Title page 1

Contents 5

Foreword 4

Executive summary 8

1. Overview 10

1.1. Development trajectory and the role of FDI 11

1.2. Key recommendations 14

1.2.1. Enhancing transparency in investment regulation 14

1.2.2. Modernising the investment treaty policy 14

1.2.3. Enhancing investment retention through dispute prevention 15

1.2.4. Building a cohesive framework for investment promotion and facilitation 15

1.2.5. Improving the use and design of investment tax incentives 15

1.2.6. Foreign investment for digitalisation and skills development 16

References 16

2. Trends and impacts of FDI in the UAE 17

2.1. Summary 18

2.2. Trends in FDI in the UAE 19

2.3. The contribution of FDI to innovation and productivity 20

2.3.1. Expanding FDI in high-productivity and tradable sectors could strengthen productivity growth 20

2.3.2. FDI in R&D is increasing and plays a growing role in supporting innovation 22

2.4. The contribution of FDI to the digital transformation 24

2.5. The contribution of FDI on green growth 26

2.6. The contribution of FDI to job creation and skills development 28

2.6.1. Greenfield FDI is an important driver of job creation in the UAE, outperforming most peer economies 28

2.6.2. Job intensity of FDI varies across sectors, with services accounting for a rising share of employment in the UAE 29

2.6.3. Job creation from FDI is predominately centred around Dubai and Abu Dhabi 30

2.6.4. Greenfield FDI has untapped potential to support women's economic participation and Emiratisation 33

References 34

3. Navigating the legal framework for investment 36

3.1. Summary and recommendations 37

3.2. Enhancing the role of the MoI in driving investment policy reforms 38

3.3. An overview of the domestic legal framework for investment 39

3.3.1. A rapidly evolving legal framework 39

3.3.2. A relatively open economy to FDI 40

3.3.3. A differentiated regulatory regime for protection against expropriation across Emirates 41

3.3.4. A restrictive regime for foreign ownership of land across Emirates 42

3.3.5. A strong regime for the protection of intellectual property rights 42

3.4. Strengthening the transparency and predictability of the legal framework 43

3.5. Assessing the impact of the existing regulatory framework for investment 45

References 47

Annex 3.A. A benchmark of selected domestic laws and regulations governing the investment climate 49

Notes 54

4. Modernising the UAE's investment treaties 55

4.1. Summary and recommendations 56

4.2. Strengthening the role of the Ministry of Investment in investment treaty-making 57

4.3. Overview of the UAE's investment treaty policy and current trends 58

4.3.1. The UAE's policies in concluding IIAs 58

4.3.2. The UAE's recent trend in concluding CEPAs 60

4.4. Main features of IIAs in force in the UAE 61

4.4.1. Modern design features of investor protection provisions in BITs 63

4.4.2. Rethinking recourse to ISDS under UAE's investment treaties 66

4.5. Transitioning designs in older generation treaties 68

4.6. Sustainable development and responsible business conduct considerations in IIAs 69

References 71

Annex 4.A. The UAE's bilateral investment treaty engagements 72

Notes 75

5. Enhancing investment retention through dispute prevention 76

5.1. Summary and recommendations 77

5.2. Clarifying the role of investment dispute prevention in the conflict resolution ecosystem 78

5.3. Integrating dispute prevention policies in the UAE's investment framework 80

5.3.1. A rich and complex existing judicial and alternative dispute resolution landscape 80

5.3.2. Moving from reactive systems to proactive policies 81

5.4. Preventing investment disputes in the UAE through co-ordinated communication with the government and investors alike 81

5.4.1. Reinforcing intra government communication and co-ordination for effective implementation of dispute prevention policies 81

5.4.2. Establishing a formalised mechanism of communication with aggrieved investors 83

5.4.3. Implementing the key components of dispute prevention mechanisms in the UAE 84

5.5. Defining the institutional setup for designing and implementing dispute prevention policies in the UAE 86

5.5.1. Establishing a single lead agency for dispute prevention 86

5.5.2. Allocating the responsibility of designing and implementing dispute prevention policies to several agencies 88

5.5.3. Establishing an inter-ministerial co-ordination committee for dispute prevention 89

References 90

Notes 91

6. Building a cohesive framework for investment promotion and facilitation 92

6.1. Summary and recommendations 93

6.2. Institutional governance for investment is highly autonomous at the local level 94

6.2.1. The role of local actors in a decentralised investment landscape 94

6.2.2. Co-ordination challenges in decentralised institutional governance for investment 96

6.3. FDI governance has been gradually shifting to the Ministry of Investment since 2023 98

6.3.1. A federal mandate for integrated investment planning 98

6.3.2. Designing a national investment strategy in the UAE 101

6.4. Local and federal investment promotion initiatives could be further harmonised 104

6.4.1. Aligning messages, materials and mechanisms 104

6.4.2. Fostering complementary strategies through regional institutional integration 105

6.4.3. Balancing neutrality with regional inclusivity 107

6.5. Investment facilitation is managed through diverse local systems 108

6.5.1. Building a more connected investor journey across authorities 108

6.5.2. Digital investment portals and facilitation services in the Emirates 109

References 110

7. Considering tax incentive use and design 112

7.1. Summary and recommendations 113

7.2. Recent reforms have significantly changed the UAE's fiscal policy 114

7.2.1. Overview of recent reforms 114

7.2.2. CIT and competitiveness for UAE 118

7.3. Considerations for more effective and efficient CIT incentives 121

7.4. The GMT changes the net benefits of certain incentives 123

7.5. New incentives under consideration in UAE 126

7.5.1. Considerations for R&D tax incentives 126

7.6. Tax policy, investment and revenue 129

References 131

Notes 137

8. Harnessing FDI for the UAE's digital transformation and skills development 140

8.1. Summary and recommendations 141

8.2. The policy and institutional framework for investment in support of digitalisation and skills development 143

8.2.1. Digitalisation and skills development are high on UAE's national agenda, but links with investment could be strengthened 143

8.2.2. The UAE's institutional landscape features multiple actors with overlapping mandates on investment, digitalisation and skills 145

8.3. The regulatory framework for investment in support of digitalisation and labour market outcomes 148

8.3.1. Recent reforms have expanded UAE's openness to digital investment, while regulatory scrutiny remains in a few strategic sectors 148

8.3.2. Competition reforms have enhanced conditions for digital investment, yet greater clarity and co-ordination will be needed... 149

8.3.3. The UAE has strengthened IPR and data governance frameworks, yet further advances in enforcement and institutional capacity... 150

8.3.4. The UAE could expand on recent labour market reforms to further enable foreign firms to support talent retention and Emiratisation 152

8.4. International instruments to boost FDI's contribution to the digital economy and labour market outcomes 154

8.4.1. The UAE leverages international agreements to support the digital economy and shape emerging digital norms 154

8.4.2. The UAE's recent treaties highlight a trend towards incorporating skills development and labour-related commitments 156

8.4.3. International instruments on responsible business conduct help raise labour standards and address risks associated with technological advancements 156

8.5. The skills ecosystem supporting the digital transformation and talent retention 157

8.5.1. Improving the UAE's competitiveness for FDI in the digital economy requires continued investment in basic and advanced digital skills 157

8.5.2. Skill anticipation systems enable the UAE to respond to emerging skills needs and maintain its attractiveness as a talent-rich investment destination 159

8.6. Investment incentives to draw FDI in digital activities and skills 160

8.6.1. Greater transparency could help firms to better identify available support for digital activities and labour market outcomes 160

References 161

Notes 164

Table 6.1. Typology of investment strategies 103

Table 8.1. National strategies on investment, digitalisation and skills development in the UAE 144

Boxes 32

Box 2.1. Jobs created by FDI in the UAE differ in their skill intensity 32

Box 3.1. OECD Best Practice Principles for Reviewing the Stock of Regulation 46

Box 3.2. Australia's post-implementation reviews 47

Box 4.1. Sustainable investment considerations within investment chapters of CEPAs: The case of the UAE-Cambodia CEPA and the UAE-Türkiye CEPA 61

Box 4.2. The UAE Model BIT, towards a new generation of BITs 63

Box 4.3. Characteristics of new treaty designs: FET, FPS, MFN and indirect expropriation 65

Box 4.4. Ongoing treaty reform efforts at the OECD 70

Box 5.1. Practices of systemic recommendations by business ombudsmen: the cases of Ukraine and Kyrgyzstan 83

Box 5.2. Examples of structures of single lead agencies for dispute prevention 87

Box 5.3. Examples of inter-institutional co-ordination committees for dispute prevention 89

Box 6.1. The role of SelectUSA as an information and connection platform 99

Box 6.2. Australia's institutional model for federal-subnational investment policy co-operation 100

Box 6.3. Approaches to drafting investment strategies 103

Box 6.4. Examples of collaboration networks between national and subnational bodies 106

Box 6.5. Offering an objective and informative location analysis through Switzerland's Business Navigator platform 107

Box 7.1. How the Global Minimum Tax works 115

Box 7.2. Criteria and considerations for Qualified Refundable and Marketable Transferable Tax Credits 125

Box 7.3. Definition and treatment of Qualified Substance Based Tax Incentives (QTIs) 126

Box 8.1. National investment strategies with sustainable development objectives: Ireland's case 145

Box 8.2. The OECD Guidelines for Multinational Enterprises: Employment and Technological Advancement 156

Box 8.3. Examples of programmes led by foreign firms to address skills gaps in the UAE 159

Box 8.4. Initiatives to increase transparency of tax incentives in select countries 161

Annex Table 3.A.1. Benchmarking the UAE's legal framework for IP against the TRIPS Agreement 49

Annex Table 3.A.2. Regulating expropriation at a federal and Emirates' level 50

Annex Table 3.A.3. Comparing land tenure regulations amongst Emirates 52

Annex Table 4.A.1. BITs in force 72

Annex Table 4.A.2. BITs signed (not terminated nor suspended) 74