Tashkent, Uzbekistan (UzDaily.com) – According to UNCTAD estimates, investments are one of the most important sources of economic development of states. At the same time, the flow of foreign direct investment (FDI) in the global economy in 2020 due to the coronavirus will decrease by 40% compared to 2019 to below US$1 trillion. Their further decrease is predicted by another 5 to 10% in 2021.

In this regard, many countries are taking measures to mitigate the negative consequences of the coronavirus crisis on the economy, incl. create favorable conditions for additional stimulation of the inflow of foreign investment. Studying the experience of the UAE in this area is of interest to develop the necessary proposals to improve the investment climate in Uzbekistan.

According to the UNCTAD World Investment Report for 2020, total FDI in the UAE in 2019 reached US$154 billion, an increase of US$13.8 billion over the year. Most of FDI is concentrated in the sectors of trade, real estate, manufacturing, construction, finance and insurance.

The strengths of the UAE investment environment are:

a) lack of direct taxation of firms and companies and individuals (except for the oil, banking and insurance sectors);

b) the absence of foreign exchange controls or restrictions related to the repatriation of income;

c) rich hydrocarbon resources of the country;

d) a stable and profitable banking sector with a strong sovereign wealth fund and favorable rules for foreign investment;

e) cheap foreign labor;

f) good transport and industrial infrastructure, cheap energy.

The new law "On foreign direct investment" excluded the so-called. The 51/49 rule, when the local shareholder must own at least 51% of the share capital. Also, the new FDI regime allows the creation of enterprises and companies with 100% foreign capital. According to the law, an FDI department has been created under the UAE Ministry of Economy with the authority to make decisions in the implementation of the policy of attracting foreign direct investment, development and implementation of licensing procedures in the field of FDI.

The law also provides that foreign investment firms that obtain licenses will be treated as national companies, which significantly limits bureaucratic mechanisms. Also, FDI cannot be expropriated, in whole or in part, except in the public interest, in which case fair compensation must be paid. Any rights to real estate of companies licensed for FDI cannot be canceled, suspended or limited, except in cases of violation of the terms of the license, and the assets and funds of such companies cannot be frozen, confiscated or transferred to management, except by a court decision.

In addition, the UAE has implemented structural changes in the government in response to the negative impact of COVID-19 on the economy, which involves the abolition of half of the public service centers and their transformation into digital platforms.

The government of Abu Dhabi has developed the Abu Dhabi Economic Vision 2030 strategy to improve the business climate in its emirate. This document provides for the transformation of the emirate’s economy in the long term, including a decrease in dependence on the oil sector as a source of economic activity and an increase in attention to knowledge-intensive industries.

This Strategy defines 7 top-priority economic priorities of the government:

1) creating an open, efficient, efficient and globally integrated business environment;

2) adopting a disciplined fiscal policy that takes business cycles into account;

3) creation of a stable monetary and financial market environment with controlled inflation rates;

4) contributing to a significant increase in the efficiency of the labor market;

5) creation of sufficient and sustainable infrastructure capable of supporting the expected economic growth;

6) development of a highly qualified and highly productive workforce;

7) providing financial markets with an opportunity to become key investors in economic sectors and projects.

The UAE ranked 16th out of 190 countries in the World Bank’s Doing Business 2020 report. There are 45 free economic zones in the UAE. The peculiarity is that each zone independently manages and determines the functioning policy.

Also, each FEZ issues operating licenses to participants and assists companies in starting a business. In the FEZ, participants are 100% exempt from import and export taxes, corporate tax for 50 years, and employee income tax. 100% repatriation of capital and profits is allowed.

Typically, taxation in the UAE is based on the concept of territoriality. The corporate tax is 0% (except for oil and gas and subsidiaries of foreign banks). The federal government does not levy taxes on the income or property of companies and individuals. Branches of foreign banks are taxed at 20% in most Emirates. Capital gains are tax-free and the standard VAT rate is 5%.

In general, the UAE legislation in the field of foreign investment, which is aimed at protecting the interests of foreign investors, is regularly supplemented and improved. The changes affect both guarantees and observance of investors’ rights, as well as bureaucratic procedures. The authorities of the Emirates are striving to simplify this area as much as possible so that the UAE can successfully compete in the international market and attract investments from various countries of the world.

The UAE is the most important commercial center for the entire Middle East region, as it is characterized by optimal transport accessibility through a developed network of land, air and water transport.

In addition, the explosive growth of the tourism and hospitality industries allows the UAE to maintain its reputation as one of the most important Middle East centers for the overseas investment market.