The United Arab Emirates Cabinet passed a landmark decision last year to allow 100% foreign ownership of companies onshore and have recently announced the industry sectors that are eligible. This marks a significant change from the prior law where foreigners must seek a local partner to set up business in the UAE, onshore and where the alternative for 100% foreign ownership in free zones. International companies seeking to establish an onshore presence would have to team up with a UAE national who is required to own 51% shares of the company. With the Foreign Direct Investment Law (Federal Law No.19 of 2018) (the FDI Law) that came into force on 23 September 2018, 100% foreign ownership of UAE onshore companies will now be allowed in eligible sectors. This move is expected to boost the UAE economy, attract foreign direct investment and reaffirm UAE’s position as an international hub for commerce and an optimal environment for doing business.
The specific sectors in which 100% foreign ownership shall be allowed include 122 economic activities across 13 sectors such as:
- Renewable energy
- Agriculture
- Information and communications
- Food services
- Hospitality
- Logistics
- Manufacturing
- Space
- Transport
- Professional, scientific and technical activities
- Educational activities
- Healthcare
- Art and entertainment
- Construction
Through the inclusion of these sectors in the 100% foreign ownership eligibility list, the UAE aims to attract foreign investment into the production of solar panels, green technology, hybrid power plants and power transformers. The UAE also aims to stimulate foreign ownership into transportation and storage which is expected to increase economic activity in supply chain, logistics, cold storage and e-commerce transport. 100% foreign ownership also extends to specific professional, scientific and technical activities across the identified sectors. For example, investors can now own laboratories for research and development in biotechnology.
The UAE Cabinet has indicated that the local governments at an emirate level has the discretion to decide on the percentage of foreign ownership for each sector / activity.
A negative list has already been released along with the FDI Law’s publication in the Official Gazette last year. The sectors where 100% foreign ownership shall remain restricted include:
- Oil and gas
- Banking
- Utilities
- Road and air transport
- Telecoms
- Medical retail (including pharmacies)
We at Alsuwaidi and Company are continuing to monitor any further legal developments in these areas and shall advise our clients as and when further information and details are released regarding foreign ownership and foreign direct investment into the UAE.