What new legislative measures have come into effect in the UAE that will impact business and investment?
AL TAMIMI: There are two pieces of legislation that come to mind that have been very important for the UAE. The first is the establishment the Dubai International Financial Centre (DIFC) and the second being the establishment of media free zones. The establishment of the DIFC was a major opportunity for international businesses; in particular those with a banking and finance focus. The innovation behind the setting up of DIFC was very unique because what we have is common law applied in a civil law society. This provides bankers and lawyers with the opportunity to work with contracts and a legal framework that they are used to and familiar with in their own countries. The establishment of Dubai Media City and Dubai Internet City as a hub for media doing business in the UAE has attracted a lot of media into the region with most of them operating beyond the UAE. This has been a milestone in the development of Dubai. In Abu Dhabi of course, there was the development of twofour54 – the first dedicated media free zone in the Emirate.
On the federal level and local level there are a number of pieces of legislation in the pipeline. The property regulation and rules in Dubai and Abu Dhabi are state of the art, with neighboring countries using these as a basis to develop their own legislation. As we know, the real estate sector in the UAE developed rapidly and throughout this there was much criticism about the lack of legislation. However, by the time the property market matured, we developed rules and regulations for the community that protects investors and regulates trust accounts, to name a few. This is certainly a model that neighboring countries can learn from.There are a number of other regulations in the pipeline including the long awaited company law. The good news about this law is that it will not be put into effect until it meets the expectations of the UAE and the international business community. This will make the UAE a leader in terms of corporate business structures, which in turn, will continue the ease of doing business here. There is also an investment law and a number of other legislative measures in the pipeline. However, the most important in recent years have been the establishment of the DIFC, Dubai Media City, and Dubai Internet City.
The UAE ranks very highly on the World Bank’s Easy of Doing Business Report at number 40 overall. However, it ranks very low in several categories including protecting investors, enforcing contracts, and closing a business. What needs to be done to improve these three areas specifically?
AL TAMIMI: If you look into the practical way things are done in the UAE, it is actually better here than the World Bank ranking. We have practiced in other regions and I am somewhat amazed at times with the cumbersome processes that need to be followed when practicing in a country with a relatively high ranking. I do believe the World Bank has tried to concentrate on the wording of the text rather than the practicality. If you work on the practicality of doing business in the UAE, you can set up businesses in Dubai, Abu Dhabi, and the Northern Emirates, starting with Sharjah, in about 2 days. We have managed to set up complex businesses here for clients in two days, with the maximum process taking us between 1 and 2 weeks. Closing a business in the UAE can be a lengthy process because foreign investors cannot just close their business, take people’s money, and leave the country. Therefore, we need to ensure that an appropriate judicial process is followed to protect all involved. So on the face of it, yes; it may take a long time to close a business. But how can we promote the UAE as being the place to do business in the region if we are not seen to be protecting investors and creditors alike? Being a mixed, cosmopolitan city, investors come from all over the world and some of them do not have permanent residency here – many just come and go. Therefore, we cannot simply close a company overnight in the UAE.
I do not deny that there are areas in the UAE that need to be improved in terms of corporate structure, and I hope the new company law, now in its 5th draft, will deal with this. What is great about the UAE authorities, the company registrar and the Ministry of Economy, is that they are very receptive to feedback. In my practice there have been many occasions where we have walked into a government agency to let them know that certain processes do not work or do not add any value to the overall objective. They have always been very receptive to us and have actively tried to find ways to improve. We work very closely with the government to assist them in improving rules and regulations on a very regular basis. Our partnership with the Dubai Department of Economic Development is an example of this relationship. This partnership means that we can now set up a company for someone in our offices and print their certificates and registration directly from here. Similarly, the Ministry of Economy has just introduced new rules for customs for companies looking to export out of the UAE where companies, if they meet certain requirements, can print out their own certificate of origin in-house to expedite the process. So the path is right, the authorities are going through the right processes. There will always be areas for improvement, but we are seeing improvements every day. Overall the judicial system has improved tremendously over the last 15 years. There was a huge investment in terms of manpower, IT systems, and other processes that have taken place in the courts which has resulted in much of the interaction moving online. However this is still a work in progress and we are certainly not at the end of the road just yet.
Which sectors currently provide the best investment opportunity?
AL TAMIMI: The tourism sector in the UAE has certainly been one of the most successful and recent figures show that it has almost gone back to where it was before the crisis in 2008. The retail sector has also been very successful with very little, if any, decline since 2008. I had a client in January 2009 who told me they had not had one single customer in their store for 3 months. Today, they are in the process of setting up 13 additional retail outlets between Abu Dhabi and Dubai as part of their expansion plan. My realistic reading on the UAE is that certain sectors have been affected, but most of the sectors are coming back and coming back in a big way. Most of our clients are actually acquiring businesses across the border which has resulted in significant growth of our corporate structures practice at Al Tamimi. Before the crisis, much of the growth Al Tamimi experienced was in the area of capital markets. This type of work has now dried up with very little activity, although I do believe we will see a return in 2 to 3 years from now. What has substituted capital markets work is mergers and acquisitions and a lot of that is happening across the border and a lot of it is regional. These are multi-million dollar deals that are not only high priced and of high value, but also a very good sign for the growth of the economy in other sectors. I do anticipate we will see a spillover that is going to increase job opportunities for locals and expatriates in Dubai, the UAE, and the region.
If you look at what is happening in the Middle East today with the Arab Spring, I am expecting to see more enforcement of a number of Arab treaties, that are already in existence but have not been practically implemented, to encourage trade among the pan-Arab states. This will assist with the movement of raw materials and manpower as well as manufacturing resulting in the further growth of such sectors.
The good thing about the crisis for the real estate sector is that it cleaned up a lot of the excess. Today, companies are much healthier and they are living with the reality of the markets. Over the last 3 to 4 years, many of these companies have been forced to clean up many of their problems. The rental market is stabilizing, especially in well-developed areas in both Dubai and Abu Dhabi. So the real estate sector is back on the rise, but certainly not as fast as the retail sector. If you look at industry, import/export SMEs are doing very well. In dealing with customs and one of our clients, we learned that imports have grown by one third this year. So that shows the increase in the inflow of goods into the region. By being close to our clients, we certainly learn a lot from them. I think the retail market is back in business and growing very well. Healthcare is growing very well throughout the UAE and I think you will see many investments in healthcare from the both the government and the private sector. There is a huge initiative from the government to encourage investment into healthcare services in the UAE. I have a client who is involved in manufacturing and doing very well. In 2008, when the crisis hit, about 70% of his business was export and today 90% of his business is export. Those areas will continue to grow and if you consider the geographical location of the UAE, there will always be opportunities to export and trade with Africa, the Indian subcontinent, and, subject to United Nations restrictions, with Iran. If you look at what is happening in the Middle East today with the Arab Spring, I am expecting to see more enforcement of a number of Arab treaties, that are already in existence but have not been practically implemented, to encourage trade among the pan-Arab states. This will assist with the movement of raw materials and manpower as well as manufacturing resulting in the further growth of such sectors.
What are your growth and development plans?
AL TAMIMI: The vision of the firm comes from learning from our clients and by working very closely with our clients. Whether it is our banking and finance clients including the international banks or whether on a capital market transaction or a bond, or an Islamic sukuk, or in working with some of the well-established traders in the UAE, the firm has made a decision to be present in every single Arab country. We are exploring opportunities to practice in Morocco, Tunisia, Libya, Egypt, and Lebanon. We committed to this vision prior to the Arab Spring, and given the current movement, we are very excited to be in a position to continue with our development plans. Currently we have 10 offices in 6 countries in the region in Iraq, Jordan, Kuwait, Qatar, Saudi Arabia, and the UAE, with 5 offices here. Our growth has been very much driven by our clients’ requirements. Our clients have the need to be able to work with one law firm from anywhere in the region.