Company ownership rules that require local partners are hindering some German companies from setting up in the Emirates, a conference heard.
While giants of German industry like Siemens and Mercedes-Benz cannot afford not to have a presence in the UAE, there are many smaller companies that are put off by the country’s investment restrictions, business promoters said.
“One thing that could improve the situation is this 49 per cent/51 per cent regulation,” Peter Gopfrich, the chief executive of the German Emirati Joint Council for Industry and Commerce, said at a UAE-Germany business conference in Abu Dhabi yesterday.
He was referring to the requirement for local partners to own 51 per cent of locally registered companies outside of free zones. In a free zone, a foreign business can own 100 per cent of a company.
“Saudi Arabia abolished this regulation. While there are still some restrictions in certain fields but generally speaking according to the companies law in Saudi Arabia, you can now have 100 per cent foreign venture without the lead of a local majority partner.
“And of course as long here as it is 50 per cent requirement of the local partnership, some people hesitate. It’s a barrier. This is one of the things that could be improved and should be improved in order for the UAE to become more attractive for foreign investment.”
Volker Trier, the Berlin-based deputy chief executive of the German Chambers of Commerce, agreed, saying that a relaxation of the laws would open the flood gates to further investment from small and medium-sized enterprises. The investment laws aside, Mr Trier said that the oil and gas sector and financial services present the best opportunities for German businesses in the UAE.
UAE policymakers have been counting on smaller businesses to play a key role in the development of the Emirates economy. SMEs account for 86 per cent of the workforce in the private sector, according to the Ministry of Economy. Nearly 300,000 companies can be classified as part of the SME sector, ministry data showed. The UAE companies law, which decrees that Emiratis must control 51 per cent of local businesses, has often been cited as an obstacle to growth, despite a number of free trade zones in the countries where companies can avoid these regulations.
“The backbone of our economy is manufacturing, but these companies are cautious because they want to keep and control their know how,” said Mr Gopfrich. “If they don’t have a majority in a company they feel that they are not safe.”
mkassem@thenational.ae
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