Over the past five decades, the United Arab Emirates (UAE) has undergone a remarkable economic transformation, evolving from a highly hydrocarbons-based economy into a more diversified regional and global hub for finance, logistics and renewable energy sectors. Foreign direct investment (FDI) has been central to this transformation. The FDI stock has risen from negligible levels in the early 2000s to over half of GDP by 2024, exceeding the Gulf Cooperation Council (GCC) countries average and approaching OECD levels. FDI inflows as a percentage of GDP has also now surpassed OECD and GCC levels. These trends underscore the UAE’s success in establishing itself as a major regional hub for foreign investment.
As one subset of foreign investment, greenfield FDI (i.e. new establishments of foreign companies) is also increasingly aligned with the UAE’s ambitions to diversify the economy. Renewable energy has emerged as the top recipient of greenfield FDI over the past decade, while digital sectors account for a growing share. FDI in R&D is also increasing and plays an increasingly important role in supporting innovation. Greenfield FDI generates more jobs per dollar invested in the UAE than in the OECD and GCC on average.
This investment boom has been underpinned by an ambitious reform agenda designed to enhance the competitiveness of the UAE’s business environment. Policy efforts have focussed on reducing administrative barriers, modernising regulatory frameworks and strengthening public institutions at both the federal and Emirate levels. The broad deployment of e‑government platforms and one‑stop-shop licensing systems has streamlined administrative procedures, improved efficiency and shortened time to market for investors.
A central pillar of the reform agenda has been the modernisation of investment and business laws, regulated on a federal level. The repeal of the 2018 Foreign Direct Investment Law and its replacement by amendments to the Federal Commercial Companies Law in 2021 marked a decisive shift in investment policy. These reforms removed a longstanding requirement for majority Emirati ownership in most sectors, permitting 100% foreign ownership across a broad spectrum of economic activities, with limited exceptions for some sectors deemed strategic by the UAE, such as defence, finance and telecommunications.
The UAE’s comprehensive and highly decentralised investment promotion framework has been another key driver of its FDI performance. This system, shaped by a multi-layered governance model that delegates significant authority to individual Emirates and their respective investment promotion agencies (IPAs), enables local experimentation, tailored sectoral positioning and agile facilitation at the subnational level.
While such a degree of decentralisation allows for policy space at local level, it can also create uneven access to regulations and implementation of reforms, variability in licensing, and administrative complexity for firms operating in multiple jurisdictions, leading to an uneven regional distribution of FDI. Key areas of investment regulations, such as corporate, commercial and intellectual property (IP) laws, are regulated at a federal level, whereas other aspects of the investment framework, including land tenure, are regulated by Emirates, sometimes leading to uneven access to regulations. Enhancing the quality, predictability and accessibility of regulations would reinforce investor confidence across the country and support long-term investment aligned with the UAE’s national objectives. Advancing more co‑ordinated reform efforts and facilitating structured investor engagement can also help ensure that investment initiatives align with national strategic objectives and contribute effectively to sustainable economic development.
The development of a comprehensive national investment strategy, clearly articulating federal and Emirate‑level priorities, identifying strategic sectors, and aligning promotion efforts with broader development objectives, would provide a coherent framework to guide future legislative, institutional and promotional initiatives. In this context, the recent creation of a Ministry of Investment (MoI), endowed with a broad mandate to formulate integrated investment strategies, strengthen policy coherence, and attract both capital and talent, could provide a strategic opportunity to address these issues.
Building on these efforts, the UAE could strengthen the impact of FDI on labour market outcomes and digitalisation by reducing regulatory discretion in strategic sectors such as telecommunications and media. Strengthening implementation and co‑ordination in digital competition, data governance and intellectual property enforcement, and ensuring representation of the MoI in relevant co‑ordination bodies, would improve policy coherence. Harmonising labour conditions between the public and private sectors would allow foreign firms to support Emiratisation (i.e. the engagement of nationals in private sector employment) through greater labour mobility. Partnerships between foreign investors and education providers, alongside incentives for workplace training, would support the UAE’s digital talent pipeline.