Last week I took part in a webinar that explored how Canadian companies can take advantage of the many business opportunities in the United Arab Emirates. If you weren’t part of the live audience, I urge you to watch it on-demand to get a quick overview of this dynamic market—especially some of the recent legislative changes that will make it easier than ever to do business there. Fellow panelists included Owais Ahmed, EDC’s Chief Representative for the Middle East & North Africa Region, as well as Ross Prusakowski, a senior economist and country risk analyst with EDC.
UAE market snapshot
It might surprise you to learn that the UAE ranks right up there—in the 21st spot to be exact—of the 190 countries monitored by the World Bank for ease of doing business. It’s no wonder that Dubai, perhaps best known for its unique skyscrapers and megastructure Palm Islands, was chosen to host the World Expo in 2020. Construction is booming, and Canadian infrastructure sector companies would do well to take a closer look at Dubai. Abu Dhabi has announced a $45 billion integrated petrochemical project, which speaks to huge opportunities for Canadian companies in the oil and gas sector as well.
But the story doesn’t end there.
The UAE is a significant regional hub for air and sea freight, not to mention tourism. Their economy is much more diverse relative to other countries in the Middle East, and a quick review of their trade patterns with Canada bears this out. About half of all Canadian goods exports are in the agrifood sector, not a huge stretch when you consider how wealthy the UAE population is, and how evolving consumer tastes have translated into high demand for quality Canadian products. Our automotive, machinery, and computer equipment sectors also fare well in this market.
Last year, foreign affiliate sales topped the $668 million mark. And while Canadian imports from the UAE were only $189 million, the UAE came close to spending $4 billion in direct investment in Canada.
What’s driving the UAE economy?
A look at the UAE economy is really a tale of two realities. On the one hand, there is the well-developed oil economy, which can be volatile as it follows global oil-price dynamics. But on the other hand, there’s the non-oil segment, which is well-positioned for solid, continuous growth. Keep in mind that Dubai is where many imports first reach the Gulf, then get packaged into smaller shipments and sent off to other states in the region. So it’s a commercial logistical centre to be sure, but it’s also a business travel hub as well. By diversifying their economy, the UAE has been able to reduce some of its reliance on oil, and is now focusing on longer-term planning, with infrastructure and transportation networks being key initiatives for future growth.
Numerous free trade zones can be found throughout the seven emirates, offering 100 per cent foreign ownership with zero taxes. The UAE government has continued to make concerted efforts to improve its business environment not only in the free zones, but overall as well. A new law was recently passed that will allow a number of sectors to operate without any foreign ownership restrictions. As well, visa periods, which typically expire after two to three years, will now be extended for up to 10 years. They are also unfolding their first bankruptcy law, which up until now had been an area of uncertainty that held back foreign investors. And in an effort to solidify its revenue base, the UAE government implemented a new five per cent value-added tax (VAT), which came into effect at the beginning of the year. This will affect Emirati businesses through the reverse charge mechanism, but the new VAT will have no practical impact on Canadian businesses exporting goods or services into the UAE.
5 ways to start doing business in the UAE
As part of the Trade Commissioner Service in Dubai, it’s my job to help prepare Canadian companies to do business in the UAE. We can help by assessing your market potential and can provide you with advice on an entry strategy. As well, we have a deep network of contacts and service providers, and can put you in touch with local suppliers, potential partners, government agencies and any other contacts that you might need. And if you run into challenges, we can help you stick-handle those difficulties.
So you’ve done your homework and determined that the UAE is a market you can succeed in...what’s the next step?
1. Select a local sponsor who is a UAE national
Late last month, the government announced new rules that will allow 100% foreign ownership of businesses that set-up outside the established free zones. But keep in mind, until this comes into effect, you are required to take on an Emirate national as a 51% partner and local sponsor.
2. Select a Free Zone if you wish to own your business 100%
Free zones offer three great advantages: 100% ownership, speedy start-up, and duty-free customs boundaries. Most free zones are set up to accommodate different industries, so choose one that best suits your sector.
3. Select a location that optimizes suitability, convenience, and costs
You’ll need to weigh different criteria like distance, cost, and sector suitability against your business model and trade requirements.
4. Confirm your visa eligibility and requirements
Although you’ll need to work with your sponsor to get a visa, the bureaucracy is open to foreign investors planning to set up shop, so it’s not as difficult as you might think.
5. Hire a registration agent to take you through the business start-up process
These consultants will pay dividends in the long run, as they can register your company, open your bank account, arrange for an auditor, do your renewals, and even offer nominee services.
A few words about cleantech in the UAE
One of my areas of expertise is the cleantech sector, which cuts across a lot of sectors, and is one of the major initiatives in the UAE. In fact, Dubai has a clean energy strategy that aims to transform the emirate into a hub for green energy by 2050. Over $160 billion is slated to be invested in generating power from clean energy sources, with the ideal objective of increasing clean energy to 75 per cent of the total energy mix by 2050. So I couldn’t possibly end without a shout-out to the Mohammed bin Rashid Al Maktoum Solar Park. Check it out. They’re keen on making the project adaptable to the latest trends and technology in the market, and they’re actively encouraging companies to come and play a role.