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Local Sponsorship in UAE
In the ever-evolving landscape of the UAE’s business ecosystem, the concept of local sponsorship has always garnered significant attention. Local sponsors, often perceived as the gatekeepers to accessing the UAE’s lucrative market, have played a pivotal role in shaping the country’s commercial fabric. But with recent changes and reforms, what does local sponsorship mean in the current context? Let’s delve deep into the intricacies of local sponsorship in UAE, drawing insights from official resources and outlining its importance.
- TABLE OF CONTENTS
Local Sponsorship in UAE
The Historical Context of Local Sponsorship
Historically, the UAE mandated foreign investors to collaborate with a local sponsor to set up a business on the mainland. This arrangement would typically see the local sponsor holding a significant majority of the business ownership, often around 51%, while the foreign investor would hold the remaining 49%. This was a strategic move, aimed at ensuring local participation in the nation’s growing economy while providing foreign investors with unparalleled access to the UAE market and its myriad opportunities.
A Paradigm Shift: Towards Full Foreign Ownership
However, as global economic landscapes evolve, so does the UAE’s approach to business ownership. Recognizing the need to further bolster foreign investment and ensure competitiveness on the global stage, the UAE introduced a groundbreaking reform in 2020. As per the new decree cited on the official UAE government portal, the nation now allows full foreign ownership of commercial companies in the UAE. This significant step reaffirms the UAE’s commitment to fostering a more inclusive and investor-friendly environment.
But what does this mean for the traditional local sponsorship model? It means that while local sponsorship remains a viable route, it’s no longer the only avenue for foreign investors. Depending on the nature of the business, its objectives, and the strategic outlook, investors can opt for 100% ownership or still pursue the sponsorship model.
The Continued Relevance of Local Sponsorship
While full foreign ownership is now an option, the significance of local sponsorship in the UAE persists. Businesses desiring to venture into niche sectors or leverage local expertise for a competitive advantage will find a local sponsor indispensable. These sponsors offer grounded expertise, streamline administrative processes, and impart insights anchored in the Emirati landscape.
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