Author: Carl Dowling, Partner, CBD Corporate Services
It has been a little over twelve months since the UAE entered lockdown because of the worldwide Covid-19 pandemic, and there was plenty of speculation about what sort of impact the outbreak would have on the worldwide economy. After the passing of a year, can we see its effect on some of the economic indicators? What initiatives have been launched to attract foreign direct investment, and what are plans for the future?
One of the key indicators in any country’s economy is the real estate market. When lockdown commenced, many commentators predicted a mass exodus of people from the UAE and, as a result, that the housing market would plummet. However, the statistics show a different story.
Faisal Durrani, Head of Middle East Research at Knight Frank said, “The pandemic has had the impact of placing the world economy in a state of suspended animation, causing a dramatic slowdown in global growth. Countries have responded with stimulus packages, which have included monetary as well as fiscal policy changes and adjustments, with varying degrees of success. Here in the UAE, the government’s flagship Targeted Economic Support Scheme (TESS), which runs until June 2022, currently totals AED 126.5 billion.
The success of the UAE’s TESS has been bolstered by the country’s world-leading vaccination program, with 108.6 doses administered per 100 residents, second only to Israel (116 doses per 100 residents) (FT, 1 May 2021). These factors have improved the country’s economic outlook substantially, with the IMF upgrading its GDP forecast for the UAE to 3.1% for 2021, up from a prediction of 1.2% in October 2020.
Furthermore, the real estate sector in the country’s main business hub of Dubai has already begun to show signs of stabilizing and returning to growth. In fact, average residential values grew by 0.7% to just over AED 1,000 psf (per square foot) during Q1 2021, the strongest rate of quarterly growth since the summer of 2016.”
The effect of the pandemic on the worldwide economy was a major concern on international companies setting up their business in the UAE. However, in 2020 Dubai saw 42,000 new business licenses issued – a 4% increase compared with 2019. This has been aided by some of the economic measures put in place by government authorities such as reducing the service fees for licensing and visa-related transactions.
Flexible visa types
The UAE has set an ambitious target to double the national economy over the next 10 years to reach AED 3 trillion by 2031. There have been a number of new regulations to relax previous measures which will benefit both residents and tourists. These changes include:
- Alcohol consumption is no longer a criminal offense in the UAE, meaning those without an alcohol license will not face prosecution for consumption or selling of alcohol in authorized areas.
- Unmarried and non-related men and women in the UAE are now legally allowed to cohabit. Previously it was against the law for an unmarried couple to live together in the UAE.
- Divorce, separation, and division of assets will now follow the rules of the country where the marriage took place. This change also covers wills and inheritance – both of which will also be based upon a person’s citizenship rather than Sharia Law.
Traditionally in the UAE, employees would have to obtain authority to reside in the country by obtaining a visa associated with a registered legal entity such as:
- Employment visa – a two-year residency visa available for individuals working for an employer. This visa also allows sponsorship of family and dependants on completion.
- Investor visa – a three-year investor visa is available for individuals owning a minimum of 24% of a UAE registered entity. Investors can also sponsor their family and dependants once their visa is finalized.
However, there are now a number of new visa options for foreign nationals which have been introduced such as:
- Golden visa – a 10-year Golden Visa available for individuals with specialized talents or investments in a public fund or company to the value of AED 10 million. Specialized talents must be accredited by the relevant council and doctors or specialists must have a recognized qualification and demonstrate relevant work experience. A five-year option is available for individuals investing in property with a value of AED 5 million, entrepreneurs with an investment of AED 500,000, or outstanding students.
- Remote visa – a one-year visa available for employees and business owners with an average monthly income of USD $5000 per month. All applications are reviewed and processed by Dubai Tourism Commerce and Marketing (DTCM). In addition to proof of salaries, employees must have a valid work contract and business owners must provide proof of ownership. These visas can be renewed on an annual basis.
- Foreign student family visa – foreign students studying in the UAE can sponsor their immediate family members during their studies provided the family is able to afford suitable housing.
- Retirement Visa – individuals aged over 55 years with either an investment in property of AED 2 million, financial savings of no less than AED 1 million or a monthly income of at least AED 20,000 can apply for a five-year retirement visa. This can be renewed so long as one of the aforementioned criteria continues to be met.
- Five-year multi-entry tourist visa – this visa allows individuals to enter the UAE at any time over a five-year period, staying a maximum of six months each time. One advantage is that holders do not have to enter every 180 days to keep their visa valid, which will greatly benefit companies regularly sending employees to the UAE, or UAE residents who are studying or working abroad and returning to visit family.
- UAE citizenship – individuals can now be nominated by government officials for UAE citizenship and this initiative is aimed at investors, professionals and special talents and their families. As passports are given on nomination only, there is currently no way to apply for permanent citizenship.
These changes are aimed at attracting people to base themselves in the UAE and will assist with meeting the population target.
Foreign ownership regulations
It is not only the flexibility around visa types that should support the drive to increase the population. In November 2020, the UAE announced a change to the Companies Law which would enable international investors to apply for up to 100% foreign ownership. One of the barriers in the route to the market has been the requirement to appoint a local Emirati partner to hold a minimum of 51% shares in the onshore LLC. The removal of this requirement, for business activities that have a “strategic impact”, is aimed at attracting companies to enter the UAE market and this, in turn, should have a positive effect on multiple sectors in the local economy.
Furthermore, the UAE signed the Abraham Accord, a normalization agreement with Israel to drive economic growth between the two countries, which could see significant bi-lateral trade.
Ease of Doing Business in the UAE
How will the UAE be able to deal with the expected influx of international businesses? In 2020, the UAE ranked 16th in the Ease of Doing Business, a report issued by the World Bank. This is a jump of 17 places from the ranking of 33 in 2010.
The most recent World Bank report mentions the reforms undertaken by the UAE, such as reducing the cost of starting a business, easier construction permits by using a risk-based approach, the decrease in the number of inspections, improving minority investor protection, ease of paying taxes and making the trading process easier by reducing the time to export by fully digitalizing certificates of origin and the cost of import by issuing certificates of conformity that cover multiple shipments.
The UAE has introduced a number of digital measures to assist international investors, taking into consideration recent travel restrictions. For example, the authorized signatory of an international company or investor can sign legal documents remotely by utilizing software platforms such as Botim and Webex. As part of its national vision the UAE continues to embrace technology to enhance lifestyles and ease of doing business.
Short- and long-term plans
Despite all the external challenges experienced in the past 12 months, the UAE has introduced a number of measures to boost the economy with a ‘business as usual’ approach but with clear guidelines to citizens, residents, and tourists to protect public health.
But what about the future? In the short term, we have the Expo 2020 later this year coined ‘Connecting Minds, Creating the Future’, which aims to recognize the need to create sustainable solutions to global problems by highlighting three main themes: Opportunity, Mobility, and Sustainability. Despite the pandemic, projected visitor numbers for Expo2020, set in 2014, remain the same: 25 million over its six-month duration.
Earlier this year Dubai announced the Dubai 2040 vision – a plan focused on developing the Emirate over the next 20 years with the aim of creating the best quality of life for Dubai residents and citizens. The Dubai 2040 Urban Master Plan is expected to increase public beaches by 400%, commercial areas by 168%, tourism areas by 134% and land allocated to education and healthcare by 25%, securing Dubai’s status as a top global destination for work, leisure, lifestyle and business.
Despite these uncertain times, the UAE continues to offer residents, visitors, and companies great opportunities. Fourteen years ago, when I first arrived in the Middle East, I would hear many expats talk about the ‘two-to-three-year plan’ – save as much money as you can and move on, possibly home or to another country. In recent times this outlook seems to have changed to the 20-to-30 year plan and the UAE is certainly making all the moves to justify it.