• Thursday, February 29, 2024
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Explainer: Why Dubai is global magnet for businesses

Dubai-splendour

Dubai, a city in the United Arab Emirates (UAE), is fast becoming the preferred destination for entrepreneurs and businesses across the globe, especially from Africa.

Over the past few years, the city with over three million people, has introduced several incentives that have achieved high per capita incomes, low unemployment rates and strong economic growth.

Some of the incentives, which are long-term residency, low-tax environment, ease of doing business and efficient business setups, have attracted and driven foreign investments.

These incentives also show the city’s drive to be a magnet for talent and capital to lure businesses from largely populated economies.

“The UAE has over the years taken great strides to make it an attractive, efficient, safe and low-cost business destination,” analysts at Anjarwalla Collins & Haidermota, a UAE-based international legal consulting firm, said in a recent report.

“This aim has substantially succeeded as is evidenced by the large number of local and international business groups which have decided to set up in the UAE,” it said.

They said the Foreign Direct Investment (FDI) attracted into the UAE is impressive and was approximately $20.7 billion in 2021. “This is impressive for a country with a population of less than 10 million.”

Read also: Dubai opens Nigeria office in bid to boost trade

The report added that the recent amendments to the federal commercial companies’ law have eased many of the FDI restrictions that had previously applied to mainland companies.

“Following the latest changes, non-UAE nationals are now permitted to set up companies in the mainland that are wholly owned by them. As a result, the local ownership restriction is now only applicable to certain businesses which are deemed to be in an industry which has strategic impact.”

The law firm also highlighted that depending on the size of the office space occupied by a company, the UAE government can issue a UAE residence visa for the employees/officers of that company.

“However, offshore businesses are not permitted to sponsor residence visas as they essentially do not possess an office or a physical presence in the UAE,” they said.

The UAE also has another type of residency visa that enables foreign talents to live and work or study in the UAE for up to 10 years.

The visa, which is renewable and reserved for certain categories ranging from investors to individuals with exceptional talents, is designed to attract foreign investment and expertise to the country.

Another type of visa is the residence visa for foreigners working outside the UAE. The one-year virtual work visa allows them to enter the UAE under self-sponsorship and work in line with the terms and conditions issued with the visa.

Read also: Dubai opens Nigeria office to promote trade

UAE is an oil-producing country, but over the years, the country has evolved as a knowledge-based economy as it relies more on intellectual capabilities than natural resources to drive economic growth and development.

According to the World Bank, knowledge economies are defined by four pillars: institutional structures that provide incentives for entrepreneurship and the use of knowledge, skilled labour availability and good education systems, ICT infrastructure and access, and a vibrant innovation landscape that includes academia, the private sector and civil society.

In 2010, the country developed its vision 2021 plan to achieve its vision of developing a diverse and flexible knowledge-based economy.

The plan is linked to a national strategic plan for higher education and scientific research to set up programmes for tackling problems facing the higher education sector.

The 2023 Global Innovation Index, ranked UAE 32nd out of 132 countries while Africa’s biggest economy ranked 109th. In 2022, UAE’s total non-oil trade with Nigeria stood at $2.11 billion from $1.55 billion in 2018, according to the Dubai Chambers.

Dubai International Chamber noted that the city’s FDI inflow last year was $12.79 billion. Its 58 percent of those inflows are of medium and high technology level over 2018.

“The city charges a zero percent tax on salary income, dividends, and capital gains. Last year, the country ranked number one globally in Greenfield FDI project attraction and is also ranked number one in international trade and number 26 in international investment,” it said.

The chamber projected that the city of Dubai will have 50 international offices by 2030. “In 2022, Dubai recorded a 4.6 percent GDP growth and is ranked number one regionally in ease of doing business.”

Then in January 2023, Dubai launched the ‘Dubai Economic Agenda’ (D33) in a bid to double the size of the city’s economy over the next decade and consolidate its position among the top three global cities.

“2033 will mark 200 years since the foundation of Dubai, the year in which Dubai will be the most important global business centre,” Mohammed bin Rashid Al Maktoum, the ruler of Dubai, said.

“Dubai will rank as one of the top four global financial centres with an increase in FDI to over AED650 billion over the next decade and an annual AED100 billion contributions from digital transformation,” he said.

Al Maktoum, who also serves as UAE’s vice president, prime minister, and minister of defence, added that the agenda includes 100 transformative projects, with economic targets of AED32 trillion over the next 10 years, doubling its foreign trade to reach AED25.6 trillion and adding 400 cities as key trading partners over the next decade.

“Over 300,000 global investors in Dubai helping build Dubai into the fastest growing global city.”

Read also: Tortuous journey for Nigerian travellers to Dubai

D33 also plans to increase trade between itself and Africa as the Dubai Chambers plans to open its seventh office for the continent in Lagos, Nigeria.

“One of the main things taken into consideration is to have an office in one of the largest economies in Africa. Now we’re covering all parts of Africa, especially the large economies of Africa, from east, west, south, and north,” Mohammad Lootah, president and CEO at Dubai Chambers, said in an interview with BusinessDay.

He said the expansion is in line with the D33 agenda and direction and also the opportunities and growth they have seen in the markets.

“Usually, an office for us does not cover only the city that we operate in, it covers a radius of cities or countries. So, in West Africa, we will be having another one before the end of the year, two offices, one in Lagos, another one in Ghana,” he added.