codified and procedures for title documentation and conveyance 
remain to be established, potential buyers are unsure whether they 
will have an absolute "freehold" title that means the same as it 
does in Europe or the U.S.  In 2005, the Emirate of Abu Dhabi 
announced that it would also allow "lease hold" real estate 
ownership for non-UAE nationals in certain designated areas. 
Non-GCC nationals can own buildings in the Emirate of Abu Dhabi in 
certain investment areas, but cannot own the land.  The law states 
that non-UAE nationals shall have the right to own surface property, 
but not the land itself in investment areas. Foreigners shall have 
the right to arrange all their surface properties and to derive 
benefits from them based on a 50-year surface ownership agreement 
that can be renewed for the same period subject to the agreement of 
the two parties.  The law grants mortgage rights to anyone with the 
right to benefit from the property for a period of more than ten 
years, even without the permission of the owner.  However, the owner 
of the property shall not mortgage it unless he gets approval from 
the person who has the right of benefit of the property. 
 
In November 2004, the UAE announced its intent to open up the 
insurance sector to new foreign insurance companies.  Any new 
companies entering the market are required to meet high level 
international rating criteria and must complete a viability study to 
prove that it will be offering new products to the market.  About 
half of the insurance companies in the UAE are foreign.  New entries 
of foreign insurance companies were frozen since 1999, but officials 
 
from the Insurance Section of the UAE Ministry of Economy have 
stated that the Ministry of Economy licensed three subsidiary 
foreign insurance companies in 2007.  Currently, there is only one 
American subsidiary insurance company operating in the UAE. 
 
In 2008, Abu Dhabi Chamber of Commerce and Industry created a 
one-stop-shop for investors whQQQ UAE 
nationals, with the exception of Israeli currency and the currencies 
of those countries subject to United Nations sanctions.  The UAEG 
passed comprehensive anti-money laundering legislation following the 
attacks of September 11, 2001, that imposes strict documentary 
requirements on large wire transfers. Travelers entering the UAE 
must declare currency amounts of more than 40,000 Dirhams 
(approximately USD 10,800) as part of these measures. 
 
Since February 2002, the Dirham has been officially fixed to the 
U.S. Dollar.  The exchange rate is 3.67 UAE Dirhams per one U.S. 
Dollar.  Every bank transaction in U.S. dollars is subject to a 1 
percent fee. 
 
The GCC countries, including the UAE, are expected to implement a 
monetary union by 2010, but it is unclear which foreign exchange 
system will be adopted. 
 
A.3 Expropriation and Compensation 
---------------------------------- 
 
Foreign investors have not been involved in any expropriations in 
the UAE in recent years.  There are no set rules governing 
compensation if expropriations were to occur, and individual 
emirates probably would treat this differently.  In practice, 
authorities in the UAE would not expropriate unless there was a 
compelling developmental or public interest need to do so, and in 
such cases compensation would likely be generous. 
 
A.4 Dispute Settlement 
--------------------- 
 
The Embassy is aware of a few substantial investment disputes during 
the past few years involving U.S. or other foreign investors and 
government and/or local businesses.  There have also been several 
contractor/payment disputes, with the government as well as local 
businesses.  Disputes generally are resolved by arbitration, by the 
parties themselves, or by recourse to the legal system.  Dispute 
resolution can be difficult and uncertain, however. 
 
Arbitration may commence by petition to the UAE federal courts on 
the basis of mutual consent (a written arbitration agreement), 
independently (by nomination of arbitrators), or through a referral 
to an appointing authority without recourse to judicial proceedings. 
 Enforcing arbitration judgments rendered in the UAE can be 
difficult as they require court certification, and judicial 
proceedings may continue for several years.  Some companies are 
reportedly unwilling to resort to arbitration out of concern that it 
would affect their future business opportunities in the UAE. 
 
The UAEG's accession to the UN Convention on the Recognition and 
Enforcement of Foreign Arbitral Awards became effective in November 
¶2006.  An arbitration award issued in the UAE will now be 
enforceable in all 138 states that have acceded to the Convention, 
and any award issued in another member state will be directly 
enforceable in the UAE.  The Convention supersedes all incompatible 
legislation and rulings in the UAE, and should be welcomed by many 
businesses that consider arbitration the most advantageous form of 
dispute resolution.  The Embassy does not yet have any experience 
with U.S. firms attempting to use arbitration under the UN 
convention. 
 
The UAE constitution established a federal court system while 
acknowledging the right of the individual emirates to opt out, which 
Abu Dhabi, Dubai and Ras Al Khaimah have.  However, some issues must 
be heard in the federal court system such as security matters, 
conflicts between the emirates, constitutionality of a federal law, 
trial of ministers and senior officials and jurisdictional issues. 
 
There is no independent judiciary in the UAE.  The Ministry of 
Justice appoints judges to the federal courts, while judges in Abu 
Dhabi, Dubai and Ras Al Khaimah are appointed by the respective 
rulers of those emirates.  The majority of judges are non-Emirati. 
Each emirate applies federal law in its own court system that 
consists of courts of first instance, courts of appeal and a Supreme 
Court.  The court of first instance consists of civil, criminal, and 
Sharia (Islamic law) courts.  Sharia law is applicable to both 
Muslims and non-Muslims, but is focused primarily on family, 
inheritance and personal status matters.  Courts will interpret 
statutory law and Sharia law in deciding cases.  Commercial disputes 
involving foreign parties tend to come before the civil courts in 
the federal system; a panel of three judges ordinarily hears 
commercial disputes.  All cases involving banks and financial 
institutions are required to be heard by civil courts.  In Abu 
Dhabi, all non-arbitration commercial disputes are first brought to 
the Abu Dhabi Conciliation Department.  If the parties are unable to 
reach a settlement, they can begin legal proceedings in the court of 
first instance. 
 
The Code of Civil Procedure contains comprehensive rules regarding 
the various types of preventive and provisional remedies prior to 
litigation and the issuance of judgments,  including the attachment 
of property, confiscation of the defendant's passport and 
prohibitions on travel, as well as the detention of the defendant in 
certain instances.  However, the courts must certify all arbitration 
decisions, and though they do not review substantive claims, they 
can invalidate decisions based on procedural considerations. 
Parties can also appeal certification decisions thus prolonging 
enforcement indefinitely. 
 
In 1993 the Abu Dhabi Chamber of Commerce and Industry formed the 
Abu Dhabi Commercial Conciliation and Arbitration Center in an 
effort to accelerate commercial dispute resolution.  The Center has 
jurisdiction to conciliate or arbitrate commercial disputes.  The 
Center's executive regulations govern the conciliation and 
arbitration procedure.  Though referral by the parties to the 
Dispute Center ostensibly requires them to accept the finality of 
the Center's decision, the courts must still certify the decision 
and enforcement can be delayed.  The Center conducts proceedings in 
Arabic or any other agreed upon language. 
 
The Dubai Chamber of Commerce and Industry has promulgated similar 
commercial conciliation and arbitration rules that permit parties to 
have conciliation or arbitration proceedings under the auspices of 
the Chamber.  In 2004, the Dubai International Arbitration Center 
was made independent of the Chamber.  The Arbitration Center aims to 
bring international standards of arbitration to business in Dubai. 
The UAE is a member of the International Center for the Settlement 
of Investment Disputes. 
 
A.5 Performance Requirements/Incentives 
------------------------------------- 
 
As listed elsewhere in this report, the regulatory and legal 
framework in the UAE favors local over foreign investors. 
Government tendering is not conducted according to generally 
accepted international standards, and re-tendering is the norm.  To 
bid on federal projects, a supplier or contractor must be either a 
UAE national or a company in which UAE nationals own at least 51 
percent of the capital or have a local agent or distributor. 
Federal tenders must be accompanied by a bid bond in the form of an 
unconditional bank guarantee for 5 percent of the value of the bid. 
UAE federal government entities can tender internationally since 
foreign companies sometimes are the only suppliers of specialized 
goods or services that are not widely available. 
 
Incentives are given to foreign investors in the free zones (details 
in section A15).  Outside the free zones, no incentives are given, 
although the ability to purchase property as freehold in certain 
favored projects in Dubai would appear to be incentives aimed at 
attracting foreign investment. 
 
A.6 Right to Private Ownership and Establishment 
--------------------------------------------- --- 
 
Except as detailed elsewhere in this report, there are no 
restrictions on the right of private entities to establish and own 
business enterprises and engage in all forms of remunerative 
activity. 
 
A.7 Protection of Property Rights 
--------------------------------- 
 
In September 2005, the Emirate of Abu Dhabi passed a law allowing 
Emiratis to hold title on properties in the Emirate and opened up 
some foreign leasehold rights to surface property in certain 
designated areas.  Most construction, commercial and residential, is 
financed by a specialized agency of the government of Abu Dhabi, and 
commercial banks finance the remainder.  Their collateral 
traditionally has been access to the rent stream of the building or 
the personal guarantee of the developer. 
 
Foreign and national banks have increased their activity in the 
mortgage market, expanding their services to foreigners as well as 
nationals due to the recent boom in freehold property.  Foreign 
banks have entered the market on a smaller scale; the local Mashreq 
Bank and Dubai Islamic Bank are most heavily involved in new 
mortgage business, with banks such as Standard Chartered and HSBC 
providing mortgages on a case-by-case basis to established 
customers. 
 
The UAE Government (UAEG) continues to lead the region in protecting 
intellectual property rights (IPR).  Anecdotal and statistical 
evidence confirms that the UAEG is enforcing copyright, trademark, 
and patent laws passed in 2002 to protect U.S. intellectual 
property, and continues to demonstrate its commitment to the 2002 
agreement providing TRIPS-plus levels of protection to U.S. 
pharmaceuticals.  In 2008, the UAE Ministry of Economy established 
an intellectual property rights protection office.  Although the UAE 
is the leader in the region at enforcing intellectual property 
rights and the Emirate of Dubai is very pro-active in enforcement, 
many stakeholders believe that the UAEG could do more to fight 
piracy in the other emirates and to deal with the problems of 
transshipping of counterfeit goods. 
 
The copyright law, enacted in July 2002, grants protections to 
authors of creative works and expands the categories of protected 
works to include computer programs, software, databases, and other 
digital works.  Efforts to combat computer software piracy in the 
UAE have been successful.  According to industry estimates, the rate 
of software piracy in the UAE is the lowest in the Middle East and 
North Africa, estimated to be 34 percent.  The UAE is recognized as 
the regional leader in fighting computer software piracy.  In 2008, 
the UAE launched several campaigns against piracy and seized and 
destroyed thousands of pirated auto spare parts, perfumes, air 
fresheners, electrical devices, sport equipment, medicines, movies 
and music discs.  The value of seized pirated goods in 2007 amounted 
around USD 800 million (3 billion Dirhams). The UAE's Trademark Law, 
also issued in July 2002, confirms that the UAE will follow the 
International Classification System and that one trademark can be 
registered in a number of classes.  The law provides that the owner 
of the registration shall enjoy exclusive rights to the use of the 
trademark as registered and can prevent others from using an 
identical or similar mark on similar, identical or related products 
and services if it causes confusion among consumers. 
 
A.8 Transparency of the Regulatory System 
----------------------------------------- 
 
The fundamental instrument by which all of the emirates regulate 
business activity is the requirement that any place of business must 
acquire and maintain a proper license.  The procedures for obtaining 
a license vary from emirate to emirate, but are straightforward and 
publicly available. 
 
A license is not required unless a place of business is set up in 
the UAE.  In other words, foreign businesses exporting to the UAE 
but without a regular or continuing business presence in the UAE do 
not need a license.  Licenses available include trade licenses, 
industrial licenses, service licenses, professional licenses, and 
construction licenses. 
 
Several federal regulations govern business activities in the UAE 
outside free trade zones.  Activities within the free zones are 
governed by special bylaws. 
 
A.9 Efficient Capital Markets and Portfolio Investment 
-------------------------------------------- 
 
The UAE federal commercial code, promulgated in 1993, devotes an 
entire chapter to bankruptcy:  the first comprehensive legislation 
in the UAE on the subject.  Monetary judgments in bankruptcy cases 
are made in the local currency, and UAE courts enforce the judgments 
of foreign courts if there is reciprocity based on bilateral or 
international treaties.  In the judgment of western legal experts, 
the commercial code chapter on bankruptcy governs the procedures and 
effects of bankruptcy in the UAE, but does not provide a mechanism 
for the orderly evaluation and distribution of assets of a bankrupt 
entity. 
 
Following a banking crisis caused by accumulating bad debts after 
the oil boom in the mid-1980s, the Central Bank stopped giving 
licenses to new foreign banks.  However, in September 2003, the UAE 
Central Bank announced that it would allow the operation of more 
banks from other countries on a reciprocal basis.  The Central Bank 
has since granted licenses to some GCC banks.  In 2008, the Central 
Bank allowed several foreign banks operating in the UAE to set up 
new branches. 
 
Citibank is the only U.S. bank in the UAE that offers full banking 
services.  There are a number of U.S. financial institutions with 
either representative offices in the UAE or that have established a 
presence in the Dubai International Financial Center (a financial 
free zone).  The largest banks in terms of assets include the 
Emirates NBD (the new name after Emirates Bank International and 
National Bank of Dubai merged), National Bank of Abu Dhabi, Mashreq 
Bank, and Abu Dhabi Commercial Bank.  In November 2008, the UAE 
Ministry of Finance announced that it started the official 
procedures to merge Amlak Finance PJSC and Tamweel PJSC, two leading 
Sharia (Islamic Law)-compliant real estate finance providers in the 
UAE, under the UAE Real Estate Bank to create the largest real 
estate finance institution in the country under the umbrella of the 
Federal Government. 
 
The Central Bank prohibits lending an amount greater than 7 percent 
of a bank's capital base to any single customer.  Foreign banks with 
branches in the UAE are not permitted to calculate loans as a 
percentage of their global capital, which may however be used to 
calculate the capital adequacy ratio.  In a revision to the rule, 
the Central Bank in 1993 said it would exclude from the requirement 
non-funded exposures, such as letters of credit and guarantees.  The 
Central Bank also announced implementation of internationally 
recognized and accepted accounting principles. 
 
The UAEG implemented a body of anti-money laundering legislation at 
the end of 2001.  In 2004, the UAE strengthened its legal authority 
to combat terrorism and terrorist financing by passing Federal Law 
Number 1 of 2004 on Combating Terror Crimes on July 29, 2004.   In 
2006, the UAE also enacted Law No. 2 of 2006 -- the Cybercrimes Law 
-- which has articles dealing with money laundering and terrorist 
finance.   The UAE Central Bank's Anti-Money Laundering and 
Suspicious Cases Unit (AMLSCU) performs the functions of a financial 
intelligence unit (FIU) and is a member of the Egmont Group. 
 
A.10 Political Violence 
----------------------- 
 
There have been no instances in recent memory involving politically 
motivated damage to projects, or insurgencies that have impacted the 
investment environment. 
 
A.11 Corruption 
--------------- 
There is no evidence that corruption of public officials is a 
systemic problem; however, in 2008, UAE authorities investigated 
several high-profile corruption cases.  Several senior Emirati and 
foreign nationals were dismissed and detained.  In October 2008, the 
UAE Bureau of Accounting (BA) announced the return of 300 million 
Dirhams (USD 81.67 million) to the UAE federal budget which was 
spent illegally in 2007. 
 
The law stipulates that a public servant convicted of embezzlement 
shall be subject to imprisonment for a minimum of five years if the 
crime is connected to counterfeiting.  Article 237 imposes a minimum 
term of one year for accepting a bribe, while anyone convicted of 
attempting to bribe a public servant may be imprisoned for up to 
five years. 
 
American firms are bound by the Foreign Corrupt Practices Act - a 
copy of which may be obtained from the Commercial Section of the 
U.S. Embassy.  In August 2005, the UAE signed the UN Anticorruption 
Convention and ratified it in February 2006. 
 
A.12 Bilateral Investment Agreements 
------------------------------------- 
 
The UAE has signed a variety of bilateral and multilateral trade and 
investment agreements, including six free trade agreements, 45 
related to bilateral trade and economic cooperation, 33 to promote 
investment, and 45 prohibiting double taxation on income.  The UAE 
is involved in Gulf Cooperation Council (GCC) negotiations with 
Australia, China, and other countries on free trade agreements. In 
December 2008, the GCC General-Secretariat announced suspension of 
the GCC FTA negotiations with the European Union. 
 
On March 15, 2004, the United States signed a Trade and Investment 
Framework Agreement (TIFA) with the United Arab Emirates to provide 
a formal framework for dialogue on economic reform and trade 
liberalization.  TIFAs promote the establishment of legal protection 
for investors, improvements in intellectual property right 
protection, more transparent and efficient customs procedures, and 
greater transparency in government and commercial regulations. 
 
The United States began negotiating a Free Trade Agreement with the 
UAE in March 2005.  In early 2007, the United States and the UAE 
announced that despite considerable progress in a number of areas 
under negotiation, they would not be able to complete FTA 
negotiations under the existing time frame for trade promotion 
authority.  The United States and the UAE have since initiated a 
"TIFA Plus" consultative process under the existing bilateral Trade 
and Investment Framework Agreement (TIFA); this process will be used 
to advance trade liberalization in as many areas as possible - 
building where appropriate on progress made during the FTA 
negotiations. 
 
A.13 OPIC and other Investment Insurance Programs 
------------------------------------------ 
 
The UAE has been suspended from U.S. OPIC insurance programs since 
1995 because of the UAEG's lack of compliance with internationally 
recognized worker rights standards, particularly laborers' rights to 
association and collective bargaining.  The ILO reported in April 
2003, however, that the UAE had started to address these concerns. 
 
A.14 Labor 
---------- 
 
The population of the UAE was approximately 4.765 million in 2008, 
according to the Ministry of Economy.  More than 80 percent of 
residents are foreigners, and approximately 98 percent of private 
sector workers in the UAE are non-UAE nationals.  Emiratization of 
the workforce remains a national objective, although mandated hiring 
of nationals has been limited to only a few sectors, such as 
banking, which has a 4% quota, insurance, which has a 5% quota and 
trade, which has a 2% quota for companies employing 50 workers or 
more as well as quotas in the federal government.  In addition, in 
2006, the UAEG added requirements that all secretaries and Public 
Relations Officers must also be Emirati.  The UAE National Human 
Resource Development and Employment Authority (TANMIA), is the 
federal body tasked to boost Emiratization.  Despite these efforts, 
the percentage of UAE nationals to total employees in the private 
sector decreased from 1.79 percent in the end of 2007 to 1.63 
percent in the first half of 2008. 
 
The UAE Government has committed itself to strictly regulating and 
enforcing labor laws, as witnessed by a series of regulatory and 
legislative intiatives.  In February 2007, the Ministry of Labor 
published the proposed new labor law for public comment.  The 
proposed law does not contain any provisions for labor unions or for 
collective bargaining, but the UAE Ministry of Labor continues to 
press businesses and work with countries from which the labor pool 
originates to improve and streamline contracts, ensure timely salary 
payment and maintain adequate living accommodations.  A committee 
constituted from several UAE governmental bodies and experts has 
reportedly been established to discuss standards and a mechanism for 
labor representation. 
 
Businesses in free trade zones must comply with federal labor laws; 
however, the Ministry of Labor does not regulate them.  Instead, 
each free trade zone maintains its own labor department to address 
workers' concerns. 
 
Acceptable Conditions of Work 
 
There are a considerable number of skilled foreign nationals in the 
country who are employed under favorable working conditions. 
However, the country is also a destination for a large number of 
unskilled workers, including approximately 268,000 domestic 
servants, most of them women from South and East Asia, and an even 
larger number of unskilled male workers, mostly from South Asia. 
These unskilled laborers actively compete for jobs in the UAE, and 
many are subject to poor working conditions.  UAE employers tie most 
foreign employee's residency permit or visa to his employment and 
sponsorship.  If the employee terminates his employment and is 
unable to secure new employment and a new sponsor, the employee 
loses residency and could be required to leave the country. 
 
Visas, residence permits, and work permits are required of all 
foreigners in the UAE except nationals from Gulf Cooperation Council 
(GCC) countries. Americans are eligible to receive 10-year, multiple 
entry visas, which authorize stays of up to six months per entry, 
with the possibility of a six-month extension.  U.S. citizens may 
obtain visit visas for business and tourism at the airport upon 
arrival.  These visas do not permit employment in the UAE. 
 
A.15 Foreign Trade Zones/Free Ports 
----------------------------------- 
 
Free Zones in the UAE are home to more than 17,000 companies with a 
total investment estimated at more than USD 21 billion.  Presently, 
38 free trade zones operate in the UAE, with more in the development 
stage.  Overall, these free zones form a vital component of the 
local economy, and serve as major re-export centers to the Gulf 
region. 
 
Since UAE tariffs are low and not levied against many imports, the 
chief attraction of the free zones is the waiver of the requirement 
for majority local ownership.  In the free zones, foreigners may own 
up to 100 percent of the equity in an enterprise.  All free zones 
provide 100 percent import and export tax exemption, 100 percent 
exemption from commercial levies, 100 percent repatriation of 
capital and profits, multi-year leases, easy access to sea and 
airports, buildings for lease, energy connections (often at 
subsidized prices), and assistance in labor recruitment.  In 
addition, the free zone authorities provide significant support 
services, such as sponsorship, worker housing, dining facilities, 
recruitment, and security. 
 
By far the largest and most successful of the free zones is the 
Jebel Ali Free Zone (JAFZA) in Dubai, located 20km south of Dubai 
city adjacent to the Jebel Ali Port.  Over 6000 companies 
representing 80 countries have set up shop in the JAFZA, including 
numerous Fortune 500 firms. 
 
The JAFZA managing authority authorizes three types of licenses:  a 
general license, a specific license, and a national industrial 
license.  The licenses are valid while a company holds a current 
lease from the free zone authority and are renewable annually as 
long as the lease is in force.  The special license is issued to 
companies incorporated, or otherwise legally established, within the 
free zone or outside the UAE. Q such cases, no other license is 
required, and the ownership of the company may be 100 percent 
foreign.  The license is issued for any activity permitted by the 
free zone authority, including manufacturing.  A company with a 
special license can only operate in the JAFZA or outside the UAE, 
but business can be undertaken and sales made in the UAE through or 
to a company holding a valid Dubai EcoQic Department license. 
However, a company with a special license can purchase goods or 
services from within the UAE. 
 
A variety of innovative free zones in Dubai have been established 
since 2000, most notably the TECOM (Technology, Electronic Commerce 
and Media) free zone.  TECOM houses both Internet City and Media 
City, two subdivisions which cater, respectively, to the IT and 
media sectors.  TECOM offers a high bandwidth and state-of-the-art 
IT infrastructure.    Other Dubai free zones include Dubai Health 
Care City, specializing in medical products and services, the 
Mohammed Bin Rashid Technology Park, which aims to promote 
scientific research and development, and to transfer technology 
throughout the region and the Dubai Aid City, which hosts local, 
regional and international relief aid donors, suppliers and 
organizations.  Internet usage in the free zones is not censored as 
it is in the non-free trade zones. 
 
A.16 Foreign Direct Investment Statistics 
----------------------------------------- 
 
The United Nations Conferences on Trade and Development (UNCTAD) 
reports that inward FDI flow for the UAE rose to USD 13.253 billion 
in 2007.  The UNCTAD Inward FDI Performance Index 2004-2007 (141 
economies)listed UAE in 34th place worldwide and 5th place of Arab 
countries in attracting foreign direct investment. 
 
The stock of U.S. foreign direct investment (FDI) in United Arab 
Emirates (on historical-cost basis) was USD 3.846 billion in 2007, 
according to the U.S. Bureau of Economic Analysis.  U.S. FDI in 
United Arab Emirates is concentrated largely in the mining, finance, 
and wholesale trade sectors. 
 
The Abu Dhabi Chamber of Commerce and Industry notes that the 
leading sectors for investment in the UAE are (in order of magnitude 
of investment):  oil and gas field machinery and services, power and 
water, computer/peripherals, medical equipment and supplies, airport 
development and ground equipment, telecommunications, and 
franchising. 
 
There are no restrictions or incentives with regard to the export of 
capital and outward direct investment, and UAE investment abroad is 
significant.  It is conservatively estimated that the Abu Dhabi 
Investment Authority (ADIA) manages an approximate USD 500 billion 
(estimates range upward) in government assets in overseas markets -- 
mostly in the United States, Europe, and Asia. 
Other Emirate level investment authorities primarily from Abu Dhabi 
and Dubai are also actively investing overseas. 
 
 
OLSON