UAE companies should allow higher foreign ownership

Various legal and regulatory hurdles prevent many successful UAE-based companies from opting for initial public offerings, market analysts said.

"Though the UAE Company Law allows foreign ownership of up to 49 per cent of equity, very few companies have so far opted to allow foreigners to buy shares in their companies by amending their articles of association," said Iyad Dawjai, CEO of Shuaa Capital. He spoke at a seminar on GCC/Arab Markets organised by Shuaa. The UAE lags many countries in the region when it comes to allowing foreign ownership in listed companies, he said.

Dawjai cited the examples of Oman, Qatar and Kuwait as places where foreign participation rates in markets are higher than in the UAE. The region's markets in general are passing through a boom period, he said. The year to come will see additional initial public offerings (IPOs) in the UAE, he said.

The Shuaa Capital Composite Index grew 7.3 per cent during 2002. It grew 57.4 per cent in 2003, and 64.6 per cent in 2004. This compares to the 24.3 per cent growth recorded by Morgan Stanley Capital International (MSCI), and the 3.14 per cent growth in the Dow Jones Industrial Average (DJIA) during the last three years.

The UAE economy recorded growth of 5.7 per cent in 2004, said Dr Ahmad Al Samerai, economic advisor to Shuaa Capital. The UAE will continue to grow in 2005, reaching 5.9 per cent growth in the economy, Al Samerai said. Next year should see an even higher rate of growth, he said.

"This may be attributed to the attractive growth rates predicted for sectors such as tourism, construction, aviation and services," said Al Samerai. The UAE will see inflation reach a high of three per cent, and stabilise thereafter, he said.

Analysing the performance of markets across the region in 2004, Arabi said Egypt ranked first, with a 112.5 per cent growth for the year. The UAE came second, with 103 per cent growth; next came Saudi Arabia, with 82.9 per cent growth. Jordan came next, with 66.1 per cent growth.

While the combined market capitalisation of Arab markets reached $585 billion (Dh2.1 trillion) in 2004, that of the GCC alone touched $520 billion (Dh1.9 trillion).