May 2009 HOTSPOT MIDDLE EAST Dear Friends & Partners, Due to the economic downturn being of unprecedented scale and intensity, people all over the world are facing several radical changes. As mentioned in the last issue of our newsletter: The effects of the global economic crisis in the Middle East and especially in the United Arab Emirates (UAE) could also be seen from a different viewpoint, meaning a clean up. Business people who are engaged and innovative will overcome the crisis and find a better and more straightforward atmosphere of doing business. Instead, for speculators there is no room left, especially in Dubai. The Gulf Region s commerce and trade hub, is suffering from a property sector downturn that has led to scores of project cancellations and prompted companies across the emirate to slash thousands of jobs. Governments in the Middle East are now pushing forward several initiatives and new laws to rebuild their economies. And, once again: Dubai wants to take a leading role within the Middle East by introducing a new investment rule, as announced recently by a top Dubai government official. Hot topic 100% expat ownership in onshore companies? Whilst awaited eagerly by foreigners, the 100 per cent ownership of businesses outside the country s free zones might shake up thousands of UAE nationals, currently being local sponsors and owners of a 51 per cent stake in overseas firms, acting outside the Emirates' 30 free zones. Given the introduction of the expat ownership throughout the UAE, the biggest challenge for lawmakers might be how to deal with the local sponsors, because such a new law will definitely reduce business opportunities. The UAE government has to make a thoughtful decision. In my opinion, the move to allow 100 per cent foreign ownership would counter the negative impacts of the economic slowdown and generate jobs in the UAE. More flexible rules in terms of business ownership are in the UAE s best interest. It is a fact that currently Emiratis make up less than 20 per cent of the UAE s population of over four million people and they have traditionally favoured jobs in the government sector over the private sector. However, as long as we do not have any further information regarding the introduction of the law and its impact let s do business as usual. Hot topic-start your business now-act wisely. Please do not forget the upcoming summer and the Ramadan (August 22-September 22) when business and government offices will have reduced services. My recommendation: If you will start your business in the UAE make your decision in June and register in July. If you are thinking of doing business in the region, this hot time is appropriate for setting up your business to get started right after the Holy Month. Kindly yours, Dr Theodor Strohal
NEWS UAE More value for less money. Recently, the government body Ras Al Khaimah Investment Authority (RAKIA) reduced company set up and licence fees to boost trade, investment, growth and economic development in Ras Al Khaimah. At present, land and infrastructure costs in the northern emirate are 40 to 60 per cent lower compared to other emirates. In addition, investors can break ground within 3 months of signing their lease contract. The fee reductions initiated by the one-stop-shop RAKIA enhance competitive packages for foreign investors. Since March 2009, the yearly fee for a commercial / trading license is Dh8,000 ($2,100) earlier the rate was Dh15,000. For a general trading license, the fee came down from Dh25,000 to Dh10,000 ($2,700). Fee freeze for Dubai businesses. A fee freeze will be introduced on all business costs and charges in Dubai, the Department of Economic Development (DED) has announced recently. The move is part of a three-pronged initiative to assist businesses in the emirate to support economic activity and stimulate growth. In addition, certain costs will be reduced (e.g. visa fees) and more support will be available for small to medium sized enterprises soon, senior officials from DED said, adding that there are plans to review its policies and procedures. The government will also be looking at allowing 100 per cent ownership of businesses outside the free zones. Visa changes for expats in the UAE. Expat workers could be given up to six months grace if they lose their jobs in the UAE, the Minister of Labour, Saqr Ghobash said. The new regulation was included in one of two laws aimed at helping expat employees during the current economic slowdown. Both are finished and awaiting approval and will enter into force soon. Visas could be extended by between three and six months, depending on the worker s job, but all nationalities will be included, the minister said. At present, UAE labour and immigration laws require expats who have lost their jobs to find work within one month - or leave. In addition, the Ministry of Interior recently issued a decree allowing expatriate property owners to obtain visas. Starting from June 1, expats possessing a property worth at least Dh1m will get multi-entry visas valid for a period of six months. Those expats will not have the right to work inside the country. No changes to existing worker sponsorship arrangements in the UAE. Unlike Bahrain - where foreign workers will soon have the opportunity to be directly sponsored by the Labour Market Regulatory Authority (LMRA) - the UAE has no plans to scrap the existing sponsorship system for expatriate workers, an official at the Ministry of Labour recently announced. Instead, there are plans to introduce new labour regulations, among others the right to transfer to a new employer if the worker is unpaid for more than two month as well as the encouragement of flexible employments. Three-year guarantee for bank deposits. Bank deposits in the UAE will now be guaranteed for three years after the Federal National Council (FNC) approved a draft law to this effect recently. The new law encourages financial and foreign institutions to deposit at UAE banks, from national and foreign funds alike. The duration of the guarantee is three years and ends on December 31, 2012. The law is temporary and its issuance is important to cope with the impact of the international financial crisis. The law s issuance is a strong message for the world that the UAE economy and financial sector is strong. It is among a package of laws to be announced soon, including a deposit guarantee institution and a financial tools law. The guarantee covers all national banks in the country, branches of foreign banks and foreign deposits that come into the country from outside. (N.B.: Our firm has excellent contacts to local and international banks. We can open bank accounts without physical presence of the signatories.)
Speculations. Officials in Abu Dhabi said the city s Yas Marina Circuit would be ready in time for the Formula One race on November 1, 2009. A series of construction delays has prompted speculation that the track will not be ready in time. However, authorities insist the circuit will be ready. Tickets for the event are already on pre-sale. Abu Dhabi authorities have also dismissed reports that the oil-rich emirate is planning to overtake developments and companies (e.g. Emirate Airlines or the landmark hotel Burj Al Arab) of its debt-ridden neighbour Dubai. However, the gossip factory is working overtime... RAK Offshore to double the number of registrations. RAK Offshore, a subsidiary of Ras Al Khaimah Investment Authority (RAKIA), which allows any non-resident individual to open a company registered within the RAK Free Zone, expects the number of companies to increase to more than 4,000 in 2009. According to Peter-Michael Schuster, General Manager, RAK Offshore, the number of companies jumped by six-fold from 300 in 2007 to 1,750 in 2008. Schuster assumes another 100 per cent increase in the number of registration and a 70 per cent increase on profits this year. According to Schuster, more than 2,000 companies will register this year. European entities, which currently comprise the lion's share of the registered companies, are more enticed these days to opt for alternatives and places outside of Europe. RAK Offshore, which promises a one-day acquisition time, charges only Dh4,000 ($1,100) for incorporation costs whereas other offshore centres charge up to $5,000 and discriminate according to capital. Annual charge is Dh2,500 ($680) regardless of capital and type, which is 40 per cent less expensive than major Caribbean centres. International Business Companies (IBCs) in RAK Offshore can also own real estate in some designated free hold areas. (N.B. Our firm works as registered agent for RAK Offshore.) FFZ records 15 per cent rise in new trade registrations. The number of trade, industrial and service companies that registered with Fujairah Free Zone (FFZ) rose from 287 in 2007 to 331 in 2008 an increase of 15.3 per cent. Licenses for trade projects accounted for 50 per cent of the total number of licences issued, licences of service companies 35 per cent and those of industrial firms 15 per cent. In the first quarter of 2009, 66 companies signed up with FFZ. Poll shows 50% of UAE firms looking to hire in Q3 2009. Although the Gulf may no longer be in the 'boom' market of recent years, hiring levels for professionals and managers are still relatively healthy and have only experienced a fairly minor drop from 56 per cent at the beginning of 2009 to 47 per cent now. A recent global employment survey, carried out by recruitment firm Antal, found that 50 per cent of UAE companies polled expected to recruit new managers and professionals in the coming quarter. In contrast, 44 per cent of businesses from other parts of the world said they were looking to bring in new faces during the next quarter. However, 21 per cent of UAE businesses also revealed they were making cutbacks, with 14 per cent expected to reduce workforce numbers in the next three months. NEWS-TICKER MIDDLE EAST +++++ After Ras Al Khaimah issued in 2008 a law for guarantee accounts ( escrow accounts ) for real estate developments in the emirate, Dubai issued recently similar provisions (Law No.9/2009), aiming to apply to all contracts between developers and buyers for off-plan units. (N.B. Please find all details in our upcoming newsletter in June) +++++ The Gulf regions commerce hub Dubai has revised its economic growth expectation for 2009 to 2 per cent, down from 4 per cent at the start of the financial crisis. +++++ According to a recently released GCC Overview Report by the global real estate consultancy, Colliers International, residential prices in Dubai have seen an average 40 per cent decrease since Q4 2008. +++++ Similar results shows a study from US real estate services firm Jones Lang LaSalle: While Dubai was seen as the market hardest hit by the economic downturn,
Abu Dhabi would be the top performer in the UAE, and Saudi Arabia and Qatar were rated as the hot spots for investors in the Middle East/Nord Africa (MENA) region. +++++ Jordan: The government recently announced to cut down taxes to foreign investment. +++++ According to an article published in Kuwait Times a large number of private companies in Kuwait have failed to hit the new law for national labour in the private sector. +++++ Bahrain has revealed plans to scrap its existing sponsorship systems for foreign workers. +++++ Saudi Arabia s finance ministry approved projects worth $11bn in Q1 2009 to improve infrastructure and public services and to engage the investment opportunities for the private sector. +++++ Qatar: Due to the slacking demand during the recent months office prices across the Qatari capital Doha dropped 20-25 per cent. +++++ The UAE pulls out of the proposed monetary union between Gulf Cooperation Council (GCC) countries. NEWS: STROHAL LEGAL GROUP Strohal Legal Group expands. Rana Nassar, an engaged Lebanese lawyer, recently joined the Strohal Legal Group. Graduated from the Lebanese University French Section and holder of a Master Degree in International Business Law from Lebanese University in collaboration with Aix-Marseilles as well as a Master Degree in Alternative Dispute Resolution from Lebanese University in collaboration with Paris II-France she speaks Arabic, French and English fluently. Nassar additionally has admission to the Beirut Bar Association. Nassar and another new associate, Sandra Pühringer, have their main focus on real estate arbitration, business and corporate law. Pühringer holds a Masters Degree in Law from Johannes Kepler University Linz, Austria. Both assist the founder of the Strohal Legal Group, Dr Theodor Strohal, as well senior consultant Dr Raimund Garber. Additional strong contribution comes from Marwa Mohammed El-Gazzar. The Bachelor of Commerce and holder of a Diploma in Accounting & Taxes Science was appointed recently as Executive Secretary. The experienced Egyptian takes care of administration and office communications of the Strohal Legal Group. To endorse the expansion plans of the Strohal Legal Group from its Middle East headquarters in Ras Al Khaimah (UAE) as well as the Far East headquarters in Singapore, CEO Dr Theodor Strohal appointed Barbara Schumy as Marketing & Communications Manager. The degree holder of Master of Arts from the University of Vienna with studies in Communication Science and Journalism is responsible for the company s communications, both internal and external. Dr Strohal on tour in Germany/Europe. Partners and friends will have the opportunity to meet Dr Theodor Strohal in person during a special road show, taking place in June 2009. Dr Strohal will give several lectures, among others in Bremen (Havanna Lounge, June 9 at 7 pm), Graz (Chamber of Commerce, June 10 at 2pm) and Frankfurt (Forum Mittelstand, June 14 at 2 pm). The founder of the Strohal Legal Group will then be available for answering all your questions regarding chances & risks for businesses in the Middle and Far East as well as newly introduced laws and their impacts. For further information, please contact the team of Strohal Legal Group. Even during Ramadan, the Holy Month, we will be available at any time, including weekends. *** Should you wish to remove your email address from the Strohal Legal Group newsletter-mailing list please send email to barbara@advocates.cc
Contact: Strohal Legal Group International Legal Consultants Phone: +971 7 236 45 30 Mobile: +971 50 376 58 47 Email: tstrohal@advocates.cc Homepage: www.advocates.cc