FDI Law in the UAE : Will it make the Emirate an Investment Hub?


For most of the Middle Eastern Countries, oil exports not only make up for a major source of government earnings but also account for a lion’s share in the national GDP. However, the dwindling oil prices in the past few years, and its obscure future utility, have forced many of these nations to reduce their heavy dependency on oil and instead diversify and re-orient their economies to other sectors like services, manufacturing and education through other routes including private investments and FDI.

Scaling of UAE:

UAE, amongst these countries, has already outshone others in economic diversification, and with a series of investment friendly policies and domestic measures; it has significantly increased its global FDI rankings. By promoting the development of special industrial zones and by restructuring its industrial sectors, it has over the years become an oasis for foreign investors. Especially with the introduction of FederalLaw No. 19 of 2018 (“FDI Law”) UAEdrastically increases hopes amongst the expatriate investors and compelled them to re-consider UAE as the investment hub.

What has the FDI Law changed?

The FDI Law has increased foreign shareholding from from 49% up to 100% in the UAE, waiving off the need for local sponsorship in certain sectors.

If one recalls, China witnessed its economic boom not by the closing up of these economies to foreign trade but by allowing foreign investment and raising of domesticsaving rates. In such a scenario UAE’s FDILaw is a welcoming and relieving move for global investors especially in times of such global economic slowdown, and for economic diversification & progress of UAE.

Are all sectors or business activites covered under the FDI Law?

The FDI Law has imposed enough safeguard mechanisms to take care of theEmirate’s trade and economic interests onone hand and promotes the welfare of the Emirates on the other hand.

Article 7 of the FDI Law provides a negative list for sectors in which 100% ownership cannot be granted expat investors. Foreign investors will need local nationals to hold minimum 51% to run the following activities:

  • banking activities;
  • financing;
  • payment systems and dealing in cash;
  • insurance services;
  • land and air transport services;
  • commercial agent services; and
  • medical retail services such as private pharmacies
  • Water and electricity provision;
  • Fishing and related services;
  •  Post, telecommunication and other audio visual services;
  •  Road and air transport;
  • Printing and publishing;
  • Commercial agency;
  • Pilgrimage and umrah services;
  • Certain recruitment activities; and
  • Blood banks, quarantines venom/poison banks

Which sectors or business activities are allowed under the FDI Law?

The FDI Law partially put an end to the requirement of having at least 51% of the share capital in the hands of UAE nationals and/or companies wholly owned by UAE nationals in accordance with Article 10(1) of the Commercial Companies Law (Federal Law No. 2 of 2015).

Art. 6(2)(A) FDI Law allows the Foreign Direct Investment Committee, which was established by the UAE Cabinet, to recommend certain economic activities and sectors that shall be included in the Positive List.

The Positive List coveres 122 activities across three sectors i.e. Agriculture (19 activities), Industry (51 activities) and Service (52 activities)

Any requirements for the Agriculture Sector under the Positive List?

Foreign investors need to set up a company with a minimum capital of AED 7.5 Million and join the Emiratization Partners Club (EPC), which is an initiative of MoHRE. Such companies must also use modern technology for production.

Any requirements for the Industrial Sector under the Positive List?

Apart from the EPC and modern technology requirem ents, the company shall have a minimum capital of AED 15 Million to maximum AED 100 Million, depending on whether it is light or a heavy industry.

Any requirements for the Service Sector under the Positive List?

As a general rule, the minimum share capital for this activities is according to the general legal requirements (non FDI Law related). It should be noted, however, that some service activities require a minimum share capital (e.g. hospital activities require a minimum share capital of AED 100M

Does this mean expatriates can own 100% in these Sectors?

As of now the UAE Cabinet has allowed each of the seven Emirates of the UAE to decide the percentage of ownership that maybe granted to expatriates in these three sectors of the positive list. So, it is highly likely that for example, Abu Dhabi may allow 100% foreign ownership in company A of industry sector whereas Dubai may allow only 70% foreign ownership of shares for the same business activity.

It is yet to be seen how each Emirate will amend its local laws to accommodate the positive stride that the FDI Law has brought in its wake.

Any other concerns which foreign investors may have under the FDI Law?

Article 13 of the FDI Law makes it obligatory for the companies to employ and train nationals and equip them with the necessary

skills, and adhere to the percentages and special criteria relating to the Emiratization.

However, the FDI Law has showb enough flexibility to allow the UAE Cabinet to add or remove an acitivity/sector from the negative list in interest of the Emirate.

Also, the decree does not apply to projects established in the financia l and non- financial free zones in the State as per Article 3(2) of the FDI Law.

Any other benefits of the FDI Law

The decree provides certain incentives and privileges to FDI companies and their employees not otherwise accorded in other jurisdictions under Article 8.

  •  treatment of such FDI companies as national companies in UAE;
  • 100% foreign repatriation of profits,
  • confidentiality of technical, economic, financial and investment information, and transfer of ownership, etc to a newinvestor within the confines of the laws
  •  employees of FDI companies also have 100% right to repatriate their salaries, compensations and entitlements outsideUAE.Article 9 of the FDI Law provides the assurance that government will not expropriate FDI projects in whole or part except for public interest and in exchange for fair compensation, which grants certain guarantees to FDI companies regarding their investment in the UAE


The FDI Law is expected to boost the impetus for foreign investment in the UAE, especially in those sectors that are listed in the positive list. Foreign investment has already increased rapidly in the UAE since passing of the decree in 2018 and is expected to further scale up in coming years with possible dilution of some more investment barriers.

Soon, existing companies will be able to restructure itself to reap the benefits of the FDI law and new investments willsimultaneously positively project the UAE’seconomy to new heights.


Adv. Shayan Dasgupta
Corporate & Commercial Law | M&A |
FinTech, Blockchain & AI

Adv. Urvashi Ramachandran
Inheritance and Personal Law Practice