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»Issue 8, Volume 07 www.scarbrough-intl.com » August 2007 |
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BUSINESS NEWS Current Trade Environment UAE The UAE is a Federal Sovereign State, formed in 1971, consisting of seven emirates — Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Quwain, Fujairah and Ras Al Khaimah — and governed by the Supreme Council of the Federation, which is made up of rulers from each emirate. A contracting party to GATT since 1964, the UAE joined the World Trade Organization (WTO) in 1996. The main federal legal instruments on investment in the UAE are the Commercial Companies Law and the Trade Agencies Law and these laws contain provisions limiting and regulating the participation of foreign investors in the UAE domestic economy. Specifically, the Trade Agencies Law designates that importing and distribution activities are reserved for exclusive UAE "agents." However, a significant portion of trade moves through the UAE's free zones (22 in late 2005) where foreign investors can enjoy 100 percent ownership, operate in a tax-free environment and be exempt from the licensing, agency, "emiratization" (hiring of nationals) and national majority-ownership obligations that apply in the domestic economy. Recently, changes have been made to the scope of the Trade Agency Law and reforms are being actively discussed such as adoption of competition legislation, structural reforms, and further liberalization of the services sector. Logistics, transportation, telecommunications, tourism, insurance, construction and the energy sector are considered to be major areas for future investment. The financial sector is developing rapidly, in part through the creation of financial free zones such as the Dubai International Financial Center, a financial free zone regulated by the Emirate of Dubai and home now to more than 100 financial services and associated companies. The main products being imported into the UAE include aircraft (most notably, the development of indigenous flag carriers is seen as an important economic catalyst to economic sustainability), automobiles, drilling equipment, industrial engines and agricultural machinery. In addition, the iron, steel and manufactured metal product industries continue to grow. Many expansion projects are currently taking place, with the expectation that the Gulf region will become one of the important world centers for iron and steel consumption within a few years. Steel requirements in the UAE are expected to grow to 4MM tonnes in the medium term from the current level of 2.5MM tonnes. The Emirate of Abu Dhabi, according to the Abu Dhabi Chamber of Commerce and Industry, is expected to invest more than $200 billion by 2010 in construction, water, electricity and tourism. Another $33 billion is slated for industry, including $22 billion for oil and gas projects. The country is investing in growth and expecting to remain a major trade hub for the region. The UAE realizes that the best way to attract foreign investment is to promote trade-friendly policies. International companies setting up in the UAE can obtain significant cost advantages not generally available internationally. The major factors are no foreign exchange controls; no trade barriers or quotas; competitive import duties (usually 5 percent with many exemptions); competitive labor costs — labor force is multi-lingual and skilled; competitive energy, financing and real estate costs; and no corporate profit or personal income taxes (except for oil companies and branches of foreign banks). An estimated 70 percent of UAE's trade passes through the Emirate of Dubai, which has created a favorable environment for inward investment over the past few years. Today, Dubai enjoys a global reputation as a major economic hub for foreign multi-national corporations (MNCs) due to:
The largest contributor to trade is the Jebel Ali Free Zone where around 5,500 companies from more than 120 countries currently operate. Exciting new projects in Dubai include the Dubai World Central, a planned residential, commercial and logistics complex adjacent to the Jebel Ali Free Zone and Port. This development will also house Dubai Logistics City, the world's first truly integrated logistics platform, with all transport modes, logistics and value added services, including manufacturing and assembly, in a single bonded and Free Zone environment. In addition, a new international airport is being built to handle annual freight capacity of 12 million tonnes and passenger capacity of more than 120 million. -- Len Casley general manger of the JPMorgan branch based in the Dubai International Financial Center |
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