DUBAI: COUNTRY AND FOREIGN INVESTMENT

Dubai Population

Modern Dubai is the product of more than 20 years of intensive development. Prior to that, Dubai was a small trading port, clustered around the mouth of the Creek.

It had grown gradually from a fishing village inhabited in the 18th century by members of the Bani Yas tribe. Its origins, however, go back into the far more distant past. The town’s museum displays a rich collection of objects found in graves of the first millenium BC at nearby Al-Qusais, while a caravan station of the sixth century AD was excavated in the expatriate suburb of Jumairah.

By the turn of the 20th century Dubai was a sufficiently prosperous port to attract settlers from Iran, India and Baluchistan, while the souk on Deira side was thought to be the largest on the coast, with some 350 shops. The facilities for trade and free enterprise were enough to make Dubai a natural haven for merchants who left Lingah, on the Persian coast, after the introduction of high customs’ dues there in 1902. These people were mostly of distant Arab origin and Sunni, unlike most Persians, and naturally looked across to the Arab shore of the Gulf finally making their homes in Dubai.

Meanwhile a flourishing Indian population had also settled in Dubai and was particularly active in the shops and alleys of the souk. The cosmopolitan atmosphere and air of tolerance began to attract other foreigners too: by the 1930s, nearly a quarter of the 20,000 population was foreign, including 2,000 Persians, 1,000 Baluchis, many Indians and substantial communities from Bahrain, Kuwait and the Hasa province in eastern South Arabia. Some years later the British also made it their center on the coast, establishing a political agency in 1954.

The population has increased tenfold since the 1960s to more than 1.4 million, and now hundreds of hotels accommodate the expat workers and tourists who help run the economy. Indeed, only around 22% of the emirate’s population, at the last count, were actually ethnically emirati in a population mixture that has to be one of the world’s most cosmopolitan.

This diversity discourages any real ethnic tensions and while war and the threat of war might simmer further north, it creates far less tension in Dubai than many might imagine it would. There are large groups of Indians, Pakistanis, Iranians and Southeast Asians. The population is, however, 95% Muslim. Arabic is of course the official language but English is widely spoken as are Urdu, Malayalam and from the Philippines, Tagalog.

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Dubai Government

There are no elections or legal political parties in the UAE. Power rests with the seven hereditary sheikhs -- also known as emirs, and hence the area ruled by an emir is known as an emirate -- who control the seven traditional sheikhdoms (Abu Dhabi, Dubai, Sharjah, Ajman, Umm al-Qaiwain, Ras al-Khaimah and Fujairah -- each emirate is named after its principal town) and choose a president from among themselves. Sheikh Khalifa bin Zayid al-Nuhayyan, the ruler of Abu Dhabi has been President since 3 November 2004, following the death of the UAE's Founding Father and first President Zayid bin Sultan Al Nuhayyan

The Vice President and Prime Minister is the ruler of Dubai, which was Sheikh Maktoum bin Rashid al Maktoum until his death in January 2006, following which the role was assumed by his brother and heir, Sheikh Mohammed bin Rashid al-Maktoum. The Deputy Prime Minister is Sheikh Sultan bin Zayed Al Nahyan. There is also a Cabinet, and its posts are distributed among the seven emirates. (The members of the Cabinet are the government ministers, such as Minister of the Interior, etc.)

The Supreme Commander of the Armed Forces is the President while the second in command (Deputy Supreme Commander) is Sheikh Mohammed Bin Zayed Al Nahyan, the Crown Prince of Abu Dhabi.

The parliament is known as the Federal National Council (FNC). It was established on 13th February 1972 and is considered a landmark in the country's constitutional and legislative process. The FNC advises the Cabinet and the Supreme Council but cannot overrule them. According to the constitution, the FNC consists of 40 members who are drawn proportionately from each of the seven emirates. Each ruler appoints the members for his emirate.

The FNC is structured as follows:

A Speaker and his two deputies and two elected observers

The Parliamentary Section Executive Committee headed by the speaker, the council's undersecretary, the secretary general and four elected members.

There are also eight specialized committees dealing with studies regarding draft laws and general issues in addition to the legislative, legal, educational, health, social, planning, labour, oil and mineral resources, agriculture and fisheries and public work sectors.

The FNC has powers to amend and review all legislation and also to summon Ministers to review and criticize the work of their ministries.

Despite the fact that there is a federal government, each ruler is completely sovereign in his domain.

The UAE was a founding member of the Gulf Cooperation Council (GCC) created at a summit conference in Abu Dhabi in 1981. The members of the GCC include Saudi Arabia, Kuwait, Bahrain, Qatar, the Sultanate of Oman as well as the UAE. The country is also a member of the League of Arab States, the Islamic Conference Organization, the United Nations.

On 1st January 2003, the unified customs area of the Gulf Co-operation Council came into effect, covering Kuwait, Qatar, Oman, Saudi Arabia, Bahrain, and the United Arab Emirates (including Dubai). As of 2006, Yemen has been in negotiations with the existing member states, and hopes to join by 2016.

In April 2005, the 15th Joint Council and Ministerial Meeting between the European Union and the six member states of the Gulf Cooperation Council in Bahrain took place, focusing on the state of the free trade agreement negotiations between the European Union and the Gulf Cooperation Council.

The two parties agreed that rapid progress was needed on a number of outstanding trade issues, particularly on services, industrial tariffs and public procurement, and noted the importance of a rapid conclusion of the negotiations on human rights, terrorism, weapons of mass destruction and migration issues.

A further round of talks on the matter took place in June 2005.

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Dubai Economy and Currency

Petroleum has traditionally dominated the economy of the UAE. The immense wealth has been invested in capital improvements and social services in all seven of the emirates. Petroleum production is centred in Abu Dhabi and Dubai. Industrial development is essentially petroleum related and is limited by a lack of trained personnel and raw materials.

The GDP of the UAE grew by 5.7% per cent in 2004 to a record USD63.67 billion. Oil contributed 38 per cent, up from 34 per cent in 2002.

The emirate of Dubai is strategically located between Africa and the Middle East and between the Far East and Europe, making it a gateway to over 1.5 billion consumers located in countries surrounding the Red Sea and the Gulf. It has a superb infrastructure with the consequence that it has become a key link in the global transport and distribution system.

Dubai is served by more than 170 shipping lines and more than 86 airlines offering links to over 100 cities worldwide. The strong shipping and transportation sector is composed of most of the leading regional and international freight forwarders, insurers and shipping agents. It has a rapidly developing high quality manufacturing sector and a buoyant and prosperous domestic market. In a nutshell its infrastructure and services match the highest international standards.

Despite a relatively small population, in 2004, total non-oil imports stood at Dh 149,046 million. The reason is that Dubai is the major re-export centre for the region. Many of the economies of the region served by Dubai are still at a relatively early stage of development, so there is plenty of long term scope for diversification and expansion in the future. Another important consideration is Dubai's rapidly developing role as a supplier to such emerging markets as India, the CIS, Central Asia and South Africa.

There are no foreign exchange controls, quotas or trade barriers. Import duties are extremely low, and many products are exempt. The UAE dirham is freely convertible and is linked to the US dollar, the currency in which oil revenues are paid. The current exchange rate is Dh 3.675 = US$ 1 and no revaluation has occurred since 1977.

In 2003, the government of Dubai set a precedent by launching the country's first ever government bond issue worth Dh1.5 billion ($400 million).

Following the success of the Jebel Ali free zone, the Government has developed Dubai Internet City (DIC), which has a highly developed technical infrastructure.

The DIC occupies 3,200 hectares in the South of Dubai, near the Jebel Ali Free Zone. It offers state of the art facilities and sites for manufacturing, offices, housing, and academic, research, distributions and logistics institutions.

During 2002, Dubai developed plans for the Dubai International Financial Centre (DIFC), which is proving to be a major financial entrepot. The DIFC fills what was once a significant gap in the market for international Shariah banking, fund management and life assurance. One of its biggest selling points is that it appeals to both Arab money looking for a local centre of excellence and Western cash seeking sophistication and safety.

Philip Thorpe, chief executive of the DIFC Regulatory Authority, explained at the time that: 'We have...made good use of our freedom to create a single, logical framework - in contrast to older-established jurisdictions, who often have to make (do) and mend within existing frameworks which may gradually become more complex and less relevant.'

Deutsche Bank, HSBC and Standard Chartered Bank were among the many international financial sector firms which signed up to be among the first residents of DIFC. By November 2007, the number of firms licenced by the Dubai Financial Services Authority (DFSA) to operate in the DIFC had reached the 200 mark, comprising 158 Authorised Firms, 37 Ancillary Service Providers and 5 Registered Auditors.

It is hoped that the DIFC will double - to 20% - the financial sector's contribution to the GDP of the United Arab Emirates by 2010.

In July, 2003, the Federal Cabinet of the United Arab Emirates (UAE) approved a Federal Decree allowing the Dubai International Financial Centre (DIFC) a large degree of sovereignty. The approval of the Decree, which allows for Financial Free Zones to be established in the UAE, marked a significant step forward for the Centre.

In January, 2004, the Dubai Financial Services Authority (DFSA) announced 12 new laws relating to operations within the Dubai International Finance Centre (DIFC), providing a wide-ranging corporate legal envelope.

In 2006, the Companies Law contained in the 2004 package was updated.

In July, 2004, Sheikh Mohammed bin Rashid Al Maktoum acted decisively to guarantee the independence of the Dubai Financial Services Authority (DFSA), giving his personal commitment to the independence of the DFSA and declared that this will be formally enshrined in the Dubai Law which will signal the launch of the DIFC. Dr Habib Al Mulla, Chairman of the DFSA Regulatory Council, said: "The way is now clear for the DIFC when it launches, very soon, to become the powerful engine of business and employment creation that our region needs."

Finally, in September 2004, His Highness Sheikh Maktoum bin Rashid Al Maktoum, Prime Minister of the United Arab Emirates and Ruler of Dubai signed a decree formally establishing the Dubai International Finance Centre.

In addition to confirming the appointment of General Sheikh Mohammed bin Rashid Al Maktoum, UAE Defence Minister and Crown Prince of Dubai as the President of the DIFC, the decree officially created the DIFC Financial Services Authority, the DIFC Judicial Establishments and the DIFC Registrar of Companies.

Speaking following the signing of the decree, Director General of the Dubai International Financial Centre Authority, Dr Omar Bin Sulaiman announced that:"I am delighted to now say that the DIFC is open for business. This final legislative approval has established our independence and formalises the legal framework within which the DIFC and its tenants will operate."

In April 2007, the Dubai International Financial Centre (DIFC) held an official inauguration ceremony for the DIFC Courts, an independent judicial system which will deal with matters arising from and within the DIFC, and which is expected to raise the bar of legal standards within the region.

The Real Property Law, enacted in June 2007, guarantees ownership of freehold land and buildings, and other interest in land, within the DIFC. The Law is based on the underlying principles of English common law, but also incorporates the Torrens system of land registration, well known in countries such as Australia, New Zealand, Canada and Singapore.

Under the Real Property Law, land transactions are registered in a central register administered in the DIFC. Once registered, the Law certifies them to be fully effective. Unlike some other systems of land registration, title interests registered under the Real Property Law are “indefeasible”. In practical terms, this means that persons buying real estate in the DIFC, lending on the security of real estate in the DIFC, or taking a lease of real estate in the DIFC, can be assured that their investment is backed by the full protection of the Law.

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Dubai Entry and Residence

The Naturalization and Immigration Department at the Ministry of Interior is the only administrative authority responsible for issuing visas to foreigners wishing to enter the UAE. The visas issued by the Department differ in accordance with the purpose of the visit of the foreign visitor.

Citizens of GCC countries (Gulf Cooperation Council: Saudi Arabia, Kuwait, Bahrain, Qatar and the Sultanate of Oman) and British nationals with the right of abode in the UK do not need visas to enter the UAE. GCC nationals can stay more or less as long as they like. Britons can stay for a month and can then apply for a visa for a further two months.

The Dubai Naturalization & Residency Department (DNRD) issues different types of visas which are listed below.

1) 96 hour visa:

2) Visit visa:
2.1 In case of Personal sponsorship:

2.2 In case of Establishments sponsorship:

2.3 Renewal:

2.4 Extension:

3 - Transit visa

4 - Tourist visa

Whatever kind of visa you request, it will be deposited at the airport for you to collect upon arrival, but there is a charge for this service. If your passport shows any sign of travel to Israel, you will be denied entry to the UAE.

German citizens (both tourists and business visitors) may apply to the UAE embassy in Germany for one or two year multiple-entry visa. No sponsor is required. The maximum duration of stay should not exceed three months a year. The visa fee is Dh1500.

US citizens may apply to the UAE embassy in the US for one to ten year multiple-entry visas. A sponsor is required and the visa will be granted free of charge. The maximum duration of stay should not exceed six months per visit.

A Residence Visa stamped on a passport proves the legal residence of an expatriate in the country. This visa is given to workers who have obtained work permits or for relatives living with them permanently, and additional documentation is required.

In June, 2003, the government announced that it planned to allow expatriate residents to move freely among GCC countries by the end of the year, something which in any case became possible with the establishment of the GCC Common Market.

In 2003, Dubai, and the United Arab Emirates (UAE) started making a determined push to increase the participation of locals in the work-force under a policy known as 'emiratisation'.

Dr Omar bin Sulaiman, CEO of Dubai Internet City, noted that at the time that while the Dubai Internet City was devoted to emiratisation, this would not mean that all UAE nationals would be guaranteed a job there. "Nationals must not take for granted that jobs are waiting for them at DIC, which will scour the market to hire the most dedicated individuals irrespective of nationality. Dubai is a cosmopolitan city and we will look at all individuals of various nationalities to recruit the best. You will secure a job not because you are a citizen but because you are a hard-working citizen."

In June 2005, the body responsible for administering the programme, the National Human Resource Development & Employment Authority (or Tanmia) announced plans to deny work permits and entry visas to firms that do not comply with their prescribed 'emiratisation' quotas.

The Board of Trustees, chaired by Dr Ali bin Abdullah Al Kaabi, Minister of Labour and Social Affairs, decided to step up measures to deny firms not complying with the prescribed Emiratisation quotas the right to obtain work permits and entry visas for foreign labour.

Studies undertaken by Tanmia revealed that in the banking sector only seven out of 47 banks operating in the UAE had achieved their 2004 Emiratisation target of four per cent; that over 19 banks registered a gap of over 10 per cent between the targeted and realised levels; and that the overall Emiratisation percentage realised by the sector was 27.6 per cent. In the insurance sector, only one out of the 46 operating firms achieved the prescribed quota (5 per cent) and that the nationals accounted for only 5.3 per cent of the sector's overall work force in 2004. Practical steps were agreed upon in the meeting to accelerate implementation of the Cabinet resolutions in order to reverse the modest results.

In June, 2004, the Dubai government unveiled plans to enshrine in law rules governing foreign freehold ownership of property. Deputy director general of the Dubai Chamber of Commerce and Industry (DCCI), Ahmed Abdul Rahman Al Banna explained that:

"At present there is no federal law to govern foreign freehold ownership of property in Dubai," although he added that as an internim measure "major property developers have got together to offer guarantees to investors on freehold ownership, which has been endorsed by the Dubai government."

The DCCI deputy director general went on to announce that: "As part of our commitment to regulate the real estate sector, the Dubai government will issue a new property law which will address some of the key issues including legalising foreign freehold ownership of properties."

In March 2006, the long-awaited Dubai property law was issued, but Law No.7 of 2006 stipulated that freehold is limited to UAE and GCC citizens and companies wholly owned by them, as well as public shareholding companies. However, the law also stipulated that upon approval of Dubai's ruler, non-UAE nationals may be given the right to own properties in some parts of Dubai.

In November 2005, meanwhile, as soaring rents and other costs prompted businesses in Dubai to consider relocating to cheaper bases, the government stepped in to ensure that property owners couldn't increase rents by more than a stipulated level over the following year.

According to a decree issued by General Sheikh Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and UAE Minister of Defence, rents in the Emirate could not be raised by more than 15% until the end of 2006. This was followed by Dubai's second Rent Cap Law for 2007 which introduced a cap of 7% on rents. It has also been reported that the Dubai Rents Committee is prepared to review increases in rent by property owners should residents decide to contest them.

In August 2006, the Dubai International Financial Centre Authority (DIFCA) published draft legislation that would allow foreign freehold ownership of property in the DIFC.

The laws included the DIFC Real Property Law 2006 and the Strata Title Law 2006. These laws, enacted in June 2007, allow for foreign companies and individuals to hold freehold ownership of real estate within the Dubai International Financial Centre.

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Dubai Business Environment

Overseas businessmen will find that their counterparts combine local and regional expertise with a full understanding of international business practices. English ranks on a par with Arabic as the main business language and there are plenty of foreign banks, lawyers and other advisors - as well as the Department of Tourism and Commerce Marketing, The Economic Department, Chamber of Commerce and Industry and Jebel Ali Free Zone Authority to help those wishing to enter the market.

The emirate's transport infrastructure is unrivalled in the region in terms of size, facilities and efficiency. Its ports are served by more than 170 shipping lines and the airport by around 100 airlines.

The postal system in the UAE is very modern and the post offices are among the most efficient in the Gulf. Between the UAE and Europe or the USA, mail takes about ten days. To Australia, mail takes about eight to ten days. There is an excellent telephone system and you can phone anywhere in the world from the most remote areas. Throughout the country there are telephone offices which are equipped to send and receive fax, telex and telegraph messages. Internet use in the UAE in general and Dubai in particular (as evidenced by the creation of Dubai Internet City) is extensive, and the government has developed many effective online portals for accessing services and information.

There is no corporate tax in Dubai. The only exceptions to this are for oil producing companies and branches of foreign banks. Likewise, there are no personal taxes. Direct taxation is against the traditions of the UAE and it is highly unlikely that it will be introduced in the near future. (See Direct Corporate Taxation and Personal Taxation.)

Trade practices in Dubai are in line with normal international standards. All correspondence should be in Arabic or English. As a sophisticated market, full technical specifications should be provided with CIF Dubai prices and Middle East references. Payments are normally effected by letter of credit.

The UAE is a signatory of the General Agreement on Tariffs and Trade (GATT).

The registration of accountants and auditors in the UAE is governed by Federal Law No. 9 of 1975. There is no local professional body of accountants but many of the large international accountancy firms have offices in Dubai. Under Federal Law No.13 of 1988, as amended, all businesses are required to keep financial records but current legislation is not specific as to the nature of such records.

Foreign companies and individuals are not permitted to own land or real estate in Dubai. All property must be rented or leased for the purposes of running a business.

Towards the end of 1992, the UAE President enacted three Federal Laws on the protection of industrial and intellectual property. These laws came into effect in 1993 and provide protection against commercial piracy and fraud. The laws are: Federal Law No. 37 of 1992 on Trademarks, Federal Law No. 40 of 1992 on Protection of Intellectual Property and Copyright, and Federal Law No. 44 of 1992 on Protection of Industrial Property.

There is a comprehensive framework of legislation to ensure that business in the UAE is conducted in a fair and orderly manner. There are laws dealing with commercial transactions, intellectual property, labour and other aspects of business life.

In September 2005, Khalaf Al Habtoor, member of the Dubai Economic Council, revealed that the UAE's Ministry of Finance and Industry was putting the finishing touches to new company laws.

The legislation being finalised by the UAE authorities will amend partnership rules, foreign ownership thresholds and IPO rules.

Under current rules, when a firm decides to float on the stock market, it must list at least 55% of its shares, leaving its former owners holding a minority stake. This has led many family-owned enterprises to avoid listing.

However, the proposed legislation would bring the listing threshold as low as 25%.

Al Habtoor, who consulted on the law during its development phase, confirmed that:

"The federal government is revising the company law which will bring down the listing ceiling, making it flexible for us...A change in this, offering flexibility, will help the UAE's family businesses to go public."

Dubai has many local and international law firms willing to advise foreign business organisations on legal matters.

Dubai has civil, criminal and Shariah (Islamic) Courts of first instance. All court decisions may be brought to the Dubai Court of Appeal. Thereafter, a final appeal may be made to the Dubai Court of Cassation.

The Civil Court (as opposed to the Shariah court) has jurisdiction over labour, civil and commercial transactions, as well as personal matters (e.g. wills, divorces etc) relating to non-Muslims. The language of the Courts is Arabic and advocates admitted to plead are Arab nationals.

However, in addition to these systems, the DIFC has its own court, which held its first session in October 2005.

The session was chaired by Sir Anthony Evans, Chief Justice of the DIFC Courts and Mr Michael Hwang, who was recently appointed as the Deputy Chief Justice of the DIFC Courts.

“Today is a historic day for us. We have firmly established what we set out to create – an international financial centre governed by internationally recognised laws and regulations. The first session of the court reaffirms our status as a unique institution in the region, " commented Dr Omar Bin Sulaiman, Director General of DIFCA, at the time.

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Dubai Stock Exchange

Dubai stock market trading began in March 2000 in the Dubai Financial Market (DFM).

DFM operates as a secondary market for trading of securities issued by public shareholding companies, bonds issued by the Federal Government or any of the Local Governments and public institutions in the country, investment units issued by local investment funds and any other financial instruments, local or foreign, which are accepted by the Market. Located in the Dubai World Trade Center, the Market is regulated by the Emirates Securities and Commodities Market Authority (ESCA). Its rules ban insider trading and enforce transparency rules and release of information guidelines.

The fall of Saddam Hussein in Iraq led to a major influx of investment in the stock markets of the United Arab Emirates, including the Dubai Financial Market, with market capitalisation jumping significantly to reach a level of Dh4.5 billion ($1.23 billion), up 17%, by late 2003.

Abdullah Salim Al Turifi, Executive Director of ESCA, said: "Adoption of stringent regulations and corporate governance, transparency of the companies' half yearly and quarterly profits, restoration of investors' confidence in the stock market regulations and absence of alternative investments opportunities are some of the reasons that helped in local market growth in the last nine months."

DFM has an electronic share registry, order-driven trading and a clearing system that can support six trading floors and link more than 3,000 terminals. Share tickers are displayed on TV, the Internet, Reuters, Bridge and Teletext. Trading hours are divided into a pre-opening session between 10.00-10.30am and a main session from 10.30am to 12.30pm, Saturday through Thursday.

In March, 2004, the UAE's stock market regulator stepped up the region's campaign against money laundering and terrorist financing. In a circular sent to the Abu Dhabi and Dubai stock exchanges, and to 25 stockbroking firms in the United Arab Emirates, the UAE Securities and Commodities Authority announced that: "You are requested to verify all information and documents when accepting cash or opening accounts for clients."

A UAE-based broker explained that: "You can say it is an official umbrella. Before, we did not have written instruction concerning money laundering. Most of us had refused to accept big amounts of cash before because we wanted to make sure the money is clean and legal. But now the process is more organised and clear as we have official instructions in this respect. You can say that we are now part of the campaign launched by the UAE against money laundering."

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Dubai Gold And Commodities Exchange (DGCX)

The DGCX commenced trading on 22nd November 2005, and is first international commodities derivatives market in the Middle East region. DGCX offers a range of commodities, commencing with gold futures, with electronic trading accessible from anywhere in the world.

Transactions on the DGCX take place on a state-of the-art electronic trading platform.

The exchange is established within the Dubai Metals and Commodities Centre (DMCC), which is a strategic initiative of the Dubai government created to establish a commodity market place in Dubai. The DMCC is also a free zone authority offering 100% business ownership, a guaranteed 50 year tax holiday and freehold property options.

The DGCX is regulated by Emirates Securities and Commodities Authority.

Alongside the DGCX, the newly created Dubai Mercantile Exchange (DME) is likely to focus on energy trading starting with crude futures, and will not compete against the DGCX.

In February 2006, the DME unveiled its plans to launch a new trading hub concept on an electronic trading floor, in an effort to capitalize on local liquidity, draw regional market participants and attract financial institutions from the Middle East and internationally.

Once the trading in futures is stabilised, the DGCX will allow options trading on different commodities.

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Dubai International Financial Exchange

The Dubai International Financial Exchange (DIFX) opened for trading for the first time on Monday 26th September, 2005.

The launch of the first truly international stock exchange located between Western Europe and East Asia took place at a ceremony at the Dubai International Financial Centre (DIFC), where the DIFX is located.

The stated aim of the DIFX was to become the leading exchange in its region for equities, bonds, funds, Islamic products and other securities, and a gateway for international and regional investment.

It is the first exchange in the region that has been created to list securities from many different countries. UAE companies are able to list shares on the DIFX by setting up a holding company in the DIFC. Companies seeking listin