Investment in the UAE's Maritime Sector: the barriers and recommendations

English

By Arvind Ahuja, Managing Director, Zara Maritime

Besides profits, what do investors look for before deciding to put their money into a country?. As working in the maritime industry for many years, I’d like to summarize my topic with the below points, 

  1. Political and Social Stability: In the UAE various cultures, nationalities and religions coexist peacefully in harmony
  2. Incentives: Besides the ease to set up new companies, there is no financial incentive. The new VAT regime may provide jobs to citizens, but has increased the financial burden of hiring accountants and submitting tax returns. Granting Citizenship may be an area which the government and rulers may visit to provide security to investors.
  3. Focused Growth Policies: The country has a national master plan for ports and ships and local master plans for urban waterfronts and pleasure craft. The local maritime industry is a major contributor to Emirate’s economy with AED 26.9 billion share and an unprecedented growth of over 25 per cent since 2011.
  4. Existing investors: According to recent statistics published in 2017, the UAE has over 5,500 maritime related companies, employing 76,000 personnel.
  5. Infrastructure and Maritime Capacity: The UAE’s road and marine transport structure is world-class and provides hinterland connectivity.
  6. Barriers: Each port in different Emirates restrict entry of companies registered outside their Emirates. This places a financial burden of registering branches in each Emirate. This may generate income for that Emirate, but doesn’t allow fair competition, restricting the clients’ freedom to hire the companies of their choice and price.
  7. Accountability and Legislation: The Dubai Maritime Arbitration Centre and Courts lack the manpower resources to deliver swift decisions and are unable to enforce them, making it easy for defaulters to escape responsibility of payments. The recent Bankruptcy laws, no arrests for Cheque Bounce and by not allowing arrests of ships in the UAE, there is no fear of retribution from those doing business with malicious intent.The rules appear to be more pro-employer than pro-employee, which is attractive to investors.
  8. Availability of Natural Resources: The UAE is surrounded by deep draft ports and abundant safe anchorage areas
  9. Cost of establishment and cost of operation: The UAE has a high cost of establishment, high cost of visas, manpower, insurance, office hire, residence, chillers, telecommunications, electricity and food compared to international standards.
  10. Land: Ports and coastal facilities require large land acquisitions, which is abundant along the coastline and in the hinterland of the UAE.
  11. Avenues for investment: Development and operation of ports, Intra-city road and rail networks, water sports and entertainment, third party ship management, purchase of inter-country coastal and deep sea ships, storage facilities for goods, containers, bulk, gas, oil, movement of passengers and tourists. Waste management collection and disposal. Regulatory bodies whether Government or Private, Safety organizations and port control. Ship Breaking and Scrap, urban water front development and housing, manufacture of pleasure crafts / yachts. Human Resources Training and Development.
  12. Downsides: All maritime investments and development will generate traffic, increase maritime emissions, port noise, air and water pollution, impact the biodiversity and cause climate change.
  13. Upsides: Investments generate jobs, profits and benefit the economy.

Conclusion

Is Dubai the best choice when other countries offer permanent residency, citizenship, ownership of immovable property & assets, tax breaks or tax free regimes, financial incentives to invest in their state or country?

The UAE leaders have a focused plan that is being implemented, but more is required to make UAE irresistible to the Maritime investors.

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