New Companies Law must be welcomed

UAE Economy Minister Sultan Bin Saeed Al Mansouri's statement that the country will introduce a revised Companies Law within six months to allow majority and 100 per cent foreign ownership of companies outside the free trade zones will be welcomed by potential investors.

This ownership provision has been the subject of discussion for more than two years, but details are elusive. It is apparent the government is reluctant at this time to disclose the contours of the new law as the issue is complex and involves protection of national economic interests.

At present, foreigners can fully own companies based in free-trade zones only. No one is expecting the UAE to introduce sweeping changes governing foreign equity holding in onshore companies.

Both Al Mansouri and his predecessor Shaikha Lubna Al Qasimi have said that majority foreign ownership will be limited to certain sectors. Of course, the government has to first determine what will be gained by liberalising ownership rules.

It is a legitimate expectation that foreign ownership should bring in investment and technical know-how. In turn, such companies will benefit from the growing integration of GCC economies through unified customs and the free movement of goods within the six-member bloc.

The revision of the law is also in line with the general improvement in the business environment in the country. The changes should be seen in the light of the UAE's growing integration into the global economy.

A number of free trade pacts with key countries are under discussion and some of the reforms will have to accommodate concerns of other parties. Overall, the expected changes should attract more investment to the UAE and increase competition locally.

In this regard, the Ministry of Economy can help the local business community in preparing for the coming changes by offering more ideas of the reforms it is planning.