Foreign Direct Investment
According to the UNCTAD's World Investment Report 2022, the UAE saw its FDI inflows increase by 11% from USD 19.8 billion in 2020 to USD 20.6 billion in 2021, confirming its role as the leading destination for FDIs in the Arab world (and 19th globally). Over the same period, the stock of FDI reached USD 171 billion (around 41.8% of GDP). The bulk of FDI is concentrated in the sectors of trade, real estate, finance and insurance, manufacturing, mining and construction. The main investors are the United Kingdom, India, the United States, France and Saudi Arabia. According to Investment Monitor, in 2021, Dubai ranked first globally in terms of number of FDI projects, recording 441 projects, an 87% increase year-on-year. The U.S. was the main investor (87 projects), followed by the UK (71) and India (60). 26% of these projects were in the software and IT services sector, 17% in business and professional services, and 8% in tourism. Furthermore, Dubai attracted a record 492 FDI projects during H1/2022 (+80.2% year-on-year), with greenfield projects accounting for a 56% share of the total (official governmental figures).
The strengths of the UAE include its political and economic stability, easy access to oil resources, low energy costs, a willingness to diversify the economy and high purchasing power. The absence of direct business taxation (excluding banks, oil companies and telecommunications operators – see after) and direct income taxation, of exchange controls and of any limitations on the repatriation of capital, as well as the existence of a strong and profitable banking sector, plus a large pool of expatriate labour, are the country's undeniable assets. In addition, the UAE further liberalised its FDI regime with the promulgation of the FDI Decree 2020, which further facilitated foreign investment by extending some of the free zone incentives to the wider economy. A decision of the Federal cabinet allowed up to 100% foreign ownership for 122 economic activities across 13 industry sectors. The government also launched 50 economic initiatives aimed at making the country more competitive and attracting USD 150 billion into domestic projects by 2030. A slew of 40 laws covering trade, online security, copyright, residency, narcotics and other social issues was implemented, and government entities shifted to a four-and-a-half-day working week (Oxford Business Group). On the other hand, the country’s main weaknesses are the small size of its domestic market, the dependence on imports and on the international financial situation, as well as on the hydrocarbon sector. Furthermore, the UAE introduced a federal corporate tax on business profits starting in 2023, with a headline rate of 9% (for incomes exceeding a particular threshold). Several exemptions are available for businesses operating across strategic sectors (e.g. exploitation of UAE natural resources, Government-controlled entities, pension or social security funds, certain investment funds, etc.). The UAE ranks 24th out of 82 countries in the Economist Business Environment ranking and 12th in the 2022 World Competitiveness Index.
| Foreign Direct Investment | 2019 | 2020 | 2021 |
| FDI Inward Flow (million USD) | 17,875 | 19,884 | 20,667 |
| FDI Stock (million USD) | 131,012 | 150,896 | 171,563 |
| Number of Greenfield Investments* | 445 | 384 | 535 |
| Value of Greenfield Investments (million USD) | 13,557 | 8,698 | 7,066 |
Source: UNCTAD - Latest available data.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
| Country Comparison For the Protection of Investors | United Arab Emirates | Middle East & North Africa | United States | Germany |
| Index of Transaction Transparency* | 10.0 | 6.4 | 7.0 | 5.0 |
| Index of Manager’s Responsibility** | 10.0 | 4.8 | 9.0 | 5.0 |
| Index of Shareholders’ Power*** | 4.0 | 4.7 | 9.0 | 5.0 |
Source: Doing Business - Latest available data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
