Update Notes on the United Arab Emirates

There now seems little doubt that the UAE is powering ahead, with Dubai now firmly established as the "Singapore of the Middle East" with its world class infrastructure and regional hub status.

The real estate/construction sector continues to have its challenges but from an energy perspective Dubai continues to offer some compelling business case reasons to be based there regionally: 100% foreign ownership/free zones, no corporate/personal taxes, world class infrastructure including direct aviation links to the USA, Europe and all of the Asia Pacific markets and an advanced lifestyle suitable for westerners. Dubai's proximity to some of the largest oil and gas production areas in the world – Saudi, Iraq, Iran, Libya, Kazakhstan – and some of the key prospective plays such as Turkmenistan, (deepwater) India, the East Med and East Africa, are not lost on the UAE's strategic plans. Iraq, in particular, offers major spin off proximity opportunities for the UAE over the next 5 years with Libya and Iran to follow?

From a Dubai perspective, the rise of the Energy Division of the Dubai Metals and Commodities Centre (DMCC) has been notable, and DMCC is now attracting an increasing share of the regional HQ offices of western oil and gas services companies in the face of more established competition from Jebel Ali, Hamriyah, Ras Al-Khaimah, Dubai Airport and TECOM free zones. Jebel Ali and Hamriyah remain the free zones of choice where operational facilities are needed with the jury out on whether RAK can catch up with its infrastructure. Promises of the removal of the much criticised 51/49 local limited liabilities company laws are now off the table so this almost guarantees the continued popularity of the free zones. However, the new Dubai Investment Law of 2011 appears to offer more flexibility as regards free zone entities doing business in the onshore UAE but the details and practicalities of this have yet to become clear.

To the south in Abu Dhabi, free zone companies will continue to have difficulty in accessing the ADNOC market and a local LLC company or foreign branch registration will continue to be must for the foreseeable future. The new MASDAR special economic zone in Abu Dhabi does now offer 100% ownership to renewable/clean energy companies and so this is a welcome addition to the legal options. On a great scale will be the new KIZAD industrial zone which is designed to be the centre point of Abu Dhabi's drive to diversify its economy away from the current oil and gas domination.

Beyond the UAE itself, there is now increasing evidence that the Jebel Ali offshore companies regime is emerging as an alternative for the use of international offshore companies as part of a group's structural mix. Although these companies cannot do business directly in the UAE, they do offer an alternative tax effective, 100% foreign owned, limited liability vehicle through which to conduct international business whether through direct contracting, branch registrations or in-country subsidiaries.

In summary, it is now clear that the UAE will continue to offer the best "oasis" for corporate stability and growth in a region which is fraught with both challenges and opportunities.

Further information on development and opportunities in Dubai can be obtained from:-

Hugh Fraser – Group Managing Partner - hugh.fraser@hfi-international.com

Kerry Calvert – Senior Specialist Consultant – kerry.calvert@hfi-international.com