Saturday, February 25, 2006

Dear America

With all the baloney about DP World controlling some ports in the US, I replied to a comment on Secret Arabian. An American commenter had expressed curiosity about exactly how 'free' trade is in the UAE. He'd heard that foreigners could not have full control of their businesses. Here's my reply:

Foreign ownership of companies in the UAE goes like this: generally, you need a local partner, and that partner will own 51% of the business. In Free Zones, however, foreign individuals and companies can own 100% of their business. There is no corporate or income tax in the UAE.

It is likely that the 51/49 ownership rule will be relaxed or revoked in the next few years. Free Zones in Dubai include Jebel Ali port (an enormous industrial area), Internet and Media Cities, Airport Free Zone and Dubai Healthcare City. There are many other Free Zones in the pipeline in Dubai, so whatever kind of business you want to invest in, you will be able to do it without a local partner.

Dubai realises how important FDI is, and that is why they are setting up all the Free Zones (I'm sure Dubai would love to abolish the local partner thing altogether, but that's a UAE Federal law, so it's not so easy).

In terms of Middle East reaction to the cartoons, the UAE has been very moderate. There have been protests and there is a boycott of Danish goods (misguided in my opinion), but there is one thing you absolutely have to understand about the UAE. It is the most liberal country in the region.

It supports the West in numerous ways. It is staking its future on being the friendly face of the Middle East: anyone (who has the money!) can come and live and work and do business here. It is not in the interests of this country to encourage terrorism or extremism in any form. You need to remember that the country is only 30 years old, and what it has achieved in that short time is absolutely mind-blowing.

No response from the anon American yet.

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Blogger Hot Lemon& Honey said...

I like your response...will you post his response if he actually did respond?

7:15 pm  
Anonymous Anonymous said...

Stick it to the buggers Keefie; I tried blasting the "but they support terrorists" brigade on the BBC but, um, I got "moderated"!

Keep posting, will send you some Frencg Lurpak (should upset the Merkins AND the Jihaddi's)

PNG (yes, me again)

8:21 pm  
Blogger Keefieboy said...

Hey PNG - was getting worried about u!

10:15 pm  
Blogger moryarti said...

Good reply Keefieboy..

9:57 am  
Blogger Tim Newman said...

Actually, one of the more sensible arguments coming from the US when the Chinese were trying to buy Unocal was along the lines of "I will support the right of China to purchase Unocal when they allow an American company to purchase a giant Chinese company."

This argument is, I believe, mistaken but it at least should be listened to and countered. I can perfectly understand why an American would ask why the UAE should be permitted to purchase a company with US interests when an American company is not allowed to set up shop in the UAE without being forced to partner up with a local company (free zones aren't much of a help to most companies, especially retailers).

However, this argument is flawed: the US freely allowing foreign companies to buy US companies makes the US richer. The UAE not allowing foreign companies to operate freely in the UAE might make a handful of sheikhs personally wealthy, but it acts as a huge restruction on the prosperity of Dubai. The UAE citizens are harmed massively by this outdated protectionism.

But I've not seen this argument made with respect to the P&O purchase. Most of the opposition I have read to the purchase should not be graced with even a cursory reply.

12:03 pm  
Blogger John B. Chilton said...

Nice job, keefieboy. You, too, Tim.

5:28 pm  
Blogger Slagothor said...

I agree that the 51/49 rule is outdated and counterproductive, and should go. But one has to consider the context in which it was invoked: in the 60s and 70s, the locals frequently got severely screwed over by foreign businessmen who could only be described as carpetbaggers.

The local ownership rule was a necessary evil in a country populated by a tiny number of people having their first contact with the big, bad sophisticated world of business, western-style. In short, the locals were rubes, ripe for the picking, and needed the protection.

Clearly, that is no longer true. If I was made Guest-Sheikh in charge of economic development, this rule would be the second to go, right after the "exclusive import" licenses.

5:55 pm  
Blogger Tim Newman said...

In short, the locals were rubes, ripe for the picking, and needed the protection.

Clearly, that is no longer true.

I'm not so sure. I can't believe they've learned much in the decade or so they've been pampered by protectionism, and had their rather dubious business plans underwritten by a high oil price. Historically, countries struggle when emerging from a period of protectionism (which is yet more proof of how damaging it is).

I reckon these mighty companies such as Emaar and Etisalat would last about 5 minutes when faced with free market conditions and the ruthlessness of the global business world.

9:20 am  

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