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The UAE Foreign Direct Investment (FDI) Law

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The UAE Foreign Direct Investment (FDI) Law

For a great many years, global businesses have viewed the United Arab Emirates as an attractive global investment market. With a strong presence of high-net-worth consumers and a geographically strategic location from which to distribute throughout the Middle East and North Africa, the UAE is rife with opportunity.

Yet, many international corporations could not own companies outright in the UAE and were restricted to a maximum ownership of 49%. Ownership laws, however, are now being revisited to diversify the country’s economy beyond the energy sector, which has been the source of UAE wealth for decades. But precisely the degree to which economic liberalization is taking place is very much based on one’s perspective.

Background

The United Arab Emirates (UAE), a federation of seven Emirates (member states), has served as a global centre for trade for centuries. However, most global businesses had often expressed discomfort with the country’s investment laws which, despite allowing 100 percent foreign ownership of businesses in the country’s Free Trade Zones (FTZs), stipulated that at least 51 percent of a company established  within the UAE, and outside a Free Trade Zone, must be owned by UAE citizens, or companies wholly owned by UAE citizens.

In addition, agency and distributor laws require that only a local commercial agent could sell products in the UAE market; and only UAE citizens or companies wholly owned by UAE citizens could register with the Ministry of Economy as commercial agents. Regulations also prevent the termination, or non-renewal, of a commercial agency contract unless the principal has a material reason to justify the termination or non-renewal; and the principal must often approach a court to terminate a contract.

Legislating Economic Diversification

The most recent Trade Policy Statement issued by the UAE through the World Trade Organization’s Trade Policy Review mechanism in 2016 stated the country aims to drive towards economic diversification by being less reliant on the oil sector and to increase its attractiveness to foreign investment.

The UAE enacted Federal Law No. 19, the Foreign Direct Investment Law (FDI Law) in November 2018. To promote and develop the investment environment and attract foreign direct investment in line with the developmental policies of the country, the Law established a framework for the country’s Cabinet to mandate which sectors and activities of the economy would be eligible for 100 percent foreign ownership. However, a list of eligible economic sectors and activities was not published by the UAE Cabinet until July 2019.

The list comprised of 122 economic activities across 13 sectors that would be eligible for up to 100 percent foreign ownership. The decision simultaneously conveyed that each emirate (member state of the UAE) could determine the percentage of foreign ownership under each activity suggesting that foreign ownership levels could vary from emirate to emirate. It was also clarified that oil & gas production and exploration sectors, air transport, and security and military sectors would be excluded from the purview of the FDI Law.

A Method of Recourse

It is also of interest that news reports indicate that for activities that are not included in the list of activities/sectors eligible for 100 percent foreign ownership, companies could approach the government for permission for a higher level of ownership; and that approvals may be granted on a case-by-case basis. The sectors that would allow 100 percent foreign ownership include:

-Space

-Renewable Energy

-Agriculture

Manufacturing

-Road Transport & Storage

-Hospitality and Food Services

-Information and Communication Services

-Professional, Scientific and Technical activities

-Administration and Support Services

-Education

-Healthcare

-Art & Entertainment; and

-Construction

For those businesses that do qualify under the FDI law, their products will be treated as being of UAE origin and therefore, eligible for such treatment under international agreements to which the UAE is a party. This is a privilege that is not available to goods manufactured by foreign-owned companies based in UAE Free Trade Zones. In addition, they can transfer abroad operating profits and proceeds from sale of investment or other assets.

Measuring Success

The Emirate of Dubai has reported that it has attracted US $12.7 billion in foreign direct investment (FDI) in the first half of 2019 thereby ranking the emirate third globally in FDI capital flows into Greenfield Projects. Also, in October 2019, Dubai assumed the presidency of the World Association of Investment Promotion Agencies (WAIPA), a global entity that works for the smooth flow of cross-border investments.

Although it is still too early to gauge the impact of the FDI Law and other developments, the consensus is that the UAE has taken steps to accelerate foreign direct investment into the country. It remains to be seen whether further steps such as changes to the agency and distributor laws, and changes to regulations related to the termination of agency contracts will be implemented to enhance the attractiveness of the UAE to foreign investors.

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JC Pachakkil is a senior consultant in Global Trade Management at trade services firm Livingston International.

solar panel

Tigers Caters to Solar Panel Demands with Added Energy Vertical

Tigers announced the addition of a renewables energy-focused vertical to its South African operations, following the opening of its e-commerce facility in the region. The energy vertical will cater to solar panel imports from China through added customs brokerage, local logistics, and warehouse storage.

“These are exciting times for Tigers as we move into the renewable energy sector, which is a growing market, especially in South Africa,” said Paul Lawrence, Managing Dire

“As with the recently opened Tigers e-commerce facility in South Africa, the renewable energy vertical is in line with our progressive approach to freight forwarding and embracing new markets.”

To further support efforts in the evolving sector in South Africa, Tigers also confirmed partnering with the region’s primary manufacturers, including energy solutions company, Energy Partners. Tigers will oversee the distribution of solar panel imports once shipped to Cape Town and Durban, adding to its extensive logistics portfolio.

“In South Africa, there are frequent power failures, and with such high levels of sunshine in the region it makes sense for people to invest in solar power generation,” continued Lawrence.

“We expect the market for renewable energy to continue to grow in the coming years, and Tigers is ready for the demand.”

Credit: Tigers

IRENA Report Reveals Renewable Energy Sector Supported 11 Million Jobs in 2018

A report released by the International Renewable Energy Agency (IRENA) confirmed the renewable energy sector is not only increasing numbers in global employment, but also expanding regional diversification for employment opportunities in key markets beyond China, the United States and the European Union. Malaysia, Thailand and Vietnam supported Asia’s position as a global employment hub for renewables jobs in 2018, boasting a 60 percent share worldwide.

Among specific renewable energy industries, solar photovoltaic (PV) represents a third of the workforce in 2018, ahead of liquid biofuels, hydropower, and wind power.

Following a dynamic trend is the wind industry with China representing 44 percent of global wind employment with the U.S. and Germany closely following. Land wind activity accounts for a majority of the 1.2 million jobs identified in the sector, while biofuel jobs were reported with a 6 percent growth in jobs in regions such as Brazil, Colombia, Southeast Asia, European Union, and United States.

“Beyond climate goals, governments are prioritizing renewables as a driver of low-carbon economic growth in recognition of the numerous employment opportunities created by the transition to renewables,” said Francesco La Camera, Director-General of IRENA. “Renewables deliver on all main pillars of sustainable development – environmental, economic and social. As the global energy transformation gains momentum, this employment dimension reinforces the social aspect of sustainable development and provides yet another reason for countries to commit to renewables.”

To read the full report, visit: IRENA.org

Source: International Renewable Energy Agency

The Port of Seattle tackles Greenhouse Gas with RNG

In an effort to create the nation’s first airport heated entirely by renewable natural gas, the Port of Seattle announced last week’s Request for Proposals to support the boilers and bus fueling system of Seattle-Tacoma International Airport with renewable natural gas.

“The Port can play a major role in creating a renewable natural gas market because we offer a stable, long-term use of gas.” said Arlyn Purcell, Director of Aviation Environment and Sustainability, Port of Seattle.

The Port of Seattle’s Century Agenda is an initiative to meet the company’s vision of a 50 percent reduction in greenhouse gas emissions by 2030 within company operations. Currently, the company’s primary legislative focus is on the state level through advocating for a clean fuel standard in Washington and catching up to its competitors in California and Oregon that have ample support of state-level clean fuel standard policies.

Through the use of Renewable natural gas (RNG), the company hopes to replace fossil natural gas in its operations and create more opportunities that create a competitive advantage while supporting a gas emissions reduction total of 18,000 metric tons per year, depending on what proposals the company receives.

“If we can attract a project developer to supply the airport, this will spur more opportunities to feed the current gas pipeline with RNG rather than have landfills or digesters flare the gas on-site or allowing their methane emissions to escape into the air,” concluded Purcell.

Source: Port of Seattle

Space-Time Insight, NEC Ink Asia Sales Contract

San Mateo, CA – Situational intelligence solutions developer Space-Time Insight and the NEC Corporation have announced the formation of a partnership for the “smart, renewable energy market.

Under the partnership, NEC has concluded a preferred sales contract covering Japan and the Asia-Pacific (APAC) region with Space-Time Insight for the sale of several of the company’s real-time visual analytics applications.

Japan-based NEC plans to focus its sales efforts on demand response, small grids (microgrids) and advanced metering infrastructure (AMI).

Space-Time Insight’s software applications help businesses make faster more-informed decisions by correlating, analyzing and visualizing large volumes of business, operational and external data, spatially, over time and across nodes in a network.

Renewable energy, energy storage and smart meter initiatives are being driven by the need for more reliable and efficient electricity systems.  With these systems continually generating vast quantities of data, there is an urgent need to quickly and accurately retrieve, analyze and take action on the data and derive greater operational insight.

This partnership enables NEC to combine its energy storage systems (ESS) and information and communication technology (ICT) solutions with Space-Time Insight’s real-time visual analytics applications to provide electricity operators and local governments with a comprehensive view of the health and performance of storage batteries installed in different locations.

In addition, the new applications “enable the monitoring of solar, wind and other power-generation output, historical power generation trends, the operational status of individual smart meters, communications and health information, and other information that contributes to improving the stability and efficiency of power networks.”

09/12/2014

Talks Begin on New Environmental Trade Pact

Washington, DC – The US and 13 other WTO member nations have launched negotiations on the proposed Environmental Goods Agreement (EGA) in Geneva, Switzerland. 

The EGA aims to eliminate tariffs on environmental technologies that can be as high as 35 percent and, says US Trade Representative Michael Froman, “pose a significant barrier to trade for US companies.”

The EGA negotiations will build on a list of 54 environmental goods on which APEC – Asia-Pacific Economic Cooperation – leaders agreed to reduce tariffs to five percent or less by the end of 2015, and will explore a wide range of additional products. 

The APEC list includes a variety of environmental technologies used in a number of environmental applications including renewable and clean energy generation such as solar panels and gas and wind turbines; wastewater treatment; air pollution control; solid and hazardous waste treatment; and environmental monitoring and assessment.

In addition to the US, Australia, Canada, China, Costa Rica, the European Union, Hong Kong, Japan, Korea, New Zealand, Norway, Singapore, Switzerland and Taiwan are participating in the negotiations.

The countries involved in the talks generate fully 86 percent, about $1 trillion, of global trade in environmental goods annually.

US exports of environmental goods totaled $106 billion last year and have been growing at an annual rate of eight percent since 2009, according to the US Department of Commerce.

“By eliminating tariffs on the technologies we all need to protect our environment, we can make environmental goods cheaper and more accessible for everyone,” Froman said.

07/14/2014