This morning a partner of the Grant Thorton Group traveled to our hotel conference room to present a brief history of Dubai and an overview of the general business environment in this prospering area of the world. Hisham Farouk is a well spoken, London educated (MBA), Egyptian expatriate, who joined Grant Thorton in 1998, a time when there were only four hotels here in Dubai, he has been here since the beginning and his knowledge of the countries many facets is expansive. Not one question our group posed was met with even a pause or an “um”.
Mr. Farouk began his presentation with a brief history of the UAE, which I have studied rather extensively prior to this trip. He highlighted the uniting of the seven emirates under the UAE and most notably, the rise of Abu Dhabi as the reigning power. The bar here is whichever Emirate possesses the largest amount of sustainable economic power, makes the rules. AbuDhabi sits on 300 square kilometers of oil, so for now, they call the shots.
The most popular form of business here is the limited liability corporation, accounting for 80% of the business. 51% of shares are required to be owned by an UAE national, a law that was implemented in the 70's as a way to control business in the region and was conducted by means of a gentlemen's handshake. Not one single contract was drawn here until the mid 1980's. The incentive for creating an LLC here is the freedom from any form of tax or trade barriers.
The second form of business highlighted by Mr. Farouk was the Branch and parent Company ownership model. Many corporations such as Microsoft and Intel have established marketing offices here, not wishing to sell through the country or to establish separate legal entities. Although this business model allows for greater control, there are zero tax structure advantages. Branch business has grown in popularity here during the economic downturn as countries such as the United Kingdom have encouraged business to repatriate profits through tax incentives in order to stimulate homeland economics.
Finally, the most famed business model here in the United Arab Emirates is the Free Trade Zone. A FTZ provides 100% foreign ownership, repatriation, tax exemption, and import/export duties. This form of business was implemented in response to western timidity of penetrating Arab markets, Mr. Farouk noted that it takes him about three months to convince American Lawyers to conduct business in the Emirate on the grounds of legal wording and cultural differences. The take away for Dubai is visa fees, real estate sales, licensing and of course increased spending in their economy. The most relevant slogan for this model is the motto “If you build it, they will come”, and it has held true in a tremendous way here in the UAE.
With fast pasted growth comes the need for a financial regulatory body. The central bank, as all government run agencies, had become too large to deal with incoming investments. Hence, the DIFC was created which allows inflowing finances to be reinvested wisely through traceable and regulated means. The DIFC follows FSA regulations (UK) and has settled much of the money laundering accusations of those who would block outgoing funds from western countries.
In reflection, leadership here has created one of the fastest growing economies over night, in doing so they have walked before they could run and have had to back track in order to hedge against all the usual risk. Although the economic downturn has halted much of the real estate investment in the area, a bounce back of the world economy will create another boom of both business and scientific development here in Dubai. The lifestyle and incentive to move here is just too great to pass up, Dubai has certainly set itself up as the Hub of the East.
Mr. Farouk began his presentation with a brief history of the UAE, which I have studied rather extensively prior to this trip. He highlighted the uniting of the seven emirates under the UAE and most notably, the rise of Abu Dhabi as the reigning power. The bar here is whichever Emirate possesses the largest amount of sustainable economic power, makes the rules. AbuDhabi sits on 300 square kilometers of oil, so for now, they call the shots.
The most popular form of business here is the limited liability corporation, accounting for 80% of the business. 51% of shares are required to be owned by an UAE national, a law that was implemented in the 70's as a way to control business in the region and was conducted by means of a gentlemen's handshake. Not one single contract was drawn here until the mid 1980's. The incentive for creating an LLC here is the freedom from any form of tax or trade barriers.
The second form of business highlighted by Mr. Farouk was the Branch and parent Company ownership model. Many corporations such as Microsoft and Intel have established marketing offices here, not wishing to sell through the country or to establish separate legal entities. Although this business model allows for greater control, there are zero tax structure advantages. Branch business has grown in popularity here during the economic downturn as countries such as the United Kingdom have encouraged business to repatriate profits through tax incentives in order to stimulate homeland economics. Finally, the most famed business model here in the United Arab Emirates is the Free Trade Zone. A FTZ provides 100% foreign ownership, repatriation, tax exemption, and import/export duties. This form of business was implemented in response to western timidity of penetrating Arab markets, Mr. Farouk noted that it takes him about three months to convince American Lawyers to conduct business in the Emirate on the grounds of legal wording and cultural differences. The take away for Dubai is visa fees, real estate sales, licensing and of course increased spending in their economy. The most relevant slogan for this model is the motto “If you build it, they will come”, and it has held true in a tremendous way here in the UAE.
With fast pasted growth comes the need for a financial regulatory body. The central bank, as all government run agencies, had become too large to deal with incoming investments. Hence, the DIFC was created which allows inflowing finances to be reinvested wisely through traceable and regulated means. The DIFC follows FSA regulations (UK) and has settled much of the money laundering accusations of those who would block outgoing funds from western countries.
In reflection, leadership here has created one of the fastest growing economies over night, in doing so they have walked before they could run and have had to back track in order to hedge against all the usual risk. Although the economic downturn has halted much of the real estate investment in the area, a bounce back of the world economy will create another boom of both business and scientific development here in Dubai. The lifestyle and incentive to move here is just too great to pass up, Dubai has certainly set itself up as the Hub of the East.
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