Global Invest

Sparkling Dubai Beckons to Foreign Investors

Dubai has risen out of the desert to become a dynamic country with a competitive economy. As a gateway country serving the Far East and Europe, it offers numerous investment and export opportunities.

- By William Bell

Words like “gleaming” and “sparkling” are frequently used to describe Dubai. Rising from the desert are glass skyscrapers, including the world’s tallest building named BurjKhalifa. Ride an elevator to the top floor of any of the tall buildings and look out over the city and what you will see are futuristic spires, shiny angled office buildings, and a network of highways and interchanges that would make any other city in the world jealous.

Dubai is an oil-rich emirate that has flaunted its wealth with abandon as it embraces a modern 21st century, but now there is another reason to pay attention to this remarkable member of the United Arab Emirates (UAE). Dubai is rich with opportunity for foreign investments as the government works to diversify its economy for long-term success.

Dubai seemed to magically appear overnight on the desert floor. It was not magic, of course, but it seemed that way because it was only 20 years ago that Dubai could only be described as a village. The ruler of Dubai and Vice President of the UAE, Sheikh Mohammed bin Rashid Al Maktoum, wanted his country to enjoy the fruits of its oil, so to speak, and began investing in the infrastructure, new office buildings and hotels, and in efforts to attract foreign investments, particularly Western companies.

Most North American and European cities would be thrilled to have the sophisticated road network or the towering structures that represent a city determined to be an active member of the world’s economy. It is in a prime location, enabling it to serve as a gateway city-state, bridging Europe and the Far East. It is only a three-hour flight to India and six hours to the U.K. Dubai is also a country that wants Western technology, investments and ideas that can be put to work to expand the economy.

Linked for Success

The reasons for investing in Dubai do not stop at prime real estate and economic growth. English is the business language so the communication barriers are almost nonexistent. Western companies operating in Dubai are not taxed when operating in one of the Free Zones, each of which is focused on a particular industry. For example, the Jebel Ali Free Zone is dedicated to the trade and manufacturing industry. Foreign companies do not need a local sponsor to start doing business.

Most importantly, just about every market needs an influx of investment, including IT, banking and finance, tourism, media, health care, education, training, agriculture, infrastructure projects, and power generation. Dubai wants to develop its non-oil and gas markets and is particularly interested in growing a knowledge-based economy.

Another area of opportunity lies in the fact Dubai has no trade barriers or exchange controls. Located on the Persian Gulf and serviced by reliable airlines and shipping companies, businesses are able to move products and people to global destinations with ease. The state-of-the-art modernism of Dubai is already impressive. For example, the Jebel Ali port is linked to the Free Zone Park and the Dubai World Central Airport. The system is called the Dubai Logistics Corridor and links land, air and sea transport routes and integrates 6,500 companies. It is not surprising that Dubai has become an export destination and re-export hub with such a sophisticated shipping system.

Welcoming Businesses with Style, Opportunity

More than 80 percent of Dubai’s population is comprised of people who moved there from overseas. It is important to understand that this is a Muslim country, and there are rules and practices that some Westerners may not fully understand at first.

The modern version of the Wasta system is a cultural phenomenon in which informal channels are the basis for doing business and networking. It reminds Westerners of the old expression that says, “It’s not what you know, but who you know that counts.” Business relationships must be slowly cultivated, but the effort can lead to a host of benefits that include getting leads on new business opportunities and meeting important new connections. Establishing a physical presence in Dubai has distinct advantages that include better ability to develop personal-business relationships.

There are three ways to enter the Dubai market. A business can export products and services via direct sales, enter into an agency agreement or create a physical presence.

The agency agreements are made with local companies, but once awarded, the contracts are almost impossible to cancel. Agents must be licensed for the particular emirate, which in this case is Dubai. The government carefully evaluates any business interested in operating in Dubai before granting a license to prevent overpopulating any particular service or industry. Dubai is run by the royal family, and anyone living or doing business in Dubai is only doing so because of privileges granted by the ruling government. Business people or companies who fail to follow the rules can be summarily evicted.

There are several ways to develop a physical presence. One is to operate in a Free Zone, as mentioned. A major advantage of this approach is that companies are allowed to own 100 percent of the business. Businesses establishing a presence outside the Free Zone as limited liability companies can only own 49 percent, and the remaining 51 percent must be owned by an UAE national. The third way to establish a physical presence is by setting up a branch office, which can be 100 percent foreign-owned, but is subject to restrictions as to the scope of allowed activities.

A good place to start researching business rules and opportunities is by contacting one or more agencies or organizations that can provide detailed information on the progressive emirate. They include the Dubai Chamber of Commerce and Industry, the American Business Council of Dubai & the Northern Emirates, and the export site of the International Trade Administration. A lot of assistance is available, and doing in-depth research is critical.

Western business people must understand how business is best conducted in the sparkling emirate of Dubai. It requires some patience to work through the legal requirements, but many companies are finding it is well worth the effort.