Question

UAE is one ofthe fastest economies of the world which focuses on attracting Foreign Direct investment for many years. The recent changes in FDI policy inJuiy 2019 a decision ofthe Federal cabinet allowed up to 100% foreign ownership for 122 economic activities across 13 industry sectors, including manufacturing; agriculture; construction; space; renewable energy; hospitality and food services; healthcare; transport and storage; ICT; professional, scientific and technical activities; administrative and support services; educational activities; art and entertainment. A new foreign investment law has also been approved recently (Federal Decree Law No. 19 of 2018), with the establishment ofan FDI unit within the Ministry of Economy, with the mandate to propose and implement FDl policies. On the other hand, the country's main weaknesses are the small size of its domestic market, the dependence on imports and on the international financial situation, as well as on the hydrocarbon sector. The UAE ranked 16th out of 1 90 countries in the 2020”. There are many sectors are performing and UAE invites many investors from different to invest in UAE. Global Zipsy, a leading German—based Travel agency specialized in leisure and religious travel across the world intends to invest in UAE considering its recent changes in its FDP policy to establish its businesses and spread across the neighboring countries. Suggest the company an I appropriate route to enter into UAE considering its new FDP policy.

1. Critically analyse the impact of new FDI policy in attracting more FDi to UAE, and which are the sectors are under open list and which are the sectors are under protected list and comment on its impact over FDI growth in UAE for the coming years

2. Suggest Global Zipsy an appropriate route to invest in UAE considering the new FDI policy.

https://www.youtube.comwatchv=oEEHp4meLlA (New FDI policy)

Answer 1

ANSWER:-

1).

Critical Analysis of UAE FDI Policy 2009

Prior to introduction of Foreign Direct Investment (FDI) allowed, it was not possible for foreign investor to invest in UAE. They could form Joint venture where one of the resident shareholder have to hold prescried shareholding. However Free Trade Zone were foreign resident were able to invest upto 100% without requirement of local shareholding. However this special economic zone had limited reach to attract the foreign investment.

On 30 October 2018, the UAE government issuedUAE Federal Law on Foreign Direct Investment (FDI Law). The FDI Law provides a regulatory framework which would allow foreign shareholders to own up to 100% of UAE companies incorporated outside of the designated free zones (known as "Onshore"). The aim of the FDI Law was to position the UAe as an attractive destination for foreign direct investment, and provides exceptions UAE's foreign ownership restrictions limit a foreign shareholder to holding a maximum of 49% of the shares in a company incorporated Onshre.

UAE have adopted approach of positive list to permit FDI. "positive" list, means a list setting out the economic sectors in which more than 49% of foreign ownership will be permitted (the Positive List). The "negative" list, on the other hand, was set out in the FDI Law, and restricted the Committee from including them in the Positive List, and therefore, the sectors set out in the negative list were not eligible for greater levels of foreign ownership.

UAE has now approved Positive List of 122 economic sectors and activities in which foreign direct investment is permitted and the criteria for the licensing of FDI companies. This includes the minimum capital requirement for each activity, the Emiratisation thresholds, and the specific conditions for certain business activities.

The publication of the Positive List is expected to change the foreign investment landscape in the UAE, particulary to those wishing to invest a controlling majority in UAE Onshare companies, or to foreign investors looking to restructure their existing shareholding arrangements in the UAE to own a controlling majority, if not all the shares, in UAE Onshare companies. The expectation is that foreign investors will find the UAE a more appealing investment hub.

* Positive list includes:

* Administrative services;

* Agriculture;

* Art and entertainment;

* Construction;

* Educational services;

* Healthcare services;

* hospitality and foods services;

* Information and communication;

* Manufacturing industry;

* Professional, scientific and technical activities;

* Renewable energy;

* Space; and

* transport and storage

* Negative list includes :

* Petroleum related exploration and production

* Investigation, security, military (including manufacturing of military weapons, explosives, dress and equipment)

* Banking and finance Insurance

* Pilgrimage and Umrah services

* Certain recuitment activities

* Water and electricity provision

* Fishing and related services

* Post, telecommunication and other audio

* visual services

* Road and air transport

* Printing and publishing

* Commercial agency

* Medical retail (including private pharmacies)

* Blood banks, quarantines and

* venom/poison bank.

2).

Suggest to Global Zipsy an appropriate route to invest in UAE considering new FDI Policy

Apparently Travel and tourism is not included in positive list of FDI. It has included peer industry "hospitality and food services" under positive list.

On other than UAE is one of the top destination in the world which attracts millions of tourist and for a global player like Global Zipsy, it is always goods strategy to have foothold in hot destination of the globle.

For Global Zipsy, there is no change as far as investment options are concerned since "travel and tourism" is not included in positive list. On other hand pilgrimate and umrah services is included in negative list.

The main attraction for Globle Zipsy to establish in UAE would be to take advantage of most awaited Dubai Expo 2020 which seems to be most attractive event.

However considering Covid-19 pandemic issue & UAE itself have been early impacted by Covid-19 there are lots of uncertainity over Dubai Expo now. Also trave and tourism industry is at great risk and may find difficulty to survive for some time untill normalcy is restored hence it is advisable for travel & tourism industry for not to explore any investment now.

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