UAE Urged To Relax Foreign Investment Rules

by Lorys Charalambous, for LawAndTax-News.com, Cyprus

06 September 2005

In its recently published Survey, the International Monetary Fund urged the UAE authorities to relax rules governing foreign investment outside of the designated free zones.

The IMF Executive Board welcomed the government’s continued progress in diversifying and reforming the economy, which, the Fund argued, has bolstered its ability to weather external shocks.

To sustain growth, however, the Board said it is critical that the UAE take additional steps to liberalize the economy and pursue further structural reforms, including lifting remaining barriers to foreign investment outside the free zones and enhancing the long-term employability of the national labor force through training and education.

Although overseas entities are allowed to own 100% of enterprises within the free zones, they are currently limited to 49% ownership elsewhere. However, the government is currently considering increasing this limit to 70%, a suggestion which has been welcomed by the international community.

Predicting 7.3% GDP growth this year as a result of high oil prices and increased investment in construction, manufacturing and property, the IMF went on to observe of the country's recent economic performance that:

"An outward-oriented development strategy, good macroeconomic management, and a business-friendly environment have all contributed to high growth in the United Arab Emirates (UAE) in recent years. Last year, the economy grew at an impressive 7.8 percent, driven largely by robust export growth in both the oil and nonoil sectors, which benefited from a real depreciation of the UAE currency and strong demand in export markets."

Recommended