On 5 May, His Highness Sheikh Mohamed bin Zayed Al Nahyan, the Crown Prince of Abu Dhabi, made a series of announcements by Twitter approving a Dh50 billion economic stimulus package for Abu Dhabi, aimed at accelerating economic growth over the next three years. He also launched a number of economic initiatives aimed at promoting the ease of doing business in Abu Dhabi and enhancing the work experience for UAE nationals, residents and investors alike. In this short briefing, we outline the Crown Prince's announcements and comment on their possible implications.
Sheikh Mohamed Bin Zayed has launched ten new economic initiatives to improve the ease of doing business in Abu Dhabi. These include instructions to:
- exempt new licenses from the requirement of having a physical presence for two years;
- permit permanent home licenses;
- implement instant licensing systems in most commercial licence types and all services provided by Abu Dhabi Government;
- accelerate the settlement of due payments on contracts for the private sector;
- review all fines for the healthcare, education & municipalities’ affairs sectors;
- form a committee by the Executive Office and the Department of Finance to oversee (5);
- establish the Abu Dhabi Accelerators and Advanced Industries Council to attract and support value-added investments and technologies;
- provide at least 10,000 jobs for Emiratis in the private and public sectors over the next five years;
- encourage and organise local production and support SMEs to boost their competitiveness locally and regionally; and
- issue dual licenses for companies in Abu Dhabi free zones to enable them to work outside the free zones and to participate in government tenders.
The Crown Prince's tweets last night are extremely encouraging, especially because they come at a time when a number of commentators have indicated how challenging market conditions in Abu Dhabi have been. The announced economic stimulus package looks to address this, and the fact this is a 3-year project should give a real boost to the Abu Dhabi private sector.
Niall O'Toole, Partner at Clyde & Co in Dubai, comments: "Taken together, these could constitute major changes to the fabric of how business is conducted in Abu Dhabi. Potentially government departments in Abu Dhabi will need to conduct a root and branch analysis of their policies and procedures to ensure that the Crown Prince's vision is achieved."
Ross Barfoot, Partner at Clyde & Co in Abu Dhabi, comments: "Traditionally Abu Dhabi has been a hydrocarbon based economy, reliant on Government and quasi Government activity to provide opportunities for the private sector, despite Abu Dhabi's burgeoning private sector. The Crown Prince's announcement reflects a package of initiatives that indicate a clear intention to boost the Abu Dhabi economy, and strikes a balance between attracting new investment into the Emirate while supporting existing businesses."
The Crown Prince has also directed the Executive Council to draw up a working plan for allocation of the Dh50 billion within 90 days. The strict deadline given to the Executive Council is very welcome, and indicates a real desire to get the stimulus package up and running as soon as possible. We look forward to seeing more details on the initiatives during the following 90 days.
As a leading law firm advising international companies on doing business in the Emirate, the announcements regarding dual licensing for Abu Dhabi free zone companies, instant licensing systems and the exemption from the requirement for the need to have physical premises is very encouraging news, and will help reduce the initial capital investment required to establish a licensed presence in Abu Dhabi. In the past, this has made it more challenging for companies to enter the Abu Dhabi market speculatively.
We have already seen Abu Dhabi Global Market (ADGM), Twofour54 and Masdar City free zones announce dual licensing, where a free zone company registers an onshore branch licence but continues to use the free zone office premises. These still require an onshore local service agent or "sponsor" however. We will need to see whether this is replicated across all Abu Dhabi free zones, or whether a new structure will be implemented.
The two-year exemption on physical premises is also currently in place in Abu Dhabi for UAE nationals licensed as an "Abu Dhabi Trader". So far this has been used to facilitate "pop-up" and kiosk concession stores in the thoroughfares of malls. Again, we will need to see whether this will be expanded to other sectors.
It will also be interesting to see whether the stimulus package will affect the Emirate's current position on foreign investment into the education and healthcare sectors where Government land is provided. This has been of particular concern to international school operators, and we understand that the Abu Dhabi Department of Education and Knowledge (ADEK) have been reviewing this. This could see more affordable school options in Abu Dhabi, which will further boost the economy.
Dino Wilkinson, Partner at Clyde & Co in Abu Dhabi, comments: "The establishment of the Abu Dhabi Accelerators and Advanced Industries Council - to be known as “Ghadan”, which is Arabic for tomorrow - should be a further boost to the local technology sector following initiatives such as ADGM’s fintech regulatory measures and IBM’s launch of an Innovation and Industry Client Centre in Abu Dhabi. These are important steps in the government’s drive to develop a knowledge economy and will make Abu Dhabi an exciting option for innovative industries."
The Crown Prince's announcement follows the recent Federal Cabinet announcement on the relaxation of foreign ownership restrictions and is a continued sign that the UAE is focusing on improving the country's business environment.