Transcript The UAE Economy - Scottish Chambers of Commerce

Alex Gray
International Trade Director
17th November 2012
Oct 2011 Version 4.0 Internal use only.
Doing Business in Dubai
The UAE Economy
M a jo r e xp o rts 2 0 1 0
C o u n try M e tric s
P o p u la tio n
Dubai
C u rre n c y
P eg
Abu Dhabi
K ey Languages
GDP
E xp e c te d G ro w th
F D I In flo w s
6 .7 m illio n
AED
U S D 1 : 3 .6 7 5
% o f to ta l
M a jo r im p o rts 2 0 1 0
C ru d e p e tro le u m
2 8 .3 J e w e ls & P re c io u s m e ta ls
R e -e xp o rts
4 0 .6 M a c h in e ry & e le c tric a l e q u ip m e n t
G as
% o f to ta l
2 0 .7
14
5 .5 V e h ic le s & o th e r tra n s p o rt e q u ip m e n t
B a s e m e ta ls & re la te d p ro d u c ts
A ra b ic , E n g lis h , H in d i
9
6 .2
U S D 298 bn
3 -4 %
3 .8 % G D P
L e a d in g m a rk e ts 2 0 1 0
% o f to ta l
L e a d in g s u p p lie rs 2 0 1 0
% o f to ta l
Japan
1 7 .8 C h in a
1 6 .9
1 3 .4 In d ia
1 4 .3
E xp o rts
$780 bn
S o u th K o re a
Im p o rts
$590 bn
T h a ila n d
6 .8 U S
7 .8
A D X M a rk e t C a p
$100 bn
In d ia
6 .1 G e rm a n y
5 .7
Key Themes
Growth opportunities
GDP growth of 3.6% forecast for 2012
Safe haven within the wider
region
One of just 3 countries in the MENA region that has not witnessed significant demonstrations
Resilient economy, better
structured
Asset prices are far less “frothy” and there is no sign of a credit bubble
Real estate assets still stand up to 50% lower than their peak values
Lending growth has started to return gradually
Oil ties the economy to Asia
more than the West
UAE is the 4th largest oil producer in the region
High oil prices continue to provide shore-up budgets
Oil exports are predominantly tied to Asia and not the West
Sources: EIU, Central Bank Data, HSBC Global Research
Doing Business in the UAE
Opportunities

Access to a Diversified Economy that is the second largest in the GCC

Access to wider

GCC region
Growing hub for world trade and re-exports enjoying
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Well established ports and infrastructure/banking
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Favourable tax environment
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Convenient time zone
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Stable political situation
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Fixed Currency
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Highly skilled expatriate workers
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No material exchange controls
•
Free-zones facilitate entry and access
Challenges
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7 Emirates, 36 Freezones, Federal and Emirate laws
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As per the latest World Bank, Ease
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The Global
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Despite the world class infrastructure and ease of trading across borders, challenges particularly exist in starting a business and
protecting investors rights
•
The UAE is not an English common law jurisdiction
of Doing Business Index, UAE ranks 40th out of 183 economies
Competitiveness Report for 2010-11, ranks the UAE 25th out of 139 economies
Tax and Legal framework
Taxation Environment
Legal Environment
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•
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•
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No VAT levied in the UAE
No withholding taxes
No thin capitalisation rules
No transfer pricing rules
No personal income taxes
No corporate taxes in Free Zones
No requirement to file corporate
tax returns in the UAE
5% import tariff on most goods
levied ONLY ONCE at the first
port of entry to the GCC
The UAE has signed double
taxation treaties with over 40
countries – including INDIA
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Complex legal environment which
is a mixture of federal and
emirates law
Restrictions exist on foreign
ownership of companies, property
and shares
Key laws are: Federal companies
law, Commercial Agencies Law,
Federal Industry Law &
Government Tenders Law
Federal law permits a range of
entity types to be established (for
instance partnerships, JVs
Bankruptcy law has lagged
economic development and has
not been tested in the courts
Alternative Strategies for Entry
100% owned by foreign company
Restricted activities
Not licensed to do conduct business/market directly
UAE national service agent must be appointed
8-12 weeks establishment time usually required
Certain financial intermediaries are subject to special
laws
Services and industries relating to national resources are
also subject to separate legislation
The Federal Laws do permit sole proprietorships,
partnerships and JVs as well – however these are not
commonly deployed
UAE Branch
Office
Other
Client
Representative
Office
Similar to a branch but may not undertake
income generating activities
8-12 weeks establishment time usually
required
Entry
Governed by own regulatory authorities
Activities within zones tend to be industry specific
Formation is usually a 2 stage process – initial approval followed by
provision of a Trade License
May be 100% foreign owned
No corporate or personal taxes
Free zone
100% repatriation of capital
Exempt from import and export taxation
Entity
Access to infrastructure and warehousing
4-6 weeks lead time for establishment
Not permitted to do business outside of the Freezone in the UAE
Strategy
UAE Company
(typically LLC)
Must be 51% owned by UAE national (s)
Profits may be shared differently from the capital
contributions
Capital requirements vary by Emirate
Potentially subject to federal and emirate taxes (varies
up to 55% in principle)
Subject to local laws, including emiratisation
Potential for local taxation
Important considerations…..
• 5% Beneficial Ownership requirement
–
–
Central Bank requirement
More onerous than most other countries
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Post Dated Cheques are commonly deployed instruments
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Capital Account Requirements
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Wage payments system
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Non-resident accounts are strongly discouraged and require high level sign off
•
Current interest environment – there is a premium
•
Central bank imposes a cap
for AED funding
on real estate lending (20% of total deposits)
HSBC Commercial Banking in UAE
Scale of the UAE Commercial Banking Business
•Our history in the Middle East dates back to 1959, when we acquired The British Bank of the
Middle East. Founded in London in 1889, it pioneered banking in the region and for decades
was the only bank committed to supporting the area.
•In addition to Dubai, Deira and Jebel Ali our 8 branches are located in the main centers of
commercial activity including Abu Dhabi, Sharjah, Ras Al Khaimah, Fujairah and Al Ain.
•Additionally we have 3 Corporate Service Centres, conveniently located across the country
with a relationship team comprising 350 people.
Awards

Best Overall Bank for Cash Management in the Middle East (2007-2010)
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Best Bank for Payments and Collections in the Middle East (2007-2010)
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Best Sub-Custodian in Middle East (2010)
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Best Debt Bank in Middle East (2010)
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Best CLS-Linked Bank Offering in the Middle East (2008-2010)
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Best Supply Chain Finance Provider in Middle East (2008- 2010)
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Best Trade Finance Bank in the Middle East (2007)
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Best Trade Finance Provider in Saudi Arabia (2009)
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Best Investment Bank in the Middle East (2010)
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Best Domestic Cash Manager in UAE, KSA, Qatar, Bahrain, Jordan, Kuwait & Lebanon (2008)
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Best Cash Management House in the Middle East (2005-2007, 2009)
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Best Domestic Cash Manager in UAE, KSA, Qatar, Egypt, Pakistan, Bahrain, Jordan and Kuwait (2009)
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Best Cash Management Bank in KSA
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Best Emerging Markets Debt House (2010)
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Leading Trade Services Bank in the Middle East and North Africa (2007-2009)
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Best Trade Bank in Middle East (2010)
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Middle East Logistic Awards Best Trade Finance Bank in Middle East (2006-2009)
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TMI Awards – Best Cash Management Bank – MENA (2008)
Questions