Uncertainty due to ambiguous laws has been identified as the top regulatory challenge facing business leaders in the UAE – that’s according to a new report “The Making of an Investment Powerhouse: The Future of the UAE’s Regulatory Framework” by international law firm Pinsent Masons.
The study combines the results of a cross-sector survey, conducted prior to the Covid-19 pandemic, with in-depth, one-to-one interviews with leading experts from the energy, financial services, infrastructure, real estate and technology sectors to better understand perceived barriers to success in the market.
Although a number of sector-specific issues were highlighted in the report, 40% of those surveyed stated that ambiguous laws present their number one challenge.
The other two barriers identified in the study are foreign ownership restrictions (39%) and employment laws. – particularly the hiring of top talent (29%).
The report aims to analyse the evolution of the UAE’s legal framework across the key industries that have been instrumental to the nation’s growth and offer expert counsel on how businesses can navigate existing challenges and take full advantage of the bountiful opportunities that exist in this market.
Catherine Workman, head of Pinsent Masons Middle East Region, said: “The UAE’s business landscape has evolved over the past decade at tremendous speed and although this has brought with it immense opportunities, certain challenges have of course been borne from such rapid progression.
"In light of the Covid-19 pandemic, we are now in unprecedented times, and that will no doubt lead to further uncertainty from a regulatory and business perspective.
"We hope that this report will help to instigate important conversations about how the UAE business community and the Government can work together to ensure that they UAE builds upon its unique business proposition.
"We advise clients to maintain a constant dialogue with other industry stakeholders and decision makers. The regulatory framework is not set in stone and ensuring that your voice is heard can make the difference between a project doomed to fail and one that will strive and expand across borders.
"Regulatory frameworks are not only for the purposes of compliance, but are used as a competitive advantage by governments. Businesses should devise and implement flexible strategies that will align with, or be easily adaptable to, future regulations.
"Pinsent Masons is deeply committed to working with businesses to understand how to best navigate these identified challenges and succeed during this incredibly turbulent period and the uncertain times that are yet to come.”
Although ambiguous regulations can provide uncertainty for businesses, Pinsent Masons recommends that businesses develop a collaborative and agile strategy that can be quickly amended if new regulations are introduced. In sectors such as technology, uncertainty can actually be an advantage as it enables companies to think creatively and provides the flexibility to innovate and expand quickly – which can be tricky in markets that are heavily regulated.
Whilst some of the challenges identified in the report are certainly unique to the UAE and the Middle East, many are caused by globalisation effect on the business environment. The report reveals the different levels of support required by each sector.
44% of energy sector participants found the regulations especially challenging; compared to only 11% in the infrastructure sector.
78% of those surveyed in the infrastructure sector revealed hiring top talent as their key challenge.
62% in the financial services sector confirmed that support was required to help them to navigate an increasingly digital world.
100% of participants in the technology sector and 83% in real estate emphasised the need for more regulation to 'level the playing field'.
Whilst these challenges exist, participants highlighted the UAE as a leader in the development of regulation.
89% of infrastructure and 85% of energy leaders believe that the UAE represents the ‘gold standard’ in terms of regulation, compared to other jurisdictions globally.
Interestingly, 97% of all of those surveyed believe the country to be either “extremely business friendly” or “somewhat business friendly”; this highlights the strength of the UAE’s regulatory framework overall.
Workman said: “Although challenges exist, the report highlights that business confidence is strong and this will be instrumental in ensuring the UAE’s recovery post Covid-19.
"At Pinsent Masons we firmly believe that the UAE is indeed extremely business friendly and it is up to us to ensure that our clients understand the extent of the UAE’s unique business proposition and to help them to thrive in this extremely dynamic business landscape.”