Investment Opportunities in Dubai

Investment opportunities in Dubai
Syed Fahd Shah

Eisa Abdelgalil
Economic Research Department.
April 2010
1
The views expressed in this study are those of the author(s) and do not necessarily reflect the position of
Dubai Chamber of Commerce and Industry.
‫ ملخص تنفيذي‬....................................................................................................................................... 5
EXECUTIVE SUMMARY ............................................................................................................ 7
Section 1: Introduction .................................................................................................................... 9
1.1. Background ...................................................................................................................... 9
1.2. Research Objective .............................................................................................................. 9
1.3. Research questions ............................................................................................................... 9
1.4. Methodology and data........................................................................................................ 10
1.5. Outline of Study ................................................................................................................. 10
Section 2: Dubai and UAEs economic environment and prospects ............................................. 11
2.1. Economic history of UAE .................................................................................................. 11
2.2. UAE Growth outlook and forecast: ................................................................................... 12
2.3. UAE’s Business environment ............................................................................................ 14
Section 3: Detailed Opportunities for Investment in Dubai by sector .......................................... 16
3.2. Detailed sector opportunities in Dubai .............................................................................. 18
3.3. Investment in Travel and Tourism ..................................................................................... 19
3.3.1. Sector profile ............................................................................................................... 19
3.3.2. Future projections ....................................................................................................... 20
3.3.3. Investment potential and opportunities ....................................................................... 21
3.4. Investment in Financial Services Sector ............................................................................ 22
3.4.1 Sector profile ................................................................................................................ 22
3.4.3. Investment Opportunities ............................................................................................ 24
3.5. Investment in Professional Services .................................................................................. 25
3.5.1. Sector profile ............................................................................................................... 25
3.5.2. Investment Opportunities ............................................................................................ 25
3.6. Investment in Transport, logistics and storage sector ........................................................ 26
2
3.6.1. Sector profile ............................................................................................................... 26
3.6.2. Future projections for UAE transport and logistics industry ...................................... 28
3.6.3. Investment Potential and Opportunities ...................................................................... 29
3.7. Investment in Trade and Storage ....................................................................................... 30
3.7.1. Sector profile ............................................................................................................... 31
3.7.3. Investment potential and opportunities ....................................................................... 32
3.8. Investment in construction ................................................................................................. 33
3.8.1. Sector profile:.............................................................................................................. 33
3.8.2. Future forecasts ........................................................................................................... 35
3.9. Investment in infrastructure ........................................................................................... 35
3.9.1. Sector profile ............................................................................................................... 35
3.9.2. Future projections for UAE infrastructure sector ....................................................... 36
3.10. Prospects for investment in utilities ................................................................................. 37
3.10.1. Sector profile ............................................................................................................. 37
3.10.2. Future Forecasts ........................................................................................................ 39
3.10.3. Investment Opportunities .......................................................................................... 39
3.11. Prospects for investment in Manufacturing ..................................................................... 41
3.11.1. Sector profile ............................................................................................................. 41
3.11.2. Future projections ..................................................................................................... 42
3.11.3. Investment Potential and Opportunities .................................................................... 42
3.12. Public Private Partnerships in Dubai and the UAE ......................................................... 43
Section 4: Investment Regime in UAE and Dubai ....................................................................... 46
4.1. UAE Investment regime .................................................................................................... 46
4.2. Options in setting up a business in UAE: .......................................................................... 48
3
4.2.1. Formation of a UAE company: ................................................................................... 48
4.2.2.1. UAE Branch office: ................................................................................................. 48
4.2.2.2. UAE Professional: ................................................................................................... 48
4.2.2.3. Investment in UAE Free-Zones: .............................................................................. 48
4.3. Forming a company ........................................................................................................... 49
4.3.1. Licensing: .................................................................................................................... 49
4.3.2. Options for Legal Structure ........................................................................................ 49
4.4. Dubai’s investment regime ................................................................................................ 51
4.4.1. The special case of Free-Zones ................................................................................... 52
4.4.2. An overview of investment regime in JAFZA ............................................................ 53
4.4.3. An overview of the investment regime in the DIFC ................................................... 54
4.4.4. An overview of investment regime in DMCC ............................................................ 56
4.5. Lessons from other countries ............................................................................................. 56
Section 5: Conclusion ................................................................................................................... 58
References ..................................................................................................................................... 60
Website references ........................................................................................................................ 62
Appendix 1: Useful publications and websites ............................................................................. 64
Appendix 2: UAE selected double taxation treaties ..................................................................... 65
4
‫ملخص تنفيذي‬
‫‪ ‬ر‪ٙ‬ذف ٘زٖ اٌذساعخ ٌزسذ‪٠‬ذ ‪ِٕٚ‬بلشخ آفبق االعزثّبس ف‪ ٟ‬دث‪ٚ ٟ‬اإلِبساد ِٓ لجً اٌّغزثّش‪ ٓ٠‬األخبٔت‬
‫‪ ‬ف‪ ٟ‬اٌؼم‪ٛ‬د اٌمٍ‪ٍ١‬خ اٌّبض‪١‬خ ش‪ٙ‬ذد دث‪ٚ ٟ‬اإلِبساد رمذِب الزصبد‪٠‬ب ِطشدا ػٍ‪ ٝ‬خٍف‪١‬خ اإلصالزبد اٌز‪ ٟ‬لصذ ث‪ٙ‬ب رّٕ‪١‬خ اٌجٕ‪١‬خ‬
‫اٌزسز‪١‬خ ‪ٚ‬رٕ‪٠ٛ‬غ االلزصبد‪ٚ .‬لذ زممذ ٘زٖ اإلصالزبد ٔدبزب ‪ٚ‬رضإِذ ِغ خ‪ٛٙ‬د ٌزؼض‪٠‬ض اٌزدبسح ‪ٚ‬االعزثّبس رّثٍذ ف‪ٟ‬‬
‫إلبِخ اٌؼذ‪٠‬ذ ِٓ إٌّبطك اٌزدبس‪٠‬خ اٌسشح ‪ٚ‬اٌز‪ ِٓ ٟ‬أثشص٘ب ِٕطمخ خجً ػٍ‪ ٟ‬اٌسشح‪ٚ ،‬خؼٍذ ِٓ دث‪ِ ٟ‬شوضا ٔشطب‬
‫ٌالعزثّبس ‪ٚ‬اٌزدبسح‪.‬‬
‫‪ٔ ِٓ ‬بز‪١‬خ ِضا‪ٌٚ‬خ األػّبي‪ ،‬رؼزجش اإلِبساد زغت ِؤرّش األُِ اٌّزسذح ٌٍزدبسح ‪ٚ‬اٌزّٕ‪١‬خ (ا‪ٔٚ‬ىزبد) راد الزصبد ِزمذَ ِّب‬
‫‪٠‬ؼٕ‪ ٟ‬أْ ٌذ‪ٙ٠‬ب إِىبٔ‪١‬بد وج‪١‬شح ف‪ ٟ‬خزة االعزثّبس األخٕج‪ ٟ‬اٌّجبشش ‪ٚ‬رزّ‪١‬ض ثأداء ِزط‪ٛ‬س ف‪ ٟ‬االعزثّبس األخٕج‪ ٟ‬اٌّجبشش‪.‬‬
‫‪ ‬لبِذ اإلِبساد ثخط‪ٛ‬اد سئ‪١‬غ‪١‬خ ف‪ ٟ‬رسغ‪ ٓ١‬ث‪١‬ئخ األػّبي‪ .‬فف‪ ٟ‬خالي ػبَ ‪ٚ‬ازذ فمظ‪ 2008 ِٓ ،‬إٌ‪ ،2009 ٝ‬زغٕذ‬
‫اإلِبساد ِٓ رشر‪١‬ج‪ٙ‬ب ف‪ِ ٟ‬ؤشش رغ‪ِ ً١ٙ‬ضا‪ٌٚ‬خ األػّبي ثأْ لفضد ‪ِ 14‬شرجخ‪ٚ ،‬زغٕذ ِٓ رشر‪١‬ج‪ٙ‬ب ثـ ‪ِ 74‬شرجخ ِٓ ز‪١‬ث‬
‫رأع‪١‬ظ األػّبي‪ِ 29ٚ ،‬شرجخ ف‪ ٟ‬اٌزؼبًِ ِغ رصبس‪٠‬ر اٌجٕبء ‪ِ 8ٚ‬شارت ف‪ّ١‬ب ‪٠‬زؼٍك ثبٌزدبسح ػجش اٌسذ‪ٚ‬د‪.‬‬
‫‪ ‬رىّٓ فشص دث‪ ٟ‬االعزثّبس‪٠‬خ اٌشئ‪١‬غ‪١‬خ ف‪ ٟ‬اٌمطبػبد اٌز‪ ٟ‬زذدر‪ٙ‬ب خطخ دث‪ ٟ‬اإلعزشار‪١‬د‪١‬خ ٌؼبَ ‪ 2015‬ثبػزجبس٘ب اٌٍجٕبد‬
‫اٌشأع‪١‬خ ‪ٚ‬رشًّ اٌغفش ‪ٚ‬اٌغ‪١‬بزخ‪ ،‬اٌخذِبد اٌّبٌ‪١‬خ‪ ،‬اٌخذِبد اٌّ‪١ٕٙ‬خ‪ ،‬إٌمً ‪ٚ‬اٌذػُ اٌٍ‪ٛ‬خغز‪ ،ٟ‬اٌزدبسح ‪ٚ‬اٌزخض‪ٓ٠‬‬
‫‪ٚ‬االرصبالد‪.‬‬
‫‪ ‬ثبٌٕغجخ ٌمطبع اٌغ‪١‬بزخ‪ ،‬ر‪ٛ‬لغ اٌّدٍظ اٌؼبٌّ‪ٌٍ ٟ‬غفش ‪ٚ‬اٌغ‪١‬بزخ ثأْ ‪ ّٕٛ٠‬إٌبرح اٌّسٍ‪ ٟ‬اإلخّبٌ‪ٌ ٟ‬مطبع اٌغ‪١‬بزخ ف‪ٟ‬‬
‫اإلِبساد ثّؼذي ّٔ‪ ٛ‬عٕ‪ ٞٛ‬زم‪١‬م‪ ٟ‬لذسٖ ‪ ،%4.5‬ف‪ ٟ‬ز‪٠ ٓ١‬ز‪ٛ‬لغ أْ ‪ ّٕٛ٠‬االعزثّبس اٌشأعّبٌ‪ ٟ‬ف‪ ٟ‬اٌغفش ‪ٚ‬اٌغ‪١‬بزخ‬
‫ثّؼذي ّٔ‪ ٛ‬عٕ‪ ٞٛ‬زم‪١‬م‪٠ ٟ‬جٍغ ‪ٚ %6.4‬أْ ‪ ّٕٛ٠‬إٔفبق صائش‪ ٞ‬اٌذ‪ٌٚ‬خ ثٕغجخ ‪ %2.9‬ف‪ ٟ‬اٌغٕخ ‪ٚ‬رٌه ف‪ ٟ‬اٌفزشح ِٓ ػبَ‬
‫‪ 2010‬إٌ‪.2020 ٝ‬‬
‫‪ ‬أِب ف‪ّ١‬ب ‪٠‬زؼٍك ثمطبع اٌخذِبد اٌّبٌ‪١‬خ‪ ،‬فئْ ٕ٘بٌه اٌؼذ‪٠‬ذ ِٓ اٌفشص ع‪ٛ‬اء ضّٓ ِشوض دث‪ ٟ‬اٌّبٌ‪ ٟ‬اٌؼبٌّ‪ ٟ‬أ‪ ٚ‬خبسخٗ‪.‬‬
‫‪ٚ‬رشًّ اٌفشص اٌ‪ٙ‬بِخ اٌّزبزخ ٌششوبد اٌزىٕ‪ٌٛٛ‬خ‪١‬ب ِثً اٌششوبد اٌّبٌ‪١‬خ اٌز‪ ٟ‬رغزثّش ف‪ ٟ‬رسذ‪٠‬ث ‪ٚ‬رسغ‪ ٓ١‬رىٕ‪ٌٛٛ‬خ‪١‬ب‬
‫اٌّؼٍ‪ِٛ‬بد ‪ٚ‬االرصبالد‪ٚ ،‬اٌفشص اٌّشرجطخ ثزط‪٠ٛ‬ش ع‪ٛ‬ق عٕذاد اٌّؤعغبد اٌغبئٍخ ‪ٚ‬وزٌه ف‪ِ ٟ‬دبي اٌزّ‪ ً٠ٛ‬اإلعالِ‪.ٟ‬‬
‫‪ ‬رشًّ فشص االعزثّبس ف‪ ٟ‬إٌمً ‪ٚ‬اٌذػُ اٌٍ‪ٛ‬خغز‪ ٟ‬إِىبٔ‪١‬خ رط‪٠ٛ‬ش طشق ِزؼذدح ف‪ ٟ‬دث‪ٚ ،ٟ‬ف‪ ٟ‬اٌّشبس‪٠‬غ راد اٌصٍخ‬
‫ثّزش‪ ٚ‬دث‪ٚ ٟ‬وزٌه اٌّشبس‪٠‬غ اٌّزؼٍمخ ثّشاػبح عٍغٍخ اٌز‪ٛ‬س‪٠‬ذ ‪ٚ‬اٌز‪ٛ‬ص‪٠‬غ ٌٍج‪١‬ئخ‪ٚ ،‬خٍك فشص ٌٍششوبد اٌز‪ ٟ‬رزّزغ ثبٌخجشح‬
‫ف‪ِ ٟ‬شبس‪٠‬غ اٌزّٕ‪١‬خ اٌّغزذاِخ‪.‬‬
‫‪٠ ‬غزّش الزصبد دث‪ ٟ‬اٌّزٕبِ‪ ٟ‬ف‪ ٟ‬اٌسبخخ إٌ‪ِ ٝ‬ض‪٠‬ذ ِٓ االعزثّبساد ف‪ ٟ‬اٌجٕ‪١‬خ اٌزسز‪١‬خ ‪ٕ٘ٚ‬بن إِىبٔ‪١‬خ ٌ‪ٛ‬خ‪ٛ‬د فشص‬
‫اعزثّبس‪٠‬خ ِشثسخ ف‪ ٟ‬رط‪٠ٛ‬ش لطبس االرسبد ‪ٚ‬رط‪٠ٛ‬ش ‪ٚ‬ر‪ٛ‬ع‪١‬غ ‪ٚ‬إػبدح رط‪٠ٛ‬ش ِ‪ٛ‬أئ ‪ِٚ‬طبساد ‪ٚ‬أٔظّخ طشق‪.‬‬
‫‪ ‬وزٌه ٕ٘بن فشص خ‪١‬ذح ٌالعزثّبس ف‪ ٟ‬لطبػبد اٌخذِبد اٌّ‪١ٕٙ‬خ‪ٚ ،‬اٌّشافك اٌؼبِخ ‪ٚ‬اٌصٕبػبد اٌزس‪١ٍ٠ٛ‬خ اٌز‪ ٟ‬رسزبج‬
‫ٌٍّٕ‪ٚ ٛ‬اٌز‪ٛ‬عغ رّبش‪١‬ب ِغ اعزّشاس ّٔ‪ ٛ‬الزصبد دث‪ٚ ٟ‬ػذد اٌغىبْ ف‪ ٟ‬اإلِبسح‪ .‬رشًّ اٌخ‪١‬بساد اٌّز‪ٛ‬فشح ٌالعزثّبس ف‪ٟ‬‬
‫ِدبي اٌّشافك اٌؼبِخ االعزثّبس ػجش ص‪١‬غخ اٌششاوخ ث‪ ٓ١‬اٌمطبػ‪ ٓ١‬اٌخبص ‪ٚ‬اٌؼبَ‪ٚ ،‬اٌز‪ّ٠ ٟ‬ىٓ أْ رى‪ِ ْٛ‬ف‪١‬ذح ف‪ ٟ‬رس‪ً٠ٛ‬‬
‫ِخبطش اٌغ‪ٛ‬ق إٌ‪ ٝ‬اٌمطبع اٌخبص‪ ،‬ف‪ ٟ‬ز‪٠ ٓ١‬سزفع اٌمطبع اٌؼبَ ثبٌّخبطش اٌز‪ّ٠ ٟ‬ىٕٗ ِ‪ٛ‬اخ‪ٙ‬ز‪ٙ‬ب‪.‬‬
‫‪٠ ‬ؼزجش ٔظبَ االعزثّبس ف‪ ٟ‬دث‪ِ ٟ‬الئّب ٌٍغب‪٠‬خ ِغ ‪ٚ‬خ‪ٛ‬د اٌؼذ‪٠‬ذ ِٓ إٌّبطك اٌسشح اٌز‪ ٟ‬لبِذ ٌزغ‪ ً١ٙ‬االعزثّبس‪٠ .‬غزغشق‬
‫األِش أ‪٠‬بِب لالئً ٌزغد‪ ً١‬ػمبس ف‪ ٟ‬ز‪ ٓ١‬أْ ع‪ٛ‬ق اٌؼّبٌخ ‪٠‬ؼزجش ألً خّ‪ٛ‬دا ثبٌّمبسٔخ ِغ ِٕطمخ اٌششق األ‪ٚ‬عظ ‪ٚ‬شّبي‬
‫أفش‪٠‬م‪١‬ب‪ .‬أ‪٠‬ضب‪٠ ،‬ز‪ٛ‬لغ أْ رصذس اإلِبساد لش‪٠‬جب لبٔ‪ٔٛ‬ب خذ‪٠‬ذا ٌالعزثّبس األخٕج‪ِّ ،ٟ‬ب ‪٠‬غ‪ ًٙ‬ػٍّ‪١‬خ االعزثّبس‪ٚ ،‬ص‪٠‬بدح‬
‫اٌشفبف‪١‬خ ‪ٚ‬فزر ثؼض األٔشطخ االلزصبد‪٠‬خ اٌز‪ ٟ‬رؼذ زز‪ ٝ‬ا‪ ْ٢‬غ‪١‬ش ِغّ‪ٛ‬ذ ٌالعزثّبس األخٕج‪ ٟ‬ثذخ‪ٌٙٛ‬ب‪.‬‬
‫‪ ‬ر‪ٛ‬ضر اٌذس‪ٚ‬ط اٌّغزفبدح ِٓ د‪ٚ‬ي أخش‪ ٜ‬أْ دث‪ٚ ٟ‬اإلِبساد ‪ّ٠‬ىٕ‪ّٙ‬ب االعزّشاس ف‪ ٟ‬ارخبر ِٕب٘ح اعزجبل‪١‬خ ٌزسغ‪ٓ١‬‬
‫اٌزٕبفغ‪١‬خ ‪ٚ‬خزة االعزثّبساد‪ .‬رشًّ اٌخط‪ٛ‬اد اٌّّىٕخ ل‪١‬بَ خ‪ٙ‬خ ‪ٚ‬ازذح ‪ّ٠‬ىٕ‪ٙ‬ب رغ‪ ً١ٙ‬اعزفغبساد اٌّغزثّش‪ ٓ٠‬ػٍ‪ ٝ‬وبفخ‬
‫‪5‬‬
‫اٌّغز‪٠ٛ‬بد ‪ٚ‬ص‪٠‬بدح وفبءح ػٍّ‪١‬خ االعزثّبس‪ٕ٘ .‬بٌه خط‪ٛ‬اد اخش‪ ٜ‬رشًّ ر‪ٛ‬ف‪١‬ش ِض‪٠‬ذ ِٓ اٌّؼٍ‪ِٛ‬بد ز‪ٛ‬ي ظش‪ٚ‬ف األػّبي‬
‫‪ٚ‬اٌج‪١‬ئخ االلزصبد‪٠‬خ‪ ،‬اٌشفبف‪١‬خ ‪ٚ‬ر‪ٛ‬ف‪١‬ش ِض‪٠‬ذ ِٓ اٌسّب‪٠‬خ ٌٍّغزثّش‪ .ٓ٠‬رسغٓ اٌخط‪ٛ‬اد اٌّزو‪ٛ‬سح ِٓ اٌمذساد اٌزٕبفغ‪١‬خ‬
‫‪ٚ‬اٌشفبفف‪١‬خ ‪ٚ‬رمًٍ ِٓ رىبٌ‪١‬ف ِضا‪ٌٚ‬خ األػّبي ِّب ‪٠‬دؼً ِٓ دث‪ٚ ٟ‬خ‪ٙ‬خ أوثش ِالءِخ ٌالعزثّبساد ف‪ ٟ‬إٌّطمخ ‪ٚ‬اٌؼبٌُ‪.‬‬
‫‪6‬‬
EXECUTIVE SUMMARY
 The objective of this study is to identify and discuss the prospects for investment in Dubai
and UAE by foreign investors.
 Dubai and UAE have experienced rapid economic progress in the last few decades on the
back of reforms meant to both develop infrastructure and diversify the economy. These
reforms combined with efforts to boost trade and investment by having several free-trade
zones, of which Jebel Ali Free Zone is the most significant, have been successful and have
made Dubai a hub for investment and trade.
 In terms of doing business, UAE is regarded by The United Nations Conference on Trade
and Development (UNCTAD) as a ‘front-runner’ economy which means it has high Foreign
Direct Investment (FDI) potential and also high FDI performance.
 UAE has made major strides in improving the business climate. In only one year, from 2008
to 2009, UAE has improved its ranking by 14 ranks in overall ease of doing business, while it
has improved its ranking by 74 ranks in terms of starting a business, by 29 ranks in terms of
dealing with construction permits and by 8 ranks in terms of trading across borders.
 Dubai’s main investment opportunities lie in those sectors which are defined as vertical
building blocks by the Dubai Strategic Plan for 2015. These include the Travel and Tourism,
Financial Services, Professional Services, Transport and Logistics, Trade and Storage and
Construction sectors.
 For the tourism sector, the World Travel and Tourism Council (WTTC) projects that UAE
tourism GDP will grow by a real annualized growth rate of 4.5%, while capital investment in
travel and tourism is forecast to grow by a real annual growth rate of 6.4% and spending by
inbound visitors by 2.9% per annum respectively in the period 2010 to 2020.
 For the Financial Sector, there are many opportunities both within and outside the Dubai
International Financial Centre (DIFC). Important opportunities include for technology
companies as financial firms invest in upgrading and improving ICT technology,
7
opportunities related to the development of a liquid corporate bond market and also in the
area of Islamic Finance.
 Investment in transport and logistics include opportunities to develop various roads in Dubai,
in projects associated with the Dubai metro and also projects involving greening of the
supply chain, creating opportunities for companies which have experience in sustainable
development projects.
 Dubai’s growing economy continues to require greater investment in infrastructure and

lucrative possibilities could exist in development of the Union Railway, development,
expansion and redevelopment of ports, airports and road systems.
 There are also good opportunities in the professional services, utility and manufacturing
sectors which need to grow and expand as Dubai’s economy and population continues to
grow. Choices available for investment in utilities include investing through the Public
Private Partnerships (PPP) structure, which could be useful in transferring market risks to the
private sector, while the public sector keeps the risk that it can best manage.
 The investment regime in Dubai is considered very favorable, with many free-zones
established to facilitate investment. It takes fewer days to register a property and the labor
market is comparatively less rigid than the Middle East and North Africa (MENA) region.
Also, it is expected that the UAE will soon release a new Foreign Investment Law, easing the
investing process, increasing transparency and opening up some economic activities that are
now off limits to foreign investment.
 The lessons from other countries show that Dubai and UAE must continue to take a pro-
active approach to improving competitiveness and attracting investment. Possible steps
include creation of a single body which could facilitate investor queries at all levels and
increase the efficiency of the investment process. Other steps include provision of more
information about business and economic conditions, transparency and greater protection for
investors. These steps to improve competitiveness, transparency and reduce the cost of doing
business could make Dubai the most favored destination for investment in the region and the
world.
8
Section 1: Introduction
1.1. Background
Dubai has long been regarded as a hub for investment and trade. The purpose of this increased
investment has been to increase the GDP of Dubai, to diversify the economy and to project
Dubai at the global stage in terms of logistics, tourism, financial market and trading
infrastructure. The global economic downturn has reduced the risk appetite for investors
globally, led to large correction in the real-estate and construction sectors around the world and
led to significant uncertainty about the future.
As Dubai and the UAE also emerge from the impact of this downturn and recover, it is important
to assess which sector opportunities can be availed by foreign investors, the regulatory regime
that applies to foreign investors and which projects are available for investment from overseas.
UAE is regarded as an FDI ‘front-runner’ according to UNCTAD which means that it has high
FDI potential and also high FDI performance. Thus the UAE has performed to its potential and it
can be expected that it will continue to be a front-runner in the future. As such UAE and Dubai
will continue to be important candidates for foreign investment from developed countries and
also in the future from the developing countries of Asia and Latin America including India,
China and Brazil.
1.2. Research Objective

This study is meant to address issues that an investor may face in Dubai with respect to the
investment regime and opportunities. It highlights key sectors of interest and also opportunities
in the pipeline for the future. The focus of this study is on Dubai but where relevant analysis will
also be done for the UAE. At the most basic level, investment opportunities are considered with
respect to their rate of return in relation to the risk. While this differs greatly by the specific
project, some general observations will be made by sector, with regards to the sector’s position
in the risk-return space.
1.3. Research questions

This study will answer the following research questions:
9
1. What are the future economic growth prospects of Dubai?
2. What investment regime applies to investment in Dubai?
3. What are the key sectors of interest for investors?
3. What opportunities exist in specific sectors for investment in Dubai?
1.4. Methodology and data

This study uses a descriptive and analytical approach to describe and analyze future investment
opportunities in Dubai for investors. An analysis of past economic data and future forecasts will
be conducted to assess UAE and Dubai’s prospects. The study would use government sources to
help in identifying sectors of interest to foreign investors. The study also uses well known
databases like MEED to present future projects in the pipeline. Data is also collected from
national, regional and international sources.
1.5. Outline of Study

Section 2 presents an overview of macro-economic conditions and future prospects for UAE and
Dubai. Section 3 will show major investment opportunities and projects for investment in Dubai
by sector. Section 4 presents an overview of the investment regime for Dubai and the UAE.
Section 5 concludes with recommendations for government.
10
Section 2: Dubai and UAEs economic environment and prospects
Dubai and the UAE have experienced rapid economic progress in the last few decades on the
back of reforms meant to both develop their infrastructure and also diversify the economy. This
section explores the current economic environment and the prospects for future macro-economic
growth. This macro-economic analysis helps create a framework for later sections regarding the
investment regime and specific investment opportunities
2.1. Economic history of UAE

Table 2.1 below shows important macro-economic variables for the UAE. UAE total GDP stands at 228.6
billion USD in 2009. As shown in the table industry and services are the two important sectors in the
UAE, with agriculture playing a marginal role. The growth in services shows that the UAE (and Dubai in
particular) has had success in diversifying the economic base. This is a trend that is expected to continue
as Dubai and the UAE continue to try to look at diversifying into new sectors. This is likely to create
long-term business opportunities which will be explored in later sections.
Table 2.1: UAE basic economic data (2009)

UAE
Total GDP (USD billion) current prices 230.0
Agriculture (%) 1
Industry (%) 52
Services (%) 47
GDP per capita at current prices (USD) 46,857
Employment by economic activity1
Agriculture (%) 4
Industry (%) 24
Services (%) 72
Source: IMF/EIU, ILO, Australian DFAT, UAE Ministry of Economy, UN and other international sources
Some 2009 data is based on forecasts
1
Data for sector employment share is for 2008
11
2.2. UAE Growth outlook and forecast:
Table 2.2 below shows the outlook for the UAE economy based on forecasts by the Economist
Intelligence Unit (EIU). As shown below real GDP is expected to grow at a healthy rate and growth is
expected to pick up pace in 2012 and beyond.
Table 2.2. UAE projections for key economic variables (% real change)
2010 2011 2012 2013 2014
% change % change % change % change % change
Real GDP 3 4 6 6 6
Agricultural sector real GDP 2 2 2 2 3
Industrial sector real GDP2 3 4 6 6 6
Manufacturing sector real GDP 4 3 4 6 6
Services Sector real GDP 2 3 5 6 6

Source: EIU Country data3
Table 2.3 shows important developments that have happened in Dubai’s economy and the future
prospects. Also identified are important sectors identified as vertical building blocks. These
sectors include Travel and Tourism, Financial Services, Professional Services, Transport and
Logistics, Trade and Storage and Construction and efforts to boost trade using for example Jebel
Ali Port and Jebel Ali Free Zone as a key mechanism to achieve this objective
Table 2.3: Key developments in the Dubai economy at a glance

 Dubai’s historical growth rate from 2000-2008 has been rapid and has outpaced other economies
in the region.
 Dubai’s strongest sectors in terms of international competitiveness are tourism, transportation,

construction, financial services and professional services.
 The effort to boost trade and investment in Dubai by having several free trade zones, of which the
Jebel Ali Free Trade Zone is the most significant, has been a successful exercise. It has put Dubai
on the map as a logistics and trade hub.
 Building on the economic gains that Dubai has made, the Dubai Strategic Plan for 2015 sets out a
2
This variable measures the percentage change in real mining, quarrying, manufacturing, construction and utilities value-added,
over previous year.
3
Figures are based on nominal numbers.
12
target for 11% growth per annum and an increase in Dubai’s per-capita GDP to USD 44,000. It
may be noted here that plans have been announced to update the DSP 2015, taking into account
the impact of the global economic downturn. However, the update has not been announced as yet.
Investors are encouraged to look for the update for a further view of important sectors and
investment prospects in Dubai4.
 For the future, the Dubai Strategic plan for 2015 identifies the following sectors as important for
a strategic thrust as building blocks. These include Travel and Tourism, Financial Services,
professional Services, Transport and Logistics, Trade and Storage and Construction
Source: Dubai Strategic Plan for 2015, Rettab and Kwaak (2005) and identification of sectoral investment
opportunities in Dubai, Dubai Chamber, 2007.
Figure 2.1 below shows the value of Dubai’s sectors from 1975 to 2007. According to this data,
there has been rapid growth from 2000 onwards. In terms of magnitude this growth has been led
by Trade and Construction and real estate.
Figure 2.1. Historical GDP values in Dubai’s key sectors (AED mn.)
50000
40000
30000
20000
10000
0
1996
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Manufacturing Construction
Trade Transport, Storage & Communication
Real Estate The Financial Corporation Sectors
Government Services Sector
Source: Dubai Chamber based on UAE Ministry of economy
When the data in figure 2.1 is compared with the sectors identified as strategic sectors, there is an overlap
as the sectors identified for strategic thrusts are the ones that have grown rapidly in the past. Therefore,
Dubai knows where its strength lies and wants to build on that strength. Although potential opportunities
4
http://www.dubai.ae/en.portal?topic,hm_dxbstgplan,1,&_nfpb=true&_pageLabel=general
13
exist in almost every sector, this information will inform any prospective investor about the sectors in
which he is more likely to find sound long-term investment opportunities.
2.3. UAE’s Business environment
The UAE has made significant strides in the ease of doing business when compared to the 183
economies of the world (table 2.4). The change in rank is over one year and the measurement
period is normally from June 2008 to June 2009 (reported in Doing Business 2010 UAE)5. As
shown in table 2.4, in one year, the UAE has made large gains in the ease doing business (i.e.
overall). This has made it improve its ranking by 14 points. It has also improved its ranking by
74 points in terms of ease of starting a business and its ranking by 29 points in dealing with
construction permits. Significant improvements were also experienced in the ranking for trading
across borders.
Table 2.4. Ease of doing business in UAE 2010
UAE: Ease of... Doing Business 2010 rank Doing Business 2009 rank Change in
rank
Doing Business 33 47 +14
Starting a Business 44 118 +74
Dealing with Construction 25 54 +29

Permits
Employing Workers 50 45 -5
Registering Property 7 7 0
Getting Credit 71 68 -3
Protecting Investors 119 114 -5
Paying Taxes 4 4 0
Trading Across Borders 5 13 +8
Enforcing Contracts 134 135 +1
Closing a Business 143 143 0

Source: Doingbusiness.org, World Bank Group.
5
One of the exceptions is for the Paying Taxes indicator that refers to the period January to December of 2008 (doingbusiness.org)
14
Table 2.5 shows the important indicators for starting a business in the UAE as compared to the MENA
region and also the OECD. As shown in the table it takes almost the same number of procedures to start a
business in the UAE as compared to the MENA region. In terms of days, it takes 15 days to start a
business in the UAE as compared to 20 for the MENA region.
Table 2.5. Starting a business ranking
Indicator UAE MENA OECD
Procedures (number) 8 7.9 5.7
Duration (days) 15 20.7 13.0
Cost (% income per capita) 6.2 34.1 4.7

Table 2.6 shows the ease of enforcing contracts in the UAE. As shown here, it takes 49 procedures to
enforce a contract in the UAE, this compares with 43.4 procedures in Middle East and North Africa. But
again, it takes fewer days to enforce contracts in the UAE.
Table 2.6: Ease of enforcing contracts
Indicator UAE MENA OECD Average
Procedures (number) 49 43.4 30.6
Time (days) 537 679.9 462.4
Cost (% of claim) 26.2 23.7 19.2

Table 2.7 shows important indicators for investor protection. These include the extent of
disclosure index, extent of director’s liability index, index for ease of shareholder suits and also
for strength of investor protection. In these indices, higher numbers indicate greater disclosure,
greater director’s liability and also greater strength of investor protection, which generally imply
greater investor protection.
Table 2.7: Level of investor protection
Indicator UAE MENA OECD Average
Extent of disclosure index (0-10) 4 6.3 5.9
Extent of director liability index (0-10) 7 4.8 5.0
Ease of shareholder suits index (0-10) 2 3.7 6.6
Strength of investor protection index (0-10) 4.3 4.9 5.8

15
Section 3: Detailed Opportunities for Investment in Dubai by sector
Dubai, in its role as an entrepot, has attracted foreign investment in a variety of sectors. More
recently the activity has been in construction and real estate sectors, although as part of the
Dubai Strategic Plan (DSP) for 2015, Dubai is also encouraging investment and development of
other sectors of the economy as well. This section contains a list of data collected about
opportunities in various sectors. Some projects may be past projects for which contracts have
been awarded and some may be in design or still in planning phase (i.e. the contract may not
have been awarded yet). These projects serve as examples of the kind of investment activity by
sector. It is up to the individual investor to do their due diligence and search for the most
appropriate investment opportunity, given their particular risk-return requirements. It may be
noted here that plans have been announced to update the DSP 2015, taking into account the
impact of the global recession. However, the update has not been announced as yet and investors
are encouraged to look at this update for a further view of important sectors and investment
prospects in Dubai6.
6
http://www.dubai.ae/en.portal?topic,hm_dxbstgplan,1,&_nfpb=true&_pageLabel=general
16
Table 3.1: Summary of Dubai’s main competitive advantages
 Dubai’s main advantage is its strategic location in between major economies of Asia,
Africa and Europe.
 Dubai has successfully leveraged this strategic location using the Jebel Ali Port, the sixth
largest port in the world and also the newly built Al-Maktoum airport.
 In the longer run, it can be expected that the Al Maktoum airport will become a multi-
modal logistics hub for about 12 million tons of freight. A corridor will link Jebel Ali Port
to the Al-Maktoum airport, greatly cutting
down transit time. Efficient multimodal transportation will be one of Dubai’s important
competitive advantages.
 According to research done at Dubai Chamber, Dubai’s main Revealed Comparative
Advantage lies in its re-exports from its free-zones (Azzam, Rettab and Morada, 2010).
 The Jebel Ali Free Zone lies in between Jebel Ali port and Al Maktoum airport. The free
zone offers commercial facilities such as office space, light industrial units and warehouse
and showroom facilities. It also offers 100% foreign ownership, no currency restrictions
and unrestricted repatriation of both capital and profits.
 A business located in the Jebel Ali Free Zone benefits not only from the incentives and
facilities offered in the zone but also its location between the worlds two major logistic
hub, i.e. Jebel Ali Port and the Al Maktoum airport.
 Dubai continues to invest in infrastructure and make it easier to do business making it an
attractive location for service the billions of potential customers in the regions surrounding
Dubai
Adapted from: Invest in Cananda.

Sources: Jafza.ae, Azzam, Rettab and Morada (2010), Gulf news and Zawya.com
Table 3.2 below shows FDI inflows into Dubai by sector. Although the time period is between
the years 2005 and 2006, which places it before the global downturn, it does serve as a guide to
which sectors have been attractive in terms of investment recently. As the table shows, while
construction has the largest amount of investment in 2005, it is closely followed by financial
intermediation and insurance in the same year and then by wholesale and retail trade sector. In
2006, it is financial intermediation and insurance that has the largest share, followed by
construction, followed by wholesale retain and trade which has the highest amounts of
investment.
17
Table 3.2: FDI inflows into various sector of Dubai (2005-2006)
2005 2006 % change
Agriculture 16 13 -19%
Mining 1,098 1,302 19%
Manufacturing 737 1,061 44%
Electricity and Water 39 46 18%
Construction 13,239 14,652 11%
Whole sale and retail Trade 7,939 8,696 10%
Hotels and Restaurants 3 38 1,167
Transportation and Communication 603 851 41%
Financial intermediation and Insurance 12,931 15,025 16%
Others 830 780 -6%
Total 37,435 42,463 13%
Source: Dubai Chamber based on FDI bulletin 2005-06, Dubai Statistics Centre
Table 3.3 below shows important indicators for companies that have made FDI in Dubai, such as
Dividend Payment, Income Payment and Compensation of employees among others. These
variables generally show a large percentage increase from 2005 to 2006.
Table 3.3: Major indicators for companies that have made FDI in Dubai
Main Sector 2005 2006 % change
Foreign Direct Investment 37,435 42,463 13%
Dividend Payment 1,738 2,394 38%
Income Payment 6,835 10,085 48%
Sales of Goods and Services 53,054 55,822 5%
Purchases of Goods and Services 32,378 39,400 22%
No. of Employees 56,430 70,445 25%
Compensation of Employees 2,601 3,636 40%
Source: Dubai Chamber based on FDI bulletin 2005-06, Dubai Statistics Centre
3.2. Detailed sector opportunities in Dubai

This sub-section covers detailed sector opportunities for investment. Although opportunities
exist in other sectors, the opportunities in Dubai are concentrated in certain sectors given Dubai’s
location, logistics and free-zone advantages. These sectors are also among those mentioned
earlier and are part of the Dubai Strategic Plan for 2015. The format for the subsection for each
sectors is as follows. First we start with a sector profile, followed by future projections and
finally an overview of some investment opportunities (past and future) in each sector, generally
focusing on specific projects.
18
These sectors are as follows:-
1) Travel and Tourism

2) Financial Services
3) Professional Services
4) Transport and Logistics Services
5) Trade and Storage
6) Construction
7) Utilities
8) Industry (Manufacturing)
3.3. Investment in Travel and Tourism

This section covers investment prospects in Dubai’s key Tourism sector. This sector has also
been identified as a important vertical building block in the Dubai Strategic Plan 2015.
3.3.1. Sector profile

According to the Department of Tourism and Commerce Marketing (DTCM) survey of
international overnight visitors for 2006-07, most visitors who came to Dubai were male (75%),
aged 26-25 (68%) and nearly a third came here on business trips (32%). Most visitors came for
leisure breaks (68%) with a third on business trips.
For investors in Dubai’s Tourism sector it would be interesting to note that during this period,
95% of visitors arrived through Dubai International Airport. 77% of visitors stayed in hotels.
Most of these visitors stayed in 5 start hotels (31%), while 16% in four star hotels and 28% in 3-
star hotels or below.
Outside their accommodation, 71% of visitors ate at restaurants. Visitors also went to food courts
in shopping malls, but these were more popular amongst visitors who came for leisure rather
than visitors who came for business visits. In terms of spending time, 79% of visitors spent their
time in shopping, 70% sightseeing, 53% in visiting heritage sites and 44% spent time in guided
activities. Shopping malls were the most popular destination (86%) while clothing was the most
popular item purchased followed by souvenirs (35%).
19
In terms of expenditure, for the period for which the DTCM overnight survey was undertaken, in
2006-2007 the expenditure per day per person was AED 1,021.74 per day per person. This was a
large increase of about 104% over the figures for 2002, when average expenditure was AED
500.10. American visitors spent the most per person per day, AED 2,430. On average the
business visitor spent AED 1,439.88 while leisure visitors spent about AED 840.22. Visitors
generally came to Dubai for the first time (61%), and a large proportion, 62% said they will
return to Dubai for a visit.
Table 3.4: Important companies for Dubai’s tourism sector

Company name Major activities Opportunities
Emirates airlines Emirates is part of the airline industry. It is now Emirates plans to increases fleet of
reportedly expanding into hotels and resorts. Has aircraft. In addition tour operators and
built a hotel in Dubai and a luxury conservation resorts can link up with Emirates airline
resort in the Blue mountains in Australia to offer
Air Arabia Airline industry Although based in Sharjah, Air Arabia

has flights going to Kenya among other
locations. There is possibility for Dubai
tour operators and hotels to exploit
opportunities for growth in tourism from
Asia and Africa.
Accor hotel group Ibis , Novotel, Sofitel, Pullman Can potentially partner with this large
international chain in food and beverage
and event/conferencing areas.
Source: BMI UAE Tourism Sector Report, 2010.
3.3.2. Future projections

The World Travel and Tourism Council (WTTC), forecasts that in the next ten years the UAE
travel and tourism sector GDP is expected to achieve high levels of growth. These are
summarized in the table 3.5 below. It is also important to note that UAE tourism sector is ranked
6 out 181 countries by the WTTC in terms of expected growth in the tourism sector, implying
potentially lucrative opportunities for tourism related businesses to profit from.
20
Table 3.5: Expect values and real growth rate for UAE tourism
Expected values in 2020 Annualized Real Growth
Tourism Economy 27,723 4.5%
GDP (USD mn.)
Demand for travel and 203,830 5.5%

tourism (USD mn.)
Employment in 745,000 5.7%

Tourism sector
economy (number of
employed)
Capital Investments in 61,113 6.4%

Travel and Tourism
(USD mn.)
Spending by inbound 44,742 2.9%

international visitors
(USD mn.)
Source: WTTC
Table 3.6 shows the top economies in terms of Tourism growth among all the economies of the
world. As shown below, the tourism sectors of China and India are expected to grow at the
highest rate. Also two countries in Africa, Zimbabwe and Malawi are also expected to grow at
highest rate as well. Dubai sits in between these two regions and in its position as a tourism hub
can benefit from increased tourism between Asia and Africa. This is only one of the potential
opportunities and there can be many more that can be exploited by investors in utilizing Dubai’s
strategic location at the cross-roads between East and West.
Table 3.6. Forecast: Fastest Growing Tourism Sector Economies 2010-2020

Tourism Economy 10 Year Real Growth Expected spending by visitors in host 10 Year Real Growth
GDP Annualized % country Annualized %
China 9.0 Montenegro 11.4
Zimbabwe 8.7 Solomon Islands 10.1
Malawi 8.7 Brazil 9.6
India 8.5 Chile 9.5
Mongolia 8.1 Zimbabwe 9.5
Source: World Travel and Tourism Council
3.3.3. Investment potential and opportunities

The potential for investment in Tourism in Dubai is for two reasons. One is the potential for
growth within the UAE itself. The other is exploiting Dubai’s position as hub for tourism
21
elsewhere in the region and even beyond. International investors can gain by partnering with
some of the major companies in UAE and
Table 3.7 shows a list of projects in Dubai’s Tourism sector. Many of these projects would have
been awarded to potential investors but they serve as examples of the kinds of projects that
foreign investors can look for in the future.
Table 3.7: Important investment projects and opportunities

Project name Project value (USD mn.) Contract parties
DCA - Dubai World Central (Al 120 Department of Civil Aviation (DCA)
Maktoum International Airport) -
Helipad & Tunnel
300
I&M Galadari Group - Restless Dubai Tourism Projects Development
Planet (City of Arabia) Company (DTPDC)*I & M Galadari Group
(Dubailand)
Tanmiyat – Dubai land: Living 3,5007 Dubai Tourism Projects Development

Legends Company (DTPDC)*Tanmiyat Group
Falcon City of Wonders - Central 300 Salem al-Moosa Group*Dubai Tourism

Park Towers Projects Development Company (DTPDC)
Dubai Sports City - Multi-Purpose 150 Dubai Tourism Projects Development

Indoor Stadium Company (DTPDC)*Private Developer
5508 Dubai Tourism Projects Development
I&M Galadari Group - Wadi Walk Company (DTPDC)*I & M Galadari Group
(City of Arabia) (Dubailand)
Source: Meedprojects.com
3.4. Investment in Financial Services Sector

Dubai’s Financial Services sector is another important vertical building block in the Dubai
Strategic Plan for 2015. Most of the material in the sub-sections below is taken from the BMI
UAE Insurance Report Q2 2010 and the UAE Commercial Banking Report Q2 2010.
3.4.1 Sector profile

The Central bank of the UAE is responsible for supervising monetary, credit and banking policy.
This is in order with the UAE’s policy to use these policy tools to help support the economy and
support currency stability.
7
This is budgeted value, not contract value
8
22
In insurance, UAE has several small insurance companies and so they don’t have benefit of
economies of scale. A profile of some important companies in the UAE banking and insurance
industry is provided below.
Table 3.8: Selected companies in UAE banking and insurance sector

Emirates NBD Leading bank in UAE in Management at Emirates NBD has mentioned that it wants to shift
terms of assets towards more investment in emerging markets. This could create
opportunities for investors as the bank could possibly also look to
combine with foreign partners
Mashreq bank Lending by Mashreq has Mashreq is targeting organic growth in deposits and loans.
grown substantially.
Dubai Islamic Bank Islamic banking products Opportunities for expansion due to continued growth in Islamic
and services banking and finance. Has growing product range
Emirates Islamic Bank Islamic banking products Opportunities exist in Islamic finance as this industry grows and new
and services products and services are designed. EIB also provides internet
banking, Etisalat online payment services, corporate banking and
business banking services. The wide range and growth opportunities
in these products and services create opportunities for other
companies to collaborate with EIB.
AIG Operate in many countries Premiums could rise as the demand for life and non-life insurance
and has global network of services increase
life and non-life insurance
Allianz Alliance is another global As with AIG, there could be opportunities as premiums improve due
company offering to greater demand for insurance products.
insurance, banking and
asset management products
Source: BMI UAE Insurance report, Q2 2010.

This section covers future projections for the UAE insurance and banking sub-sectors. For the
UAE Commercial banking sector it may be noted that BMI notes a projected Compound Annual
Growth Rate (CAGR) of about 9% for assets, 7% for liabilities and 9% for deposits, from 2010
to 2014.
Table 3.9: Future projections for the UAE Insurance industry
2011 2012 2013 2014
Non Life insurance 24,342 24,231 28,742 30,776
premiums AED mn
% annual growth 17 12 6 7
Life insurance 3,180 3,603 4,955 6,554

premiums
Total 27,523 30,833 33,696 37,330

Source: UAE Insurance report Q2 2010.
23
Table 3.10 below shows future projections for UAE banking sector assets and liabilities, which
are forecasted to grow significantly over the next few years.
Table 3.10: Projected levels for UAE banking sector assets and liabilities (US$ bn.)
2011 2012 2013 2014
Total Assets 482.31 535.36 599.60 671.56
Client Loans 317.24 345.79 380.37 418.41
Client deposits 329.63 362.59 395.23 426.84
Source: UAE Commercial Banking Report Q2 2010.
3.4.3. Investment Opportunities

Dubai has many opportunities in the financial sector. For example, an investor can setup a
company with the following functions in DIFC: Wealth Management, Banking and brokerage,
Capital, Islamic Finance and ancillary services and re-insurance and captives (DIFC.ae).
Table 3.11 highlights some important opportunities in this sector. Some of these opportunities
are in what is expected to be a rapidly growing sector, i.e. Islamic Finance. Opportunities in this
are not only limited to designing and promoting Islamic financial instruments but also in areas
such as education of professionals in this field. Some possible investment projects are given
below. Another area of opportunity is greater financial integration across the Arab world. This
could create opportunities for financial institutions in terms of creating payments systems, ICT
technology and even regional investment institutions. Therefore, foreign investors, including
those from other Arab and GCC countries can partner with Dubai financial institutions to profit
from these opportunities as they emerge. These opportunities are partly dependent on greater
integration between the members of the Grater Arab Free Trade Agreement (GAFTA). Another
potential area is that investment from the GCC and wider MENA can be directed towards local
capital markets and companies as compared to overseas. This will help recycle wealth in the
region, leading to greater wealth generation. Therefore, the wealth of the GCC, the MENA
region and even South Asia could be attracted by the investors in Dubai’s capital market, using
Dubai as a financial hub. International investors are looking for diversification. Increased
correlation between major global stock markets is increasing and this has reduced the natural
benefits of portfolio diversification, the GCC region could offer both return and diversification
potential. International investment funds should therefore consider Dubai as the location from
which to tap the GCC’s potential given the quality of financial infrastructure, for example in the
DIFC. This list of possible opportunities below is not exhaustive. With further analysis, investors
can find many more opportunities in Dubai’s financial sector.
24
Table 3.11: Projected levels for UAE banking sector assets and liabilities
Possible projects Project value Opportunities
ICT technology upgraded banking NA Greater integration within the Arab world will create need
systems and integrated payments systems for updated finance and payment systems.
across Arab countries.
Partnerships between financial institutions NA Opportunities are very high and language and cultural
from Arab countries, Asia and Africa and similarities between Dubai businesses and other businesses
the UAE to provide greater financial in Arabic speaking countries partner with each other.
services to un-served (unbanked Similar opportunities also exist in the financially un-served
population). populations of Asia and Africa. According to
Mckinsey/Financial Access Initiative, 67% of the adult
population in Arab states is financially un served.
Corporate and infrastructure related bonds NA High amounts of infrastructure spending by GCC countries
in areas such as transport systems, pipelines,
telecommunication and electric grids means that some of
these projects can be securitized by using the capital
markets
Islamic Finance NA
Opportunities also exist for designing and promoting
Islamic Finance products, to serve a growing international
market. Dubai is well placed to serve these needs as a
global financial hub. Also Dubai based investors can
partner with other financial hubs, such as Luxembourg
which has strong fund brand internationally, using their
expertise to offer Islamic funds.
Sources: BMI, ERF9 , PWC10 DIFC, McKinsey and Financial Access Initiative, Saidi, Future of Capital markets
11
in the middle-east, DIFC presentation and Ernst and Young
3.5. Investment in Professional Services

The professional service sector is an important sector of the Dubai economy and has been
defined as a key vertical building block according to the Dubai Strategic Plan for 2015. This
section discusses investment opportunities in Dubai’s professional services sector.

According to a survey done by Dubai Chamber in 2006, the share of marketing services is at
19%, followed by professional services at 18% and then renting and leasing at 18%. Within
professional services, management consulting represents 31% of the share, followed by book-
keeping, accounting and auditing at 19% and then legal services at 15%. Other professional
services account for about 35% of the total (Abdelgalil and Hussain, 2007)

Given the specialized nature of this sector, there are opportunities for investment by
professionals such as accountant, management consultants and legal professionals to setup office
9
Saidi, Nasser, ERF Working Paper Series, ‘Arab Economic Integration: An awakening to remove barriers to prosperity’.
10
http://www.pwc.com/en_LU/lu/podcast/docs/pwc-islamic-finance-podcast.pdf
11
Half the World is unbanked, 2008
25
in the UAE. Opportunities could also exist to service the needs of Dubai’s large free-zone
business community. Given the expected growth in Dubai’s trade, logistics and tourism sectors,
investors could expect a continued need to provide specialized professional services to these
sectors.
3.6. Investment in Transport, logistics and storage sector

This section covers investment opportunities freight transport and logistics sector of Dubai and is
based primarily on a BMI Freight transport report for Q2 2010.

UAE’s position in logistics in transportation and logistics is based on two major factors. One is
the strategic location of the country and the other is its ability to project the advantages of that
strategic location by investing in high quality infrastructure. This is especially relevant in the
case for Dubai which has been able to become a hub for many sectors, tourism, re-exports,
finance among other sectors. The government continues to try to encourage diversification of
the economy into non-oil sectors. As these sectors grow, there will be continued need to provide
top quality transportation to facilitate growth in traffic.
Recently, Dubai has developed the Dubai Logistics Corridor. This development is expected to be
a multi-modal logistics platform12. In another development, the Al Maktoum, international
airport is opening in Dubai. In terms of capacity, the airport is expected to cater to 120 to 150
million passengers and 12 million tons of cargo annually13. Investors from overseas can expect
investment opportunities in the Dubai World Central complex and in this new airport as it
develops and passenger numbers grow.
In another development, the UAE is planning to build a railway network to connect all seven
emirates. This Union Railway will also connect the UAE to Saudi Arabia via Ghwaifat city. It is
also planned that it will connect the UAE to Oman in the east (gulf news, business, 22 June
2010). The pace of these developments shows the seriousness of the Dubai and UAE
governments to develop the transportation infrastructure in the country. It also shows Dubai’s
12
http://www.khaleejtimes.com/DisplayArticle08.asp?xfile=data/business/2010/January/business_January326.xml&section=busi
ness
13
http://www.zawya.com/story.cfm/sidGN_21062010_220607/Al%20Maktoum%20airport%20will%20fuel%20future%20growt
h
26
determination to continue to be a global logistics hub. Business Monitor international forecasts
that in 2010-2014 it is forecasted that the strongest growth is by air, with an average annual
growth rate of 7.5% in freight carried. It is also expected that during this period shipping will
grow at 5.4%, pipeline transport at 4.8% and road haulage at 4.5% per year. Detailed forecast
will be covered in the next sub-section.
Table 3.11 below shows the scores the logistics performance index (LPI) for UAE and compares
this to Bahrain, Saudi Arabia and also Qatar. The other items which are considered here include
customs, infrastructure, and international shipments and logistics competence. A high score in
customs indicates that the UAE is better in terms of the efficiency of the clearance process, for
infrastructure, it refers to the quality of the trade and transport related infrastructure. For
international shipments a high score reflects greater ease of arranging international shipments
and logistics competence refers to competence and quality of logistics services. Within the GCC
the UAE has the highest LPI score showing superior quality of logistics infrastructure.
Table 3.11. World Bank LPI ranking

United Arab Bahrain Saudi Arabia Qatar
Emirates
LPI 3.63 3.37 3.22 2.95
Customs 3.49 3.05 2.91 2.25
Infrastructure 3.81 3.36 3.27 2.75
International 3.48 3.05 2.80 2.92
shipments
Logistics 3.53 3.36 3.33 2.57
competence
Tracking and 3.58 3.63 3.32 3.09
tracing
Timeliness 3.94 3.85 3.78 4.09
Source: LPI Index, World Bank.
Table 3.12 shows the major organizations in the UAE transport and logistics sector. Most of
these organizations are based in Dubai while the Union Railways is expected to cover the seven
emirates. These are world class organizations and the basing of these organizations in Dubai’s
shows the Dubai government’s commitment to continue to have world-class infrastructure.
27
Table 3.12: Important organizations in UAE transport sector
Organization name Major activities Opportunities
Union Railway It is expected that the union railway will The project targets 20m metric tones of
extend 1,500 km across seven emirates. freight. Expressions of interest are being
invited in this giant project. There is also
possibility of investing in associated
projects connected to this railway
project14.
Emirates Airline Emirates airline has flights to and from With the development of Al Maktoum
many destinations for passenger and airport, emirates Air Cargo can use the
cargo multi-modal transport platform more
efficiently. Investors can benefit from this
by partnering with and also using this
more efficient transport combination.
Jebel Ali Free Zone JAFZA is an international business hub JAFZA offers many incentives for setting
(JAFZA) offering incentives, a strategic location up a business including ease of doing
and outstanding logistics infrastructure to business and sites in between the two
its clients. main logistics hub of Jebel Ali port and
Al Maktoum airport.
Jebel Ali Port The world’s sixth largest container port There is scope for shipping and related
and an international hub for shipping. companies to expand their business to this
port and use it as a hub for regional and
international traffic. This port is
especially attractive as it is highly
efficient in terms of the time it takes to
receive goods that have been shipped.
Al Maktoum Airport This newly built airport has opened as an There is potential for air-cargo, freight,
international hub for cargo operations. industrial and other companies to use this
Traffic to this airport is expected to airport in combination with JAFZA and
register strong growth. the Jebel Ali port for multi-modal
transport.
Source: JAFZA, BMI UAE Freight transport report Q2 2010, Zawya.com15
3.6.2. Future projections for UAE transport and logistics industry

Table 3.13 below shows future projections for some important sub-sections of the UAE transport
and logistics industry. Some of the highest annual growth is for air transport as the Dubai places
greater importance on multi-modal transportation to decrease transport time and increase
efficiency.
14
http://gulfnews.com/business/general/uae-railway-operational-in-7-8-years-1.644416
15
http://www.zawya.com/Story.cfm/sidZAWYA20100628042418/Al%20Maktoum%20welcomes%20foreign%20cargo%20flights
28
Table 3.13: Projections for UAE transport and logistics sector
2011 2012 2013 2014
Road-mn tones-km 174 183 191 201
Annual growth (%) 5.2 5.2 4.0 5.2
Maritime, mn tones-km 127 134 142 149
Annual growth (%) 4.8 6.2 5.4 5.0

Air mn, tones-km 2.56 2.81 3.02 3.31
Annual growth (%) 7.5 10.0 7.4 9.6
Pipeline, mn-tonnes-km 36 38 40 42
Annual growth (%) 5.3 5.8 4.3 5.5
Total, mn-tonnes-km 340 359 375 395
Annual growth (%) 5.1 5.7 4.6 5.2
Source: BMI UAE Freight Transport Report Q2 2010.
3.6.3. Investment Potential and Opportunities

Given new developments such as Al Maktoum airport and the Dubai Metro, there are
opportunities in providing services and infrastructure around these large scale developments.
There is also the possibility of Public Private Partnerships, where the government and private
sector divide the risks so that the private sector bears the risk that it is best suited to bear, while
the public sector bears risks that it is best suited. These projects include public-private
partnerships regarding the Dubai metro. Prospective investors should contact the RTA and other
relevant authorities form more details on these possibilities. Table 3.14 below lists some
important projects in the Dubai Transport and logistics industry. This is not an exhaustive list
and prospective investors should undertake their own studies regarding investment prospects in
Dubai’s transport and logistics sector.
29
Table 3.14: Selected investment projects in transport and logistics
Project name Project value Contracting part
(USD mn)
DCA - Dubai Airport Expansion 3,594 Department of Civil Aviation (DCA)
Dubai Tramway system II Phase 1 1,100 Road and Transport Authority (RTA)
Dubai RTA - Dubai Metro: Red Line 3,811 Dubai Roads & Transport Authority
Dubai RTA - Parallel Road Scheme 1,699 Roads & Transport Authority
Dubai RTA - Parallel Roads Scheme I 188 Road and Transport Authority (RTA)
(Dubai)
Dubai RTA - Dubai Metro: Green Line 3,811 Road and Transport Authority (RTA)
Dubai RTA - Parallel Roads Scheme II B 163 Road and Transport Authority (RTA)
Dubai RTA - Ras Al Khor Roadway (Phase 169 Roads & Transport Authority
VI)
Dubai RTA - Three Bridges Connecting the 162 Roads & Transport Authority
Deira Island Frond to Palm Deira: Bridge II
Dubai RTA - Extension to the Red & Green 20016 Dubai Roads & Transport Authority
Line
Dubai RTA - Dubai Metro: Purple Line 100017 Dubai Roads & Transport Authority
Dubai RTA - Dubai Metro: Blue Line 100018 Dubai Roads & Transport Authority
Projects involving greening of supply chain NA Greening of supply chain aims to minimize social
impact of products and/or services. According to
research done by Dubai Chamber, this can be done by
design of eco-products, sales of used materials and
recycling and packaging (Rettab and Ben Brik, 2008).
Source: meedprojects.com and (Rettab and Ben Brik, (2008)
3.7. Investment in Trade and Storage

Trade and Storage is described as another important sector in the Dubai Strategic Plan for 2015.
This section is based primarily on a BMI UAE Retail Sector report for Q2 2010. The section on
the UAE automotive market is based primarily on the BMI Auto Sector report Q2 2010.
16
The value for this item are budget values not contract values
17
18
30
Overtime, the UAE retail sector has evolved from a souk setting (traditional bazaar) to a modern
retail environment. Today in the Dubai, hypermarkets and supermarkets are common in large
shopping malls which are also home to a variety of retail outlets catering to different segments of
society. Although the global downturn has been challenging for many retailers, some retailers
have reported a recovery in sales. Also the location of some retail outlets near the Dubai Metro
can be expected to increase the number of visitors to adjacent malls.
Important shopping events in Dubai include the Dubai Shopping Festival (DSF). In important
trends, retail stores selling consumer electronics have seen the emergence of the ‘big-box’ retail
trend. This means that large electronic stores within malls are offering wider choices and also
better prices for electronic items. In the automotive sector, the UAE has high rate of vehicles
ownership at 548 per 1,000 people. Therefore, the growth potential in this sector lies in
immigration and replacing existing cars with new ones. Japanese brands have a strong presence
in this market and this could become stronger if the UAE signs a Free Trade Agreement (FTA)
with Australia. There is also a significant auto-parts and accessories market with the size being
around US $ 2.4 billion in Q1 2009, (BMI Auto Sector report Q2 2010). Table 3.15 below shows
the breakdown of some important trade sector products.
Table 3.15: Breakdown of retail sales by important segment

Estimated market share % Estimate value (USD bn.)
Automotives 9.0 9.7
Consumer Electronics 2.4 2.6
OTC Pharmaceuticals 0.3 0.3
Source: BMI Retail Report Q2 2010.
Table 4.16 below shows historical values for sales for various components of the UAE Mass
Grocery Retail (MGR) sub-sector. As discussed earlier, the UAE has moved from a souk style
retail environment to having more supermarkets and large hypermarkets. As shown below the
sales value in the MGR subsector is dominated by hypermarkets and supermarkets with
convenience stores playing marginal role. Investment in this sub-sector must therefore consider
any growth potential of hypermarkets and super markets over other kinds of grocery retail
outlets.
31
Table 3.16: Sales value in UAE by value (US $bn.)
2002 2003 2004 2005 2006 2007 2008
Supermarkets 0.43 0.50 0.56 0.67 0.81 0.98 1.20
Hypermarkets 1.36 1.49 1.67 1.90 2.17 2.50 2.92
Convenience 0.07 0.08 0.09 0.11 0.12 0.14 0.17
Stores
Total MGR 1.86 2.07 2.32 2.67 3.11 3.62 4.29
Sector
Source: BMI, Ministry of Planning

Table 3.17 shows forecast for important sub-sectors and products in the UAE trade sector/. As
shown the sales of most of the items is expected to increase as consumers in the UAE continue to
increase the purchases of these items. According to BMI, part of the increase in computer
spending may come from demand due to computers required for education and e-government.
Table 3.17: Sales Forecasts for UAE retail and trade sector
2011 2012 2013 2014
Supermarket (USD bn.) 1.53 1.70 1.86 2.02
Hypermarket (USD bn.) 3.60 3.93 4.28 4.58
Convenience stores (USD bn.) 0.25 0.29 0.34 0.34
Total MGR sector (USD bn.) 5.38 5.92 6.48 6.94
Computer electronics total demand 3,037 3,281 3,471 3,667
(USD mn.)
Computers (USD mn.) 1,765 1,929 2,050 2,179
Video gaming (USD mn.) 917 978 1,026 1,072
Communications (USD mn.) 354 375 395 416
Total auto sales (US $ bn) 12.84 14.02 14.70 15.45
Total auto re-exports (CBUs) 86,498 93,941 99,895 107,041
Car ownership ( % of population) 56 56.31 56.61 56.93
Source: BMI UAE retail report Q2 2010.
3.7.3. Investment potential and opportunities

Within Dubai, the project for Dubai land and city of Arabia offer investment prospects. The mall
of Arabia is set to be one the biggest malls in the world19. Retail and Tourism have synergies and
19
BMI retail report Q2 2010
32
are dependent on each other. As tourism in Dubai grows the trade and retail sector is also likely
to benefit. Generally, there is a lack of Mass Grocery Retail (MGR) outside the urban centers in
the UAE creating good investment prospects there.
Table 3.18: Selected Investment projects

Project name Project Value (USD mn.) Contracting parties
Al Ghurair Investments/Bawadi - 2,750 Al Ghurair Investments Co*Bawadi
Bawadi: Shopping Mall LLC
Dubai Sports City - Arena Mall 2000 Dubai Tourism Projects

Development Company
(DTPDC)*Private Developer
Source: meeedprojects.com
3.8. Investment in construction

Construction has been identified as vertical building block in the Dubai strategic plan for 2015.
This section discusses investment opportunities in Dubai’s construction sector and is based on a
BMI UAE Real Estate report Q2 2010.
3.8.1. Sector profile:

Construction has been a major source of investment flows into Dubai as was explained earlier in
table 4.2. Due to the global downturn, the construction sector has undergone a correction. This
sub-section is based on Business Monitor International Real Estate Sector Report for Q2 2010.
According to this report, Damac announced that six projects are due to be completed in Dubai in
the next 12 months. Two phases of building of the company’s emirates Gardens development at
Jumeriah Village South and also the second of its projects at IMPZ and also two towers at
business bay. While challenges in Dubai’s real estate and construction sector remain, the
continued construction activity by major companies shows that companies are continuing to
build in this sector to benefit from Dubai’s strategic location and its positions as hub for trade,
tourism and finance among other activities.
33
Table 3.19: Important companies In Dubai’s construction sector
Al Habtoor Leighton Involved in building of airports, civil works, commercial The company reportedly has plans to
and residential buildings, hospitals and hotels. Company is build hotels in Dubai and also plans to
45% owned by Australian contractor Leighton making it buy buildings overseas.
one of the Gulfs largest multi-discipline contractors
Damac A leading developer of free-hold properties. Has The company continues to complete
developed properties in Dubai Marin, Jumeirah Lake projects and in future could continue
Tower and DIFC among other locations to be an important player in the
construction
Deeyar Properties Deeyar Properties has property developments in business Deeyar’s operations are divided into
bay of Dubai. Its developments can be found in Dubai four business units 1)Property
Marina, Water Front and also Jumeirah Lakes Towers Development 2) Lease Management
(JLT). 3) Asset Management 4) Fund
Management
Dutco Balfour Beatty Dutco benefits from experience and support of an The Gulf region is one of the fastest
international company Balfour Beatty. It is a multi- growing infrastructure markets in the
disciplinary company based in Dubai and one of its world and Dutco Balfour Beatty
important projects include the Burj Tower Shopping Mall stands to benefit from this. Also, the
in Dubai company can benefit from the
development of Dubai Land in which
it is reported to be building the Tiger
Woods complex. This could bring
more projects in which Dutco
specializes in.
Emaar This Dubai based company has developed into one of the Emaar’s drive for diversification
world’s biggest property developers. The company has means that investors could expect a
been diversifying its portfolio. One large international different risk-return profile from this
project is the development of the King Abdullah Economic company as compared to a purely
City in which Emaar is building a sea-port, CBD, property based company. As the
Industrial Zone, Educational Zone, Residential company reinvests in other sectors,
communities and resort district this creates demand for associated
infrastructure and opportunities for
investors to invest in such
infrastructure projects
Source: BMI Real Estate report Q2 2010
34
3.8.2. Future forecasts
Table 3.20 shows future forecasts for the UAE construction sector. These projections for the
whole of UAE shows that overtime construction activity is expected to pick up pace and grow.
Table 3.20 Future projections for UAE construction industry

2011 2012 2013 2014 2015 2016 2017 2018
Value US $ bn. 24.57 27.16 29.58 32.05 34.73 37.62 40.74 44.13
Real growth % y-o-y 6.59 6.56 5.42 5.36 5.34 5.33 5.31 5.30
Capital Investment US $ bn. 65.1 71.7 78 84.3 91.2 98.6 106.7 115.3
Real Growth in capital investment 6 6 5 5 5 5 5 5

% y-o-y
Source: BMI Real Estate Report Q2 2010

Table 3.21 below shows some selected investment projects for investment in Dubai’s
construction sector.
Table 3.21: Selected investment projects

Project name Project value US$ mn. Contracting parties
Residential development, Dubai 422 Dubai Silicon Oasis Authority
Silicon Oasis
Hotel for Emirates Airline 715 Multiplex
Falcon City of wonders 1,500 Pauling Middle East/Salem Al-

Moosa Group
Festival City Dubai 4,770 Al Futtaim/Carrillion

Source: BMI UAE Real Estate report Q2, 2010
3.9. Investment in infrastructure

Infrastructure is an important sector of the Dubai economy. This sub-section is based on the
UAE Infrastructure report for Q2 2010 and also Middle.

Dubai is home to some of the world’s best infrastructure projects. Among them are world class
projects such as the Jebel Ali Port, the Al Maktoum international airport, Dubai metro. Jebel Ali
35
Port is one of the best container ports in the middle-east, while the newly built Al Maktoum
airport will propel Dubai into the next generation of becoming a multi-modal transportation hub
for the next generation. The Dubai government continues to invest in high-quality infrastructure,
including such projects as the Metro system. As Dubai’s economy continues to grow with
growth in tourism, logistics re-exports and related sectors it is expected that this sector can be
expected to witness continued growth
3.9.2. Future projections for UAE infrastructure sector

Table 3.22 shows projections for capital investment both total and by the government in the
UAE. The definitions in table 3.22 are based on Business Monitor International (BMI)
methodology. Total capital investment is derived from GDP expenditure data and is a measure of
total capital formation (excluding stock build) over the equivalent of the12 month reported
period. Total capital formation, in turn is a measure of net additions to a country’s capital stock,
and so it takes into account depreciation as well as new capital. Here since capital refers to
structures, equipment and vehicles etc, it is a broader definition as compared to say using simply
construction or infrastructure only. BMI uses it as a proxy for measuring a country’s
commitment to development. Government capital expenditure is derived from budgetary data
and it covers all non-current spending (UAE Infrastructure report Q2 2010, BMI).
Table 3.22: Forecast for UAE capital investment

2011 2012 2013 2014 2015 2016 2017 2018
Total capital 64.2 70.7 76.9 83.1 89.9 97.2 105.1 113.7
investment US$ bn.
Real Capital 6 6 5 5 5 5 5 5
Investment Growth %
y-o-y
Total Capital 22.04 21.97 22.62 22.85 23.49 24.09 24.59 25.16
Investment as % of
GDP
Government Capital 5.84 6.10 6.3 6.5 6.72 6.95 7.19 7.44
Investment US$ bn.
Source: UAE Infrastructure report Q2 2010

Table 3.23 below shows some selected investment projects for investment in Dubai’s
infrastructure sector.
36
Project name Project value (USD mn.) Contracting parties
Union Railway NA It is expected that the union railway will extend
1,500 km across seven emirates. The project
targets 20m metric tons of freight. Expressions
of interest are being invited in this giant project.
There is also possibility of investing in
associated projects connected to this railway
project.
Schon Properties / Town 50 Town Centre Management, Schon Properties

Centre Management - Dubai
investment Park: Dubai
Lagoon: Infrastructure
Works
DCA - Dubai Airport 1,334 Department of Civil Aviation (DCA)

Expansion (Concourse 3)
Nakheel - Redevelopment of 1000 Nakheel Corporation

Mina Rashid
Dubai RTA - Three Bridges 256 RTA

Connecting the Deira Island
Frond to Palm Deira: Bridge
III
Source: BMI, Meedprojects.com
3.10. Prospects for investment in utilities

Utilities are important for the development of every economy. Due to higher economic growth
rates and influx of population from foreign countries, Dubai has experienced increased demand
for electricity and water. Positive expectations for the long-term for both Dubai and UAE’s
economy mean that investors could reasonably expect continued growth in utility demand over
the longer-term.

The Utility sector is an important sector for investment in Dubai and the UAE. Demand for
Water and Power is deemed to have increased for two reasons. One is the growth of the
population and the other is the growth of income in Dubai.
Figure 4.1 shows the relation of the growth of Dubai GDP and lagged electricity consumption
growth. As the graph shows increased GDP growth generally seems to be related to next year’s
electricity consumption growth rate. Various combinations of the relationship of growth in Dubai
37
GDP and electricity consumption were analyzed such as electricity consumption and GDP
growth in the same year, electricity consumption and lagged GDP growth. The correlation was
not found to be strong, until the relationship between electricity consumption lagged by one year
and GDP growth rate was analyzed. In this case the correlation between the two variables was
found to be strong, with the square of the Pearson Product moment correlation of about 0.68.
Graphical analysis of the relation between Dubai GDP growth and electricity consumption
growth lagged by one year is shown in figure 3.1 below.
Figure 3.1: Dubai GDP growth rate and lagged electricity consumption growth
35
30
25
20
15
10
5
0
2002 2003 2004 2005 2006 2007
Dubai electricty consumption growth lagged by one year Dubai GDP growth
Source: Dubai Chamber based on DEWA and Dubai Statistics Centre data
This is confirmed by research done in other countries. For example, it was noted in Aktas and
Yilmaz (2008) that economic growth causes expansion in industrial and commercial activity.
This in turn causes increased usage of energy which leads to increased electricity consumption.
This could also be the reason why Dubai electricity consumption responds to economic growth
but with a one year lag. Increased economic growth causes greater commercial and industrial
activity. Also higher incomes could cause residents to buy more electrical appliances and also
move into bigger residential units. This could also cause electricity consumption to increase in
response to increased economic growth, but with a lag of one year (Shah, 2009).
Solar power is one of the fastest growing sources of renewable energy worldwide. A popular
way to harness solar energy is to install solar panel installations on residential roofs. Give the
unexploited solar potential, in Dubai there is scope for using photovoltaic cell and other
technology to harness this important source of renewable energy The Dubai Electricity and
38
Water Authority DEWA is responsible for utility services in Dubai. This is the body prospective
investors should contact regarding various investment, including Public Private Projects (PPP) in
the utilities sector.
3.10.2. Future Forecasts

Table 3.24 shows forecasts for UAEs Power sector and the supply and demand balance going
into 2013. It shows UAE’s demand for power growing from 67.8 TWh in 2009 to 82.7 TWh in
2013. The power demand and supply balance is positive and growth in over demand will
continue to require more investment to keep this balance positive
Table 3.24: Forecasts for UAE Power Supply and Demand balance
2009f 2010f 2011f 2012f 2013f
Electricity generation (TWh) 76.5 80 85 92 98.9
Electricity demand (TWh) 67.8 70.8 74.6 79.2 82.7
Source: Business Monitor International UAE Power Sector Report.

F refers to forecasted data.
Table 3.25 shows forecasts for the UAE water sub-sector. As shown below, both overall water
production in the UAE and per-capita water production are forecasted to increase up until 2014
as the UAE tries to keep pace with rising demand.
Table 3.25: UAE water industry forecast

2006 2007e 2008e 2009f 2010f 2011f 2012f 2013f20 2014
Total water 176,457 191,553 212,548 204,030 214,884 226,943 241,479 254,497 265,908
Produced (MG)
Average daily water 483 525 582 559 589 622 662 697 729
production (MGD)
Total water supply 175,011 189,847 210,693 202,236 213,013 224,986 239,419 252,344 263,674
(MG)
Average daily water 479 520 577 554 584 616 656 691 722
supply (MGD)
Source: Business Monitor International UAE Water report for Q1, 2010.

Table 3.26 shows selected investment projects. As with other sections some are already
underway and some may be in design or planning phases. Interested investors should also do
20
F means forecast. Number from 2009 onwards is forecasts.
39
their own research and contact relevant authorities, especially DEWA regarding more details for
investment opportunities.
Project type Project name Project value Contracting Parties
(USD million)
Power Plants
IGCC plant, Dubai 6,000 Sino global International, Samena Power and
Energy Ltd, Skyline Services
Jebel Ali Power Plant 10 Metito
Dubai Thermal solar na Na

power plant
Warsan and Gardens 288 DEWA

transmission stations
Solar and Wind 130 Portland Group

Power, Dubai
400 KV Transformer, 59 Hyundai Engineering and Construction

Dubai
Hassyan IWPP 8,600 Alstom and Ibedrola

Ingenieria Y
Construction
Jebel Ali Plant 10 Metito
DEWA - Dubai Coal 10021

Fired Power Plant
Renewable energy NA Prospects exist for investing in Dubai’s solar

projects power and renewable energy sector. As
controlling emissions becomes an increasingly
important issue worldwide these technologies
and projects could experience increased
demand in Dubai.
Water
Al Ghafat Reservoir 108 DEWA
Desalination plant in 563 Impregilo

Dubai
DEWA - Lussaily 12022 Dubai Electricity & Water Authority (DEWA)

Reservoir Project
Phases I & II
Source: Dubai Chamber based on Business Monitor International (UAE Infrastructure report Q2-2010) and
meedprojects.com
21
These are budgeted values not contract values
22
These are budgeted values not contract values
40
3.11. Prospects for investment in Manufacturing
This section is based on BMI Petrochemical Report for Q2 2010, BMI Chemical report 2009 and
BMI Pharmaceutical and Health care report Q2 2010.

Dubai has significant manufacturing capacity, including within the free-zones. For example for
the petrochemical sector, Dubai reportedly contributes about 70% of the UAE’s foreign trade in
petrochemical products. Of about 260 plastic manufacturing plants in the UAE, about 100 are
located in Dubai (BMI Petrochemical Report for Q2 2010). About half of Dubai’s manufacturing
capacity of plastics is concentrated to production of plastic pipes. In Jebel Ali Free Zone, the
number of petro-chemical and plastics companies increased by 70% between the years 2000-
2005. Raw materials for Dubai’s petro-chemical sector are sourced from outside the UAE, from
South America, Asia, the GCC and Europe, with 40% being from the UAE. In other
developments, in oil refining, the Dubai’s ENOC has announced that it will upgrade the Jebel Ali
oil refinery.23
Table 3.27: Selected chemical manufacturing companies in Dubai
Methyl tetr-butyl ether Produces MTBE which is exported to Asian Investors can seek joint
(MTBE) Plant Jebel Ali. countries ventures with parent
Scimitar Oil (Canada) and companies in related areas.
DUGAS.
Aromatics Plant-Jebel Ali Produces Benze, xyelene and toluene. Exports Investors can seek joint
(Dubai Chemicals Company) these products ventures with parent
companies in related areas,
Latex factory-Jebel Ali Imported feedstock is processed and then Investors can seek joint
(Union Carbide Chemicals exported ventures with parent
and Plastics) companies in related areas
Source: UAE Research, BMI UAE Chemicals report 2009
For pharmaceuticals, the UAE pharmaceutical market is forecast to experience strong annual
growth. Many international pharmaceutical companies, such as Pfizer, Novartis,
GlaxoSmithKline (GSK), Eli Lilly and Abbot Laboratories among others are active in the UAE.
These companies generally have contract manufacturing or local distribution arrangements.
Gulf Pharmaceutical is the leader in the local manufacturing industry (Julphar). There are also
other contract manufacturers such as Neo-pharma, Global pharma and Gulf Inject.
23
http://www.arabianbusiness.com/577921-enoc-to-begin-jebel-ali-refinery-upgrade-in-april
41
This section covers future projects for the UAE petrochemicals sector including production of
products such as Ammonia, Urea and other products (table 3.28).
3.28: Projections for UAE petrochemicals sector (000 tpa unless stated otherwise)
2011 2012 2013 2014
Oil production, 000 3,200 3,300 3,425 Na
bpd
Gas production in 80 85 90 Na
bcm
Refining capacity 1,000 1,500 1,500 Na
Ammonia capacity 695 695 695 695
Ehtylene glycol 500 500 500 500

capacity
Ethylene capacity 2000 2000 2000 3500
Propylene capacity 800 800 800 800
Urea capacity 1,250 1,250 1,250 1,250

Source: BMI Petrochemical report Q2 2010.

This section covers investment opportunities in Dubai’s manufacturing sector including
petrochemicals. These are examples of a few opportunities and there is the chance to have many
more in the Free-zones and industrial areas of Dubai.
42
Project name Project value (USD millions) Contracting party
Jebel Ali refinery upgrade 850 ENOC
DMCC / SEOT / Tropicana Trading - 20024 Star Energy Oil tanking

Jebel Ali Storage Facility (SEOT), Dubai Multi
Commodities Centre
(DMCC), Tropicana Trading
DPE - Carbon Dioxide Capture & 30025 Dubai Petroleum

Storage Establishment (DPE)
Impel - Dubai LNG Storage Hub 2,600 Private Developer, LNG

Impel, Dubai Multi
Commodities Centre
(DMCC)
Source: Meedprojects and Arabianbusiness.com.
3.12. Public Private Partnerships in Dubai and the UAE

Public Private Partnerships are a unique way of combining public and private expertise and
control. Their most powerful use is that the public sector gets to keep the risk that is best suited
for it (such as unforeseen events etc) while the private sector manages the risks that it is meant to
take on (such as risk of market fluctuations, changes in demand etc)26. PPPs offer a way to invest
in Dubai’s growing infrastructure sector.
In Dubai, the Road and Transport Authority (RTA) recently announced that it could enter into
public-private partnerships for implementing all RTA projects. According to the RTA, many
organizations are interested in these public-private partnerships. In fact the RTA might move on
future lines such as the purple and blue lines for the Dubai Metro after entering into such public-
private partnerships27.
24
25
26
http://www.pppcouncil.ca/aboutPPP_definition.asp
27
http://www.uaeinteract.com/docs/RTA_open_to_partnership_for_all_its_future_major_projects__/37677.htm
43
Figure 3.2: Risk transfer and private sector involvement.
Source: Canadian Council for Public-Private Partnerships
Table 3.30 below highlights some reasons why PPPs may fail. Prospective investors wanting to
invest in PPP type projects in Dubai can and should consider international experience regarding
reasons for success and failure of these projects to avoid repeating the mistakes others have made
and increase chances of success.
44
Table 3.30: Reasons why a PPP may fail
Below are some reasons why the public sector may be unsuccessful in managing a PPP project based on
international experience. This forms a list of things to avoid for investors in PPPSs o that their PPP
projects may be successful.
 Inadequate monitoring and management of political, commercial and legal risks
 Focus on existing arrangements rather than emphasizing on potential improvements
 The identification of responsibility and authority in relation to commercial decisions is
unclear
 Lack of understanding of context, complexities and dependencies of the contract
 Failure to adopt an attitude towards partnership which helps the partnership succeed
 Lack of experience in either public sector or provider teams
 The contract managers are not assigned sufficient resources
 The contracts are poorly drafted
 Clashes in personality between project team personnel.
If a contract is managed inadequately, some of the following problems might occur which may render the
project unworkable.
 There are possibilities for improved performance or improvement in value for money
might be lost if the contract is not properly managed
 The provider may assume control, which may lead to unbalanced decisions that do not
reflect the interest of the public sector
 Desired benefits may not be achieved
 Progress on the project may be slow
 Some disputes or misunderstandings may arise and these may be raised inadequately
 People may fail to understand their responsibilities and roles.
 Decisions are made at inappropriate times. New business processes are unsuccessfully
integrated with old ones.
Source: City of London, 2008.
45
Section 4: Investment Regime in UAE and Dubai
This section combines the information about sector specific opportunities with information about
the current and incumbent investment laws, legal structure regarding company formation,
procedures and incentives specific to foreign investors. This may be called the investment
regime. At the time of writing this study, the UAE Federal government is planning to put in a
new law for foreign investors, the Foreign Investment Law which is expected to be finalized
soon. This new law may open up service sector areas to full ownership and also allow more
foreign participation, possibly 100% foreign ownership (BMI, 2010)28. Also planned is an
investment department to facilitate foreign direct investment at the UAE level.
In the meantime it is useful to see which laws currently apply to foreign investors in terms of
company formation, legal regime, investor protection both in Dubai and the UAE. This will be
done in the following sub-sections. For now, full foreign ownership is already allowed in the
Free-Zones of Dubai and this will be discussed in more detail later in this section.
4.1. UAE Investment regime

The UAE has differential treatment for free-zones as compared to the customs region.
Companies in the free-zones are allowed to be 100% owned by foreign investors. There is also
no income tax applied to profits. There are no restrictions of profit repatriation (Dubai Chamber,
2007)29.
As discussed earlier, the UAE is in the process of drafting a new foreign investment law.
Although details are still awaited the goals of this law seem to be to attract investments in areas
which are not the core competencies of individuals, increase diversification in the economy and
also to increase the transfer of technology (Al Farra, Investment Reform in UAE 2007)30. This
law would also give more security and certainty to foreign investors regarding their investments
in the UAE. It can be expected that foreign investors would also be given some incentives based
on the economic significance of the project, value added, technology transfer etc.
28
BMI UAE Petrochemicals Report Q2 2010
29
Identification of Sectoral Opportunities in Dubai, 2007, Dubai Chamber
30
http://www.oecd.org/dataoecd/20/44/39296053.pdf
46
Box 1: Indicators for Investment Climate in UAE
Table 4.1 Global Competitiveness Index Dubai with its world class logistics infrastructure has helped the UAE
Rank Score
score highly in terms of competitiveness with regard to other
UAE 23 4.9
countries.31 The UAE ranks highly as compared to the other GCC
Singapore 3 5.5
countries in shown in table 3.1. In terms of overall competitiveness,
Hong-Kong 11 5.22
while Singapore and Hong-Kong have higher rankings, the UAE’s
Bahrain 38 4.54
relatively high ranking of 23 out of 133 countries shows the UAE’s
Qatar
strong position competitive position. According to the World Economic
Saudi-Arabia 28 4.75
Forum, Dubai has pioneered with the creation of free-trade zones and
Source: World Economic Forum
today world-class service areas are being created in health-care, finance
and IT.
In terms of burden of government regulation, the UAE
Fig 1. Burden of government regulation fares better than other GCC countries (fig 1). Here the
index numbers ranging from 1-7, with higher numbers
UAE
Oman
indicating that regulations are not burdensome. The
Saudi Arabia UAE has the same values as for Oman while other
Qatar
countries have more burdensome regulations. In terms
Bahrain
Kuwait of doing business overall, UAE generally does better
than other countries (table 4.2). For example it takes 2
0 1 2 3 4 5
days to register a property in UAE, as compared to
Source: Global Competitiveness Report 2009-2010, WEF 36.1 days in the OECD. In terms of rigidity of
employment, also the UAE has a relatively flexible
labor market as compared to the OECD and the MENA region.
Table 4.2: important indicators for doing business
Indicator UAE OECD average MENA region
Registering property-number of days 2 36.1 25
Rigidity of employment index (0-100), 7 24.5 26.4
measures difficulty in hiring and firing
workers-1
Depth of credit information index (0-6) 5 3.3 4.9
Source: Doingbusiness.org, World Bank group
Source32: IMF, Article IV consultation report
31
http://www.weforum.org/pdf/Global_Competitiveness_Reports/Reports/chapters/1_1.pdf
32
Some of the data has been updated and text changed from the initial commentary
47
4.2. Options in setting up a business in UAE:
This section is based on a UAE Ministry of Economy Publication titled, ‘Investors Guide to the
UAE’. The UAE and Dubai are increasingly becoming favored investment destinations. One of
the first issues to consider for a UAE investor is how to enter the UAE market. The options of
forming a company include:
1) Setting up a UAE company

2) Setting up a branch office
3) Professionals who wish to act as sole proprietors
4) UAE Free Zone
4.2.1. Formation of a UAE company:

The Federal Company Law No. 8 of 1984 (called the Commercial Companies Law) is the law
that regulates the establishment of companies, both local and foreign. Companies, when formed
should have at least one or more national partners who account for about 51% of the capital.
There is a special case in the case of the hydrocarbon industry. This industry is owned by the
respective emirates and any foreign ownership must be through joint-ventures in these projects
4.2.2.1. UAE Branch office:

The Commercial Companies Law allows foreign companies to exercise what is called their main
activity in the UAE by opening a branch office in the UAE. This office may then promote
products or services which are provided by the owner (or parent) company. This kind of branch
operation can be 100% owned by the foreign investor.
4.2.2.2. UAE Professional:

Foreigners who practice certain professional activities are also be given allowance to set-up a
sole proprietor ship in the UAE. This allows the individual to trade on his own account. This is
pursuant to the issuance of a trade license which has been issues in the investor’s name. The
foreign sole proprietor is required to appoint a local services agent
4.2.2.3. Investment in UAE Free-Zones:

According to the UAE ministry of economy, about 80% of the United Arab Emirates non-oil
exports come from its free-zones. There are many free-zones in the UAE and details regarding
them are discussed in a later section. These free-zones are exempt from licensing, national
48
partner requirements, agency and other domestic regulations that apply to companies which have
been formed in the customs region.
4.3. Forming a company

For many overseas investors, the favored strategy for market entry would entail establishing a
business. According to a 2010 report by Doingbusiness.org of the World Bank group, it takes 8
procedures and 15 days to start a business in the UAE. The number of days it takes to open a
business is generally lower than the average for the Middle East and North Africa (MENA)
region. For the MENA region it takes about 20.7 days to start a business. In terms of cost to start
a business it takes about 6.2% of income per capita for UAE, whereas for the MENA region it
takes about 34.1%. So it is relatively less costly to start a business in the UAE.
The major steps involved in setting up a company in Dubai are described below. As with the
earlier material, this information is also derived from the UAE Ministry of Economy Publication
titled ‘Investors guide to UAE’
4.3.1. Licensing:
Companies formed in the UAE may apply for three kinds of licenses which cater to different
activities
1) Commercial license: This would cover trading activities
2) Industrial License: This can be used for establishing an industrial activity
3) Professional License: This kind of license covers professional services. It includes craftsmen
and artisans
4.3.2. Options for Legal Structure: For the UAE, the Companies Law sets out in detail the
regulations covering foreign business. According to the federal law, there are seven categories of
organizing a business.
1. Limited Liability Company

2. Public Shareholding Company
3. Joint Venture Company
4. Private Shareholding Company
5. Share Partnership Company
6. Partnership Company
49
Because of their nature, foreign investors would mainly be interest in forming limited liability
companies, a branch or representative office or a joint venture.
In the UAE, a limited liability company can be formed by a minimum of two and a maximum of
50 persons. In this kind of structure, the liability of every member is limited to the amount of
capital they have contributed to the company (i.e. shares in capital).
A branch or representative office may engage only in activities for which they are licensed, may
be fully owned as long as a UAE agent is appointed. A joint venture structure is a contractual
agreement between a foreign party and local partner. In this case also local equity participation
should be at a minimum of 51%. Both parties can agree between themselves on the distribution
of any profits and losses. A joint venture structure is one option for a business that wants to
invest in a project through a Public Private Partnership.
Table 4.3 shows the procedure for setting up a limited liability company in Dubai and also the
number of days it takes to complete each step.
50
Table 4.3: Procedures for setting up a limited liability company (Dubai)
Procedure Time to complete: Cost to complete:
Submit the company registration 1 day AED 100 fee for the initial approval
application and the proposed company
name to the Department of Economic
Development (DED)
Notarize the company’s Memorandum of 1 day 0.25% of the capital (for 3 copies of the
Association in DED Memorandum of Association), AED 5
for each page of the additional copy
File company documents with the 6 days 5 % of the value of the lease agreement
Department for Economic Development + AED 1,000-3,000 waste fees + AED
(DED) and obtain trade license 600 for company registration + AED
500 fees for signboard approval
Register with the Dubai Chamber of 2 days AED 1,200 (application for membership
Commerce and Industry certificate)
Make a name board 2 days AED 1,000
Apply for establishment card at the 1 day AED 2000

Ministry of Labor
Register native workers with the Ministry 1 day no charge

of Labor
Register native workers with the General 1 day (simultaneous no charge

Authority for Pension and Social Security with previous
procedure)
Source: Doing business.org, World Bank group
Appendix 1 contains some helpful websites and publications on legal and other aspects for doing
business for the assistance of prospective foreign investors.
4.4. Dubai’s investment regime

Dubai is home to high quality world-class logistics and infrastructure. This has enabled the
emirate of project itself into the rest of the region. Good opportunities lie both in the customs
area and in the free-zone. However, some major advantages of Dubai with regard to incentive
structure, the ability to intermediate between the world (i.e. as a hub for re-exports), and trading
opportunities based on high RCAs lie in the free zones of Dubai (Azzam, Rettab and Morada,
2010). This next section will discuss the special case of Dubai Free-zones in more detail and
highlight some of these opportunities.
51
4.4.1. The special case of Free-Zones
There are many free-zones in the UAE and they have their own regime in place. A list of free-
zones in Dubai follows. The most prominent free-zone is the Jebel Ali Free Zone (JAFZA).
While each free-zone shares some qualities, it is best to regard them as separate clusters. For
example the Dubai International Financial Centre (DIFC) focuses on the financial industry while
the Dubai Multi-Commodities is focused on being a hub for commodity trade flows, such as
Gems, Gold, base metals and other commodities. Details regarding some selected free-zones are
discussed in the following sub-sections. Further information about free-zones can be obtained by
visiting the website of individual free-zones, given in table 4.4.
According to research done by Dubai Chamber, Dubai’s main Revealed Comparative

Advantage (RCA) is in re-exports (Azzam, Rettab and Morada, 2010). It would be of interest for
Dubai exporters and re-exporters to note that Dubai’s free-zones are a major source of its re-
exports and this is another reason to consider investing in Dubai’s free-zones.
Table 4.4 Current and Planned Free-Zones in Dubai 33

Name of Free zone Web address
1 Jebel Ali Free Zone www.jafza.ae/
2 Dubai Gold and Diamond Park www.goldanddiamondpark.com
3 Dubai Maritime City www.dubaimaritimecity.ae
4 Dubai Aid city
5 Techno Park www.tp.ae
6 Dubai Airport Free Zone http://www.dafz.ae/
7 Dubai Silicon Oasis www.dso.ae
8 Dubai Flower Centre
9 Dubai Logistics City http://www.dwc.ae/site/DWC_Elements_DWC_FreeZone_Du
bai_Logistics_City.html
10 Dubai Internet City www.dubaiinternetcity.com

11 Dubai Media City www.dubaimediacity.com
12 Dubai Knowledge Village http://www.kv.ae/
13 Dubai Outsource Zone www.doz.ae
14 Dubai Biotechnology and Research Park www.dubiotech.com
15 Dubai Studio City www.dubaistudiocity.com
16 International Media Production Zone
17 Dubai Healthcare City http://www.dhcc.ae/
18 Dubai International Financial Centre www.difc.ae
(DIFC)
19 Dubai multi-commodity Centre www.dmcc.ae
20 Dubai Textile City
21 Dubai Carpet Zone
33
Some of these free-zones are not in operation yet and are planned. Prospective investors are encouraged to contact individual
free-zones regarding specific opportunities, incentives and current status.
52
22 Dubai Carpet Free Zone
23 Dubai Auto Parts City
24 Heavy Equipment and Trucks Zone
25 Dubai Building Materials Zone
26 Dubai cars and Automotive Zone
27 Dubai Design Centre http://www.dubaidesigncentre.ae/main.html
28 Dubai Auto-zone
29 Dubai Energy City
30 Dubai Academic City http://www.diacedu.ae/
Source: Ministry of economy, Investors guide to UAE.
4.4.2. An overview of investment regime in JAFZA

Located in between Jebel Ali port and the Al Maktoum Airport, Jebel Ali Free Zone (JAFZA) is
the only free-zone in the world to be situated between two important logistics enablers. A range
of incentives are offered in Jebel Ali free zone including 100% foreign ownership, zero corporate
and income taxes for 50 years and full repatriation of profits and capital and no foreign currency
restrictions.
When considering the incentives offered by JAFZA, the opportunity to use the two major
transport hubs of Jebel Ali port and Al Maktoum Airport, Jebel Ali port can be regarded as a re-
processing and manufacturing cluster. Table 4.5 shows the facilities offered by JAFZA.
Table 4.5. Facilities offered in JAFZA

Light Industrial Units (LIU) Light industrial unites can be used as storage warehouses (to
be used in distribution and storage) and as factories for
assembly and also light production. Facilities for LIUs include
loading docks, parking space and office for each LIU
Showroom and Warehouse facilities Showroom and warehouse facilities are structured into eight
blocks comprising 68 showrooms and warehouse. The
showrooms can be used for displaying products for sale.
Office Space JAFZA offers unfurnished offices which can be of any size
and are equipped with light fixtures. JAFZA office space is
also designed with options for improvements.
Land Land can be provided in JAFZA in various sizes ranging from

2,500 square meters upwards. Utility services essential for
development of land are provided to JAFZA land.
Source: JAFZA.ae
53
4.4.3. An overview of the investment regime in the DIFC
The Dubai International Financial Centre (DIFC) has been formed to further promote Dubai’s
position as an international financial hub. Most of the information in this section is based on the
PWC and DIFC publication, ‘Doing Business in the Dubai International Financial Centre’. Its
purpose is to create a regional capital market which offers investors and issues of capital world-
class regulations. With the increased importance of transparency in current times, the DIFC has
‘integrity, transparency and efficiency’ as its hallmarks 34. One important distinction must be
made that the DIFC is not an offshore tax haven. Rather, it is an onshore centre, like other
markets such as London, Hong-Kong and New-York.
Table 4.6. Incentives offered by DIFC

Allowance of 100 percent foreign ownership
Benefit of a wide network of double taxation treaties available to entities incorporated in the UAE
A transparent operating environment combined with high standards of regulations and rules
Benefit of a zero percent tax rate on income and profits
Benefit of a dollar denominated environment
There are no restrictions on foreign exchange or capital/profit repatriation
There is strict supervision and enforcement of money laundering laws
Investors in DIFC have access to ultra modern office accommodation, state-of-the-art technology,
sophisticated infrastructure, data protection/security, operational support and business continuity
facilities of uncompromisingly high standards.
Source: DIFC.ae
4.4.3.1. Areas of focus within DIFC

For foreign investors, these are main areas of focus within financial services
34
http://www.difc.ae/about-us/overview/
54
Banking and brokerage services
The DIFC offers a wholesale platform for investment banks and other financial
intermediaries. These include those looking to establish underwriting, M&A advisory,
venture capital, private equity, fund administration, private banking, brokerage and trade
finance services.
Wealth Management:
The pool of financial assets held by investors in the region has traditionally been invested
overseas. The DIFC provides a range of investment opportunities, including mutual
funds, open and closed ended investment companies, hedge funds and also Islamic
compliant funds. The DIFC therefore is an onshore centre which can encourage the
repatriating the regions wealth invested overseas and also to cater for increased demand
due to demographic reasons. To encourage the wealth management industry, the DIFC
has created regulation for mutual funds, a code of Practice for Hedge Funds. Family
offices can work using the DIFC Trust law and also new Family Office Regulation.
Reinsurance and captive insurance35
Although historically the rate of penetration for insurance has been low in the region,
premiums in the middle-east are expected to outpace industrial countries. Some important
reasons for this include expected growth in the Takaful (or Islamic insurance) market,
introduction of compulsory health insurance in Saudi-Arabia and the GCC.
What is Captive insurance: A captive insurance is a company formed for the insurance
of the risks of the company itself or related entities. With increased awareness of
insurance in the region, it is expected that interest in captive insurance will grow.
Islamic Finance and Ancillary Services
Islamic finance is a growing area which is becoming an increasingly, segment within the
global financial market. It is expected that the Islamic finance market is growing in
double digits and are expected to reach 1 trillion by 2010 (PWC)36.
35
http://www.mondaq.com/article.asp?articleid=102682
55
4.4.4. An overview of investment regime in DMCC
The Dubai Multi Commodities Centre is a commodity market trading hub based in Dubai. It
provides infrastructure for the commodity industry and as such can be regarded as a commodity
trading cluster. One of the important objectives of the DMCC is to facilitate and integrate the
whole value chain of key commodity market segments. It also aims to increase local activity in
refining, manufacturing and trading of commodity products (dmcc.ae).
Table 4.7: Incentives offered by the DMCC

Guaranteed 50 year tax holiday on personal and income taxes
100% business ownership
Facility for processing of documents, which include licensing, immigration and registration
Purpose built infrastructure, which may be available on leasehold or free-hold basis

Source: DMCC.ae
4.5. Lessons from other countries

The UAE and Dubai can learn from the experience of other countries in improving the ease of
doing business and attracting FDI, including comparable entrepots like Singapore and Hong-
Kong. In one study, (Dongyun Park, Nanyang Technological University, Singapore) did research
for Singapore’s experience with FDI and corporate taxation37. The author found that there are
many factors influencing FDI inflows. For example, in case of China, it is low labor costs and a
huge potential labor market. Some high tax countries, for example China attract high levels of
FDI, while some low tax countries still fail to attract large FDI inflows. The author notes that in
the case of Singapore, the freedom to pursue profits, the presence of avoidance double taxation
agreements with many countries, investment guarantee agreements which are there to protect
nationals of both countries against acts such as war, expropriation etc , encourage the flow of
FDI. The author mentions that Singapore’s natural geographic advantage, by virtue of its
strategic location, has been reinforced by a highly liberal trade regime. Time-Zone is another
major advantage the Singapore giving its financial institutions the ability to transact with entities
in Japan, Europe and US within its own working day. Other factors facilitating FDI inflows into
Singapore include a stable political and economic climate, the presence of business parks and a
pro-business environment.
36
http://www.pwc.com/en_LU/lu/podcast/docs/pwc-islamic-finance-podcast.pdf
37
http://www.econ.hit-u.ac.jp/~ap3/apppfdi6/paper/SINGAPORE.pdf
56
Investing Across Borders 2010, of the World Bank Group, analyzed FDI inflows into 87 world
economies. This study mentions that countries with poor regulations and inefficient processes for
foreign companies have smaller amounts of FDI inflows and smaller FDI stock. Countries tend
to attract more FDI if they allow foreign ownership of companies in different sectors, have
transparent and efficient procedures for company startup, commercial arbitration, ease of land
acquisition and strong laws protecting investor interest. The study does caution that a causal
relationship between FDI flows and these factors above are not implied. Other factors such as the
size of the market, infrastructure quality and level of economic development are likely to better
explain this relationship. The study also finds that reliable information, predictable and efficient
actions by public institutions help create an environment conducive for foreign investment38.
Although many of the measures taken by these Singapore have either been taken by Dubai and
UAE or being planned, it is the quality of implementation and dynamism of these initiatives
which should be harnessed. Dubai and UAE can learn from success in comparable countries such
as Singapore and beyond to take steps to improve transparency and security for investors,
protecting investor interests and creating a single body to deal with matters relating to foreign
investment. Continued investment in building world-class infrastructure and logistics, together
with focused sector based initiatives, such as building world class financial infrastructure in the
financial sector, will help Dubai take full-advantage of its geographic and time-zone advantages.
These and other actions can help institutionalize initiatives aimed at making Dubai the most
favored destination for investment.
38
http://iab.worldbank.org/~/media/FPDKM/IAB/Documents/IAB-report.ashx
57
Section 5: Conclusion
Dubai and the UAE have made great economic progress within a short span of time. A benign
government approach towards business, high investment in infrastructure and forward looking
policies have propelled Dubai into becoming a top destination for Foreign Direct Investment.
UAE ranks quite highly with the rest of the world and the MENA region in terms of the ease of
doing business. Moreover, recently the UAE has made strides in the ease of doing business,
especially with regards to starting a business, dealing with construction permits and trading
across borders. This is a historical trend of improvement in business environment by the UAE
and Dubai and investors can reasonably expect more improvement in the coming years.
The UAE and Dubai have strived to formulate a Foreign Investment Regime that is attractive to
foreign investment. This includes initiatives to improve competitiveness, such as creating free-
zones, tax incentives and world class infrastructure which aims to take Dubai into the next
generation in terms of trade and logistics competitiveness. Setting up an office in the UAE is
relatively simple and is even simpler in various free-zones, such as JAFZA.
The effort to boost trade and investment in Dubai by having several free-trade zones, of which
Jebel Ali Free Zone is the most significant, has been a successful step. It has put Dubai on the
map as a major logistics and trade hub and helped build its competitive advantage in key
clusters. To further the development of the emirate, the Dubai Strategic Plan for 2015 sets
ambitious targets. The sectors identified as key vertical building blocks are the ones in which
Dubai has grown rapidly in the past. These include Travel and Tourism, Financial Services,
Professional Services, Transport and Logistics, Trade and Storage and Construction. Most of the
important opportunities to invest in Dubai lie in these sectors, but are not limited to them. For
example there are also good opportunities in areas such as utilities, where there is possibility of
Public Private Partnership (PPP), in manufacturing and there are opportunities in Petrochemicals
and Plastics too. Non-traditional sectors such as renewable energy and greening of the supply
chain and buildings could be growth areas in the future as well. There is also possibility of Public
Private Partnership (PPP) in transportation projects undertaken by the RTA. These include
projects such as the Dubai Metro. This includes not only the actual metro-stations but also
ancillary projects related to the metro.
58
Investors with experience will realize that then most important resource is not really the
abundance of factors of production but really good governance. The UAE and Dubai
governments have shown that they can implement policies reflecting exemplary governance and
investors can expect more of this in the future.
Recommendations for the future:
1) Increasing transparency for foreign investors. The UAE Foreign investment law which is
expected to be announced soon will be a big step in this direction.
2) Learn from the experience of other countries such as Singapore in improving the ease of
doing business. Dubai and UAE can learn from success in comparable entrepots and
beyond in improving transparency and security for investors, making actions by public
institutions predictable and creating a single body to deal with matter relating for Foreign
Investment. Other steps include increasing the number of bilateral investment agreement
with other countries which protect the rights of investors in both countries. These and
other actions can help institutionalize initiatives aimed at making Dubai the most favored
destination for investment.
3) Continue to diversify both the economy and the sectors which are promoted for growth to
give the economy a broad base of production. This should be combined with
diversification of production in different products and services and also diversification of
export markets.
59
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Business Monitor International, UAE Telecommunications Report, Q2 2010.
Business Monitor International, UAE Tourism Report, Q2 2010
Business Monitor International, Water report, Q1 2010.
Business Monitor International, Water report, 2009.
Canadian Council for Public-Private Partnerships
Dr. Aktas, Cengiz, Dr. Yilmaz, Veysel, 2008, ‘Causal relationship between electricity consumption and economic growth in Turkey’.
Dubai Chamber, Identification of Sectoral investment opportunities in Dubai, 2007
Dubai Statistics Centre, 2005-2006, Foreign Direct Investment Bulletin, Emirate of Dubai,
Dubai Strategic Plan , 2015.

Hesse, Heiko and Jobst, Andreas and Sole, Juan, IMF, Current Trends in Islamic Structured Finance and Capital Markets,
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60
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at the 1st Annual World Conference: Asia Summit 2.
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School of Humanities & Social Sciences, Nanyang Technological University, Singapore.
Research Republic LLP, City of London, 2008, Developing India’s Infrastructure through Public Private Partnership, A Resource Guide, viewed 12th
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61
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62
<http://www.fentonreport.com/2009/09/09/world-economy-news/middle-east/world-bank-recognizes-saudi-arabia-as-the-13th-most-competitive-
economy-top-10-by-2010-is-within-reach-2/1374>, viewed 24th June 2010.
63
Appendix 1: Useful publications and websites
1. Choosing a location for your business, Dubai Business Advisor, Vol. 1, no 1, 2009, Dubai
Chamber.
2. Signing a Commercial Lease, Dubai Business Advisor, Vol. 1, No 2, 2009, Dubai Chamber.
3. Rating Economic Sectors in Dubai, Dubai Business Advisor, Vol. 1, No 3, 2009, Dubai Chamber.
4. Starting a business: A Practical Guide, Dubai Business Advisor, Vol. 1, No 4, 2009, Dubai
Chamber.
5. Dubai Chamber: www.dubaichamber.ae.
6. UAE Ministry of Economy: www.economy.ae/English.
7. Foreign Investment Office, Department of Economic Development, Government of Dubai:

www.dubaided.gov.ae/English/DEDAgen/ForInvstOff/default.aspx.
64
Appendix 2: UAE selected double taxation treaties
No Date of the Official Gazette Name of the Agreement Decree No
Official Gazette No.
1 26/4/1975 27 Agreement on avoidance of double taxation & 25/1987
evasion of taxes between the Arab Council of
Economic Unity
2 29/8/1989 203 Agreement on avoidance of double taxation on 76/1989
income resulting from air transport between the
UAE and India
income between UAE and France
4 31/3/1990 211 Agreement on taxation depending on income 5/1990
resulting from air transport between UAE and
Singapore
income and products resulting from international
air transport between the UAE and Holland
air transport between the UAE and Switzerland
air transport between the UAE and India
air transport between the UAE and Sri-Lanka
air transport between the UAE and Pakistan
air transport between the UAE and Poland
air transport between the UAE and China
65
air transport between the UAE and Romania
air transport between the UAE and Italy
air transport between the UAE and Germany.
air transport between the UAE and Singapore.
air transport between the UAE and Malaysia.
air transport between the UAE and Indonesia.
air transport between the UAE and Finland.
19 27/2/1997 Agreement on avoidance of double taxation on 25/1997
air transport between the UAE and Tunisia
air transport between the UAE and Belgium
air transport between the UAE and Lebanon.
air transport between the UAE and Morocco.
air transport between the UAE and Turkmenistan.
66
air transport between the UAE and Syria.
air transport between the UAE and Thailand.
Source: Al Tamimi and Company, Taxation Law in the UAE
67

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Syed Fahd Shah

EXECUTIVE SUMMARY ............................................................................................................ 7

Section 1: Introduction .................................................................................................................... 9

1.1. Background ...................................................................................................................... 9

1.2. Research Objective .............................................................................................................. 9

1.3. Research questions ............................................................................................................... 9

1.4. Methodology and data........................................................................................................ 10

1.5. Outline of Study ................................................................................................................. 10

Section 2: Dubai and UAEs economic environment and prospects ............................................. 11

2.1. Economic history of UAE .................................................................................................. 11

2.2. UAE Growth outlook and forecast: ................................................................................... 12

2.3. UAE’s Business environment ............................................................................................ 14

Section 3: Detailed Opportunities for Investment in Dubai by sector .......................................... 16

3.2. Detailed sector opportunities in Dubai .............................................................................. 18

3.3. Investment in Travel and Tourism ..................................................................................... 19

3.3.1. Sector profile ............................................................................................................... 19

3.3.2. Future projections ....................................................................................................... 20

3.3.3. Investment potential and opportunities ....................................................................... 21

3.4. Investment in Financial Services Sector ............................................................................ 22

3.4.1 Sector profile ................................................................................................................ 22

3.4.2. Future projections ....................................................................................................... 23

3.4.3. Investment Opportunities ............................................................................................ 24

3.5. Investment in Professional Services .................................................................................. 25

3.5.1. Sector profile ............................................................................................................... 25

3.5.2. Investment Opportunities ............................................................................................ 25

3.6. Investment in Transport, logistics and storage sector ........................................................ 26

3.6.3. Investment Potential and Opportunities ...................................................................... 29

3.7. Investment in Trade and Storage ....................................................................................... 30

3.7.1. Sector profile ............................................................................................................... 31

3.7.2. Future projections ....................................................................................................... 32

3.7.3. Investment potential and opportunities ....................................................................... 32

3.8. Investment in construction ................................................................................................. 33

3.8.1. Sector profile:.............................................................................................................. 33

3.8.2. Future forecasts ........................................................................................................... 35

3.8.3. Investment Potential and Opportunities ...................................................................... 35

3.9. Investment in infrastructure ........................................................................................... 35

3.9.1. Sector profile ............................................................................................................... 35

3.9.2. Future projections for UAE infrastructure sector ....................................................... 36

3.9.3. Investment Potential and Opportunities ...................................................................... 36

3.10. Prospects for investment in utilities ................................................................................. 37

3.10.1. Sector profile ............................................................................................................. 37

3.10.2. Future Forecasts ........................................................................................................ 39

3.10.3. Investment Opportunities .......................................................................................... 39

3.11. Prospects for investment in Manufacturing ..................................................................... 41

3.11.1. Sector profile ............................................................................................................. 41

3.11.2. Future projections ..................................................................................................... 42

3.11.3. Investment Potential and Opportunities .................................................................... 42

3.12. Public Private Partnerships in Dubai and the UAE ......................................................... 43

Section 4: Investment Regime in UAE and Dubai ....................................................................... 46

4.1. UAE Investment regime .................................................................................................... 46

4.2. Options in setting up a business in UAE: .......................................................................... 48

4.2.2.1. UAE Branch office: ................................................................................................. 48

4.2.2.2. UAE Professional: ................................................................................................... 48

4.2.2.3. Investment in UAE Free-Zones: .............................................................................. 48

4.3. Forming a company ........................................................................................................... 49

4.3.1. Licensing: .................................................................................................................... 49

4.3.2. Options for Legal Structure ........................................................................................ 49

4.4. Dubai’s investment regime ................................................................................................ 51

4.4.1. The special case of Free-Zones ................................................................................... 52

4.4.2. An overview of investment regime in JAFZA ............................................................ 53

4.4.3. An overview of the investment regime in the DIFC ................................................... 54

4.4.4. An overview of investment regime in DMCC ............................................................ 56

4.5. Lessons from other countries ............................................................................................. 56