The decision not to begin to allow foreign companies doing business in the UAE to own more than a 49% share of their operations there had been expected – even though UAE nationals represent only about a tenth of the country’s population of around 8.3m.
As reported here in December, this is said to be in part because powerful interests in the UAE and Gulf would prefer to keep the status quo, rather than allowing 100% foreign ownership of such entities as banks.
In a report on the decision today, Reuters noted that the fact that Emiratis are so outnumbered by foreigners in their own land meant that many of them fear “a loss of identity and control” if the currently-tight regulations were relaxed.
Security concerns
According to Reuters and other media reports this evening out of Abu Dhabi, the reason cited by members of the Federal National Council (FNC) for rejecting the draft legislation included concerns over security, and the potential threat foreign-owned businesses could pose to Emirati-owned ones.
Reuters quoted an FNC deputy opposed to relaxing the rules for foreign ownership, Ahmed al-Zaab, as saying, "these clauses… could lead to foreign investments being outside the control of the state and its supervision, and this, in turn, could lead to destabilisation of security".
“If the move had been passed citizens would have left nothing to own and our parliament with its weak powers would not be able to change such a law," Another news website, that of the Gulf News, quoted a representative from Ras Al Khaimah, Dr Abdul Rahim Al Shaheen, as saying.
“Nowadays foreigners are allowed to possess their houses, next they will own their companies and soon they will demand citizenship.”
No mention of the decision was posted on the English-language website of the FNC, which featured a detailed description of other business dealt with at today’s council meeting.
Ownership allowed in free zones
Foreign businesses operating in the UAE are allowed to own 100% of companies located within one of the country’s so-called free zones – of which the Dubai International Centre (DIFC) is one – providing they stay inside of it.
But outside of the free zones – which are designed to accommodate specific industries, such as, in the case of the DIFC, financial services – an Emirati or Gulf Cooperation Council entity, usually an individual, must hold at least 51% of a company’s shares.
Owning the majority share of one or more foreign-owned businesses is said, in fact, to have become a livelihood for many Emiratis and other GCC nationals, whose annual fee, those familiar with such arrangements say, is normally based on the power and influence they command in the Emirate in which they live.
As a general rule, these majority-share Emirati owners are expected to stay well out of active involvement in their companies.
