UAE bucks global economic trends
At the end of each year, it’s useful to take stock of what’s been going on – and what is expected to happen next year. And what a year it’s been!
Firstly, when looking back over 2022, we can’t ignore the biggest shake-up of the UAE visa system in decades. The new Advanced Visa System came into effect in October – bringing a raft of new opportunities and different eligibility and length-of-stay rules.
The new rules expand accessibility to the existing ten-year Golden Visa and the five-year Green Residence Visa and add new entry permits and visas for visitors, jobseekers, relatives, and tourists.
The visa shake-up also brings new long-term residence visas with additional benefits.
This year also witnessed a major shift in UAE work practices to a four-and-a-half-day working week, first adopted by government entities and then by the private sector, although many private sector companies simply shifted to the Monday-to-Friday working week model.
Read: Economic Integration Committee: UAE’s legislative & investment environment 2022
The UAE made global news as one of the first nations to wholeheartedly adopt a shorter working week.
The move aligns the UAE with other nations that have a Monday to Friday working week and created a better work-life balance – especially after all the changes to work practices catalyzed by the pandemic.
Given the change to the working week – and global analysis that such a shortening of hours will bring economic woes – the outcomes so far seem positive overall. Exponents of the shorter working week also point out that it could boost investment in skills and research (by reducing the supply of cheaper, less productive work), and increase consumer spending (by giving people more leisure time and income).
And the biggest indicator of the success of the change is the UAE economy – which, against the global trends, grew in 2022, and looks set to grow even more in 2023.
Against a backdrop of global political tensions, continuing pandemic-related supply issues, and the Ukraine war, the IMF reports UAE economic growth of 5.1% in 2022, sitting in the top three GCC nations. But when it comes to 2023, the IMF suggests that the UAE’s economy will expand by 4.2%, outperforming all the other GCC economies to become the fastest growing in the Arabian Gulf.
Given the IMF prediction of global growth of just 2.7% in 2023, the UAE’s economic prosperity seems outstanding.
The nation witnessed Foreign Direct Investment of almost $14 billion in Q1 2022, up some 14.6% year-on-year, according to official reports. The record first half saw Dubai attract 492 FDI projects, an 80.2% year-on-year increase, with greenfield (new) projects accounting for a 56% share of total projects.
Such investment levels make Dubai the world’s top destination for FDI projects, which bodes well for future economic strength, growth, and of course, job opportunities.
It would certainly seem like a good time to start a business in the UAE, and such an idea is backed by an ever-growing range of incubators, funds, and accelerator programs as the nation strives to become a hotspot of innovation, high technology, and cutting-edge financial business, especially with the launch of a Virtual Assets Market to create a vibrant, yet regulated, environment for cryptocurrency trading.
This year also saw the launch of a metaverse accelerator program, in a joint venture between Emirates NBD bank and financial free zone DIFC, the first of its kind in the region. The scheme attracted 100 global applicants keen to take advantage of the ten-week training and business start-up program and blazes a trail for Dubai’s nascent metaverse strategy.
The recently-launched UAE Metaverse Strategy – which aims to add $4 billion to Dubai’s GDP, support 40,000 virtual jobs by 2030, and attract 1,000 companies specialized in blockchain and metaverse technologies – is designed to attract innovators in this nascent sector to the region, enabling the UAE to fulfill its ambition to become a leading global metaverse economy.
We have seen more events in the hi-tech space, such as DIFC’s Blockchain Week, and its AI Festival, which underline the ongoing national drive to encourage innovation.
Looking forwards, 2023 will see the very first corporate tax being introduced in the UAE, as part of the government’s commitment to meeting international standards for tax transparency and preventing harmful tax practices. The new corporate tax of 9% will be introduced in mid-2023, on taxable income exceeding AED 375,000. The tax won’t apply to free zone companies.
The rate compares favorably with global corporate tax rates, which currently stand at an average of 23.64%, according to KPMG data.
There are also new laws coming into force in 2023, regarding increasing the number of Emiratis working in the private sector. As of January 1, 2023, companies with more than 50 employees must recruit UAE nationals at the rate of 2% per year, with a national aim of ensuring Emiratis make up 10% of the workforce by 2026.
Companies face fines of at least AED6,000 per month in respect of each Emirati employee not hired. Failure to pay these fines is likely to result in the suspension of the company’s ability to apply for work permits. Fines will apparently be increased on an annual basis.
The new Emiratisation Law (Ministerial Decision No. 279 of 2022 (2% Emiratisation Law and Cabinet Decision No. 18 of 2022) is only applicable to companies registered with the Ministry of Human Resources and Emiratisation (MOHRE)), and not applicable to Free Zone companies.
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