United Arab Emirate

United Arab Emirate
Picture: World’s 2nd busiest airport in terms of international passengers
Picture: Dubai International Airport - world’s 2nd busiest international passengers airport
Picture: Dubai’s hotel sector - world’s 3rd most profitable
Picture: Dubai’s hotel sector is the world’s 3rd most profitable in 2013, ahead of London and Sydney
Picture: World’s most-visited and largest shopping centre – Dubai Mall
Picture: Dubai Mall - world’s largest shopping centre and most-visited mall
Picture: Sharjah - UAE’s manufacturing hub
Picture: The UAE’s 3rd largest economy, Sharjah, contributes more than 48% of the country’s industrial output
Picture: Foreign citizens: 80% of total population
Picture: Foreign citizens account for about 80% of the UAE’s population
Picture: Abu Dhabi’s population grew by 8% annually during 2005-2012
Picture: Abu Dhabi’s average population growth rate was 8% during 2005-2012
Picture: Abu Dhabi aims at building high-value added industries
Picture: Building sophisticated and high-value added industries is a key priority in Abu Dhabi’s diversification strategy
Picture: Hong Kong’s largest export market in the Middle East
Picture: The UAE is Hong Kong’s largest export market in the Middle East
Picture: Imports of precious stones and transport equipment grew by CAGR of 20% during 2009-2013
Picture: Dubai’s import of precious stones and transport equipment grew by about 20% annually during 2009-2013
Picture: Dubai airport - world’s 5th busiest cargo airport
Picture: Dubai International Airport is the world’s 5th busiest cargo airport in 2013

United Arab Emirates: Market Profile

Table: Major Economic Indicators (United Arab Emirates)
Table: Major Economic Indicators (United Arab Emirates)

Recent Developments

  • UAE[1] GDP is expected to grow moderately at 1.5% in 2017 due to fiscal consolidation and an expected fall of oil output following the OPEC production cut agreement.
  • In its 2017 budget, Dubai allocated Dh8 billion (US$2.2 billion) for infrastructure spending, a 27% increase from 2016, as the emirate prepares for World Expo 2020.
  • In February 2016, the UAE announced to introduce a VAT of 5% in 2018, with exemptions covering 100 food items, healthcare and education.
  • The UAE is Hong Kong's largest export market in the Middle East. In the first four months of 2017, Hong Kong's total exports to the UAE dropped by 9.5% YOY to US$ 2,209 million.

Current Economic Situation

The UAE’s services, industry and agriculture sectors account for, respectively, 55%, 44% and 1% of the combined GDP of the seven emirates. Among the seven, Abu Dhabi and Dubai take up the lion’s share of the country’s GDP. Abu Dhabi, accounting for about 60% of the UAE’s GDP, owns around 10% of the world’s oil reserves and about 90% of the country’s oil reserves, is focused on energy-based industries. Meanwhile, Dubai, the second largest economy in the UAE, is known for its commercial and financial services, tourism, logistics and trading.

Revised statistics released by the Federal Competitiveness and Statistics Authority (FCSA) indicated that non-oil GDP growth slowed to 2.7% in 2016. Economic sentiment in the UAE has gradually stabilised along with a mild recovery of oil prices since 2H 2016. The Economic Composite Indicator (ECI), a quarterly tracker of the non-oil economic activity, grew by 3.1% in Q1 2017, up from 3.0% and 2.6% in the previous two quarters. On the other hand, the UAE’s oil GDP growth slowed to 3.8% in 2016 following an expansion of 5.4% in 2015. For the whole year of 2017, the UAE economy is expected to grow moderately at 1.5% due to fiscal consolidation and an expected fall of oil output following the OPEC production cut agreement.

In November 2016, OPEC countries agreed with non-OPEC producers to curtail oil production, the first time since 2008, with the agreement extended in May 2017 for nine months to March 2018. However, there are growing market calls that oil suppliers will have to enlarge production cuts to reduce the global supply glut as US shale oil production continue to rise. In April 2017, the UAE ranked fourth in oil output at 2.842 million barrels per day (MBD) among the 14-member OPEC, trailing Saudi Arabia, Iraq and Iran.

To achieve fiscal consolidation amid declining government revenues, the UAE government has introduced a number of measures to reduce government spending through subsidy reforms. In January 2015, Abu Dhabi took steps to reduce subsidies by introducing usage-based water and electricity tariff systems. In August 2015, the UAE government removed fuel subsidies in petroleum, making it the first oil producer in the Middle East to deregulate energy prices. Subsidy reforms are expected to help ease pressures on the budget to allow savings to be directed towards financing transport and other infrastructure projects.

To further strengthen their revenue base and reduce dependence on oil prices, the UAE announced in February 2016 to introduce value added tax (VAT) at 5% from January 2018, with exemptions including 100 food items, healthcare and education. In the first year of VAT introduction, the UAE is expected to generate Dh12 billion (US$3.3 billion) of new tax revenue.

Economic Diversification

With an aim to reduce the contribution from the oil-related sectors, the UAE strives to diversify its economy by developing tourism, retail, trade and real estate industries. The UAE is adhering to its long-term strategy to diversify its national economy, from slightly less than 70% of the country’s GDP currently, to as high as 80% in 2021. In November 2015, the UAE announced a Dh300 billion (US$81.7 billion) plan to foster a knowledge economy and innovation, which will include initiatives with major investments in education, health, energy, transport, space and water. The plan also includes tripling the labour force in the “knowledge economy” by 2021.

The UAE is well known for its rapid infrastructure and construction development. Mega construction projects announced in 2016 included the metro extension project in Dubai (US$2.9 billion), second phase of the Atlantis Hotel on The Palm Jumeirah (US$840 million), and Nakheel’s Palm Gateway Towers (US$380 million).

Dubai won the bid to host the 2020 World Expo in 2013. Expo-related infrastructure works have created many business opportunities in the construction and tourism sectors. In its 2017 budget, the Dubai government allocated Dh8 billion (US$2.2 billion) for infrastructure spending, a 27% increase from 2016. In addition to awarding 47 construction projects worth US$3 billion in 2017, a further 98 non-construction contracts totalling more than US$98 million will also be disbursed in the same year, ranging from legal advisory services to event management and merchandising.

Dubai is also home to the largest theme park resort in the Middle East. Opened in October 2016, the US$3.6 billion Dubai Parks and Resorts comprises three theme parks (Bollywood Parks, Motiongate Dubai, and Legoland) and cover 30.6 million sq m of land. The construction of Bluewaters Island, a retail, residential, hospitality and entertainment complex off the coast of the Jumeirah Beach Residence in Dubai, is also set to complete in 2018.

The logistics industry has become increasingly important to the country’s economic diversification. As a trading and transportation hub in the MENA region, Dubai is the region’s largest container handler, with container throughput more than doubling from 7.6 million TEUs to 15.6 million TEUs between 2005 and 2015. In 2016, Dubai handled 14.8 million TEUs, ranking the 9th busiest seaport in the world.

Thanks to the expansion of airport infrastructure and airline networks, passenger traffic in the Dubai International Airport (DIA) grew 7.2% to reach a historical high of 83.7 million in 2016, making it the world’s busiest airport for international passengers. Despite a shift of cargo operations to Al Maktoum International Airport (AMIA) at Dubai South (previously named as Dubai World Central), DIA handled a record volume of 2.59 million tonnes of aircargo in 2016, increasing by 3.4% from 2015. AMIA, Dubai’s second airport, started managing passenger traffic in October 2013 after launching its cargo operations in 2010. Currently, there are over 30 freight operators at AMIA, including Emirates’ SkyCargo and Hong Kong-based Cathay Pacific. In 2015, the Dubai authorities announced plans to expand AMIA’s passenger terminal capacity to 130 million passengers per annum in 2022.

Financial Development

The UAE has become as an investment safe haven amid continuing conflicts in different countries in the Middle East and North Africa (MENA) region. To enhance investor confidence and raise UAE’s business environment to global standards, a new commercial law was introduced in 2015, covering corporate governance, shareholders protection and corporate social responsibility.

The global Islamic finance sector has been growing rapidly. The UAE government, particularly Dubai government has taken the lead in ensuring the emirate being a leading hub for Sukuk trading. As of March 2017, a total value of US$ 52.1 billion of Sukuk was listed in Dubai, making it the world’s largest Sukuk listing centre by value. 

The Dubai International Financial Centre (DIFC), a free zone located in Dubai’s central business district, is one of the leading financial centres in the region. The DIFC is focussed on facilitating business transactions, trade and investments across the South-South corridor and has undertaken a number of overseas roadshows, including China, India, Singapore and the UK. The DIFC is also promoting the growth of FinTech – it is a member of the Global Blockchain Council, having launched the region’s first FinTech accelerator programme together with Accenture in 2017.

Investment Policy

The UAE welcomes FDI and highlights it as a key part of its long-term economic plan, with a goal to raise inward FDI from 2.7% of its gross national product (GNP) in 2014 to 5% in 2021. Various emirates in the UAE have set up their own investment promotion units. The Abu Dhabi Department of Economic Development (DED) is responsible for leading the emirate’s economic agenda towards a balanced, diversified and sustainable knowledge-based economy. In attracting FDI, Abu Dhabi provides many investment incentives, including zero corporate tax and income tax, with more details found at the DED website.

In 2015, the Abu Dhabi Investment Attraction Committee has been set up to draft a FDI attraction strategy that focus on sectors already identified under the Abu Dhabi Economic Vision 2030. These sectors include industry, tourism, transport and logistics, financial services, insurance, media, energy, construction, real estate, telecom, information technology, health and education.

In Dubai, a new investment promotion agency under the emirate’s Department of Economic Development was established in 2014. The Dubai Investment Development Agency is tasked with enhancing Dubai's position as a global economic hub for attracting investment, targeting strategic sectors including manufacturing, logistics, information technology, green technology, retail, tourism and healthcare.

Free Zones

Dubai was the first emirate in the UAE to pioneer the free zone model, offering foreign businesses attractive concessions and investment incentives. Currently, there are over 40 free zones in the UAE and many of them have specialised themes such as finance, logistics, media, healthcare, textiles and automobile. Companies in free zones can usually enjoy 100% foreign ownership and profit repatriation, with no corporate tax, no customs duty, no currency restrictions, no labour restrictions and no trade barriers or quotas. A  Free Zone Authority (FZA)governs each free zone and is responsible for issuing operating licenses. Further details can be found at the website of the UAE Free Zones.

Dubai’s Jebel Ali Free Zone (JAFZA), for example, is one of the largest and most successful free zones. In 2016, JAFZA attracted 460 new companies, of which 21% came from the Asia-Pacific region. Currently, JAFZA is home to more than 7,000 companies including more than 100 Global Fortune 500 enterprises. These companies are engaged in a range of industrial and service sectors, majority of which involved in trading activities, and the rest in the manufacturing and logistics sectors. In April 2017, China National Petroleum Corp (CNPC) announced plans to establish its regional headquarters in JAFZA.

While recently there are plans to relax the current 49% ownership restriction to allow 100% foreign ownership of companies outside free zones in certain strategic sectors, it is worth noticing that the overall regulatory and legal framework in the UAE still favours local over foreign investors. There is no national treatment for investors in the UAE and foreign ownership of land remains restricted.

Foreign Investment

The UAE accounts for nearly 30% of total FDI stock in the Gulf Cooperation Council (GCC)[2] . According to the 2016 World investment Report published by UNCTAD, UAE’s cumulative FDI reached US$111.1 billion in 2015, a yearly growth of 11%. The bulk of FDI was concentrated in the sectors of real estate, trade and car repairs, finance and insurance and manufacturing. China’s investment in the UAE has been growing in recent years, with cumulative FDI rising from US$764.3 million in 2010 to US$4.6 billion in 2015.

Trade Policy

The UAE is a member of the World Trade Organisation (WTO), and maintains a rather liberal trade regime. Imports are subject to few controls except for the import of arms and ammunition, alcoholic beverages, agricultural pesticides, narcotics and pork products. Israeli goods are also prohibited. There are no exchange controls in the UAE. However, all importers have to apply for a licence, and an importer can import only those goods specified in the licence.

Customs duty is calculated on the CIF value at the rate of 5% for most products. Imports of intoxicating liquors, however, are subject to a 50% customs duty on their CIF value, while the rate for tobacco products is 100%. CIF value will normally be calculated on the declared value of the shipment.

There is no specific labelling requirement on goods in general, but food labels have to contain product and brand names, production and expiry dates, country of origin, name of the manufacturer, net weight in metric units, and a list of ingredients and additives in descending order of proportion. All fats and oils used as ingredients must be specifically identified on the label. Labels should be in Arabic, or both Arabic and English.

The tie between the UAE and its fellow members of the GCC is strong. In November 1999, the GCC formed a customs union, which took effect from 1 January 2003. The accord establishes a single tariff of 5% for most goods imported from non-member countries. It also provides a list of other essential items that can be imported duty-free. Under the accord, goods imported into the GCC area can be freely transported subsequently throughout the region without paying additional tariffs.

Regional Trade Agreements

On the regional level, The UAE seeks to deepen mutually beneficial collaboration with Arab nations through the Greater Arab Free Trade Area Agreement (GAFTA). Under the GAFTA, which came into force on 1998, the UAE can enjoy free trade with Algeria, Bahrain, Egypt, Iraq, Kuwait, Lebanon, Libya, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Sudan, Syria, Tunisia and Yemen.

International Trade Agreements

As part of the GCC, the UAE has free trade agreements (FTAs) with Singapore, New Zealand and the European Free Trade Association (EFTA) of Switzerland, Norway, Iceland, and the Principality of Liechtenstein. Negotiations on the establishment of FTA with the EU, Japan, China, India, Pakistan, Turkey, Australia, Korea and the Group of Mercosur which include Brazil, Argentina, Uruguay and Paraguay are also on-going.

The UAE has concluded double taxation agreement (DTAs) with a number of countries/territories including China. On the heels of concluding a Comprehensive Double Taxation Agreement with Hong Kong in 2014, negotiation of an Investment Promotion and Protection Agreement (IPPA) was also concluded in 2016.

Hong Kong's Trade with UAE[3]

The UAE is Hong Kong's largest export market in the Middle East. In the first four months of 2017, Hong Kong's total exports to the UAE dropped by 9.5% YOY to US$2,209 million. Major export items included pearls, precious and semi-precious stones (US$896 million, 40.6% of total, -26.8% YOY), telecom equipment and parts (US$757 million, 34.3% of total, +37% YOY), engines and motors, non-electric, and parts (US$78 million, 3.6% of total, -20.8% YOY).

Hong Kong's imports from the UAE increased by 7.2% YOY to US$1,510 million in the same period. Major import items included jewellery (US$587 million, 38.9% of total, +41.9% YOY), pearls, precious and semi-precious stones (US$574 million, 38% of total, -18.6% YOY), telecom equipment and parts (US$118 million, 7.8% of total, +17.5% YOY).

Table: Hong Kong Trade with UAE
Table: Hong Kong Trade with UAE

The UAE’s Involvement in Hong Kong’s Economy

According to the Census & Statistics Department of Hong Kong, there were 22 UAE local companies with a presence in Hong Kong as of June 2016. UAE companies in Hong Kong include the National Bank of Abu Dhabi (NBAD), Mashreq Bank, and Emirates Airlines.

More Information

More information on the Belt and Road countries’ economic and investment environment, tax and other subjects that are important in considering investment and doing business are available in The Belt and Road Initiative: Country Business Guides.

Related information: UAE infographics


[1]  The UAE consists of seven emirates, namely Abu Dhabi, Dubai, Sharjah, Ras Al Khaimah, Fujairah, Umm al-Qaiwain and Ajman.

[2]  Gulf Cooperation Council (GCC) comprises of six Middle Eastern countries - Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain and Oman.

[3]  Since offshore trade has not been recorded by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.


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