UAE’s FDI: What overseas investors need to get right every time

UAE’s efforts to attract and support new investment are having a positive effect.

Foreign direct investment (FDI) in the country jumped 49% in 2024 in comparison to the previous year, according to the World Investment Report 2025 — impressive, especially over a period when rising geopolitical tensions saw global FDI fall.

The jurisdiction consistently ranks highly, at 10^th, for attracting FDI and is second globally for greenfield projects announcements.

It has also taken proactive steps to establish itself as a resilient trade and investment hub, and it is not alone in that. Indeed, the Global Business Complexity Index (GBCI) published by TMF Group reveals that over half of 79 surveyed jurisdictions are pursuing trade diversification strategies to manage geopolitical risks.

Despite the competition, the strategies of the UAE appear to have achieved traction. For investors keen to position themselves close to all three of Europe, Asia and Africa, including high-growth emerging markets, the UAE can be an attractive choice.

It offers investor-friendly laws, strong security, political stability and a rich culture. Add to this growing economic diversity, reliable infrastructure and policies that actively encourage foreign investment.

Its high-quality roads, ports and telecommunications position it as a logistical hub, while technology, renewable energy and digital infrastructure support both the trade and finance sectors.

UAE’s FDI law

A significant milestone was the 2018 Foreign Direct Investment Law, which opened major avenues for foreign investors. The Law permits 100% foreign ownership in many sectors, simplifies licensing and fosters a supportive business environment.

These reforms increased opportunities in the seven emirates and the many free zone areas. Additionally, multiple MoU to reinforce diplomatic and trade ties, have boosted investor confidence.

Yet, as companies navigate this dynamic landscape, they find themselves faced with distinct challenges.

Supply chain risks in the face of geopolitical tensions are significant. Heavy reliance on imports makes the UAE, along with neighbours Saudia Arabia, Oman and Qatar, vulnerable to disruptions in global trade routes. While the UAE boosts robust trade infrastructure and diversified access points, companies must remain alert, as external events can disrupt local supply chains.

Domestic regulatory challenges also persist. This year’s annual GBCI ranked the UAE 40^th most complex globally for doing business (out of 79), based on 292 indicators across taxation, accounting, HR and payroll. Ratings were broadly similar for Saudi Arabia (37) and Qatar (48).

For investors, having up-to-date knowledge of local labour and business laws is critical.

In the UAE, investors face complex labour market conditions. It is a growth economy but the competition for talent is high. 

Complexity of compliance on labour

The specifics of labour market law and immigration policy - including employee contracts, work permit applications and the tracking of required local talent - vary. The Dubai International Financial Centre and Abu Dhabi Global Market each operate under independent legal systems. Other emirate mainlands and free zones also have unique regulations. 

This adds to the complexity of compliance, especially with evolving local employment conditions. The cost of getting it wrong, such as delays in obtaining visas or hefty fines for not meeting reporting requirements, can be high. 

Regulations in the country and nearby jurisdictions are fluid, as a suite of initiatives are implemented. The UAE’s policy is often aligned with those of Saudi Arabia and Oman. Emerging priorities — such as decarbonisation, renewable energy development, ESG, digital transformation and AI — are all areas of evolving change and part of the ‘We the UAE 2031’ vision.

For investors, keeping up and understanding up-to-date business and labour regulations is crucial. It’s vital for selecting the right jurisdiction, optimising economic incentives and ensuring smooth and efficient business administration over time.

The complexities are such that many investors opt to rely on third-party experts to cut administration costs and risks, allowing management to focus on what matters most — building successful, resilient businesses.