Government Role in the Economy

The UAE has a mixed economy, with the most productive assets owned by the governments of the individual emirates. In both Abu Dhabi and Dubai, international oil companies maintain equity interests in their operations.

UAE federal government steps toward privatization have been tentative. Abu Dhabi Emirate, however, has initiated and maintained an ambitious program to privatize the emirate's power and water sector. In April 1997 the Abu Dhabi government gave the go-ahead for power and desalination projects to be carried out as Independent Power Projects (IPP), which have significantly widened investment opportunities for domestic and foreign investors.

Federal commercial laws promote national ownership of business throughout the country. Foreign businesses, must have a UAE national sponsor. Agency and distributorship laws require that a business engaged in importing and distributing a foreign-made product must be owned 100 percent by a UAE national. Other businesses must be at least 51 percent owned by nationals. Companies located within the UAE's twelve free zones are exempted from agency/distributorship, sponsorship, and national ownership requirements. However, if they lack 51 percent national ownership, they are treated as foreign firms and subjected to these requirements if they market products in the UAE.

The UAE Federal Government is attempting to establish a legal framework covering all aspects of doing business in the UAE as part of its development into a regional trading center. Intellectual property rights protection laws are the most recent additions to this framework. New copyright, trademark, and patent laws were passed in 2002 to provide high levels of protection for intellectual property.

There are no restrictions on the import or export of either the UAE Dirham or foreign currencies by foreigners or UAE nationals. The exchange rate is 3.671 UAE Dirhams per one US Dollar.

The UAE Federal Government has no official or commercial foreign debt. Some individual emirates have foreign commercial debts, but the amounts involved are not large. The foreign assets of the Abu Dhabi and Dubai governments and their official agencies are believed to be significantly larger than the reserves of the Central Bank. It is conservatively estimated that assets of the Abu Dhabi Investment Authority (ADIA) total more than $125 billion.

There is no income tax in the UAE. Foreign banks pay a 20 percent tax on their profits. There are no consumption taxes, and no customs duties on most products traded within the GCC. The GCC implemented on January 1, 2003 a common external tariff of 5 percent for many goods.