United Arab Emirates

United Arab Emirates

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Picture: World’s 2nd busiest airport in terms of international passengers
 
 
Picture: World’s 2nd busiest airport in terms of international passengers
 
Picture: Foreign citizens: 80% of total population
 
 
Picture: Foreign citizens: 80% of total population
 
Picture: Hong Kong’s largest export market in the Middle East
 
 
Picture: Hong Kong’s largest export market in the Middle East
 
Picture: Dubai’s hotel sector - world’s 3rd most profitable
 
 
Picture: Dubai’s hotel sector - world’s 3rd most profitable
 
Picture: Imports of precious stones and transport equipment grew by CAGR of 20% during 2009-2013
 
 
Picture: Imports of precious stones and transport equipment grew by CAGR of 20% during 2009-2013
 
Picture: World’s most-visited and largest shopping centre – Dubai Mall
 
 
Picture: World’s most-visited and largest shopping centre – Dubai Mall
 
Picture: Abu Dhabi’s population grew by 8% annually during 2005-2012
 
 
Picture: Abu Dhabi’s population grew by 8% annually during 2005-2012
 
Picture: Sharjah - UAE’s manufacturing hub
 
 
Picture: Sharjah - UAE’s manufacturing hub
 
Picture: Abu Dhabi aims at building high-value added industries
 
 
Picture: Abu Dhabi aims at building high-value added industries
 
Picture: Dubai airport - world’s 5th busiest cargo airport
 
 
Picture: Dubai airport - world’s 5th busiest cargo airport
 

 

United Arab Emirates: Market Profile

Picture: UAE factsheet
Picture: UAE factsheet

1. Overview

In the medium term firmer oil prices, a rebound in global trade and easing of fiscal consolidation are expected to promote economic activity, especially as investments ramp up ahead of Dubai’s Expo 2020. This rebound is faced with several downside risks including lower oil prices and tighter global financial conditions.

Source: World Bank

2. Major Economic/Political Events and Upcoming Elections

March 2015
The UAE and four other GCC states take part in Saudi-led air strikes on Houthi rebels in Yemen.

January 2017
Five UAE diplomats are killed in a bomb attack in Afghanistan.

Sources: BBC country profile – Timeline, BMI Political Risk Analysis

3. Major Economic Indicators

Graph: UAE real GDP and inflation
Graph: UAE real GDP and inflation
Graph: UAE GDP by sector (2016)
Graph: UAE GDP by sector (2016)
Graph: UAE unemployment rate
Graph: UAE unemployment rate
Graph: UAE current account balance
Graph: UAE current account balance

Note: (f) forecast
Sources: IMF, World Bank

4. External Trade

4.1 Merchandise Trade

Graph: UAE merchandise trade
Graph: UAE merchandise trade
Graph: UAE major export commodities (2016)
Graph: UAE major export commodities (2016)
Graph: UAE major export markets (2016)
Graph: UAE major export markets (2016)
Graph: UAE major import commodities (2016)
Graph: UAE major import commodities (2016)
Graph: UAE major import markets (2016)
Graph: UAE major import markets (2016)

Sources: WTO, World Bank WITS database

4.2 Trade in Services

Graph: UAE trade in services
Graph: UAE trade in services

5. Trade Policies

  • The United Arab Emirates (UAE) has been a member of WTO since 10 April 1996.

  • The United Arab Emirates is a member of the Gulf Cooperation Council (GCC) alongside Kuwait, Oman, Saudi Arabia and Qatar. Under the GCC common external tariff, the tariff on most products is either duty free or 5%.

  • For cultural and religious reasons alcoholic products are assessed a 50% duty, while tobacco products are assessed a 100% customs duty.

  • Prohibited products include live swine and other products prohibited on security, health and safety grounds. Restricted products include pig meat products and alcoholic beverages which require import licences and, in most cases, the tariff on these products is 200%.

  • A 5% value added tax was intoduced on January 1 2018.The tax will apply to almost all goods and services except basic food items, education and healthcare.

  • Trading (importing and/or exporting), in the UAE requires a trading licence and a trader code which is available from the customs department of each emirate and is valid throughout the UAE. To qualify for a licence the applicant must be a UAE national or a company established in the UAE that is 51% owned by UAE nationals.

  • Imports of all live animals and animal products (except food products of animal origin) and fodder need an import permit issued by the Ministry of Climate Change and Environment. Additionally, all live animals and animal products as well as all plants and plant products are subject to quarantine requirements and need to be accompanied by health certificates.

Source: WTO – Trade Policy Review

6. Trade Agreement

6.1 Multinational Trade Agreements

Active

  1. United Arab Emirates is a member of WTO (Effective date: April 1996).

  2. Gulf Cooperation Council (GCC) (Effective date: May 1981) implemented a customs union that allows free movement of local goods among member states.

    UAE's trade with these countries is tariff-free. Members of GCC - other members are Bahrain, Kuwait, Oman, Qatar and Saudi Arabia. This agreement helps member states to leverage each others' industrial capacity and logistics networks.

    The geographic proximity of these countries and their general adoption of free trade economic policies are factors that foster a competitive business environment.

  3. Greater Arab Free Trade Area (GAFTA) - (Effective date: January 1998) activates the Trade Facilitation and Development Agreement and eliminates most tariffs among the GAFTA members. The 17 members of GAFTA are: Algeria, Bahrain, Egypt, Iraq, Kuwait, Lebanon, Libya, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, United Arab Emirates and Yemen. GAFTA was declared within the Social and Economic Council of the Arab League as an executive programme to activate the Trade Facilitation and Development Agreement and the elimination of most tariffs among the GAFTA members. The trade agreement adopts the method of gradual reduction on taxes and customs (10% per annum) eliminating customs and nontariff barriers on goods traded amongst the 17 Arab countries.

  4. GCC and European Free Trade Association (EFTA) - which comprises Iceland, Liechtenstein and Switzerland signed a FTA which came into force on July 1 2015. The agreement covers the progressive elimination of tariffs in trade in services and manufactured goods as well as investment, and other trade-related issues such as protection of intellectual property, and is fully consistent with provisions of the World Trade Organisation. In addition, bilateral arrangements on agricultural products between three individual EFTA States and the GCC form part of the instruments establishing the free trade area between both sides.

  5. Singapore - GCC FTA (GSFTA) became effective in September 2013. GSFTA eliminates most tariffs (99%) of Singapore's exports to the GCC. This is a comprehensive agreement covering trade in goods, rules of origin, customs procedures, trade in services and government procurement among others. Key sectors benefitting include telecommunication, electrical and electronic equipment, petrochemicals, jewellery, machinery and iron and steel-related industry. The recognition of the halal certification of Singapore's Majlis Ugama Islam Singapura (MUIS) will also pave the way for trade in halal-certified products to gain faster access to the GCC countries.

Under Negotiation

  1. Australia and the GCC share a significant economic relationship, encompassing trade and investment across a broad range of goods and services. The GCC is a key market for agricultural exports such a livestock, meat, dairy products, vegetables, sugar, wheat and other grains. The agreement provides an opportunity to address a range of tariff and non-tariff barriers related to food exports that will benefit the food and drink sectors in UAE.

  2. China and the GCC are also negotiating a trade agreement. Greater trade liberalisation will help develop the industrial and service sectors.

  3. The GCC and India are negotiating a free trade agreement. The agreement is expected to remove restrictive duties, push down tariffs on goods and pave the way for more intensive economic engagement between the nations. More than 50 % of India’s oil and gas come from the GCC countries.

  4. Japan and the GCC are negotiationing a free trade agreement. This agreement will seek to reduce tariffs and the liberalisation of services trade and investment. Japan mainly imports aluminium, natural gas, liquid natural gas and petroleum products from the GCC, while Japan mainly exports electronics, vehicles, machinery, and other industrial products to the GCC.

Source: WTO Regional Trade Agreements database

7. Investment Policy

7.1 Foreign Direct Investment

Graph: UAE FDI stock
Graph: UAE FDI stock
Graph: UAE FDI flow
Graph: UAE FDI flow

7.2 Foreign Direct Investment Policy

  1. Investment promotion agencies exist based on the emirate. For example, the Sharjah Investment and Development Authority, or Shurooq, is an independent government agency that assists investors in finding partnerships in the emirate.

  2. Foreign companies or individuals are limited to 49% ownership/control in any part of the UAE not in a free trade zone, pursuant to law.

  3. 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, with at least a 51% ownership interest of the business.

  4. Branch offices of foreign companies are required to have a national agent with 100% UAE national ownership, unless the foreign company has established its office pursuant to an agreement with the federal or an emirate-level government.

  5. When a public joint stock company lists in the UAE, there is 51% Gulf Cooperation Council (GCC) ownership requirement. UAE nationals must chair and be the majority of board members of any public joint stock company.

  6. Law requires that foreign principals distribute their products in the UAE only through exclusive commercial agents who 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.

Sources: WTO – Trade Policy Review, The International Trade Administration (ITA), U.S. Department of Commerce

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
Free Trade Zones (FTZs) are located throughout the country, with some open to all sectors and some catering for specific industries. FTZs include, but are not limited to, the Dubai Airport Free Zone (DAFZ), Dubai International Financial Centre (DIFC) (typically for financial services), Dubai Internet City (DIC), Dubai Media City (DMC), Dubai Multi Commodities Centre (DMCC), Dubai South (DS), Jebel Ali Free Zone (JAFZ), and Abu Dhabi General Markets (ADGM; typically for financial services).- 100% foreign ownership permitted

- Exemption from import and export taxes

- Exemption from customs duties

- Exemption from corporate income tax

- Exemption from personal income tax

- Freedom to repatriate capital

- Subsidised utilities costs

- Strong logistics connections

- Support services for completing bureaucracy

8. Taxation – 2017

  • Goods and services tax: 5%
  • Corporate income tax: 0%

Source: PwC Tax Booklet

8.1 Important Updates to Taxation Information

  • In January 2018, the UAE Cabinet approved two double tax agreements concluded by the territory in 2017 with Moldova and Croatia.

  • From January 1 2018, a valued added tax of 5% will apply to almost all goods and services except basic food items, education and healthcare.

8.2 Business Taxes

Type of TaxTax Rate and Base
Corporate Income TaxNo federal taxation currently exists in the United Arab Emirates (UAE), although each of the individual Emirates (Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Quwain) has issued corporate tax decrees that theoretically apply to all businesses established in the UAE. Under the Emirate-based tax decrees, corporate income tax (CIT) may be imposed on all companies (including branches and permanent establishments) at rates of up to 55%. However, in practice, CIT is currently only enforced in respect of corporate entities engaged in the production of oil and gas or extraction of other natural resources in the United Arab Emirates.
Personal Income TaxNo personal income tax law enacted in the UAE.
Social security contributionsOnly due with respect to nationals of the UAE. Employer and employee persion contribution rates are 12.5% and 5.0% respectively and are based on the monthly contractual salary, inculding basic allowances, as agreed in the local employment contract.
Value Added Tax (VAT)5.0% applies to all supplies of goods or services, unless a specific measure provides for the zero rate or an exemption.

9. Foreign Worker Requirements

9.1 Localisation Requirements

The UAE government has launched a policy of 'Emiratisation' similar to that of 'Saudisation' in neighbouring Saudi Arabia, which is intended to boost the employment of Emirati nationals in the private sector and reduce reliance on expatriate labour. There are specific local hiring quotas which must be fulfilled for companies with over 50 employees or more, the banking sector, the insurance sector, and the retail sector. Specific jobs are reserved for Emirati citizens through legislation such as HR managers, secretaries and government liaison personnel. These local hiring requirements are not applicable to companies with their operations based in the UAE's free trade zones.

9.2 Obtaining Foreign Worker Permits for Skilled Workers

Non-GCC citizens need to be sponsored by their employer, and therefore need to have a job offer in order to be able to apply for a work permit. Various documents such as educational and professional qualifications, results of medical examinations, and a signed copy of the job contract all need to be lodged with the UAE Ministry of Labour before the work permit will be granted.

9.3 Visa/Travel Restrictions

Citizens of other GCC and EU states do not need a visa to visit the UAE. Citizens from North American states, Central Asian states and Asian states in general can obtain a visa upon arrival, and citizens of African and South American states are required to arrange a visa in advance. Visa processing times are estimated at being 4 to 6 weeks.

9.4 Kafala Sponsorship System

Several changes were made to prevent abuse of worker's rights under the 'Kafala' system which came in to effect from January 1 2016. These included: that job contracts must specifically reflect the terms offered to the employee verbally and must be signed by both parties prior to being submitted to the Emirate Ministry of Labour as part of the formal work permit application; that a contract of employment has come to an end if employer has not met their contractual obligations (e.g. failed to pay their employees for 60 days or more); and allows workers greater freedoms in terms of seeking alternative employment within the UAE and therefore obtaining a new work permit through a new employer.

10. Risks

10.1 Sovereign Credit Ratings


Rating (Outlook)Rating Date
Moody's
Aa2 (stable)27/05/2017
Standard & Poor'sAA (stable)02/07/2007
FitchAA (stable)14/12/2017

Sources: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators


World Ranking
201620172018
Ease of Doing Business Index
34/189
26/190
21/190
Ease of Paying Taxes Index
1/189
1/1901/190
Logistics Performance Index
13/160
N/AN/A
Corruption Perception Index
24/176
21/180N/A
IMD World Competitiveness15/6110/63N/A

Sources: World Bank, IMD, Transparency International

10.3 BMI Risk Indices


World ranking
201620172018
Economic Risk Index Rank56/202
Short-Term Economic Risk Score63.562.165.4
Long-Term Economic Risk Score61.9
63.569.6
Political Risk Index Rank75/202
Short-Term Political Risk Score83.12583.183.1
Long-Term Political Risk Score69.069.669.6
Operational Risk Index Rank18/201
Operational Risk Score727173.8

Source: BMI Research

10.4 BMI Political and Economic Risk Indices

BMI Risk Summary - Q2 2018

POLITICAL RISK

Domestic political risk is extremely low in the UAE. The government retains a strong grip on power, with the partially elected Federal National Council having a limited impact on decision making. Each of the seven emirates enjoys considerable autonomy. That said, since the onset of the Arab Spring there has been a noticeable uptick in criticism from pockets of Islamist opposition groups. The government's crackdown on such groups risks fraying tensions with other states around the region, particularly Qatar, who has supported the Muslim Brotherhood in Egypt and been accused by the UAE of attempting to sow unrest in the Gulf.

ECONOMIC RISK

The UAE has been perhaps the most successful of the Gulf states when it comes to diversifying its economy away from oil, which accounts for just under 35% of GDP. However, with diversification has come greater exposure to the global economy. Tougher regulations (focusing on 'concentration risks' and more stringent loan-to-value ratios for mortgages) for banks which have come into force in the past two years will go some way towards creating a more sustainable development model over the long run.

OPERATIONAL RISK

While the property market was booming, the UAE's key infrastructure - roads, rail, utilities - failed to keep up, resulting in congestion and overstretched services. Following the financial crisis however, the government began investing heavily in rail, port and power projects, to name a few. However, transparency remains an issue, particularly among government-owned/controlled firms, which dominate key sectors such as finance and real estate.

Graph: UAE short term political risk index
Graph: UAE short term political risk index
Graph: UAE long term political risk index
Graph: UAE long term political risk index
Graph: UAE short term economic risk index
Graph: UAE short term economic risk index
Graph: UAE long term economic risk index
Graph: UAE long term economic risk index

10.5 BMI Operational Risk Index


Operational RiskLabour Market RiskLogistics RiskTrade and Investment RiskCrime and Security Risk
UAE Score73.867.872.579.675.1
MENA Average47.449.348.448.143.9
MENA Position (out of 18)11112
MENA Average47.449.348.448.143.9
MENA Position (out of 18)11112
Global Average49.849.849.350.049.9
Global Position (out of 201)181324332

Note: 100 = Lowest risk, 0 = Highest risk
Source: BMI Operational Risk Index

Graph: UAE vs global and regional averages
Graph: UAE vs global and regional averages
Country
Operational Risk Index
Labour Market Risk Index
Logistics Risk IndexTrade and Investment Risk IndexCrime and Secruity Risk Index
UAE73.8
67.8
72.5
79.6
75.1
Qatar66.3
63.967.8
63.1
70.5
Bahrain64.158.471.168.5
58.5
Oman63.2
51.066.459.8
75.4
Saudi Arabia61.8
63.063.261.8
59.2
Jordan58.054.959.759.1
58.3
Kuwait55.352.3
51.151.7
66.2
Morocco53.639.855.262.057.2
Tunisia47.142.346.952.446.7
Egypt45.846.053.546.437.4
Lebanon43.047.9
40.650.0
33.6
Iran42.948.7
51.238.3
33.3
Algeria39.944.039.831.744.2
West Bank and Gaza33.746.430.236.8
21.5
Libya28.344.429.326.013.5
Syria28.1
42.9
26.430.0
12.9
Iraq27.3
43.7
28.825.2
11.5
Yemen21.6
30.6
17.323.0
15.6
Regional Averages47.449.348.448.143.9
Emerging Markets Averages46.848.045.847.546.1
Global Markets Averages49.849.849.350.049.9

Note: Higher score = Lower risk
Source: BMI Operational Risk Index

11. Hong Kong Connection

11.1 Hong Kong’s Trade with United Arab Emirates

Graph: UAE major export commodities to Hong Kong (2017)
Graph: UAE major export commodities to Hong Kong (2017)
Graph: UAE major import commodities from Hong Kong (2017)
Graph: UAE major import commodities from Hong Kong (2017)
Graph: UAE merchandise exports to Hong Kong
Graph: UAE merchandise exports to Hong Kong
Graph: UAE merchandise imports from Hong Kong
Graph: UAE merchandise imports from Hong Kong
Graph: Merchandise imports, Poland
 

2017
Growth rate (%)
Number of Emirati residents visiting Hong KongN/A
N/A
Number of Emirati residents in Hong Kong

Sources: Hong Kong Tourism Board, Hong Kong Immigration Department


2017
Growth rate (%)
Number of GCC residents visiting Hong Kong38,629-22.7
Number of GCC citizens residing in Hong KongN/A
N/A

11.2 Commercial Presence in Hong Kong


2016
Growth rate (%)
Number of United Arab Emirates companies in Hong Kong22
N/A
- Regional headquartersN/A
- Regional officesN/A
- Local offices22

Source: Hong Kong Census & Statistics Department

11.3 Treaties and Agreements between Hong Kong and United Arab Emirates

Double Taxation Avoidance Agreements (DTAs)

Source: Hong Kong Department of Justice

11.4 Chamber of Commerce (or Related Organisations) in Hong Kong

The Arab Chamber of Commerce & Industry

The Arab Chamber of Commerce & Industry (ARABCCI) was established in Hong Kong 2006 as a leading organization at promoting commercial ties between Hong Kong/Greater China and the Arab World. From a base of 8 founding member companies, ARABCCI has now evolved to include an ever-growing number of members. The Chamber is run by business experts for business professionals, dedicated to opening enormous trade opportunities by providing extensive information and professional services to our members.

Address: 20/F, Central Tower, 28 Queens Road, Central, Hong Kong SAR
Email: info@arabcci.org, secretariat@arabcci.org
Tel: (852) 2159 9170

Source: Directory of Hong Kong Trade and Industrial Organisations, Hong Kong Trade and Industry Department

United Arab Emirates Consulate in Hong Kong

Address: Unit 2205-6, 22nd Floor, Mass Mutual Tower, 38 Gloucester Road, Wanchai, Hong Kong SAR
Email: cg@uaehk.com, vc@uaehk.com
Hours of Business: Monday to Friday, 10:00 a.m. - 4:00 p.m.
Consul General: Mr. Ahmed Naser Alkhaja
Tel: (852) 2866 1823
Fax: (852) 2866 1690

Source: Hong Kong Protocol Division of Government Secretariat

11.5 Visa Requirements for Hong Kong Residents

Visa upon arrival valid for 30 days.

Source: Visa on Demand


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