DUBAI // Free zones will remain competitive for international investors seeking a base in the UAE even after a proposed new law allows companies to operate outside their jurisdiction with full ownership rights. Under the current regime, companies based in the Emirates need local sponsors unless they operate from special business parks where 100 per cent ownership rules and other tax incentives apply.
"We don't see any threat of flight of capital or investors migrating from here even if they are allowed full ownership rights outside under the new law," said Hadi Qassem, the director of marketing at Hamriyah Free Zone. "The basket of products and centralised services we offer make it worthwhile for investors to stay here," he said. Sultan al Mansouri, the Minister of Economy, said last week the government was preparing legislation within the next two months to allow investments in developing the country's industrial base outside free zones with full ownership privileges for investors.
Industrial and manufacturing units make up about 55 per cent of Hamriyah's client base, he said. The requirement to share ownership with local sponsors has discouraged some international companies from setting up businesses outside the free zones. "There have been some issues around local partnerships. Any liberalisation of foreign ownership will instil more foreign direct investment," said Shayne Nelson, Standard Chartered's regional chief executive officer.
"A lot of industries worldwide are very interested to move here to the UAE, providing there are certain terms and conditions they would like to see in the industrial law," Mr al Mansouri said. The planned industry law aims to attract hi-tech firms offering large capital investments to the country and help the government create new jobs and reduce dependence on oil and gas revenues. The oil and natural gas industry accounted for 38 per cent of the country's Dh929 billion (US$252.92bn) GDP last year. The UAE intends to cut its dependence on hydrocarbons to 20 per cent in the next 10 to 15 years, Mr al Mansouri said.
A spokesman for Jebel Ali Free Zone Authority (JAFZA), the largest development of its kind in the region, said the proposed new law would help to open up the economy to foreign investment but that JAFZA would remain competitive. "A company based in a free zone and in JAFZA in particular have advantages over other companies. It is part of an established business community with excellent infrastructure and services," he said.
A separate planned law to provide increased legal protection for overseas investors is also expected to be ready by the end of this year. * Additional reporting by Tom Arnold and Uta Harnischfeger @Email:skhan@thenational.ae