UAE INVESTMENT CLIMATE STATEMENT 2009

UNCLAS ABU DHABI 000077


STATE FOR EEB/IFD/OIA
STATE PASS TO USTR

E.O. 12958: N/A
TAGS: ECON EINV EFIN ETRD ELAB KTDB PGOV OPIC USTR AE
SUBJECT: UAE INVESTMENT CLIMATE STATEMENT 2009

Ref. 08 STATE 123907

A.1 Openness to Foreign Investment
--------------

Investment laws and regulations are evolving in the United Arab
Emirates (UAE) and are expected to become more conducive to foreign
investment. At present, the regulatory and legal framework favors
local over foreign investors. There is no national treatment for
investors in the UAE, and foreign ownership of land and stocks is
restricted. The UAE maintains non-tariff barriers to investment in
the form of restrictive agency, sponsorship, and distributorship
requirements. In order to do business in the UAE outside one of the
free zones, a foreign business in most cases must have a UAE
national sponsor, agent or distributor. However, the UAE Government
(UAEG) is opening up its trade sectors in line with its WTO
obligations. The UAEG already has taken steps to cut red tape for
foreign investors, and the Ministry of Economy has drafted a new law
to facilitate foreign investment.

There is no personal income tax in the UAE. Foreign banks pay 20
percent tax on their profits. Foreign oil companies with equity in
concessions pay taxes and royalties on their proceeds. There are no
consumption taxes, and the GCC states formally implemented a single
import tariff of 5 percent on most goods January 1, 2003. Companies
located in multiple "free zones" in Dubai are exempt from the tariff
on imports and re-exports that do not leave the zones. The
exceptions to the 5 percent tariff in the UAE are a fifty percent
tariff for alcohol, a one hundred percent tariff for tobacco, and
duty exemptions for 53 food and agricultural items. Import tariffs
are collected and retained by each Emirate. Dubai imposes a rental
housing tax on expatriates equaling five percent of the rental
charges. The UAE has said that it is considering passing a VAT
averaging 7-12 percent on the federal level and has asked for
assistance from the IMF. Hotels and some restaurants/coffee shops
charge ten to fifteen percent service charges.

Regulation of the establishment and conduct of business in the UAE
is shared at the federal and emirate levels. The UAE has recently
drafted a federal law for foreign direct investment (FDI) which is
expected to enter into force during 2009, according to UAEG
officials. The draft law, which is not publicly available, is
expected to facilitate FDI and improve transparency for investors.
The proposed law may allow 100 percent foreign ownership in some
sectors and projects, subject to Cabinet approval.

Under the umbrella of the proposed foreign investment law, the UAEG
created in 2008 a new department for foreign investment at the
Ministry of Economy, which will facilitate foreign investments in
the UAE. The new department includes sections for local and
international investment promotion, legal affairs, economic studies
and customer service. It will coordinate with local entities and
economic zones to facilitate business procedures for foreign
investors.

Currently, there are four major laws affecting foreign investment in
the UAE: the Federal Companies Law, the Commercial Agencies Law,
the Federal Industry Law, and the Government Tenders Law. These
laws, especially the Federal Companies Law, are seen as the largest
obstacles to foreign direct investment in the UAE.

The Federal Companies Law applies to all commercial companies
established in the UAE and to branch offices of foreign companies
operating in the UAE. Companies established in the UAE are required
to have a minimum of 51 percent UAE national ownership. However,
profits may be apportioned differently. Branch offices of foreign
companies are required to have a national agent unless the foreign
company has established its office pursuant to an agreement with the
federal or an emirate government. All general partnership interest
must be owned by UAE nationals. Foreign shareholders may hold up to
a 49 percent interest in limited liability companies. Foreign
investors may purchase 99 of the 137 issues on the UAE stock
markets, Abu Dhabi Securities Market (ADX) and Dubai Financial
Market (DFM). Under UAE law, foreign investors are allowed to own
up to 49 percent of a company. However, company by-laws in many
cases prohibit foreign ownership. The international financial
crisis and foreign speculation contributed to significant declines
in the values of local shares in 2008. As a result, some UAE public
shareholding companies have decided to reduce the percentage of
shares available for foreign ownership.

In April 2006, the UAE Cabinet amended the law regarding ownership
of insurance companies. The amended article states that 75 percent
of insurance companies must be owned by a UAE national or 100
percent by UAE national legal persons, i.e., a UAE corporation.

The Commercial Agencies Law requires that foreign principals
distribute their products in the UAE only through exclusive
commercial agents that are either UAE nationals or companies wholly
owned by UAE nationals. The foreign principal can appoint one agent
for the entire UAE or for a particular emirate or group of
emirates.

In 2006, the UAE announced substantial changes to the Commercial
Agencies Law. These amendments include: 1) requiring mutual
consent to renew an agency agreement, 2) limiting an agency contract
to a fixed time period, 3) allowing either party to file for
damages, 4) eliminating the Ministry of Economy's Commercial
Agencies Commission (which handles agency disputes),and 5) allowing
the import of "liberalized goods" without the agent's approval. In
an effort to curb price manipulation and allow unrestricted imports
of basic food products, the UAE eliminated trading agency
requirements for basic food products in August 2006. The food
products covered by the decision include milk, frozen vegetables,
baby formula, chicken, cooking oil, noodles, rice, flour, fish
products, tea, coffee, cheese, pastries and diapers. For some food
products deemed non-essential, agency agreements in existence prior
to this period are still recognized.

The UAE Ministry of Economy has publicly discussed amending the
Companies Law to provide for greater foreign ownership of companies
in certain sectors. Some of the sectors which may be liberalized
are education, health, professional services and computer-related
services.

The Federal Industry Law stipulates that industrial projects must
have 51 percent UAE national ownership. The law also requires that
projects either be managed by a UAE national or have a board of
directors with a majority of UAE nationals. Exemptions from the law
are provided for projects related to extraction and refining of oil,
natural gas, and other raw materials. Additionally, projects with a
small capital investment or projects governed by special laws or
agreements are exempt from the industry law.

The Government Tenders Law stipulates that a supplier, contractor,
or tenderer for federal projects must either be a UAE national or a
company in which UAE nationals own at least 51 percent of the share
capital or foreign entities represented by a UAE distributor or
agent. Foreign companies wishing to bid for a federal project must,
therefore, enter into a joint venture or agency arrangement with a
UAE national or company. Federal tenders must accompany a bid bond
in the form of an unconditional bank bond guarantee for 5 percent of
the value of the bid. If goods and services are not available
locally then UAE federal government entities often tender
internationally.

The UAE restricts foreign ownership of land, with rules varying from
emirate to emirate. In May 2002, the Emirate of Dubai announced
that it would permit so-called free hold real estate ownership for
non-GCC nationals by giving permission to three companies to develop
and sell freehold properties on government-designated pieces of
land. The Emirate of Dubai codified its freehold and leasehold law
in 2006. The law allows non-GCC nationals to freehold or leasehold
rights in designated areas of Dubai and does not give property
owners permanent residence visas or an automatic right to work in
the Emirate. The Emirate of Ras Al Khaimah also offers free-hold
land to offshore companies in designated areas. Individuals can
establish a company in the Ras Al Khaimah Free Zone for the purpose
of purchasing a free-hold for use by the company's owner. However,
because specific laws regarding "freehold" ownership remain to be
codified and procedures for title documentation and conveyance
remain to be established, potential buyers are unsure whether they
will have an absolute "freehold" title that means the same as it
does in Europe or the U.S. In 2005, the Emirate of Abu Dhabi
announced that it would also allow "lease hold" real estate
ownership for non-UAE nationals in certain designated areas.
Non-GCC nationals can own buildings in the Emirate of Abu Dhabi in
certain investment areas, but cannot own the land. The law states
that non-UAE nationals shall have the right to own surface property,
but not the land itself in investment areas. Foreigners shall have
the right to arrange all their surface properties and to derive
benefits from them based on a 50-year surface ownership agreement
that can be renewed for the same period subject to the agreement of
the two parties. The law grants mortgage rights to anyone with the
right to benefit from the property for a period of more than ten
years, even without the permission of the owner. However, the owner
of the property shall not mortgage it unless he gets approval from
the person who has the right of benefit of the property.

In November 2004, the UAE announced its intent to open up the
insurance sector to new foreign insurance companies. Any new
companies entering the market are required to meet high level
international rating criteria and must complete a viability study to
prove that it will be offering new products to the market. About
half of the insurance companies in the UAE are foreign. New entries
of foreign insurance companies were frozen since 1999, but officials

from the Insurance Section of the UAE Ministry of Economy have
stated that the Ministry of Economy licensed three subsidiary
foreign insurance companies in 2007. Currently, there is only one
American subsidiary insurance company operating in the UAE.

In 2008, Abu Dhabi Chamber of Commerce and Industry created a
one-stop-shop for investors whQQQ UAE
nationals, with the exception of Israeli currency and the currencies
of those countries subject to United Nations sanctions. The UAEG
passed comprehensive anti-money laundering legislation following the
attacks of September 11, 2001, that imposes strict documentary
requirements on large wire transfers. Travelers entering the UAE
must declare currency amounts of more than 40,000 Dirhams
(approximately USD 10,800) as part of these measures.

Since February 2002, the Dirham has been officially fixed to the
U.S. Dollar. The exchange rate is 3.67 UAE Dirhams per one U.S.
Dollar. Every bank transaction in U.S. dollars is subject to a 1
percent fee.

The GCC countries, including the UAE, are expected to implement a
monetary union by 2010, but it is unclear which foreign exchange
system will be adopted.

A.3 Expropriation and Compensation
--------------

Foreign investors have not been involved in any expropriations in
the UAE in recent years. There are no set rules governing
compensation if expropriations were to occur, and individual
emirates probably would treat this differently. In practice,
authorities in the UAE would not expropriate unless there was a
compelling developmental or public interest need to do so, and in
such cases compensation would likely be generous.

A.4 Dispute Settlement
--------------

The Embassy is aware of a few substantial investment disputes during
the past few years involving U.S. or other foreign investors and
government and/or local businesses. There have also been several
contractor/payment disputes, with the government as well as local
businesses. Disputes generally are resolved by arbitration, by the
parties themselves, or by recourse to the legal system. Dispute
resolution can be difficult and uncertain, however.

Arbitration may commence by petition to the UAE federal courts on
the basis of mutual consent (a written arbitration agreement),
independently (by nomination of arbitrators),or through a referral
to an appointing authority without recourse to judicial proceedings.
Enforcing arbitration judgments rendered in the UAE can be
difficult as they require court certification, and judicial
proceedings may continue for several years. Some companies are
reportedly unwilling to resort to arbitration out of concern that it
would affect their future business opportunities in the UAE.

The UAEG's accession to the UN Convention on the Recognition and
Enforcement of Foreign Arbitral Awards became effective in November

2006. An arbitration award issued in the UAE will now be
enforceable in all 138 states that have acceded to the Convention,
and any award issued in another member state will be directly
enforceable in the UAE. The Convention supersedes all incompatible
legislation and rulings in the UAE, and should be welcomed by many
businesses that consider arbitration the most advantageous form of
dispute resolution. The Embassy does not yet have any experience
with U.S. firms attempting to use arbitration under the UN
convention.

The UAE constitution established a federal court system while
acknowledging the right of the individual emirates to opt out, which
Abu Dhabi, Dubai and Ras Al Khaimah have. However, some issues must
be heard in the federal court system such as security matters,
conflicts between the emirates, constitutionality of a federal law,
trial of ministers and senior officials and jurisdictional issues.

There is no independent judiciary in the UAE. The Ministry of
Justice appoints judges to the federal courts, while judges in Abu
Dhabi, Dubai and Ras Al Khaimah are appointed by the respective
rulers of those emirates. The majority of judges are non-Emirati.
Each emirate applies federal law in its own court system that
consists of courts of first instance, courts of appeal and a Supreme
Court. The court of first instance consists of civil, criminal, and
Sharia (Islamic law) courts. Sharia law is applicable to both
Muslims and non-Muslims, but is focused primarily on family,
inheritance and personal status matters. Courts will interpret
statutory law and Sharia law in deciding cases. Commercial disputes
involving foreign parties tend to come before the civil courts in
the federal system; a panel of three judges ordinarily hears
commercial disputes. All cases involving banks and financial
institutions are required to be heard by civil courts. In Abu
Dhabi, all non-arbitration commercial disputes are first brought to
the Abu Dhabi Conciliation Department. If the parties are unable to
reach a settlement, they can begin legal proceedings in the court of
first instance.

The Code of Civil Procedure contains comprehensive rules regarding
the various types of preventive and provisional remedies prior to
litigation and the issuance of judgments, including the attachment
of property, confiscation of the defendant's passport and
prohibitions on travel, as well as the detention of the defendant in
certain instances. However, the courts must certify all arbitration
decisions, and though they do not review substantive claims, they
can invalidate decisions based on procedural considerations.
Parties can also appeal certification decisions thus prolonging
enforcement indefinitely.

In 1993 the Abu Dhabi Chamber of Commerce and Industry formed the
Abu Dhabi Commercial Conciliation and Arbitration Center in an
effort to accelerate commercial dispute resolution. The Center has
jurisdiction to conciliate or arbitrate commercial disputes. The
Center's executive regulations govern the conciliation and
arbitration procedure. Though referral by the parties to the
Dispute Center ostensibly requires them to accept the finality of
the Center's decision, the courts must still certify the decision
and enforcement can be delayed. The Center conducts proceedings in
Arabic or any other agreed upon language.

The Dubai Chamber of Commerce and Industry has promulgated similar
commercial conciliation and arbitration rules that permit parties to
have conciliation or arbitration proceedings under the auspices of
the Chamber. In 2004, the Dubai International Arbitration Center
was made independent of the Chamber. The Arbitration Center aims to
bring international standards of arbitration to business in Dubai.
The UAE is a member of the International Center for the Settlement
of Investment Disputes.

A.5 Performance Requirements/Incentives
--------------

As listed elsewhere in this report, the regulatory and legal
framework in the UAE favors local over foreign investors.
Government tendering is not conducted according to generally
accepted international standards, and re-tendering is the norm. To
bid on federal projects, a supplier or contractor must be either a
UAE national or a company in which UAE nationals own at least 51
percent of the capital or have a local agent or distributor.
Federal tenders must be accompanied by a bid bond in the form of an
unconditional bank guarantee for 5 percent of the value of the bid.
UAE federal government entities can tender internationally since
foreign companies sometimes are the only suppliers of specialized
goods or services that are not widely available.

Incentives are given to foreign investors in the free zones (details
in section A15). Outside the free zones, no incentives are given,
although the ability to purchase property as freehold in certain
favored projects in Dubai would appear to be incentives aimed at
attracting foreign investment.

A.6 Right to Private Ownership and Establishment
-------------- ---

Except as detailed elsewhere in this report, there are no
restrictions on the right of private entities to establish and own
business enterprises and engage in all forms of remunerative
activity.

A.7 Protection of Property Rights
--------------

In September 2005, the Emirate of Abu Dhabi passed a law allowing
Emiratis to hold title on properties in the Emirate and opened up
some foreign leasehold rights to surface property in certain
designated areas. Most construction, commercial and residential, is
financed by a specialized agency of the government of Abu Dhabi, and
commercial banks finance the remainder. Their collateral
traditionally has been access to the rent stream of the building or
the personal guarantee of the developer.

Foreign and national banks have increased their activity in the
mortgage market, expanding their services to foreigners as well as
nationals due to the recent boom in freehold property. Foreign
banks have entered the market on a smaller scale; the local Mashreq
Bank and Dubai Islamic Bank are most heavily involved in new
mortgage business, with banks such as Standard Chartered and HSBC
providing mortgages on a case-by-case basis to established
customers.

The UAE Government (UAEG) continues to lead the region in protecting
intellectual property rights (IPR). Anecdotal and statistical
evidence confirms that the UAEG is enforcing copyright, trademark,
and patent laws passed in 2002 to protect U.S. intellectual
property, and continues to demonstrate its commitment to the 2002
agreement providing TRIPS-plus levels of protection to U.S.
pharmaceuticals. In 2008, the UAE Ministry of Economy established
an intellectual property rights protection office. Although the UAE
is the leader in the region at enforcing intellectual property
rights and the Emirate of Dubai is very pro-active in enforcement,
many stakeholders believe that the UAEG could do more to fight
piracy in the other emirates and to deal with the problems of
transshipping of counterfeit goods.

The copyright law, enacted in July 2002, grants protections to
authors of creative works and expands the categories of protected
works to include computer programs, software, databases, and other
digital works. Efforts to combat computer software piracy in the
UAE have been successful. According to industry estimates, the rate
of software piracy in the UAE is the lowest in the Middle East and
North Africa, estimated to be 34 percent. The UAE is recognized as
the regional leader in fighting computer software piracy. In 2008,
the UAE launched several campaigns against piracy and seized and
destroyed thousands of pirated auto spare parts, perfumes, air
fresheners, electrical devices, sport equipment, medicines, movies
and music discs. The value of seized pirated goods in 2007 amounted
around USD 800 million (3 billion Dirhams). The UAE's Trademark Law,
also issued in July 2002, confirms that the UAE will follow the
International Classification System and that one trademark can be
registered in a number of classes. The law provides that the owner
of the registration shall enjoy exclusive rights to the use of the
trademark as registered and can prevent others from using an
identical or similar mark on similar, identical or related products
and services if it causes confusion among consumers.

A.8 Transparency of the Regulatory System
--------------

The fundamental instrument by which all of the emirates regulate
business activity is the requirement that any place of business must
acquire and maintain a proper license. The procedures for obtaining
a license vary from emirate to emirate, but are straightforward and
publicly available.

A license is not required unless a place of business is set up in
the UAE. In other words, foreign businesses exporting to the UAE
but without a regular or continuing business presence in the UAE do
not need a license. Licenses available include trade licenses,
industrial licenses, service licenses, professional licenses, and
construction licenses.

Several federal regulations govern business activities in the UAE
outside free trade zones. Activities within the free zones are
governed by special bylaws.

A.9 Efficient Capital Markets and Portfolio Investment
--------------

The UAE federal commercial code, promulgated in 1993, devotes an
entire chapter to bankruptcy: the first comprehensive legislation
in the UAE on the subject. Monetary judgments in bankruptcy cases
are made in the local currency, and UAE courts enforce the judgments
of foreign courts if there is reciprocity based on bilateral or
international treaties. In the judgment of western legal experts,
the commercial code chapter on bankruptcy governs the procedures and
effects of bankruptcy in the UAE, but does not provide a mechanism
for the orderly evaluation and distribution of assets of a bankrupt
entity.

Following a banking crisis caused by accumulating bad debts after
the oil boom in the mid-1980s, the Central Bank stopped giving
licenses to new foreign banks. However, in September 2003, the UAE
Central Bank announced that it would allow the operation of more
banks from other countries on a reciprocal basis. The Central Bank
has since granted licenses to some GCC banks. In 2008, the Central
Bank allowed several foreign banks operating in the UAE to set up
new branches.

Citibank is the only U.S. bank in the UAE that offers full banking
services. There are a number of U.S. financial institutions with
either representative offices in the UAE or that have established a
presence in the Dubai International Financial Center (a financial
free zone). The largest banks in terms of assets include the
Emirates NBD (the new name after Emirates Bank International and
National Bank of Dubai merged),National Bank of Abu Dhabi, Mashreq
Bank, and Abu Dhabi Commercial Bank. In November 2008, the UAE
Ministry of Finance announced that it started the official
procedures to merge Amlak Finance PJSC and Tamweel PJSC, two leading
Sharia (Islamic Law)-compliant real estate finance providers in the
UAE, under the UAE Real Estate Bank to create the largest real
estate finance institution in the country under the umbrella of the
Federal Government.

The Central Bank prohibits lending an amount greater than 7 percent
of a bank's capital base to any single customer. Foreign banks with
branches in the UAE are not permitted to calculate loans as a
percentage of their global capital, which may however be used to
calculate the capital adequacy ratio. In a revision to the rule,
the Central Bank in 1993 said it would exclude from the requirement
non-funded exposures, such as letters of credit and guarantees. The
Central Bank also announced implementation of internationally
recognized and accepted accounting principles.

The UAEG implemented a body of anti-money laundering legislation at
the end of 2001. In 2004, the UAE strengthened its legal authority
to combat terrorism and terrorist financing by passing Federal Law
Number 1 of 2004 on Combating Terror Crimes on July 29, 2004. In
2006, the UAE also enacted Law No. 2 of 2006 -- the Cybercrimes Law
-- which has articles dealing with money laundering and terrorist
finance. The UAE Central Bank's Anti-Money Laundering and
Suspicious Cases Unit (AMLSCU) performs the functions of a financial
intelligence unit (FIU) and is a member of the Egmont Group.

A.10 Political Violence
--------------

There have been no instances in recent memory involving politically
motivated damage to projects, or insurgencies that have impacted the
investment environment.

A.11 Corruption
--------------
There is no evidence that corruption of public officials is a
systemic problem; however, in 2008, UAE authorities investigated
several high-profile corruption cases. Several senior Emirati and
foreign nationals were dismissed and detained. In October 2008, the
UAE Bureau of Accounting (BA) announced the return of 300 million
Dirhams (USD 81.67 million) to the UAE federal budget which was
spent illegally in 2007.

The law stipulates that a public servant convicted of embezzlement
shall be subject to imprisonment for a minimum of five years if the
crime is connected to counterfeiting. Article 237 imposes a minimum
term of one year for accepting a bribe, while anyone convicted of
attempting to bribe a public servant may be imprisoned for up to
five years.

American firms are bound by the Foreign Corrupt Practices Act - a
copy of which may be obtained from the Commercial Section of the
U.S. Embassy. In August 2005, the UAE signed the UN Anticorruption
Convention and ratified it in February 2006.

A.12 Bilateral Investment Agreements
--------------

The UAE has signed a variety of bilateral and multilateral trade and
investment agreements, including six free trade agreements, 45
related to bilateral trade and economic cooperation, 33 to promote
investment, and 45 prohibiting double taxation on income. The UAE
is involved in Gulf Cooperation Council (GCC) negotiations with
Australia, China, and other countries on free trade agreements. In
December 2008, the GCC General-Secretariat announced suspension of
the GCC FTA negotiations with the European Union.

On March 15, 2004, the United States signed a Trade and Investment
Framework Agreement (TIFA) with the United Arab Emirates to provide
a formal framework for dialogue on economic reform and trade
liberalization. TIFAs promote the establishment of legal protection
for investors, improvements in intellectual property right
protection, more transparent and efficient customs procedures, and
greater transparency in government and commercial regulations.

The United States began negotiating a Free Trade Agreement with the
UAE in March 2005. In early 2007, the United States and the UAE
announced that despite considerable progress in a number of areas
under negotiation, they would not be able to complete FTA
negotiations under the existing time frame for trade promotion
authority. The United States and the UAE have since initiated a
"TIFA Plus" consultative process under the existing bilateral Trade
and Investment Framework Agreement (TIFA); this process will be used
to advance trade liberalization in as many areas as possible -
building where appropriate on progress made during the FTA
negotiations.

A.13 OPIC and other Investment Insurance Programs
--------------

The UAE has been suspended from U.S. OPIC insurance programs since
1995 because of the UAEG's lack of compliance with internationally
recognized worker rights standards, particularly laborers' rights to
association and collective bargaining. The ILO reported in April
2003, however, that the UAE had started to address these concerns.

A.14 Labor
--------------

The population of the UAE was approximately 4.765 million in 2008,
according to the Ministry of Economy. More than 80 percent of
residents are foreigners, and approximately 98 percent of private
sector workers in the UAE are non-UAE nationals. Emiratization of
the workforce remains a national objective, although mandated hiring
of nationals has been limited to only a few sectors, such as
banking, which has a 4% quota, insurance, which has a 5% quota and
trade, which has a 2% quota for companies employing 50 workers or
more as well as quotas in the federal government. In addition, in
2006, the UAEG added requirements that all secretaries and Public
Relations Officers must also be Emirati. The UAE National Human
Resource Development and Employment Authority (TANMIA),is the
federal body tasked to boost Emiratization. Despite these efforts,
the percentage of UAE nationals to total employees in the private
sector decreased from 1.79 percent in the end of 2007 to 1.63
percent in the first half of 2008.

The UAE Government has committed itself to strictly regulating and
enforcing labor laws, as witnessed by a series of regulatory and
legislative intiatives. In February 2007, the Ministry of Labor
published the proposed new labor law for public comment. The
proposed law does not contain any provisions for labor unions or for
collective bargaining, but the UAE Ministry of Labor continues to
press businesses and work with countries from which the labor pool
originates to improve and streamline contracts, ensure timely salary
payment and maintain adequate living accommodations. A committee
constituted from several UAE governmental bodies and experts has
reportedly been established to discuss standards and a mechanism for
labor representation.

Businesses in free trade zones must comply with federal labor laws;
however, the Ministry of Labor does not regulate them. Instead,
each free trade zone maintains its own labor department to address
workers' concerns.

Acceptable Conditions of Work

There are a considerable number of skilled foreign nationals in the
country who are employed under favorable working conditions.
However, the country is also a destination for a large number of
unskilled workers, including approximately 268,000 domestic
servants, most of them women from South and East Asia, and an even
larger number of unskilled male workers, mostly from South Asia.
These unskilled laborers actively compete for jobs in the UAE, and
many are subject to poor working conditions. UAE employers tie most
foreign employee's residency permit or visa to his employment and
sponsorship. If the employee terminates his employment and is
unable to secure new employment and a new sponsor, the employee
loses residency and could be required to leave the country.

Visas, residence permits, and work permits are required of all
foreigners in the UAE except nationals from Gulf Cooperation Council
(GCC) countries. Americans are eligible to receive 10-year, multiple
entry visas, which authorize stays of up to six months per entry,
with the possibility of a six-month extension. U.S. citizens may
obtain visit visas for business and tourism at the airport upon
arrival. These visas do not permit employment in the UAE.

A.15 Foreign Trade Zones/Free Ports
--------------

Free Zones in the UAE are home to more than 17,000 companies with a
total investment estimated at more than USD 21 billion. Presently,
38 free trade zones operate in the UAE, with more in the development
stage. Overall, these free zones form a vital component of the
local economy, and serve as major re-export centers to the Gulf
region.

Since UAE tariffs are low and not levied against many imports, the
chief attraction of the free zones is the waiver of the requirement
for majority local ownership. In the free zones, foreigners may own
up to 100 percent of the equity in an enterprise. All free zones
provide 100 percent import and export tax exemption, 100 percent
exemption from commercial levies, 100 percent repatriation of
capital and profits, multi-year leases, easy access to sea and
airports, buildings for lease, energy connections (often at
subsidized prices),and assistance in labor recruitment. In
addition, the free zone authorities provide significant support
services, such as sponsorship, worker housing, dining facilities,
recruitment, and security.

By far the largest and most successful of the free zones is the
Jebel Ali Free Zone (JAFZA) in Dubai, located 20km south of Dubai
city adjacent to the Jebel Ali Port. Over 6000 companies
representing 80 countries have set up shop in the JAFZA, including
numerous Fortune 500 firms.

The JAFZA managing authority authorizes three types of licenses: a
general license, a specific license, and a national industrial
license. The licenses are valid while a company holds a current
lease from the free zone authority and are renewable annually as
long as the lease is in force. The special license is issued to
companies incorporated, or otherwise legally established, within the
free zone or outside the UAE. Q such cases, no other license is
required, and the ownership of the company may be 100 percent
foreign. The license is issued for any activity permitted by the
free zone authority, including manufacturing. A company with a
special license can only operate in the JAFZA or outside the UAE,
but business can be undertaken and sales made in the UAE through or
to a company holding a valid Dubai EcoQic Department license.
However, a company with a special license can purchase goods or
services from within the UAE.

A variety of innovative free zones in Dubai have been established
since 2000, most notably the TECOM (Technology, Electronic Commerce
and Media) free zone. TECOM houses both Internet City and Media
City, two subdivisions which cater, respectively, to the IT and
media sectors. TECOM offers a high bandwidth and state-of-the-art
IT infrastructure. Other Dubai free zones include Dubai Health
Care City, specializing in medical products and services, the
Mohammed Bin Rashid Technology Park, which aims to promote
scientific research and development, and to transfer technology
throughout the region and the Dubai Aid City, which hosts local,
regional and international relief aid donors, suppliers and
organizations. Internet usage in the free zones is not censored as
it is in the non-free trade zones.

A.16 Foreign Direct Investment Statistics
--------------

The United Nations Conferences on Trade and Development (UNCTAD)
reports that inward FDI flow for the UAE rose to USD 13.253 billion
in 2007. The UNCTAD Inward FDI Performance Index 2004-2007 (141
economies)listed UAE in 34th place worldwide and 5th place of Arab
countries in attracting foreign direct investment.

The stock of U.S. foreign direct investment (FDI) in United Arab
Emirates (on historical-cost basis) was USD 3.846 billion in 2007,
according to the U.S. Bureau of Economic Analysis. U.S. FDI in
United Arab Emirates is concentrated largely in the mining, finance,
and wholesale trade sectors.

The Abu Dhabi Chamber of Commerce and Industry notes that the
leading sectors for investment in the UAE are (in order of magnitude
of investment): oil and gas field machinery and services, power and
water, computer/peripherals, medical equipment and supplies, airport
development and ground equipment, telecommunications, and
franchising.

There are no restrictions or incentives with regard to the export of
capital and outward direct investment, and UAE investment abroad is
significant. It is conservatively estimated that the Abu Dhabi
Investment Authority (ADIA) manages an approximate USD 500 billion
(estimates range upward) in government assets in overseas markets --
mostly in the United States, Europe, and Asia.
Other Emirate level investment authorities primarily from Abu Dhabi
and Dubai are also actively investing overseas.


OLSON