US embassy cable - 04ABUDHABI3483

UNCLAS ABU DHABI 003483 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR NEA/ARP 
AMCONSUL DUBAI FOR MCARVER 
STATE PASS USTR 
 
E.O. 12958: DECL: N/A 
TAGS: ECON, EINV, ETRO, TC 
SUBJECT: UAE DRAFT COMPANIES LAW WILL ALLOW GREATER THAN 49 
PERCENT FOREIGN OWNERSHIP IF CONDITIONS ARE MET 
 
1.  (SBU) Summary:  If enacted in its current draft form, a 
new UAE companies law will allow the Ministry of Economy 
and Commerce to grant exceptions to the 51/49 percent 
ownership requirement on a case-by-case basis.  This 
exception will allow U.S. and other foreign companies to 
own more than 49 percent of a business venture in the UAE 
if the company guarantees that it will employ a significant 
number of UAE nationals.  End summary. 
 
2.  (SBU) In a late September meeting with the Ministry of 
Economy and Commerce, the Assistant Undersecretary for 
Economic Affairs and International Cooperation told econoff 
that a draft companies law includes a provision that will 
grant foreign companies an exception to the 51/49 percent 
ownership requirement, provided the foreign company 
guarantees to the UAEG that it will hire a significant 
number of Emirati nationals.  According to a separate MOEC 
official, the new law will establish a committee headed by 
the Minister of Economy and Commerce that will review 
applications from foreign companies to determine if their 
proposal merits granting a waiver to the companies law. 
(Note: Under the current companies law, a foreign company 
must partner with an Emirati company in order to operate in 
the UAE outside of the free zones, and at least 51 percent 
of the business establishment must be owned by a UAE 
national. This waiver would allow U.S. companies to own a 
majority percentage of ventures in the UAE. End note.) 
 
3.  (SBU) The MOEC official noted that this law was first 
drafted seven years ago, and that it has been moving slowly 
through the process ever since.  He stated that a committee 
comprising Ministry officials, representatives from the 
UAE's Federal National Committee (FNC), and legal advisors 
from each of the seven emirates, was recently established 
to study the draft and ensure that its provisions are not 
outdated.  If the committee determines that the law is 
still appropriate at this time, the draft law will be 
forwarded on to the FNC for review and approval. 
 
4.  (SBU) Comment: The provision of exempting the 40/51 
percent foreign ownership is an attempt to address concerns 
regarding the high unemployment rate among Emirati 
nationals.  UAE officials estimate that the unemployment 
rate among nationals is 32 percent.  As such, the UAEG has 
embarked on an ambitious program of "Emiratization" that 
encourages d in some sectors, requires ivate companies 
to employ Emirati nationals.  Although the Emiratization 
program began in 1997, it has not been very effective to 
date.  End comment. 
 
Sison