FDI law and Free Zones in UAE

The UAE government recently came up with an amendment to the Commercial Companies Law by allowing 100% ownership to mainland businesses in UAE. The FDI law came into effect on December 1st.

Until recently the free zones in UAE were the most preferred jurisdictions by investors as they give 100 percent ownership to foreigners. Now with the FDI law, this distinction between free zones and mainland doesn’t exist anymore and things may not be easy for the free zones in UAE. Experts have it that the areas will have to bring in more efficient strategies to bring in foreign investments in the future.

This step by the government is an attempt to bring in more investment options to the country as a way to cope up with the financial crisis that the country is facing with the widespread of the global pandemic and due to the fall of prices of the oil.

Nicholas Maclean, managing director of CBRE, Menat Region, said that “The impact of the new law could be significant on the free zones/ “on-shore” jurisdictional boundaries, which might ease the rental differentials and could bring in flexibility in the decision making and could also be delegated allowing adaptability if any of the changes seem difficult.”

While Hisham Al Gurg, CEO of SEED Group, commented, the free zones should focus more on coming up with new strategies to compete as their primary attraction is now been offered in any part of the country.

“It remains to be seen how radical the detailed revisions will be and how the new rules will interplay with some form of taxation, which surely must be a partial replacement for the foregone income, but the preliminary outline reiterates the countries drive to maintain its position as an innovator and business hub.”, added Maclean.

The government is taking every possible step to recover their economy and as for the amendment, it was indeed one of the most awaited laws for the foreign investors. UAE is trying to achieve their goal of being the business hub of the world and hopefully this initiative would lead them to it.