Abu Dhabi - Where Is The Market Going?
11th July 2019
Businesses need to think ahead to succeed, so I thought it might be worthwhile to share my thoughts about where Abu Dhabi has come from and how I see the marketing going forward. Given that I help foreign companies to setup correctly and securely in Abu Dhabi in order to protect their profits and have control of their businesses, this article will focus on my experiences and anticipations for this sector.
Abu Dhabi - 10 years ago
So where was Abu Dhabi 10 years ago? What was it like to setup a company and do business here 10 years ago?
Difficult to get correct information
It was difficult to obtain information. And, the information that was available was often out of date or could be inaccurate. This meant, that all information needed to be verified in person. Finding the right person to do that was a mission in itself at times.
Everything was much slower
Everything was paper-based. Each company formation would end up with folders full of paper work. Online submissions and approvals were non-existent. This in turn meant going to the various government departments in person with a folder of papers for each step in the process of setting up a company. There was also a lot of hanging around and waiting - pull a ticket and await your turn.
Approvals could also take time. I remember the Supreme Petroleum Council approval taking at least a week or two, but even at that point it was a huge improvement on the old days where it could have taken weeks or months. (Carry on reading to see how this has changed since and is now super speedy.)
Essential to engage a specialist
I used to regularly meet people who had tried to setup their businesses themselves, but were struggling with the systems and processes. They ended up wasting a lot of time (and money) going around in circles. They would often end up engaging a specialist or lawyer to help them finish the task to get their trade license.
Few corporate sponsors
Corporate local sponsors were pretty rare. In most instances it was the larger multinationals which could afford such services.
Prices were higher
The cost of setting up a business was much higher 10 years ago. The processes were longer, so it took more time. Commercial rents were so high too.
Abu Dhabi - 5 years ago
This is just before the oil price crash. It had felt like Abu Dhabi was on the up after the global economic down turn and there was expectancy in the air.
Information was getting easier to obtain
Information was far more readily available and far more reliable at this time. Indeed that is roughly when I started Gateway's blog to share information about setting up companies in Abu Dhabi. Prior to this time, I had personally felt that government liaison officers (commonly known as PROs here) kept their knowledge as close to their chests as possible, just sharing it amongst themselves, because knowledge was king and had a value.
I also remember my first visit to the Abu Dhabi Department of Economic Development (ADDED). It was a little daunting. I don't remember seeing any other women (although there may well have been), but I vividly remember it being full of PROs, busy, loud and lots of hustle and bustle. It was a hive of activity.
Online systems were starting
Some applications started to be submitted through online portals, but often the hard copies of the paper works were still required to be submitted too. As with many emerging technologies, there were teething problems along the way, with systems being down, but on the whole we could all see that it was moving in the right direction. However, still lots of processes relating to trade licenses and visas were still not automated.
Abu Dhabi Free Zones
The free zones in Abu Dhabi were: TWOFOUR54, Masdar City, Abu Dhabi Airport Free Zone, ICAD and KIZAD. ADGM had been only been announced.
Abu Dhabi - 1 year ago
Lots more business setup options
There were lots more business setup options in the Abu Dhabi market which ultimately provided more consumer choice and drove down prices.
Quicker and more efficient online systems
Processes for submitting applications in government departments had transformed dramatically. Most services are online at this point, but not all departments were linked up. Huge improvements to the online systems. Approvals happening much quicker. I mentioned above the length of time it would take to obtain approvals for the Supreme Petroleum Council years back, but at this point, a year ago, approvals were generally turned around in less than 24 hours, making it much quicker for oil and gas companies to get the necessary approvals to work directly with ADNOC.
Different types of businesses in the market
Traditionally, Abu Dhabi tended to attract large multi national companies to work on the federal contracts or in the oil and gas sector. However, since the oil price crash, smaller more innovative companies have been coming into the market because they could provide cheaper and quicker solutions.
Announcement about regulatory changes
Various announcements were made to encourage foreign direct investment into the Emirate. These largely consisted of opening up the market to up to 100% foreign ownership in some sectors and five/10 year visas for expats.
Abu Dhabi - NOW
In just the last year, Abu Dhabi has changed a lot. Regulatory changes have been implemented making it a far more attractive market for foreign investment.
Cost of licenses is significantly reduced
Local government fees have been waived on new licenses. Just federal fees apply.
Two year licenses
The initial trade license for new companies in Abu Dhabi is valid for two years. When considered with the above remarks about the reduced costs of licenses, this makes Abu Dhabi trade licenses very attractive and actually cheaper than free zone licenses.
Incubator licenses for entrepreneurs
The Tajer Abu Dhabi license was opened up to expats. This is initially issued for two years and doesn't require the entrepreneur to lease office space thus helping them with cashflow whilst they get their business off the ground.
Dual licenses for free zone companies
Dual licenses enable free zone companies to apply for an onshore license providing they meet certain criteria. Previously lots of free zone companies were operating onshore, flouting the regulations. This approach has enabled them too continue their onshore business legally and ultimately clears up what many people claimed was a 'grey area' as to whether/how free zone companies could do business on the mainland.
Visa guarantees have been removed
Larger companies with lots of staff had lots of money tied up in visa guarantees. For each sponsored visa a company had to deposit AED3,000. This has been replaced with an annual insurance scheme at a couple of hundred Dirhams per person. This also is far more attractive to new companies entering the Abu Dhabi market and needing to apply for visas.
Up to 100% foreign ownership
At the time of writing over 100 activities in 13 sectors have been identified to be opened up to increased foreign ownership. Abu Dhabi government is still to announce the levels for each activity and the requirements. Many foreign entrepreneurs and micro businesses have been holding off setting up their business in Abu Dhabi in the hope that their business will fall under one of the activities to enable them 100% ownership.
Commercial rents are down
The prices for office space have lowered hugely. Five years ago the cost per square metre would have been approx. AED1,200-1,600. Now office leases, for modern buildings are as low as AED600/square metre.
So many changes are currently happening to visas for expats, which are attractive and offer increased stability, including 10 year visas, five year visas, golden visas, family visas, and the ability to sponsor an 18-year old son. Furthermore, for employees changing jobs, the visa process is now slightly quicker and cheaper as the new employer is not required to apply for a quota.
Instant licenses and quick online systems
Where ADDED was once full of hustle and bustle, all of their services are now provided online. Increasingly the government departments are linking. Abu Dhabi has just launched instant licenses making business setup much quicker for entrepreneurs to get started.
Where is the Abu Dhabi market going?
You can see the massive strides that Abu Dhabi has taken over the last 10 years. If those changes and improvements are anything to go by, we can surely expect continued improvements in the future and for setting up a new businesses here to become easier and (hopefully) cheaper. In general, the various initiatives of the Abu Dhabi government, particularly Ghadan 21 and the Economic Vision 2030 are aimed at creating a strong, diversified economy which is easy to do business in and a healthy, safe and happy living environment for its residents.
Attractive sectors in Abu Dhabi
Whilst we are still awaiting the requirements for the activities identified for up to 100% foreign ownership, once implemented, if successful in attracting FDI, then I anticipate the foreign ownership levels in the specific activities increasing and more activities being opened up for increased foreign ownership.
Abu Dhabi has been positioning itself as a culture & tourism destination. With recent announcements of an indoor snow centre on Reem Island and the much anticipated Guggenheim Museum, I am sure that other attractions will be developed and come online to make Abu Dhabi an even more attractive market to both residents and visitors.
Other sectors which look key moving forward are AI, technology, space, aviation, health care and green energy.
Real Estate in Abu Dhabi
For businesses, we are already starting to see a relaxing of requirements to have an office space with the new Tajer Abu Dhabi and instant licenses. These licenses allow for the first two years of operations to be carried out from home. Given the way the world is changing, very few people work in offices 9am-5pm nowadays - this tends to be administrative roles. Increasingly we are out and about, travelling and therefore working remotely with mobile communications. Increasingly offices are becoming redundant and for new companies coming into the market with sometimes no permanent staff here to start with there isn't a need for offices. I see the relaxing of this requirement and it would free up cashflow, negate the need for leases where offices sit empty across the city and make market entry even more cost effective.
A few areas have been designated for expats to buy property in Abu Dhabi. I think this will continue to open up moving forward. Certain nationalities prefer to buy than to rent and increasingly we are seeing rent-to-purchase options on new builds. For those that opt for a mortgage, monthly mortgage payments will ease the burden of 6 monthly or annual advance rent cheques. Combined with the new longer term visas, this will enable expats to really put down their roots here rather than consider it as a short term stay.
This is going to be the area of greatest development. ADNOC is investing US$45bn in developing the world's largest petrochemicals complex. This will require supporting infrastructure to be added to make the area a more attractive place to live and work. So there will be opportunities across multiple sectors.
Technology and online services
Just this week it was announced that 56 federal and seven local government entities have completed their e-linking process. This will increase efficiency whilst reducing costs. The government is in the process of making all of its services available via mobile platforms. The leadership and government of Abu Dhabi are forward thinking and I think they will be quick to adopt innovative technological advances which will make systems and processes quicker, cheaper and safer.
Written by Jenny Hunt, Founding Partner & CEO
Gateway Group of Companies, Abu Dhabi & Dubai UAE
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