Abu Dhabi: Overwhelming opposition by the Federal National Council to full foreign ownership of companies yielded an immediate response with the Government scrapping the proposal.

Members of the House unanimously rejected a clause in the draft companies law which would have allowed foreigners to fully own certain companies after a decision of the Cabinet.

They said the move would endanger the UAE’s national security, citing the country’s population’s structure in which “Emiratis account for less than 10 per cent”.

“If the move had been passed citizens would have left nothing to own and our parliament with its weak powers would not be able to change such a law,’ said Dr Abdul Rahim Al Shaheen, a representative from Ras Al Khaimah.

He added: “Nowadays foreigners are allowed to possess their houses, next they will own their companies and soon they will demand citizenship.”

Sultan Saeed Al Mansouri, Minister of Economy, said the move would be restricted to strategic sectors such as renewable energy and food security, where the Government sees an important opportunity for attracting investment to build, for instance, bulk grain storage warehouses to satisfy the needs of the country for six months and the investors demand more than 49 per cent stake in the project. “So we are speaking of strategic companies and not ordinary ones. Decisions on these matters will also be taken by the cabinet in coordination with local governments and proposals from the Minister of Economy.”

Al Mansouri said the world has changed. “Today we live in a completely different world, where we have to look at attracting investment, creating jobs and other requirements such as equal treatment and opportunities sought by investors from the world over … Moreover, it’s no secret that some local governments have allowed more than 49 per cent foreign ownership, and so we are legalising the move and approvals of these ownerships will be limited and subject to specific criteria.”

Ahmad Al Shamsi, a member from Ajman, disagreed and said if local governments violated laws, these violations should not legalised. “It is unacceptable to allow full foreign ownership of companies while our economy is already controlled by foreigners and citizens account for less than 10 per cent of the population.”

Rashid Al Shuraiqi, a representative from Ras Al Khaimah, demanded scrapping the clause and said their future would be “disastrous” if the economy is handed over to foreigners.

Dr Amal Al Qubaisi, a member from Abu Dhabi, suggested setting strict conditions to allow full foreign ownership of companies including capital of not less than $300 million-$500 million (Dh1.1 billion-Dh1.8 billion), use of advanced technology, creating jobs and training opportunities for citizens, operating in energy, food security and hi-tech, and being eco-friendly.

Many members insisted the move be scrapped because they said it would threaten national security and give foreigners the upper hand in strategic sectors.

The Minister of Economy said he understood the fears of the FNC members and that a new investment law would address this issue.

The House will complete review of the draft law in the next session.

Under the draft law, the founders of a Public Joint Stock Company (PJSC) are obliged to subscribe to no less than 30 per cent of the issued capital of the company.

The draft law will not apply to companies excluded by a Cabinet resolution. These include companies wholly owned by federal or local authorities or any entities wholly owned by such companies, companies in which the federal or local authority, or any establishment, authority, department or company controlled or held by any of the foregoing (directly or indirectly) holds at least a 25 per cent shareholding and which operates in oil exploration, drilling, refining, manufacturing, marketing or operating in the energy sector in power generation, gas production, or water desalination and distribution.

The law states that the Cabinet can issue a decree outlining the conditions for registering companies operating in UAE free zones that wish to carry out their business activities outside the free zone, in the mainland (onshore) UAE. These decrees will open up the jurisdiction for free zone companies wishing to also operate in the UAE outside the free zones.

The draft law enforces strict corporate governance standards and procedures on PJSCs in accordance with international standards and practices. The Ministry of Economy will be issuing a decree setting out corporate governance requirements and a framework for PJSCs consisting of more than 75 shareholders. Banks, finance companies, financial investment companies, exchanges and money brokerage companies are excluded.