Economic growth over the long term in the UAE is expected to be primarily driven by activity outside the oil sector. Diversification of the economy, notably in manufacturing, shipping, and the financial services sector will likely underpin the UAE’s recovery post COVID-19. The country’s liberal and market-friendly policies have attracted significant investment in the construction and services sectors. Medium-term forecasts indicate foreign investment will remain robust in the UAE, with the focus shifting from Dubai to other major metropolitan areas — notably Abu Dhabi. Tourism rates have declined in Dubai, increasing the need for diversification plans to succeed.
The normalization agreement with Israel will likely increase business opportunities, in particular in the agribusiness, telecoms, and technology sectors. Despite the slow introduction of new tax regulations for residents, corporate income tax is only applied to oil and gas, and sectors operating in extractive industries. The UAE is also privy to multiple free trade agreements, which serve to benefit businesses in the country. With a robust network of infrastructure in place, and continued investment in Abu Dhabi and Dubai, the UAE is progressing with efforts to increase foreign investment appetite.
Judicial affairs in the UAE tend to be complex due to the coexistence of federal, emirate, and Sharia laws. Costs of operation can be perceived as inflated owing to quotas of UAE nationals in the business sector. The UAE’s clampdown on Islamic radicalism will likely drive participants underground, increasing the risk of detention for residents and employees alike. Further, foreign arbitral stipulations are rarely enforceable, with foreign creditors likely to face substantial disadvantages legally in the event of disputes or corporate insolvency.