15th February 2016
A question I am regularly asked at the moment when I meet organisations which are looking to set up in Abu Dhabi is: What is the current state of the market and is now a good time to invest? This is a difficult question to answer because it really depends on your own circumstances, market sector and also who you speak to as to the type of response you may receive.
The media has been flooded with stories connected to the low oil price for months. We were also informed that the government was to reduce spending by 4.2% last year - the first time in 13 years. During 2015, subsidies were reduced on petrol, as well as water and electricity adding to the cost of living and working in the Abu Dhbai, but this was actually a measured approach by the government in preparing the country to be fully-sustainable, post-oil. (Ironically, despite the initial increase in fuel prices in August 2015, since then the prices have reduced on a monthly basis, which has worked in favour of residents). In 2015, the Commercial Companies Law was updated and after years of speculation of the regulations on the limits of foreign ownership being relaxed, this failed to materialize.
However, whilst these could be considered as negatives for some, for others this provides opportunities. During recent months I have spoken to a lots of foreign businesses, from around the world, covering different sectors, about starting businesses in Abu Dhabi and their response for doing it now, despite the oil prices dropping from well over $100/barrel to $30 barrel , include the following:
Why are companies investing in Abu Dhabi now?
1) Easier to network and make key contacts
Whilst business is slower during the economic downturn, its easier to set up appointments with key business players who may ordinarily be too busy, this is key to building relationships and ultimately doing business in Abu Dhabi.
2) Finding a niche for your product/service
Its a springboard for companies who have technologies which can reduce costs and improve efficiency.
3) Focusing on the long term goal
Investing in a downward market means that the compliance of setting up a business and getting staff relocated and visas arranged can be completed, so that the company is ready to hit the ground running as the market picks up because they can focus on their business development activities rather than getting their Trade License.
4) There is only so much you can do before making the commitment
For companies that have been flying in/out for a while establishing relationships and nurturing deals, they are finding they really need a full time, physical presence on the ground here, as well as a need to be legally compliant.
5) Clients calling
Organic expansion is still happening and some are choosing Abu Dhabi because their clients need them to be here.
6) Time to step out on their own
Some companies have been in partnerships with existing local businesses and now believe that the time is right for them to step out on their own. They have developed their contacts, learned about the market and gained operational experience, but now want to reap the rewards themselves.
7) Innovation and knowledge sharing
The UAE is still a relatively young country, developing rapidly and embracing change. The UAE is keen to lead the way in innovation, so companies with new technologies are looking to invest in the UAE due to the forward thinking attitude within the country; and, those with specialist experience overseas and willing to share their knowledge and experiences here, particularly in developing sectors such as renewable energy and healthcare.
8) Tax free - well at the moment!
Whilst the cost of starting a business can be expensive compared to other parts of the world, the lack of VAT, corporation tax and personal income tax still makes Abu Dhabi an attractive place to do business. Although, it should be noted that VAT is anticipated in 2018 and corporation tax is currently under discussion, according to local media reports.
9) Desire to remain in the UAE
Entrepreneurs are taking the plunge and following their passions - some instances are definitely due to their company's reducing headcount so setting up on their own gives them the opportunity to stay in the UAE.
10) More opportunities
In particular, oil and gas companies are increasingly looking to Abu Dhabi as a priority market due to the strategic, long term approach the government has taken towards investment in projects, in comparison to other areas where the market conditions are deteriorating and there is a lack of new business.
The above are just some of the reasons that companies have been shared with me about why they are currently starting a business in Abu Dhabi and why the time is right for them. However, when looking to enter a foreign market its advisable to do market research beforehand. Here are a couple of links to articles that I have previously published about preparing to start a business in Abu Dhabi: 3 Top Tips Before Setting Up A Business in the United Arab Emirates and 14 Tips to help you start a business in Abu Dhabi.
To do business in Abu Dhabi or Dubai your organisation will need to establish a business license. Don't rush in and make the wrong decision. Instead invest a little time in the research up front, to find out all of the options that are applicable for your type of business, your goals and your UAE strategy. Weigh up the PROs and CONs so that you can make an informed decision. Spend time identifying the right partners or distributors, do your due diligence.
How can Gateway Group help your company expand to the UAE?
Gateway provides concierge company formation and a unique selection of local sponsor packages to foreign companies expanding to the UAE. Gateway protects its clients’ businesses and their profits. It provides foreign companies with the peace of mind their business is secure, they have full operational control, their profits are protected and their local sponsor is responsive whenever they might need support doing business in a new market. We can also assist with ongoing compliance requirements, such as visas processing and trade license renewals. Furthermore, from a human capital perspective, we can help your organisation to ensure you have the right people in place, appropriately motivated and maximizing productivity - ideal for getting your multicultural teams to work. To discuss how Gateway can help your organisation to expand into the UAE, email us: info@GatewayToUAE.com
Written by Jenny Hunt, Founding Partner & CEO
Gateway Group of Companies, Abu Dhabi & Dubai UAE
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