For many countries with a limited amount of capital, Foreign Direct Investment (FDI) is a significant source of financial addition to their funds. It’s from the investments of other better-off countries, having business operations as investments inside that nation.
Since the United Arab Emirates (UAE) is ranked 12th in FDI inflows, it is seen as conducive for business setup, especially in Dubai. It is suggested even more so now to incorporate a business because of the growing economy and a list of strengths seen in the country or its center in Dubai.
According to the Global Investment Report issued by the United Nations Conference on Trade and Development (UNCTAD), the UAE is the second most significant Foreign Direct Investment (FDI) in Western Asia. Since the nation has been leading the Arab countries when it comes to FDI, it is worth investing in the UAE. Company incorporation happens almost every day in Dubai, and this is simply the continuation of the effects of having significant FDI inflows. It doesn’t just end there since more FDI inflows are expected in the coming years, hence increasing the country's growth.
Why is Dubai worth Investing in?
A few items make up the list of strengths of Dubai that business people see as a great idea to set up a business. Being one of the open hubs for trade and investment in the UAE, Dubai has been a long-standing Emirate as a preferred destination for investment. The reasons being -
- Individuals and corporations are not directly taxed (this is, however, excludes banking, oil, and insurance operators).
- Exchange control is non-existent and limitation of returning funds to its country of origin.
- The banking sector is reliable and profitable, and foreign investments have fair regulations.
- Its foreign labour force is cheap. Its transport and production infrastructures are adequate as the hydrocarbon income does the financing in this one. As mentioned above, the energy costs are not expensive at all.
- From 2015 to 2018, Dubai attracted a total of $21.6 billion in FDI for artificial intelligence and robotics, said to be the highest in the world.
- Dubai has diversified its economy in so many industries that each potential investor has various options for setting up a business.
- Due to the presence of different international airports and seaports, Dubai has become a trade hub. More than 6500 weekly flights through Dubai airports and 140 airlines directly connect Dubai to 260 destinations.
- Due to international events, tourism, and trade shows, Dubai is the fourth most visited destination in 2016, according to the MasterCard 2016 Global Destination Cities Index.
- The economic and political stability offered by the country which has a positive influence on Dubai
- Registering a Dubai company is very easy and fast, which is one of the most critical aspects quoted by foreign investors.
- There are a variety of industries in which foreign investors already thrive in and which are used by other abroad entrepreneurs who want to come here;
- Dubai is one of the world's wealthiest cities, and it offers a good quality of life and high living standards.
- Dubai is one of the leading trading hubs in the Middle Eastern region and the Gulf Cooperation Council.
- Dubai has one of the most impressive infrastructures in the world in terms of road and airways.
Free Investment Zones in Dubai
Dubai provides state-of-art infrastructure and logistics as well as strategic sectors for investments. Dubai tops the chart among all of the Middle Eastern cities for the quality of life index. Dubai has many free trade zones, particularly areas that are tax-free and customs duty-free for foreign investors.
Few of the most important free trade zones in Dubai are Jebel Ali, the International Media Production Zone, the Dubai Media City, the Dubai Biotechnology and Research Park, the Healthcare City, the Maritime City, the Cars and Automotive Zone, the Airport Free Zone, the Sports City or the Design District.
What to Consider while Investing in Dubai?
Look at the pointers below -
The strengths of the UAE for FDI are:
- No direct taxation of corporations (apart from oil, banking, and insurance industry) or of individuals
- No foreign exchange control or constraints related to the repatriation of funds
- Good-quality business climate
- Long-term political stability
- The dynamic and diversified economy
- Vibrant hydrocarbons resources
- Reliable and profitable banking sector with a robust sovereign fund and favorable regulations for foreign investments
- The geographical location of the country, making it a potential platform of influence on the Gulf, Iran, Asia, and the Middle-East
- Low-cost foreign labor force
- Good production and transport infrastructure (financed by hydrocarbon income)
- Easy Access to low-cost energy
The disadvantages of the UAE for FDI are:
- Dependence on hydrocarbons
- The nation imports a lot of manufactured goods.
- Dependence on the international financial situation
- Risks of speculative bubbles
- A lack of flexibility in monetary policy
- Inadequacy of the national statistical system
- Degradation of the regional geopolitical environment
- Legal obstacles to a foreign investment like the interdiction (except for free zones) of more than 49% of a local company's shareholding for a foreign investor and the compulsion to hire a local service agent for the branch and representative offices of foreign companies.
These pointers will help you understand the current scenario better.
We at Commitbiz can help you set up your business in Dubai. Get in touch with us today!
1. What is the rank of the UAE according to the Global Investment Report?
UAE ranks 2nd in terms of foreign direct investment.
2. Which are the most important free zones for business investors in Dubai?
The important free trade zones are Jebel Ali, International Media Production Zone, Dubai Media City, Dubai Biotechnology and Research Park, the Healthcare City, the Maritime City, the Cars and Automotive Zone, the Airport Free Zone, and the Design District.
3. Are repatriation of funds allowed after we invest in Dubai?
Yes, repatriation is allowed as there are no constraints or foreign exchange control.
4. Are there any direct taxation of corporations or of individuals while investing in Dubai?
No, direct taxation is there except for banking, oil, and the insurance industry.
5. Does the United Arab Emirates depend on hydrocarbons?
Yes, UAE’s dependence on hydrocarbons turns out to be disadvantageous in terms of FDI.