In 2018 the UAE passed the Foreign Direct Investment Law (the “FDI Law’), which was intended to pave the way to relaxing foreign ownership restrictions on companies registered “onshore” in the UAE. This was a major shift in policy, where in the past foreign investors were restricted to holding only 49% of shares in onshore companies (see here for more details). The FDI Law anticipated that the UAE Cabinet of Ministers would announce a list of commercial activities that would be eligible for up to 100% foreign ownership (referred to as the “Positive List”). The FDI Law also set out a list of activities for which up to 100% foreign ownership would not be permitted (the “Negative List”).
On 2 July 2019, the UAE Cabinet of Ministers has announced its initial decision on what will be on the Positive List. It is expected that 122 commercial activities across 13 sectors of the economy will be eligible for "up to" 100% foreign investment. This represents a major step in policy for the UAE, and indicates those sectors/activities which the UAE Government is targeting to boost foreign investment.
Although the Cabinet Decision is yet to be published, we understand that the Positive List will include:
- Renewables and Power: Renewable energy, solar PV panel production, power transformation production, electronic control systems in green energy and hybrid power plant projects
- Manufacturing and Construction
- Transport, Autonomous Transport, Logistics, Supply Chain Activities, E-Commerce and Storage
- Hospitality and F&B
- Healthcare Services
- Education Services
- Information and communications
- Professional, scientific and technical activities (including, specifically, biotechnology R&D laboratories)
- Arts and Entertainment
- Administrative and support services
The announcements do not make clear the actual level of foreign ownership that each activity will benefit from – it could be anywhere between 50% and 100%. This will be determined at a later date and may result in some activities still requiring a degree of local/GCC shareholding. Foreign investors should continue to monitor developments closely for both the full list of 122 commercial activities and the corresponding foreign ownership thresholds.
The UAE Government is taking bold steps to move away from a longstanding position of restricted foreign ownership, to open the economy to greater foreign investment. This also comes at a time where the UAE is passing laws relating to local substance requirements (on the back of the EU noting the UAE on its tax blacklist for alleged non-compliance with the BEPS regime), enhanced data protection laws, and “dual licence” regime allowing freezone entities to also work “onshore” in the UAE.
Viewed in the round, this can be seen as a very positive direction of travel for the UAE, where the government is focussing on developing the UAE economy and legal framework to become a more transparent, reliable and welcoming jurisdiction for foreign investment.