The Burj Khalifa tower, center, stands among city skyscrapers and the Address Sky View, right, under construction by developers Emaar Properties PJSC, in Dubai, United Arab Emirates. (Photographer: Christopher Pike/Bloomberg)  

U.A.E. Ditches Foreign Ownership Rules as Economy Feels Pain

(Bloomberg) -- The United Arab Emirates is abandoning decades of restrictions on foreigners owning companies and settling in the Gulf country to help lure money and talent in a slowing economy.

The new rules, reported by the state-run WAM news agency, include allowing non-Emiratis to control a company outright and offering residency of up to 10 years to specialists in medical, scientific, research and technical fields and top students. The changes will take effect by the end of this year.

It’s the biggest recognition yet that the second-largest Gulf economy is more reliant than ever on foreign investment and an expatriate workforce at a time when the oil-dependent region faces challenges rarely seen since the 1990s.

It follows legislation in neighboring Qatar last August that granted some foreigners the right to remain indefinitely as it adapts to a yearlong embargo on the country led by Saudi Arabia and other Arab nations including the U.A.E.

Like in most other Persian Gulf states, a majority of the U.A.E.’s population of 9 million consists of foreigners who are expected to leave once their employment ends and many send earnings abroad. In 2017 alone, expatriates remitted 164 billion dirhams ($45 billion), according to WAM.

"There seems to be a clear shift in policy to supporting economic activity, boosting investment and putting in place a framework to future development," said Monica Malik, chief economist at Abu Dhabi Commercial Bank. The measures could help by increasing "investments levels, population inflows, development of new sectors especially in the technology front and reducing remittances out of the country," she said.

While Abu Dhabi and especially Dubai have thrived on tourism, financial services and as airline hubs, the U.A.E. government is turning to science and technology to ensure the country can keep growing. The growth rate in the economy has slowed to levels last seen in 2010 and the real estate market has a glut of empty apartment blocks.

Changes to ownership rules are a significant departure from the policy of restricting foreign ownership outside so-called free zones such as the Dubai International Financial Centre. Foreigners seeking to establish businesses outside those zones, which are exempt from most local rules, must seek partnerships. U.A.E. citizens have to own 51 percent of the ventures.

"We expect a significant positive effect on foreign direct investments," said Jaap Meijer, managing director and head of equity research at investment bank Arqaam Capital Ltd. in Dubai. "The decision should also help net immigration, which should significantly alleviate the current pressure on housing markets."

The benchmark stock index in Dubai climbed as much as 1.4 percent, the most since April 15, before trimming the gain to 1 percent at the close. The gauge in Abu Dhabi rose 0.7 percent.

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