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Part two: How is the UAE diversifying its economy to attract investment?

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Part two: How is the UAE diversifying its economy to attract investment?

In the final part of this two part series examining how the UAE is diversifying its economy away from from oil, Managing Director of Ocorian UAE, Nina Auchoybur provides context to the transformation currently underway and how the government is relaxing its foreign investment laws to attract further investment. Read part one here.

The city getting smarter

The UAE is also placing a priority on their technological infrastructure. In particular, Dubai's government are pursuing a Smart Dubai 2021 initiative. Smart Dubai, which is now also a dedicated government office, is partnering academia with private and public sectors to 'empower, deliver and promote an efficient, seamless, safe and impactful city experience for residents and visitors.'

A notable goal of the initiative is an ambitious strategy to become the first government in the world to process all of its services through blockchain technology. If successful, the blockchain system is likely to transform the efficiency of how real estate, banking and trade are conducted.

Artificial intelligence (AI) technology is also high on the priority list for the UAE, advocating itself as an AI hub. A report conducted by Accenture in 2018 predicted that AI could boost the UAE’s economy by 1.6% and add $182 billion to its economy by 2035. Research suggests that smart tech could therefore augment a number of integral industries in the UAE. This would contribute to a 'sandbox' environment, encouraging technological advancement and attracting both foreign money and tech businesses.

Powering the future

In keeping with the UAE's initiative driven spending, its Energy Strategy 2050 aims to power the nation and reach its environmental goals through a combination of clean energy, gas, nuclear and clean coal sources. To do this, the UAE government aims to invest AED 600 billion by 2050 to 'meet the growing energy demand and ensure sustainable growth for the country’s economy.'

Nuclear energy is a particular priority. The government have identified it as the main future source of non-hydrocarbon electricity. It is hoped that its four South Korean designed nuclear reactors - which should be operational by 2020 - will generate around 25% of the UAE's required electricity.

Projects such as the production of nuclear power plants have not solely been the government's responsibility however. Joint-venture arrangements have been actively promoted to foreign investors by the government in order to support and operate projects such as power plants, solar farms, potable water stations and clean energy research and development labs.

Investing in knowledge

With education and healthcare focal to engineering a knowledge-based economy, the UAE has placed its inhabitants at its core, with over 50% of its 2019 federal budget allocated to education and social development.

Over the last ten years, its 'Education 2020' strategy has aimed to 'bring significant qualitative improvement in the education system' and develop students so they are 'fully prepared to attend universities around the world and compete in the global marketplace.' This dedication is also evident on an emirate level; with Abu Dhabi's 'Tomorrow 2021' plan containing 50 initiatives to stimulate job creation and investment in the knowledge sector.

With over AED 10bn allocated to education spending in 2019, the UAE's investment in skills and training aims to provide employment opportunities and boost overall competitiveness. This domino effect is also hoped to attract investment to the area and consequently, develop the UAE's social and cultural environment, making it an enticing place to live.

Just what the doctor ordered

With an expanding and ageing population, healthcare is also one of the six pillars on the 'UAE Vision 2021' for the its government. In 2018, it allocated AED 4.5bn of the federal budget specifically for healthcare and social protection. Its concerted efforts to improve healthcare were recognised in Bloomberg's 2018 healthcare efficiency report, in which the UAE ranked 10th globally.

As a key priority, the government has rolled out a number of incentives to encourage an influx of private sector investments. On average, Alpen Capital's GCC Healthcare Industry Report 2018 expects healthcare investments in the UAE to see steady growth over the coming years.

Relaxing foreign investment

As you would expect owing to the upcoming Expo and numerous initiatives, the government's 2019 fiscal budget was its highest yet. But as oil prices linger around the $60 per barrel region and with the 'UAE Vision 2021' just two years away, the UAE has realised the added value of attracting further foreign investment into the region.

The UAE prides itself on the efficiency and attractive nature of its industry-specific free zones. The zones permit 100% foreign ownership and provide legislation and regulatory frameworks specifically designed to attract inward investment (in 2017 free zones made up 33% of non-oil foreign trade in Dubai). In an effort to increase this figure, the UAE has sought to liberalise existing domestic ownership restrictions 'onshore' (outside of free zones) in the UAE. Labelled the Foreign Direct Investment Law (FDI Law), it is hoped to attract further foreign investment into the country, helping it to achieve even and sustainable development.

Looking to the future

Already a hub for technological innovation and small to medium sized companies (SMEs), the UAE appears to be in the midst of a promising trajectory. It may still be laying the physical foundations for the future in parts, but its combination of progressive, government-led socioeconomic initiatives, record fiscal budgets, enticing foreign investment opportunities and its increasingly hospitable business environment, suggest the UAE is doing all it can to diversify away from its reliance on oil.  

Ocorian Dubai is a fully-fledged operational office with services ranging from corporate structuring advice to company formation, secretarial services and fund administration (regulated by the DFSA). Ocorian are also licensed in the Abu Dhabi Global Market (ADGM) to deliver a full suite of corporate, management consultancy, accounting and tax consultancy services. Ocorian have also developed specialist expertise for a host of support services, including visa services and administration services in connection with running a UAE-based business. You can learn more about Ocorian's UAE offering here.

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