12 Sep 2010
UAE nationals share ownership in 108,035 companies or 94.9 per cent of the 113,832 registered in Dubai (outside the free zones), according to Dubai Chamber of Commerce and Industry. The total number of companies registered in Dubai exceeds 135,000, including offshore companies and those registered with free zones. However, in terms of sole ownership, Emiratis own only 22.31 per cent, or 25,400 companies.
Indian investors rank second with partnership in 20,038 companies while Iranian and Pakistani businessmen share ownership in 7,634 and 6,532 companies respectively. This is under a complex companies ownership law that restricts foreign shareholding in a company to 49 per cent.
British and American expatriates share stakes in 2,200 and 997 companies respectively while Egyptians and Iraqis share stakes in 1,200 and 1,065 businesses. Bangladeshis rank ninth with shares in 752 companies while Germans own stakes in 546 companies.
However, analysts said the numbers might not reflect the actual ownership. Prasant Gulati, secretary general of the Indian Business and Professional Council (IBPC) said: “In such a complex companies law, it would be difficult to gauge the real numbers as most companies under the UAE nationals are actually owned and run by the expatriates. “By any count, the largest investor group is Indians. This does not reflect,” he said.
However the Dubai Chamber of Commerce and Industry said most companies with more than one shareholder were run by foreigners, with the Emiratis remaining inactive as a “sleeping partner” for an annual fee starting from Dh3,000. The Emiratis relinquished management rights by issuing a power of attorney in favour of the expatriate partner, either designated as managing director, partner or general manager. The partnership was renewed with the fee every year. While the sleeping partner remained responsible for labour approvals, visa and immigration issues, the expatriate partner undertook risks, finances and losses and gains.
Despite these limitations, the number of companies was growing, regardless of the current economic slowdown. “In the first half of the year, 5,098 new members joined Dubai Chamber, which is an 18.9 per cent increase from 4,289 in the same period last year,” said Dubai Chamber of Commerce director general Hamad Bu Amim.
UAE nationals also took an active role in some companies where they shared the risks and profits along with their foreign partners. These companies include Limited Liability Companies (LLCs), Establishments, and Professional Establishments, and did not include those registered with the various free zones in the emirate. Bu Amim said raising the foreign investors’ ceiling could help change the equation. “We expect increasing the share of foreign ownership to improve the appetite of foreign investments to come to UAE markets.
However, we need to keep in mind that higher ownership is not the only element that guarantees more FDI, there are other issues such as investors’ protection, cost of doing business, laws of dispute resolutions, bankruptcy law, etc.,” he said. “We also think that such increase of foreigners’ ownership stake should be restricted to certain sectors that the country would like to grow, or know-how and technology we like to attract, and limited to flow of high capital in hundreds of millions of dirhams.”
Although the Department of Economic Development (DED) remains the main business licensing authority in Dubai, it remains mandatory for registered companies to join the Dubai Chamber. Foreigners are required to forge a partnership with UAE nationals in order to obtain business licences under various categories. Foreign investors can, however, enjoy 100 per cent ownership in companies registered with free zones.
More than 20,000 companies are registered with about 20 free zones in Dubai, where companies are largely owned by foreigners. Apart from that, there are 10,000 offshore companies licensed by three offshore licensing bodies.
Foreign investment in free zones is growing faster than those outside the free zones. Dubai Airport Freezone (DAFZ) reported 63 per cent growth in sales during the first half of this year, while 875 new companies registered with Ras Al Khaimah Free Trade Zone (RAKFTZ) during the same period.
“Interest in free zones among foreign investors remains high. However, they invest in non-free zone licences only when they are required to do business within the country,” investment adviser Jitendra Gyanchandrani, chairman of JCA business consultancy, told Gulf News.
This article originally appeared on Gulf News.