Investment Policy Perspectives in the United Arab Emirates

1. Overview

Abstract

This chapter provides an overview of the socio‑economic context and development trajectory of the United Arabic Emirates (UAE). It also summarises key messages and main policy considerations that emerge from the substantive chapters of the report.

1.1. Development trajectory and the role of FDI

Over the past 50 years, the UAE has harnessed its abundant natural resources and geographic position, together with increasingly dynamic policymaking, to achieve a remarkable economic transformation. Once heavily reliant on hydrocarbons, the economy has diversified into finance, logistics, wholesale and retail trade, consistently delivering strong macroeconomic performance. The oil sector’s contribution to GDP has decreased from nearly 55% in 1980 to 17% in 2020 (FCSC, 2025[1]). GDP has expanded more than tenfold, supported by sustained investment in infrastructure, human capital, and institutional reform since the 1990s (World Bank, 2025[2]).

FDI has been a major driver of the UAE’s economic success. Inflows have grown rapidly, reaching a record USD 23 billion in 2022 and bringing total FDI stock to over USD 194 billion, tripling the level seen in 2010 (MoET, 2025[3]). FDI inflows per capita now rank among the highest globally. These trends underscore the UAE’s success in positioning itself as a major regional hub for FDI, both in terms of accumulated capital stock and sustained annual inflows.

Beyond the scale of investment, the composition of FDI has evolved alongside the UAE’s broader economic diversification. New establishments of foreign companies, i.e. greenfield FDI, has increasingly targeted non-oil sectors, such as renewable energy, transport and logistics, ICT, financial and business services, and advanced manufacturing. Free zones, which allow for 100% foreign ownership and offer tailored regulatory environments, have been particularly successful in attracting capital in sectors such as commodities trading, fintech and professional services and advanced manufacturing (MoET, 2025[4]).

The UAE is also increasingly prioritising investment in knowledge‑intensive and future‑oriented sectors. Initiatives such as NextGenFDI and Operation 300bn aim to position the country as a hub for digital technologies, advanced manufacturing and sustainable industries. FDI in R&D-intensive activities is increasing, including in technology sectors such as software and IT services, with Dubai and Abu Dhabi serving as primary hubs. Digital activities account for 14% of total greenfield FDI flows over 2019‑2024, above the GCC and MENA average. At the same time, investment in ICT goods remains relatively limited, reflecting a digital FDI profile that is more service‑oriented and less integrated into digital manufacturing value chains. Renewable energy has emerged as the largest recipient of greenfield FDI, receiving nearly a quarter of total greenfield FDI in 2020‑2024, while environmental technologies accounting for a growing share. Greenfield FDI is also a significant driver of job creation, with the UAE generating 2 300 jobs per billion USD, surpassing OECD and GCC averages.

To achieve this strategic shift towards knowledge‑intensive and innovation-driven sectors, the UAE has implemented a series of forward-looking reforms aimed at improving the business environment and attracting both capital and talent. Digitalisation of government services, including the widespread deployment of e‑government platforms and one‑stop-shop licensing systems, has significantly improved administrative efficiency and reduced time‑to-market for businesses. Labour market reforms, pertaining for instance to long-term residency permits (i.e. golden visas), remote work visas and sponsorship rules have strengthened attraction and retention of high-skilled human capital, particularly in knowledge‑intensive sectors such as finance, technology, health and advanced manufacturing.

Complementing these measures, the UAE has also enacted sweeping legal reforms on a federal level to modernise its investment regime and create a more open, secure and investor-friendly regulatory framework. The country has moved away from a centrally managed foreign investment regime toward a more decentralised model, underpinned by broad-based commercial legal reforms. These efforts have significantly reduced statutory barriers to entry and created a more competitive regulatory environment, bringing the UAE closer to OECD investment standards. The cornerstone of this transformation was the repeal of the 2018 Foreign Direct Investment Law and its replacement by amendments to the Federal Commercial Companies Law through Decree Laws No. 26 of 2020 and No. 32 of 2021. These reforms eliminated a longstanding requirement for majority Emirati ownership in most sectors, now permitting 100% foreign ownership across a broad spectrum of economic activities. Exceptions are limited to a defined set of sectors deemed to have strategic impact, including defence, finance and telecommunications and are governed through specific regulatory approvals rather than general statutory restrictions. This shift marked a deliberate transition from a top-down FDI licensing regime to a market-access-based framework governed through company law, reducing entry barriers and integrating the UAE more fully into global capital and value chains.

These measures are bolstered by the UAE’s multilayered regulatory framework, which offers policy flexibility and experimentation and local adaptation. According to the Constitution, core business laws, such as corporate, commercial and IP laws, are regulated federally, while each Emirate retains authority over matters not exclusively assigned to the federal government (e.g. land tenure regime, property rights for foreign investors, etc.). In turn, Emirates operationalise federal laws, including through the enactment of local laws where appropriate. This decentralised model enables Emirates to respond to sectoral opportunities and investor needs while remaining aligned with national objectives. The UAE’s investment promotion system mirrors this multi-layered governance approach, with significant authority delegated to individual Emirates and their respective investment promotion agencies (IPAs). This structure has yielded strong results in attracting aggregate FDI, enabling local experimentation, tailored sectoral positioning and agile facilitation at the subnational level.

As the UAE’s investment ecosystem matures and diversifies, co‑ordination across jurisdictions becomes increasingly important to attract quality FDI. While decentralisation allows for policy flexibility and local innovation, it can also generate variations in regulatory implementation, licensing procedures, and administrative practices across Emirates. Such heterogeneity can introduce complexity and reduce predictability, particularly for investors seeking integrated, cross-Emirate operations.

Sustaining competitiveness in this context requires enhancing regulatory coherence and transparency. Across Emirates, both the clarity and accessibility of regulations can vary considerably. Land tenure regimes illustrate this dynamic: while some free zones permit full foreign ownership, other jurisdictions rely on leasehold arrangements or impose restrictions linked to zoning classifications. The absence of a unified legal approach to land ownership and zoning policy across Emirates might hence contribute to uncertainty in real estate‑intensive investments such as manufacturing, logistics and tourism infrastructure. Moreover, the rapid pace and wide scope of legal changes, while reflecting strong reform momentum, may contribute to regulatory unpredictability and increase perceived risk, particularly for long-term investors and institutional capital. Reforms are sometimes implemented without structured public consultation and there is no formal mechanism to assess the impact of investment-related laws on business operations, compliance costs or investor confidence. Embedding consultation, impact assessment and clear communication processes could further reinforce the credibility and stability of the policy framework.

At the international level, the UAE’s network of bilateral investment treaties (BITs) provides an additional layer of legal protection for foreign investors. Although most of the UAE’s BITs are relatively recent, a large portion of treaties currently in force reflect older designs, which may lead to extensive interpretation by arbitral tribunal in the event of ISDS cases and expose it to resulting reputational and financial risks. Modernising the UAE’s investment treaty policy will require ensuring strategic and institutional coherence, aligning IIAs with domestic priorities, and incorporating emerging international standards.

The UAE’s approach to preventing and managing investment disputes has also become increasingly important, including with respect to investment retention. While the country boasts modern arbitration laws, respected judicial systems and multiple dispute resolution centres, particularly in the financial free zones, its current approach remains largely reactive. There is no federal-level, structured framework for early identification, escalation and resolution of investor grievances across ministries and Emirates. As the complexity of investments and investor expectations grows, establishing such mechanisms presents an opportunity to strengthen legal certainty, improve policy co‑ordination and increase investment retention.

Retaining and actively engaging investors requires not only effective dispute prevention, but also a coherent approach to investment promotion. While individual Emirates have developed specific and well-identified strengths, such as fintech in Abu Dhabi, trade logistics in Dubai, and manufacturing in Sharjah, the overall investment landscape lacks a unified strategic direction. Federal and Emirate‑level priorities are not fully aligned, and there is no consolidated national investment strategy to define key target sectors or co‑ordinate promotion efforts with broader development objectives. In the absence of such a framework, investment promotion remains driven by Emirate‑level agendas and localised competitive dynamics, rather than a shared vision for national value creation. This fragmentation reduces the visibility of strategic sectors at the national level and creates inefficiencies in resource allocation and investor targeting.

Operational challenges are also visible in post-establishment services. While initial licensing and entry procedures have been substantially streamlined; post-establishment services, such as permit renewals, labour compliance and environmental licensing, can remain complex and duplicative, particularly for firms operating in multiple Emirates. The lack of harmonised digital platforms and interoperable systems between federal and Emirate‑level authorities creates administrative burdens and impedes the scalability of operations. Enhancing regulatory quality and predictability will require the integration of public consultation processes, rigorous impact assessments and clear communication strategies around reform objectives and timelines.

The evolving international tax landscape further underscores the need for strategic co‑ordination. For decades, the country relied on tax holidays, fee waivers and regulatory exemptions to attract FDI. The introduction of a federal corporate income tax (CIT) and the UAE’s commitment to the OECD/G20 Global Minimum Tax (GMT) mark a structural shift, requiring incentives to be redesigned for strategic alignment, compliance and fiscal sustainability. Ensuring that incentive frameworks remain targeted, transparent and performance‑based will be critical to maintaining competitiveness.

The UAE has placed digital transformation and human capital development at the centre of its long-term strategy. To support these efforts, a clearer institutional and policy framework for FDI is needed, one that articulates the role of foreign firms in advancing digitalisation and upskilling within national strategies and ensures investment considerations are co‑ordinated across Emirates and reflected in relevant co‑ordination bodies. Addressing regulatory discretion in certain strategic sectors and clarifying differentiations between free‑zone and mainland regimes would reinforce investor confidence in digital sectors. Harmonising labour market conditions between the public and private sectors would support the engagement of nationals in private sector employment (i.e. Emiratisation). Talent attraction and retention is a national priority that could be supported through labour market enhancements, including legal and institutional frameworks that promote workers’ voice arrangements.

Recognising these evolving challenges and opportunities, the UAE is seeking to enhance the strategic alignment, co‑ordination and developmental impact of its investment policy. The creation of a dedicated Ministry of Investment (MoI) through Federal Decree Law No. 37 reflects a clear political commitment to strengthening federal leadership in this domain. Endowed with a broad mandate to formulate integrated investment strategies, the MoI has the potential to serve as a central platform for consolidating policy direction, enhancing coherence across federal and Emirate authorities, and articulating national investment priorities more clearly.

Drawing on the OECD Policy Framework for Investment and the OECD FDI Qualities Indicators and Policy Toolkit, this report identifies several areas where further reforms could help reinforce a sound, predictable and transparent investment climate that supports more inclusive and sustainable economic growth. It provides a stocktaking and assessment of the regulatory and institutional framework for FDI in the UAE and examines its implications for sustainable development. Recommendations therein aim to inform future investment climate reforms and cover six thematic areas, namely the legal framework for investment, investment treaty policy, investment retention and dispute prevention, investment promotion and facilitation, the use and design of tax incentives in investment promotion and leveraging FDI to advance the digital transformation and support skills development. Throughout, the report also explores how the MoI could strengthen federal investment governance and improve coherence with Emirate‑level policies.

1.2. Key recommendations

This report provides a stocktaking and assessment of the regulatory and institutional framework for FDI, with the aim to inform future investment climate reforms, paying particular attention to strengthening institutional and regulatory governance of the investment framework across Emirates and improving sustainable outcomes of investment. The report analyses recent trends and impacts of FDI in the UAE and provides recommendations to promote a more coherent and effective investment policy framework.

Some measures can only be implemented in the long term, while the government is already considering others. The aim is to provide a list of policy options for the government to consider as it continues to advance reforms to its investment climate.

1.2.1. Enhancing transparency in investment regulation

• Consider creating a centralised, publicly accessible information portal that consolidates all investment-related legislations and regulations at both federal and Emirate levels. While the federal legal framework for investment in the UAE is generally transparent and accessible, regulatory access at the Emirate level remains uneven, which could hinder legal transparency, reduce predictability for investors, and ultimately undermine the framework for investment. A unified investment-focussed database could provide an up-to-date repository of federal laws and regulations at an emirate level.

• Strengthen engaging all stakeholders in public consultations on legislative and regulatory reforms, and institutionalising early, inclusive, and transparent engagement, particularly for reforms with significant impact on the investment climate. While some recent reforms have involved rounds of public consultation, critical amendments to the legal framework governing FDI, such as Federal Decree Law No. 26 of 2020 on Amending Certain Provisions of Federal Law No. 2 of 2015 on Commercial Companies appear to have been enacted without any prior public consultations.

• Consider conducting an ex post regulatory evaluation, notably of core investment legislation. The accelerated pace of reform over the past decade underscores the importance of ensuring that these pieces of legislation remain up to date, cost-effective. Ex post regulatory evaluations offer a valuable tool for assessing whether laws are delivering their intended outcomes.

1.2.2. Modernising the investment treaty policy

• Consider establishing an inter-ministerial committee to enhance the strategic coherence of the UAE’s investment treaty policy. Such committee would support policy alignment across international commitments, national priorities and domestics policies.

• Examine the possibility of terminating or updating older generation BITs still in force, including through joint interpretative statements or plurilateral modifying agreements, to reflect the UAE’s current treaty policy practice and to reduce exposure to ISDS.

• Continue to actively participate in and follow closely inter-governmental and other initiatives on investment treaty reforms, including at the OECD and UNCITRAL. The MoI’s active participation in such forums, in line with its mandate, would help ensure that the UAE’s treaty practice is aligned with recent global practices.

1.2.3. Enhancing investment retention through dispute prevention

• Consider establishing investment dispute prevention policies and mechanisms to address investors’ grievances and conflicts with public authorities before they escalate into formal disputes. Introducing such policies would also strengthen investment aftercare services, by fostering early engagement and addressing investors’ concerns proactively. This could be done through designing channels of communication and co‑ordination with federal and emirates’ authorities, as well as by establishing a grievance review mechanism for investors.

• Explore the most appropriate institutional set up for designing and implementing these policies in the UAE. The UAE’s institutional landscape offers a range of options for designing and implementing investment dispute prevention mechanisms. The extent of the MoI’s involvement in implementing such measures would depend on broader policy considerations.

1.2.4. Building a cohesive framework for investment promotion and facilitation

• Develop a national investment strategy to guide the UAE’s investment policy and promotional efforts. Such a strategy would articulate the federal government’s overarching vision for attracting and leveraging investment, define priority sectors and markets, and outline key reform areas to further improve the investment climate.

• Consider establishing a federal co‑ordination platform and consolidating existing digital portals and brand campaigns under a unified Invest UAE entry to enhance alignment in investment promotion efforts and intelligence sharing. To mitigate fragmentation, harmful competition and duplicative efforts across federal, Emirate and free zone levels, the creation of a formal co‑ordination platform, such as an intergovernmental working group on investment promotion, could be envisaged. Such measures would support a more consistent national investment narrative while allowing subnational entities to retain their branding and outreach autonomy.

• Develop a federal investment facilitation co‑ordination and information platform to support investor journeys. This platform could serve as a digital interface to consolidate information on licensing, documentation, procedures, and timelines, offering multilingual guidance tailored to different investor profiles such as SMEs or strategic sectors.

1.2.5. Improving the use and design of investment tax incentives

• Consider how the GMT interacts with different tax incentives and if new tax or non-tax incentives are affected by the GMT as “related benefits”. The GMT treats certain tax incentives more favourably than others, notably where these incentives are directly linked to economic substance. Policymakers should assess which incentives remain effective under the rules and which are more likely to be impacted. The GMT also includes rules on “related benefits” that prevents countries that have adopted the GMT from providing tax incentives, grants, or other benefits that would undermine the integrity of the GMT. Tax and investment authorities should be mindful of whether tax or non-tax incentives could be considered “related benefits”, as this would threaten the qualified status of the UAE’s DMTT.

• Continue to strengthen tax administration and monitor CIT collection and size of the tax base, as well as other relevant data to inform evaluations. As the government begins to collect CIT revenue on most firms, it will be important to monitor how broad the tax base is in practice, given continued tax exemptions in free zones.

• Ensure tax and non-tax incentives complement and are aligned with other policies. Attracting investment that can support the UAE’s diversification agenda requires more than reducing the tax burden on these investments. Any future tax incentives should be considered in the context of other policies that might be more effective to develop the sector or activity or should come first.

1.2.6. Foreign investment for digitalisation and skills development

• Define the role of FDI in advancing the digital economy and delivering intended labour outcomes and ensure representation of the MoI in talent and digitalisation bodies. Integrating investment considerations into skills and digital strategies, and ensuring reciprocal alignment, would strengthen policy coherence and reinforce the impact of FDI on achieving national objectives. The inclusion of the MoI in talent and digitalisation co‑ordination bodies can further ensure that investment is systematically reflected in related policies.

• Increase regulatory predictability for digital investment. Reducing regulatory discretion in areas such as telecommunications and media, and improving transparency on licensing, ownership thresholds and exemptions, with clearer guidance on how free‑zone licences interact with onshore rules, would help reduce information asymmetries for digital firms.

• Build on labour market reforms to improve FDI outcomes on talent retention and Emiratisation (i.e. engagement of nationals in private sector employment). Aligning wages and working conditions between the public and private sectors would enable foreign firms to better support Emiratisation through greater labour mobility. Ensuring appropriate labour standards, including arrangements that promote workers’ voice, would help reduce excessive turnover at both foreign and domestic firms.

• Strengthen transparency of investment incentives, including instruments supporting digitalisation and skills development. Creating a central portal that consolidates tax and non-tax incentive offerings by sector and location would improve clarity and ensure a level playing field between investors, who currently navigate varied incentive regimes between and within Emirates.

References

[1] FCSC (2025), Mapping the nation’s progress in figures, Federal Competitiveness and Statistics Centre, https://fcsc.gov.ae/wp-content/uploads/2025/04/UAE-Numbers-50-Years-English.pdf.

[3] MoET (2025), FDI and Business Environment, https://www.uae-embassy.org/fdi-and-business-environment.

[4] MoET (2025), More Than 40 Multidisciplinary Free Zones in the UAE, https://www.moet.gov.ae/en/free-zones.

[2] World Bank (2025), GDP growth (annual %) - United Arab Emirates, https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=AE.