Subchapters:
- Business Relationships
- Foreign direct investment
- FTAs and Treaties
- Development Cooperation
- Prospective fields of study (MOP)
Business relations
Trade relations with the EU
Relations with the EU are regulated by the General Agreement on Cooperation between the EU and the GCC from 1988, to which the Czech Republic also became a party after joining the EU. This is the basis of the Free Trade Agreement (FTA), which is still under discussion, and negotiations between the two blocs have been ongoing since the creation of the GCC customs union project in 2003. The UAE is the EU’s most important trading partner in the Middle East region. In 2021, total EU exports to the UAE reached approx. 29.8 billion Euros.
| 2017 | 2018 | 2019 | 2020 | 2021 | |
| Exports from the EU (million EUR) | 34,055.80 | 29,308.30 | 29,872.80 | 26,015.10 | 29,807.70 |
| Imports into the EU (million EUR) | 7,531.40 | 8,851.90 | 7,246.50 | 8,680.50 | 9,446.00 |
| Balance with the EU (million EUR) | -26,524.4 | -20,456.4 | -22,626.3 | -17,334.6 | -20,361.7 |
Source: European Commission
Trade relations with the Czech Republic
After the establishment of the UAE in December 1971, the most significant investment project of the Czech Republic in the UAE was the project for the construction of the Umm Al Naar power plant and desalination unit in Abu Dhabi, which was completed in 1984 by PZO Škodaexport. In the 1990s, exports stagnated, with the exception of 1997-1998, when a contract with the UAE army for the supply of 1,200 Tatra 815 military trucks was realized. The total mutual trade between the Czech Republic and the UAE is currently the second largest in the BVA region (after with Israel). However, in the volume of Czech exports, the UAE ranks first in the BVA region. To a large extent, however, this involves the re-export of goods to other regions.
| 2017 | 2018 | 2019 | 2020 | 2021 | |
| Exports from the Czech Republic (billion CZK) | 2.2 | 15.9 | 15.3 | 14.5 | ON |
| Imports to the Czech Republic (billion CZK) | 19.4 | 2.3 | 2.3 | 2.1 | ON |
| Balance with the Czech Republic (billion CZK) | 17.2 | -13.6 | -13 | -12.4 | ON |
Source: businesscarriers.com
Trade relations with countries outside the EU
China ranked first as the country’s largest trading partner in 2021, accounting for 11.7% of the UAE’s total foreign trade with the world, and the value of non-oil trade between the two countries was around US$58 billion, an increase of 27% from in 2020. India ranked second, accounting for 8.7% of the country’s total non-oil trade worth around $45 billion, followed by Saudi Arabia in third place with a contribution of 6.6% and worth around $34 billion during 2021, which achieved a growth of 20% compared to 2020. The United States ranked fourth as its trade exchange with the UAE increased by 8.1% compared to 2020, while Iraq ranked fifth.
| 2017 | 2018 | 2019 | 2020 | 2021 | |
| Exports from countries outside the EU (million EUR) | 232,422.5 | 243,534.1 | 236,813.9 | 206,097.6 | 264,695.2 |
| Imports to countries outside the EU (million EUR) | 225,090.4 | 213 402.4 | 220,469.3 | 197,031.7 | 251,808.5 |
| Balance with non-EU countries (million EUR) | 7,332.1 | 30 131.7 | 16,344.6 | 9,065.9 | 12,886.7 |
Source: EIU, Eurostat
Foreign direct investment
The UAE ranks 15th globally and first regionally in Kearney’s Foreign Investment Confidence Index, thanks to investor-friendly legislation that seeks to protect investors, provide new investment opportunities and ensure business stability. Strong credit ratings from internationally recognized agencies reflect the creditworthiness of the federal government. The UAE’s robust credit profile stems from a high GDP per capita, strong international relations, innovative policies to promote sustainable development and contributing factors that influence the UAE’s ability to withstand economic and financial challenges.
Ratings
- Fitch Ratings AA-
- Moody’s Investors Service AA2
Foreign direct investment in the United Arab Emirates is mainly in the following sectors:
- wholesale and retail
- real estate activities
- financial services and insurance
- production
- extraction
The main investors in the United Arab Emirates are: Switzerland, Great Britain, India, United States of America, France, Austria, Japan, Kingdom of Saudi Arabia, Kuwait and the Netherlands.
Foreign direct investment (FDI) in the United Arab Emirates is regulated by Federal Law by Decree No. 19 of 2018 Regarding Foreign Direct Investment The aim of the law is to support the investment environment, expand and diversify the production base and attract foreign direct investment in advanced technology, knowledge and training. It allows foreign investors to own up to 100 percent of the company. Other incentives and benefits include investment protection guarantee, financial transfer option, partnership change option, merger, acquisition and transfer of ownership in accordance with the interest of the investor.
The law applies only to foreign nationals who establish investment projects in the Mainland of the United Arab Emirates and meet the criteria of the minimum share capital required for each permitted FDI activity. Other conditions include the ability of the investment project to:
- use modern technologies
- bring high added value
- participate in research and development
- meet the requirements of licensing entities in the United Arab Emirates.
Institution
The Foreign Direct Investment Department at the Ministry of Economy is in charge of designing foreign direct investment policies, compiling a comprehensive database of investment data and information, and creating an attractive environment for foreign direct investment.
The Committee for Foreign Direct Investment is chaired by the Ministry of Economy. It is responsible for preparing a list of economic sectors and activities that are permitted for foreign direct investment. The list of allowed activities is called the Positive List. The committee may also approve more FDI activities that are not included in the positive list, as recommended by the relevant local and federal licensing bodies.
Permitted economic activities for foreign direct investment – positive list
In 2020, the UAE Cabinet issued Resolution No. 16 of 2020 Concerning the Determination of the Positive List of Economic Sectors and Activities Eligible for Foreign Direct Investment and Percentage of their Ownership. The aforementioned resolution lists 122 economic activities in the positive list. These activities are permitted for 100% foreign ownership. Under the positive list there are 3 categories in which an investor can start his business.
- agriculture
- manufacturing sector
- service sector
Activities not permitted for foreign direct investment – negative list.
There are certain sectors and economic activities that are not allowed for foreign direct investment. This negative list includes the following activities:
- exploration and production of petroleum materials
- investigation, security, military sector, production of weapons, explosives and military equipment, equipment and clothing
- banking and financial activities, payment systems and cash management
- insurance services
- Hajj pilgrimages and Umrah services and other activities listed in Article 7 of the Law on Foreign Direct Investments.
Legal form of foreign direct investment
Foreign direct investment projects can have any of the following legal forms:
- limited liability company, including a one-person (one-owner) company
- a private joint-stock company, including a one-person (one-owner) company.
Support of foreign direct investment in various emirates – institutions
- Abu Dhabi Investment Office (ADIO)
- Dubai FDI
- Sharjah FDI Office (Invest in Sharjah)
FTAs and treaties
Treaties with the EU
Relations with the EU are regulated by the General Agreement on Cooperation between the EU and the GCC from 1988, to which the Czech Republic also became a party after joining the EU. Free Trade Agreement (FTA) negotiations have been ongoing since the creation of the GCC customs union project in 2003. In 2008, the GCC countries unilaterally terminated the negotiations and, according to the statement of their then Secretary General, Abdul Rahman al Attiyah, will return to the negotiating table only if that the EU will sign a preliminary draft treaty in a form that suits the GCC states. The failure of negotiations puts exporters from the EU at a disadvantage compared to those countries that have either already signed the Agreement with the GCC recently (Singapore) or are intensively negotiating it (Japan, South Korea, China, India and Pakistan).
Contracts with the Czech Republic
- Agreement between the Government of the Czech Republic and the Government of the United Arab Emirates on the support and protection of investments (Abu Dhabi, 23 November 1994)
- Treaty between the Czech Republic and the United Arab Emirates on the avoidance of double taxation and the prevention of tax evasion in the field of income and property taxes (Washington, 30/09/1996)
- Agreement on Air Transport between the Government of the Czech Republic and the Government of the United Arab Emirates (Abu Dhabi, 15/12/2002)
- Agreement on economic and technical cooperation between the government of the Czech Republic and the government of the United Arab Emirates (Abu Dhabi 24.1.2022)
Developmental cooperation
Due to the maturity of the economy of the United Arab Emirates, the Czech Republic does not provide this country with foreign development aid. The Czech Republic received US$20,000 in humanitarian relief aid from the 2002 floods through the Red Crescent Society. The United Arab Emirates is one of the largest providers of development aid in the world. As of 2015, the UAE ranks first in the world in terms of the proportion of development aid provided to its annual national income. In this area, e.g. Norway, Luxembourg and Sweden excelled.
Prospective fields of study (MOP)
Electrotechnics
The Emirates Interplanetary Mission 2028 is one of the cornerstones of the “50 Projects”, which are a series of development and economic projects aimed at accelerating the development of the United Arab Emirates. The United Arab Emirates Space Agency is working to establish the first space research center in the Middle East. The center, which will cost almost 600 million CZK over five years, will function as an incubator for space research and innovation. Other projects include Mars Science City, an investment of 3 billion CZK. The above results in business opportunities not only for companies operating in the fields of electrical engineering and satellite communications, but also for companies from the food industry, energy, water management, agriculture and 3D printing.
ICT
IT spending in the United Arab Emirates will increase by 6.5% in the years 2020-2023 and reach a total of CZK 170 billion. Demand for software and services will drive IT spending growth in the medium term. In particular, the demand of large industries for solutions in the field of cloud computing, data analysis, cyber security and IoT, which brings business opportunities for Czech companies operating in these areas.
Defense industry
The UAE is estimated to have spent CZK 415 billion on defense in 2020, which is 5.6% of GDP and ranks it second in terms of defense industry spending in the region. The new focus will be on the production of non-lethal ammunition, personal protective equipment and the professionalization of basic military units.
Agriculture and food industry
During its Vision 2021, the United Arab Emirates launched the Food Security Strategy 2051 project, which aims to position the country among the leaders in agricultural innovation, food security and self-sufficiency in the next 30 years. In recent years, the UAE has invested more than 6 billion crowns in agricultural projects and innovations. The EU is the UAE’s third largest trading partner and European food exports have exceeded 20% growth in recent years.
Gaming industry
The gaming market in the Middle East is expected to grow at a CAGR of 12.1% during the forecast period 2021-2026. The gaming industry is expanding in the UAE with increasing interest and investment in the local development of homegrown talent and games. In terms of spending, this is a very diverse region. The average player in the country is expected to spend 2400 CZK per year.
Transport
Launched as part of “Projects 50” with an investment worth CZK 300 billion, the UAE Railway Program represents an integrated strategy for the railway sector in the UAE for the coming decade. It includes a national network of railway projects that would connect the seven emirates and key cities of the United Arab Emirates. The program is expected to create economic opportunities amounting to CZK trillion.
