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REGIONSMIDDLEEAST&AFRICA


FULL OWNERSHIP OF ONSHORE COMPANIES IS THE COUNTRY’S MOST DRASTIC FDI REFORM IN A DECADE


UAEtoabolish FDIcaps


Unscathed by social unrest


The Ethiopian government has been engaged in a bitter domestic conflict withthe rival political party, the Tigray People’s Liberation Front (TPLF), since early November,prompting concerns of a brewing humanitarian crisis. But onNovember 28, prime


minister Abiy Ahmed,whohas been eager to open up the economy to foreign investors, said the country’s armyis in “full control” ofMekelle, the region’s capital, allaying fears that the conflict will gomuchfurther. The relatively quick fall of the


TPLF and the city prevented attacks in economically significant regions, such as Amhara and Oromoia. “These would have posed more significant disruptionrisks to international businesses and forced firms to reconsider their operations,” says Ed Hobey-Hamsher, senior Africa analyst at Verisk Maplecroft. Between January and October


The move is part of a trend towards opening the UAE’s economy to foreigners UAE


The United Arab Emirates (UAE) has scrapped federal rules that impose a 49% foreign investment cap on local companies, a requirement that has stopped and delayed investments into the country. The November law, which builds


on last year’s liberalisation of ownership restrictions in select sectors, is the latest — and most drastic — in a series of changes intended to open the UAE’s economy to foreigners and establish a sophisticated and transparent business environment. “This is, by far and wide, the most


significant step in relaxing theUAE’s foreign investment rules over the past 10 years,” says Darren Harris, head of corporate at PwC Legal Middle East. “The requirement to havemajority local ownership represented a significant hurdle for foreign investment, including fromprivate equity and venture capital investors.” The lawstops short of abolishing


the 49% cap outright, as has been widely reported. Instead, it authorises each of theemirates to remove the restriction for their territory. Dubai and Abu Dhabi are tipped to take


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advantage first, and there is optimism that the other five emirates will followsuit. Foreign ownership restrictions for strategic sectors including oil and gas, transport and telecoms will continue. The lawalso cuts red tape for


new and existing businesses, including by removing the requirement that all foreign firms act via a local agent. Lifting the requirement that an


Emirati national holds a controlling stake in all onshore companies boosts the Emirates’ appeal as a destination to establish regional headquarters, and its bid to become a gateway for investment throughout the Gulf and into Africa. But it could diminish foreign


interest in theUAE’s 40-odd free zones. Their lack of ownership restrictions have made these areas a magnet for foreigners wanting to retain full-control, but offshore arrangements do come with other limits. “Having a 100%-owned onshore business completely opens up the market to them, including by allowing themto transact with the public sector, which often requires an onshore presence,” says Mr Harris.■ DANIELLEMYLES


2020, Ethiopia recorded eight inbound greenfield FDI projects, as compared with20 during the same period of 2019.■ SETHO’FARRELL


Investmentin BRIslows


As the coronavirus crisis has taken hold, Chinese investments in Belt and Road Initiative (BRI) countries fell to $23.5bn in the first half of 2020, downfrom $104.7bn in the whole of 2019, according to a recent report by the Moody’s Investors Services credit agency. “Worsening credit stress amid


the pandemic will put the brakes on fresh BRI investment flows, which are unlikely to return to 2014–2019 levels before 2023, even as China’s policy objectives continue to support BRI activity,” Rahul Ghosh, a Moody’s senior vice president said upon release of the report on November 23. While Chinese investment flows


into BRI countries will be subdued over the next two years due to the pandemic, there will be increasing focus on environmental and technological initiatives going forward.■ ALEXIRWIN-HUNT


www.fDiIntelligence.com December 2020/January 2021


$81.2BN


FEWERININVESMENTSWERE MADEINBRICOUNTRIES, COMPAREDWITHLASTYEAR


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