The Sharjah Islamic Bank increased foreign ownership of shares to 40%. This is the first time in the UAE’s history that a bank has reached this level of foreign ownership.
In this article, we will evaluate the details of this big increase in foreign ownership shares. The Sharjah Islamic Bank is one of the most profitable banks in the Middle East, and it is also one of the major banks in the world. Likewise, the bank has a strong international presence with many branches worldwide.
1. What is foreign ownership?
Foreign ownership is a type of ownership in which an entity owns shares of stock in a company that is not its primary residence. This type of proprietorship can be attributed to people outside the country. Likewise, citizens of the land who live abroad can have a foreign proprietorship.
This type of investment has been a controversial topic in many countries. Some restrict foreign investment because they feel it will hurt their economy. In contrast, others, like the UAE, welcome it as an opportunity for growth.
1.1 Types of foreign investment
Although foreign investment has different definitions for legal issues in other countries, it has two defined modalities: direct and indirect.
1.1.1 Direct investment
Foreign direct investment is made by an economic entity (country, company, or individual) from a given country in another foreign country. This investment must have a specific purpose to distinguish this concept from others.
This investment follows two primary purposes: obtaining a return and controlling part of a foreign company. It can be a new line of business or the expansion of a parent company in other countries as if they were subsidiaries.
Therefore, direct investment refers to any foreign capital that aims to invest and obtain a return in the country. In addition, they are part of an enterprise abroad.
1.1.2 Indirect investment
Indirect foreign investments involve corporations, financial institutions, and private investors that purchase foreign companies. This option is generally less controversial, as the local company can quickly sell its investment.
This type of investment is also often referred to as foreign portfolio investment. Indirect investments include equity instruments such as stocks and debt instruments such as bonds or commissions.
2. What are the advantages of foreign investment in the UAE?
Foreign investment is an important part of the UAE’s economy since the Sharjah Islamic Bank increased foreign ownership of shares to 40%. It has helped in the development of infrastructure and achieving economic growth. The UAE has been able to attract foreign investment for several reasons. These include:
2.1 Stable political environment
The UAE has been a stable country for many years, and it is one of the most developed countries in the region and the world. The government has always been responsive to its people, and they have provided a stable environment for them.
The UAE’s stability is not only due to its government but also because of its people. The people have always been very welcoming and open-minded, making the country very welcoming to all cultures. This nation has a stable political environment, which is one of the reasons why the Sharjah Islamic Bank increased foreign ownership of shares to 40%.
2.2 A welcoming business environment
As a country that is considered a welcoming place for all, the UAE is known to be open and accepting of people from different cultures, lifestyles, and religions.
2.3 Attractive tax regime
This Emirate has one of the most attractive tax regimes in the world. They have a zero-tax regime for professionals and entrepreneurs, including freelancers and consultants.
In addition to this, they also have no taxes on foreign-earned income and no capital gains tax. This is why many people are moving to the UAE and investing in the local economy.
3. Why is foreign ownership in the UAE a controversial topic?
Foreign ownership in the UAE is a controversial topic because it has been seen as a threat to national security and sovereignty. The UAE has been in a state of flux for decades, with its economy being primarily based on oil production and trade. The country was also one of the first to adopt free trade policies.
A few years ago, foreign ownership was encouraged by the government to develop the nation’s industry and infrastructure. However, this led to many foreigners buying up land and establishing companies without restrictions or regulations.
This led to many disputes over land rights, and it became clear that these unregulated policies were not sustainable for the country’s future development. Nowadays, after all these disputes, the Sharjah Islamic Bank increased foreign ownership of shares to 40%.
4. How does foreign ownership affect local businesses?
Foreign ownership can be beneficial to local businesses in many ways ever since the Sharjah Islamic Bank increased foreign ownership of shares to 40%. It can provide them with access to new markets, improve the quality of their products, and provide them with more capital. However, there are also some bad side effects to foreign ownership.
Foreign ownership can increase competition and decrease the number of jobs available in a local area. Besides, foreign companies are more likely to hire workers from other countries than locals, which would result in fewer job opportunities for locals. Foreign business owners might also force the company to move their manufacturing facilities abroad.
5. Who can benefit from the foreign ownership option?
The foreign ownership option is an excellent opportunity for those who want to start their own business in the UAE. For example, the fact that Sharjah Islamic Bank increased foreign ownership of shares to 40% can benefit everything related to banking transactions.
However, it is crucial to note that it does not apply to all sectors. Business activities vary across the Emirates, but these are examples of the types of activities you might see:
5.1 Contracting business
Contracting business in the UAE is a lucrative field, as it offers many benefits to those who are interested in it. The country has been making significant investments in infrastructure and other sectors, which has led to an increase in the demand for contracting services.
The UAE is one of the most progressive countries in the world. It is in the top ten countries for doing business. This means there are plenty of opportunities for those who want to start their own contracting companies in this territory.
5.2 Transportation business
The UAE’s transportation infrastructure is one of the most advanced globally. The UAE also has an international airport, considered one of the world’s busiest for international passenger traffic.
Besides, it is one of the world’s best airports for its size and passenger satisfaction. The country has a well-developed public transportation system, with buses operating in all major cities such as Dubai, Abu Dhabi, and Sharjah.
5.3 Tourism business
The UAE is a country that offers tourists a wide range of attractions and activities to choose from. There are many natural wonders, breathtaking landscapes, and a variety of cultural and historical sites.
In addition to this, there are many other activities available in Dubai. For example, tourists can explore various shopping malls or visit one of the many theme parks throughout the city.
5.4 Manufacturing and Production
The United Arab Emirates is a global industrial hub with an extensive range of industries, including petrochemicals, construction, food processing, and textiles. The UAE’s strong economic performance has been driven by its manufacturing and production industry since the Sharjah Islamic Bank increased foreign ownership of shares to 40%.
5.5 Maintenance and repair
The maintenance and repair business in the UAE is a booming industry. This is due to the high rates of car ownership and an increase in population.
As a result, these businesses need to have a reliable team of technicians who can repair all types of vehicles. There are many challenges that maintenance and repair business owners face in the UAE, including meeting customer demands and ensuring quality services.
Likewise, a business specializing in maintenance and repair needs to keep up with new technology and find qualified staff. As a result of these aspects, businesses need to invest in equipment. This will allow them to provide quality service at a competitive price.
5.6 Healthcare
The UAE has been a regional leader in healthcare. It is the only country to have a universal healthcare system. It has also been one of the first countries to adopt a holistic approach to healthcare.
This means they focus on not just treating people when they are sick, but also on preventing them from getting sick. The UAE’s healthcare system receives money from private health insurance and out-of-pocket payments. Besides, the government has subsidies for those who cannot afford them.
5.7 Investment and trade
Investment and trade business in the UAE is proliferating even more after the Sharjah Islamic Bank increased foreign ownership of shares to 40%. With the quick expansion of the country’s economy, investors have plenty of opportunities. For example, one option is investing in real estate and business ventures.
6. Is foreign investment good or bad for the UAE?
Foreign investment in the UAE is good for the country as it can bring more jobs and opportunities for citizens. However, many people are still skeptical about whether foreign investment is good or bad for the economy since it could lead to job losses if too many foreign companies come into one sector or industry.
7. How can foreign investors be attracted to the UAE?
Foreign investors are an essential part of the economy in the UAE, as the Sharjah Islamic Bank increased foreign ownership of shares to 40%. They bring in funds and resources that help businesses grow. There are a few ways to attract foreign investors:
7.1 Making connections
Foreign investors are attracted to countries with high GDP per capita and a large population. However, the country’s economic growth is not enough to make them invest in it.
A country’s culture and people are the key factors attracting foreign investors. To connect with the right people, one must have an intricate understanding of their culture and values.
7.2 Be transparent and predictable
Transparency and predictability are the two most important factors that foreign investors look for when deciding to invest in the UAE. That is why the Sharjah Islamic Bank increased foreign ownership of shares to 40%. The country must have an open and accessible government and a well-functioning legal system to be transparent.
7.3 Provide guarantees to attract foreign investors
Providing guarantees to foreign investors is an essential part of the investment process. The plan is to give the investor a sense of security so that they are not worried about the company’s future and can invest with confidence.
The use of guarantees is not new. However, it has become more popular due to the global economic crisis and uncertainty in markets.
To manage all these aspects, it is necessary to know the legal aspects of commercial agreements, international corporate finance, accounting, and budgeting. Having some knowledge about the local and international markets and all the factors involved will generate an ideal scenario to improve relations with potential investors.
At Connect Middle East, we can help you with the legal services you need to grow your business abroad. You can call us at our phone number +97143316688 write us an email at contact@c-uae.com. We are ready to assist you with any questions you may have.
