The United Arab Emirates (UAE) has become an increasingly popular place to do business in recent years. With its strategic location, pro-business environment, and world-class infrastructure, many entrepreneurs and companies are choosing to set up operations in the UAE.
Business-friendly environment
The UAE offers one of the most business-friendly environments in the Middle East region. The country ranks highly in global ease of doing business rankings, currently placing 16th out of 190 countries surveyed by the World Bank.
Some key factors that make the UAE conducive for business include:
- Low tax regime: Apart from municipality taxes, there are no personal income taxes or corporate taxes in the UAE. This allows businesses to thrive with minimal tax obligations.
- Access to finance: The UAE has a well-developed financial sector offering businesses access to funding from banks, private equity firms, and angel investors. Many free zones also have their own financial services providers.
- Strong legal framework: The commercial law framework governing businesses in the UAE is modeled on international best practices. This provides security to foreign investors.
- Good quality of life: The UAE provides an excellent standard of living for expatriates. This helps companies attract and retain talent. World-class healthcare, education hubs, and recreational options make it an appealing expat destination.
Strategic location
Situated between Europe, Africa, and Asia, the UAE enjoys a strategic geographic location making it a global trade and tourism hub.
Major factors contributing to its strategic advantage include:
- Aviation hub: Emirates, Etihad, and flydubai connect the UAE to over 250 global destinations. Dubai and Abu Dhabi airports are among the busiest international airports. This connectivity facilitates global market access.
- Maritime hub: Ports like Jebel Ali in Dubai rank among the top 10 global container ports. The UAE’s ports and customs framework promote maritime trade flows.
- Tourism hub: Dubai welcomed over 16 million visitors in 2019, showcasing the UAE’s popularity as a global tourism destination. This creates hospitality, retail, and real estate opportunities.
World-class infrastructure
The UAE boasts advanced, efficient infrastructure that enables businesses to seamlessly conduct operations.
Key infrastructure features that attract investors include:
- Utilities and connectivity: The UAE has 100% electrification and excellent connectivity through high-speed broadband and 5G networks. This allows smooth business functions.
- Real estate and free zones: World-class office spaces, industrial zones, and over 45 free zones provide tailor-made infrastructure to companies. These cater to key sectors like media, education, manufacturing, etc.
- Transport and logistics network: Airports, sea ports, vast road networks and infrastructure like Dubai Metro allow efficient transport of people and cargo within the UAE and beyond.
Government support
The UAE government plays an instrumental role in boosting the nation’s business landscape through investments, policy reforms, and support initiatives that create growth opportunities for enterprises.
Some government efforts to spur business development include:
- Economic support: Regular investments in infrastructure development and strategic sectors to diversify the economy creates openings for companies. Recent relaxation of foreign ownership laws also encourages FDI.
- Innovation promotion: Government innovation arms like Smart Dubai and Area 2071 spearhead the UAE’s vision to become an innovative knowledge economy. They nurture promising local startups.
- Trade agreements: Active pursuit of bilateral trade pacts and investment treaties expands market access for Emirati and foreign businesses in strategic markets.
Challenges
While the business environment is largely positive, companies looking to set up in the UAE should also consider some challenges:
- High costs: Factors like high rents, labor costs etc. lead to relatively higher operating costs for businesses in city centers.
- Access to funding: Local funding can be difficult for early-stage startups or SMEs that do not have local sponsors or credit histories.
- Local partnerships: Federal law mandates that all onshore companies have Emirati partners with majority ownership. Identifying the right partners can prove challenging.
- Regulations: Business permits, licenses etc. involve bureaucratic processes. Understanding complex compliance and trademark frameworks pose hurdles too.
Key sectors to tap into
The UAE offers rewarding opportunities across industries from trade to technology. Some top sectors displaying strong potential include:
Trade: With its strategic location and world-class infrastructure as a global hub for commerce, trade is a leading contributor to UAE’s GDP. Trading firms benefit from the UAE’s extensive connectivity.
Transportation and logistics: As an aviation, maritime and road transport bastion, the industry promises growth for transport providers, freight forwarders, customs agents and other logistical services.
Travel and tourism: Tourism is a mainstay of Dubai’s economy. Hospitality, entertainment and retail offerings that enrich the traveler experience continue to be in demand.
Technology: Emerging technologies like AI, blockchain, 3D printing etc. are priority economic diversification areas for governments like Dubai. Tech startups see strong government backing.
Financial services: Dubai International Finance Centre and Abu Dhabi Global Market provide reputed financial regulatory frameworks. Asset management,Islamic finance and Fintech are key segments.
Healthcare: Rapid population growth, lifestyle diseases and medical tourism fuel healthcare opportunities spanning hospitals, clinics, medical equipment and pharma.
Education: The UAE’s education industry remains buoyant supported by rising population of expat families, e-learning platforms and education hub visions of Dubai and Abu Dhabi.
Energy: While oil and gas drives Abu Dhabi’s economy, Dubai benefits from foreign energy firm headquarters. Renewable energy is a new area for companies to analyze.
Key takeaways
The UAE provides an attractive hub to launch and base operations in the Middle East, offering benefits like:
- Business-friendly regulations and environment
- Strategic access to global markets
- High quality infrastructure ecosystem
- Strong government support for economic growth
Sectors like trading, transport, tourism, technology and education hold robust opportunity. Assessing operating costs and identifying local partners pose important considerations. With its progressive vision and economic stability however, the UAE remains a prime location to fuel your venture’s expansion plans.
Conclusion
A decade ago the UAE mainly conjured up images of desert cityscapes and oil wealth. Today however it has successfully established itself as a thriving global hub for business buoyed by strategic policies, world-class infrastructure and a vibrant economy. Its sustained initiatives to enable innovation and nurture enterprise have positioned it as one of the Middle East’s top destinations to do business. With an optimistic outlook and supportive environment for investors, the question continues as “When” rather than “Why” for companies seeking to set up shop in the UAE.
FAQs:
Q: What are the benefits of starting a business in UAE?
A: Key benefits include – no personal or corporate taxes, access to finance, strong legal framework, good quality of life, strategic geographic location and world-class infrastructure.
Q: What kind of business is best suited for the UAE?
A: Sectors like trade, transportation & logistics, tourism, technology, financial services, healthcare, education and energy display strong opportunity.
Q: What are free zones in UAE?
A: Special economic zones in UAE offering 100% business ownership, streamlined license approval process, pre-built officespaces and onsite business services to companies.
Q: What are challenges faced by businesses in UAE?
A: Challenges can include higher operating costs, limited funding access for smaller firms, need for local partners in mainlands as per law and bureaucratic processes.
Q: Is the UAE economy diversified?
A: Yes, while oil contributes 30% to its economy currently, the UAE has diversified over the years into tourism, real estate, retail commerce, transportation, tech etc.
Q: Does UAE have free trade agreements (FTA)?
A: Yes, UAE has FTAs with regional and global markets including China, India, Japan and the European Union amongst others facilitating trade flows.
Q: What is the corporate tax system in the UAE?
A: Except for foreign banks and oil companies, there are no corporate taxes in UAE making it very conducive for business setups and FDI.
Q: Which are the best free zones for company formation in UAE?
A: Top options include Dubai Airport Free Zone (DAFZ), Dubai Silicon Oasis (DSO), Jebel Ali Free Zone (JAFZA), Abu Dhabi Global Market and Sharjah Media City (SHAMS).
Q: Does the UAE allow full foreign business ownership?
A: Yes, foreign investors can have 100% ownership of mainland companies outside free zones now under recent legislative reforms aimed at boosting FDI.
Q: How easy is importing goods in the UAE?
A: The UAE offers a well-developed sea and air transport infrastructure for efficient import and export of products minimizing logistical issues.
Q: How simple is the business registration process in UAE freezones?
A: Freezones offer speedy business setup permitting license approval in 2 weeks in some cases and simplified document needs assisting rapid market entry.
Q: Which emirate is best to launch my startup in UAE?
A: Dubai and Abu Dhabi offer the most supportive launchpads currently. Dubai has more private sector opportunities while Abu Dhabi government actively funds startups.
Q: Do I need a local partner for mainland company formation?
A: As of 2020, the FDI reform allows 100% ownership removing previous needs for an Emirati partner for most business categories barring certain strategic ones.
Q: Which sector contributes the most to Dubai’s GDP?
A: Trade sector comprising wholesale, retail, transportation and storage accounts for the largest sector fueling Dubai’s GDP currently underscoring its significance.
Q: Can I repatriate all profits made in UAE?
A: Yes, there are no profit repatriation barriers in the UAE for private companies. Business owners can repatriate 100 percent of their earnings.
Q: Does the UAE levy income tax on salaries?
A: No, the UAE does not impose any personal income taxes currently making it an attractive expat destination.
