VZCZCXYZ0000
RR RUEHWEB

DE RUEHAD #0072/01 0190633
ZNR UUUUU ZZH
R 190600Z JAN 10
FM AMEMBASSY ABU DHABI
TO RUEHC/SECSTATE WASHDC 0132
INFO RUCPCIM/CIM NTDB WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHAD/AMEMBASSY ABU DHABI
RUEHDE/AMCONSUL DUBAI

UNCLAS ABU DHABI 000072 
 
SIPDIS 
STATE FOR EB/IFD/OIA 
STATE PASS TO USTR 
CCG 
 
E.O. 12958: N/A 
TAGS: ECON EINV EFIN ETRD ELAB KTDB PGOV OPIC USTR AE
SUBJECT: UAE INVESTMENT CLIMATE STATEMENT 2010 
 
REF: 09 STATE 124006 
 
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" across the UAE 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 drafted a 
federal law for foreign direct investment (FDI) which is expected 
to enter into force during 2010, 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.  Some of the sectors which 
may be liberalized are those with high added value, including 
education, health, professional services, computer-related services 
and technology transfer. 
 
 
 
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 108 of the 135 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 and 2009.  As a result, some 
UAE public shareholding companies have decided to reduce the 
percentage of shares available for foreign ownership. 
 
 
 
 
In August 2009, the UAE President issued a decree to amend Article 
227 of the Federal Company Law Number 8 of 1984 and abolish the AED 
150,000 (USD 40,838) minimum capital requirement for establishing a 
limited liability company.  The removal of the compulsory capital 
requirement is designed to encourage small and medium sized 
enterprise development. 
 
 
 
 
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. In September 
2009, the Minister of Economy announced that the UAE is considering 
raising the foreign ownership ceiling from the current 49 percent 
limit and drafting an industry law that allows 100 percent foreign 
ownership in the industrial sector. 
 
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.  Individual emirate policies allow non-GCC 
nationals to freehold or leasehold rights in designated areas  but 
does not give property owners permanent residence visas or an 
automatic right to work in the Emirate.  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 February 2009, the Higher Corporation for Specialized Economic 
Zones (ZonesCorp), an industrial zone based in Abu Dhabi, signed 
Memorandums of Understanding with the Ministry of Economy (MoE) and 
the Abu Dhabi Chamber of Commerce and Industry (ADCCI) to develop 
an ideal industrial environment in Abu Dhabi and facilities, 
transactions and services for local, regional and international 
investors.  Through the electronic exchange of data and 
information, the MoU gives ZonesCorp the authority to issue, amend 
and renew Chamber of Commerce Certificates for industrial 
businesses operating in the industrial cities, as well as collect 
fees on the Chamber's behalf, streamlining the process and saving 
time for investors. ZonesCorp has also established a one-stop-shop 
for investors. 
 
In November 2004, the UAE announced its intent to open up the 
insurance sector to new foreign insurance companies.  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.  No new 
insurance companies or new branches have been authorized since 
¶2008.  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 also a 
one-stop-shop for investors , with the exception of Israeli 
currency and the currencies of those countries subject to United 
Nations sanctions. 
 
 
 
A.2 Conversion and Transfer Policies 
 
------------------------------------- 
 
 
 
The UAE's exchange system is generally free of restrictions on 
payments and transfers from international transactions.  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. In 2009, UAE has withdrawn from the anticipated GCC 
monetary union, which was expected in 2010. 
 
 
 
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 June 2009, the Abu 
Dhabi Judicial Department (ADJD) had established commercial 
directories, including directories for bonds and shares, banks, 
construction and real estate disputes, insurance, and financial 
papers. 
 
 
 
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. In May 2009, Sharjah issued an 
Emiri Decree (No. 6 of 2009) concerning the formation of the 
Sharjah International Commercial Arbitration Center, under the 
umbrella of the Sharjah Chamber of Commerce. 
 
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.  A domestic mortgage 
industry is also developing. 
 
 
 
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 (MoE) 
established  offices for copyright, trademark, and patent, each 
under different section at the MoE..  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 36 percent in 2009.  The UAE is 
recognized as the regional leader in fighting computer software 
piracy.  In 2009, the UAE launched several campaigns against piracy 
and seized and destroyed thousands of pirated CDs, auto spare 
parts, perfumes, air fresheners, electrical devices, sport 
equipment, medicines, movies and music discs.  In 2009, industry 
estimated that piracy resulted in almost $170 million (AED 623 
million) in losses to the UAE economy in 2008.  According to UAE 
officials, counterfeit and fake goods cost UAE economy around USD 
408 million (1.5 billion Dirhams) annually. 
 
 
 
 
 
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.  As part of the GCC Customs Union, the UAE and the 
other five Member States are working toward unifying their IP 
regimes. In this respect, the GCC is preparing a draft common 
trademark law. All six Member States are expected to adopt this law 
 
as national legislation in order to implement it. 
 
 
 
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, which are publicly available, vary from 
emirate to emirate. 
 
 
 
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.  The government is considering 
revising bankruptcy legislation in the wake of the global financial 
crisis. 
 
 
 
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. According to Central Bank statistics, there were no 
new foreign bank branches licensed in 2009, but 6 new foreign 
electronic banking services units were authorized.  In 2009, local 
banks opened 43 new branches, 6 new electronic banking services 
units, and 9 new pay offices. 
 
 
 
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 merged Emirates Bank International and National 
Bank of Dubai), 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 structure of the merger is still not finalized, 
 
although it was expected to be announced by late 2009. 
 
 
 
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. In the past year, 
UAE banks adopted more conservative lending policies and raised 
interest rates on time deposits, closing the gap between loans and 
deposits to an estimated USD 6.64 billion (24.4 billion Dirhams) in 
November 2009. 
 
 
 
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 Competition from State Owned Enterprises 
 
--------------------------------------------- 
 
 
 
Many fully or partially state-owned companies have grown large and 
efficient enough to compete effectively for business and financing 
in local and regional markets. 
 
 
 
A.11 Corporate Social Responsibility 
 
------------------------------------ 
 
 
 
Many companies in the UAE, including local and foreign companies, 
participate in corporate social responsibility programs, including 
employing social programs, humanitarian assistance, and 
environmental issues. 
 
 
 
A.12 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.13 Corruption 
 
--------------- 
 
 
 
 
 
Transparency International's 2009 report ranks the UAE 35th 
globally and second among Arab countries, after Qatar, in 
transparency and combating corruption. There is no evidence that 
corruption of public officials is a systemic problem; however, in 
2008 and 2009, UAE authorities investigated several high-profile 
 
corruption cases, including two cases involving two former 
ministers.  Several senior Emirati and foreign nationals were 
dismissed and detained.  Dubai Police referred 36 alleged bribery 
cases for prosecution in 2009. 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.  In 
August 2005, the UAE signed the UN Anticorruption Convention and 
ratified it in February 2006. 
 
 
 
A.14 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 49 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 
June 2009, the GCC concluded a Free Trade Agreement with Iceland, 
Liechtenstein, Norway and Switzerland (the European Free Trade 
Association). 
 
 
 
In March 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.15 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.16 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.  In May 2009, the 
Cabinet approved the establishment of the UAE Emiratization Council 
(UEC), which is responsible for formulating policies and standards 
to promote Emiratization and for supporting the development of 
skills and competitiveness among nationals. 
 
 
 
 
 
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. According to 
a 2009 Ministry of Labor study, non-Arab Asians constitute 88 
percent of the total workforce in the private sector, while Arab 
nationals including Emiratis add up to a mere 10 percent, and other 
nationalities comprise just 2 percent. 
 
 
 
 
The UAE Government has committed itself to strictly regulating and 
enforcing labor laws, as witnessed by a series of regulatory and 
legislative initiatives.  In February 2007, the Ministry of Labor 
published the proposed new labor law for public comment.  The 
proposed law, which still not finalized, 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. 
 
 
 
In 2009, the Ministry of Labor introduced a new electronic wage 
protection system (WPS) designed to combat non-payment of wages. 
This direct deposit system creates an electronic record of payment 
for the employer and employee.  Implementation is being phased in 
according to company size. 
 
 
 
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. In October 2009, UAE issued a requirement that most diplomatic 
or official passport holders obtain visas prior to their travel to 
the UAE. 
 
 
 
A.17 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.  In 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 Economic 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.18 Foreign Direct Investment Statistics 
 
----------------------------------------- 
 
 
 
The United Nations Conferences on Trade and Development (UNCTAD) 
reports that inward FDI flow for the UAE rose to USD 13.7 billion 
in 2008.  The UNCTAD Inward FDI Performance Index 2004-2007 (141 
economies) listed the UAE in 34th place worldwide and 5th place 
among 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 3.423 billion in 2008, 
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