From sand dunes to sky-high profits: Is the UAE the ideal place to do business in 2023?
A guide to the UAE’s business landscape, investment incentives, regulations, digital communication trends, and future business direction of the country.
If you’re contemplating expanding your business ventures, the United Arab Emirates (UAE) should undoubtedly be on your radar. With a robust economy and a strategic location between Europe, Asia, and Africa, the UAE is a prime destination for international trade and commerce. The country has experienced rapid growth and development in recent years, becoming the 5th largest economy in the Middle East with a GDP of $503 billion in 2022.
Not only does the UAE provide a favorable business climate, but it also offers investment incentives and a supportive regulatory framework that make it an attractive destination for foreign investors. In this article, we will delve deeper into the UAE’s economic stability parameters, investment opportunities, and the evolving trends in corporate communication that have transformed the way businesses operate in the country.
We will also take a closer look at the UAE’s future business direction and the emerging sectors that present significant opportunities for growth and development. Additionally, we will explore the commercial regulations that govern business enterprises and activities in the UAE, providing you with the necessary information to make informed decisions when it comes to conducting business in this thriving region.
By mid-2020, the number of Small and Medium Enterprises (SMEs) in the UAE totaled 350,000. These businesses:
- Comprised over 94% of all the operating companies in the nation;
- Employed more than 86% of the private sector’s labor force and contributed over 60% to the country’s GDP;
- 73% of them functioned within the wholesale and retail sector, 16% in services, and 11% in the industry sector.
Ease of doing business
The business environment in the UAE is highly favorable. The country’s superior infrastructure, skilled professionals, and customized services provide a competitive advantage over other nations. According to the World Bank’s Ease of Doing Business Report 2020, the UAE:
- Ranked as the 16th most favorable country globally for conducting business activities;
- 3rd in the world for dealing with construction permits;
- 9th for enforcing contracts;
- 10th for registering property.
According to the IMD’s World Competitiveness Ranking 2022, the UAE is the 6th most competitive economy globally, leading the MENA region. To maintain and improve this status, the UAE is consistently proving its commitment to diversifying its national income. Here are some features of the UAE’s robust economy:
- A strategic location;
- Significant financial reserves;
- Large sovereign wealth funds;
- Positive international relations;
- Consistent government investment in infrastructure, digital transformation, and innovation;
- Progressive economic diversification policies;
- Multi-specialty free zones;
- Increased foreign direct investments (FDIs).
The UAE offers appealing investment incentives, such as:
- Up to 100% foreign ownership in free zones;
- 100% foreign ownership in 122 economic activities across 13 sectors;
- 100% profit repatriation;
- Competitive financing costs, high liquidity, and a robust banking system;
- No foreign exchange controls;
- Strong currency appreciation and full convertibility;
- Low inflation;
- Low customs tariffs (ranging from 0-5% for nearly all goods).
The UAE fosters private sector growth and competition while enforcing regulations that prevent monopolies. The country also has strong affiliations with significant regional and international trade associations. Specifically, the UAE:
- Has been a member of the World Trade Organization (WTO) since 1996;
- Participates in the Greater Arab Free-Trade Area (GAFTA), which includes all GCC countries;
- Concluded Free Trade Agreements with Singapore and the EFTA;
- Collaborates with the GCC countries to finalize Free Trade Agreements with the EU, Japan, China, India, Pakistan, Turkey, Australia, South Korea, and Southern Common Market (MERCOSUR).
Megatrends shaping the future of the UAE
- It is anticipated that the adoption of AI will generate economic gains of up to $320 billion by 2030 in the region. In July 2022, Dubai has even established a dedicated committee to invest in AI, the metaverse, and the digital economy.
- The UAE is strongly pursuing its goal of becoming a cashless society and is investing heavily in its multi-billion e-commerce market. The e-commerce industry in the UAE is rapidly growing, with an estimated revenue of $13.78 billion in 2023 and a yearly growth rate of 9.53%.
- The food and beverage industry in the UAE is flourishing, with a predicted revenue of $37.89 billion in 2023.
- With over 7.97 million users, accounting for 80.2% of the country’s population, WhatsApp is the #1 tool used for digital communication in the UAE.
WhatsApp – UAE’s #1 business communication platform
The immense popularity of WhatsApp among UAE users, coupled with its $8.7 billion revenue in 2021, has attracted businesses to incorporate the app’s features for customer engagement, marketing, and sales. It is not uncommon to see the full lifecycle of UAE business deals take place on the WhatsApp platform: from the first touchpoint to due diligence, involving sensitive document exchange, contract closure, and customer support.
- 9.6 million of the UAE’s residents, including businesses, are internet users.
- 79.6% of UAE internet users use WhatsApp each month.
Business regulations landscape
The UAE has implemented various regulations to facilitate and ensure fair business practices. Entrepreneurs have an obligation to comply with regulations that:
- Govern their business operations;
- Safeguard labor, consumer, and intellectual property rights;
- Ensure health, safety, and environmental protection;
- Regulate the free zone where their business operates.
Let’s take a closer look at commercial regulations that govern business enterprises and activities in the UAE.
Business regulations related to mainland companies
The UAE Federal Decree-Law no. 32 of 2021 on Commercial Companies, applies to organizations practicing the following kinds of economic activity in the UAE: commercial, financial, industrial, agricultural, real estate, etc.
Business regulations related to free zone companies
Apart from the Federal Decree-Law No. 32 of 2021 on Commercial Companies, all general business and commercial laws are applicable to businesses functioning within free zones. These businesses must also comply with laws that are specific to their business activity, including those that govern property rights, QHSE compliance, and regulations established by the respective free zone authorities.
Regulations and policies related to online businesses
Here are the laws and policies related to online businesses in the UAE:
- Federal Decree by Law No. 46 of 2021 on Electronic Transactions and Trust Services (available in Arabic only);
- Internet Access Management Regulatory Policy;
- Internet guidelines;
- UAE official advertising guide.
Virtual Assets and Related Activities Regulations
As the world’s first tailor-made VA regime, VARA’s regulations are uniquely designed to cater to permissible activities and services for customers and investors from the Emirate of Dubai.
The framework’s bespoke rules and guidelines aim to provide clarity, ensure certainty, and mitigate market risks to develop global economic sustainability in an innovation-centric, borderless, technology-agnostic, and future-focused environment. VARA’s framework addresses the risks associated with each VA activity and provides clear rules that apply to operations and business models, while maintaining a baseline market standard of compliance across core regulatory domains, including the protection of users' personal data.
You can find more information on VARA in our new eBook.
Regulations that apply to all businesses
Here are other examples of principal regulations, as well as data protection regulations, that apply to all businesses incorporated and operating in the UAE:
- Federal Decree-Law No. 34 of 2021 on Combatting Rumours and Cybercrimes (available in Arabic only);
- Commercial Transactions Law, amended by Federal Decree-Law No.14 of 2020 Amending Certain Provisions of the Federal Law No.18 of 1993 concerning the Commercial Transactions Law;
- Federal Law No.19 of 1916 on Combating Commercial Fraud;
- Federal Law No. 15 of 2020 on Consumer Protection;
- Federal Decree-Law No. 45/2021 on the Protection of Personal Data (PDPL 2021);
- The UAE Constitution of 1971;
- Federal Law No. 15/2020 on Consumer Protection (Consumer Protection Law) protecting consumer data privacy and limiting its use for promotional and marketing purposes;
- Federal Decree-Law No. 31/2021 on the Issuance of the Crimes and Penalties Law (Penal Code) protecting against the release of state secrets and ensuring the preservation of privacy in family life;
- Federal Decree-Law No. 34/2021 Concerning the Fight Against Rumors and Cybercrime (Cybercrimes Law) covering unauthorized access to personal data through IT systems, among other provisions;
- Federal Law No. 2 of 2019 Concerning the Use of Information and Communication Technology (ICT) in Health Fields introducing regulations on the use of information and communication technology (ICT) in the UAE healthcare industry, including its free zones;
- Electronic Transactions and Trust Services law regulating the validity of electronic documents and setting provisions for eTransactions, the way eDocuments should be stored saved, sent, and received to be valid.
Aside from the above-mentioned data protection regulations, there are also emirate- and sector-specific legislation that companies can be subject to depending on the industry and geographic area of operations:
- Dubai Healthcare City Health Data Protection Regulation No. 7/2013 (DHCC Regulation);
- Consumer Protection Regulation (Central Bank Circular No. 8/2020);
- Internet of Things (IoT) Regulatory Policy;
- Internet Access Management (IAM) policy;
- Dubai Data Law;
- Information Security Regulations;
- Virtual Assets and Related Activities Regulations 2023.
Learn more about the current UAE data protection standards and how they affect businesses processing local data in our blog post.