UAE continues to keep its score high in key areas of the global ranking with 80.9 points. The UAE’s dominance
- UAE continues to keep its score high in key areas of the global ranking with 80.9 points.
- The UAE’s dominance as the commercial hub for the region will continue in the future with aggressive diversification of the economy.
- Free trade zones and friendly tax laws in the UAE provide investors and entrepreneurs an excellent place to do business.
The United Arab Emirates (UAE) has been regarded as one of the most feasible place for doing business and continues to keep its lead in the Middle East and Arab region, latest rankings released by World Bank in October 2019 stated.
The World Bank praised UAE’s business regulatory reforms that serve as an inspiration. The UAE introduced new reforms about starting a new business, deal with construction permits, protecting minority investors and cross-border trading to make it easier to do business in the country, joining 115 other countries who made it easier to do business there.
The country was ranked 11th position in the World Bank ranking in 2019. Despite a dip in the overall ranking from 11th position to 16th place, the UAE continues to keep its score high in key areas of the global ranking with 80.9 points followed by Bahrain which is the second most favourable country for businesses within the region with 76.1 points. Morocco and the Kingdom of Saudi Arabia follow the trend with 73.4 and 71.6 points respectively.
The Middle East is an oil-rich region with a combined economic strength of around $3 trillion. However, the volatile political scenario and religious tensions does not allow countries in the region to have a stable economy and a business-friendly environment.
Saudi Arabia is the most improved economy in Doing Business 2020, with economic reforms and has recently become more business friendly. Saudi Crown Prince Mohammed Bin Salman has implemented and promoted a policy of featuring the Kingdom as an open world-class investment destination. Saudi Arabia moved up 30 places this year, the highest of any nation globally.
Iran, the second-biggest economy in the region, is currently facing economic sanctions from the United States and European Union on the grounds of Uranium enrichment. The sanctions, coupled with rising internal tensions, resulted in a lowly ranking of 127 this year - only one place above last year’s 128th rank.
The UAE’s dominance as the commercial hub for the region will continue in the future with aggressive diversification of the economy. The UAE’s non-oil economy has grown 1% year-on-year since 2014 and is predicted to experience an unprecedented 2.1% growth between 2020-21. This is all part of H. H. Sheikh Mohammed bin Rashid Al Maktoum, the Prime Minister of the country, to become one of the world’s leading economies.
The government is trying to increase the economy by supporting and promoting entrepreneurship. In a bid to boost efficiency, government policies have been focused on streamlining registration and approval processes, especially in commercial areas like Dubai and Abu Dhabi. Dubai Company Formation is by far the fastest in the region as it can take a minimum of three days to form a company. For comparison, the regional average is 20 days.
Free trade zones in the UAE are another factor driving the influx of entrepreneurial capital. The laws around the free trade zones are peculiar to the kind of business being run and are particularly favourable to those looking to register an offshore company. Some benefits of establishing a company in the UAE’s free trade zones include complete repatriation of profits, and capital and minimal currency restrictions. The technical and financial procedures for setting up a company in a free trade zone are quite cumbersome. However, that has not stopped a lot of companies from taking advantage of it.
The government also made tax laws friendly for both SMEs and large corporations. Free trade zones enjoy major tax benefits including zero corporate and personal tax, and exemption of tax on import and export, which is very enticing for entrepreneurs. Overall tax contribution of profit in the country is at 15.9% compared to the region’s average of 32.5%. Using consultants like Stewart Morgan tax advisors, companies are able to get favourable rates.
The reforms provide investors and entrepreneurs an excellent place to do business. Government-backed projects like the Dubai Foundation for asset protection offered by GWS Offshore also allows the country to attract substantial investments. The foundation enables high net worth individuals (HNWI) to hedge their assets against depreciation. Corporations can also use the foundation to consolidate their ownership of assets within the region. This allows the UAE to position itself as a port of entry to the region.
In the coming years, Saudi Arabia is likely to provide competition for the UAE within the region. MBS has demonstrated his commitment towards improving the economy and making it more open to outside investment. While that is expected in the distant future, the UAE is, for the immediate future, clear ahead of other countries in the region.