UAE or Saudi Arabia: Who wins when it comes to setting up a new business?

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Opinion: The UAE continues to rank high when it comes to ease of doing busines, writes Michael James Burke, managing partner with EER Corporate Services

The United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (KSA) are two of the richest nations in the world. Both are home to sizable expat communities, but when it comes to welcoming entrepreneurs, which nation offers the best advantages?

While renowned for being much more conservative, in recent years the KSA has relaxed many of the laws relating to foreign business ownership. But despite this and other reforms, does it offer as many freedoms for international business owners as its more cosmopolitan neighbour?

Let’s consider several key criteria and see which nation comes out on top.

1. Economic stability

The UAE continues to rank high when it comes to ease of doing business. Plus, its stable and diversified economy (tourism, trade, transport – in addition to oil) presents numerous opportunities for large and small businesses. This is something currently being spurred on by the upcoming Expo 2020 to be held later this year in Dubai.

While the KSA is a very wealthy country, it’s significantly more dependent on oil as its major source of revenue. Therefore price fluctuations can have a major impact on the entire economy – as evidenced in 2017 when it contracted by 0.9%.

Why the UAE is a better choice for entrepreneurs

The UAE economy is expected to grow by 3% this year according to the IMF. This is a sign that there are multiple opportunities for new businesses and entrepreneurs to thrive. It shows that other companies have enough confidence in the wider business environment to invest their time and money into building a presence on the ground.

While plans are underway to diversify the Saudi economy, the UAE is already there – so it ultimately remains a safer bet for the time being.

2. Business bureaucracy

Since May 2019, foreign nationals have been permitted to own UAE businesses outright in a number of different sectors. These include tourism, media, education, manufacturing, and of course energy (among many others).

While many entrepreneurs still choose to be based in one of the UAE’s free zones, they’re now permitted to operate ‘onshore’ as well – which is good news for those keen to tap into the buoyant local market.

Across the border in the KSA, 100% foreign business ownership is also allowed. In 2016, the Saudi Arabian General Investment Authority (SAGIA) started permitting the issuance of licenses to wholesale and retail businesses – subject to certain rules and share capital of SAR 20m (just over USD 5m) for a five year license.

This agreement was extended to engineering firms in 2017 and expanded to many other areas in 2018 with some key exceptions including professional services, financial services, insurance, banking and telecoms.

Why the UAE is a better choice for entrepreneurs

The UAE now boasts 10 year residents’ visas available to certain categories of foreign nationals setting up in the UAE. In addition, there are five year visas requiring business owners to invest significantly less share capital (AED 500,000) than in the KSA . It’s clear the UAE is actively encouraging talented entrepreneurs to relocate here.

Combined with the growing number of startup hubs, investment capital, and other support – not to mention the network of free zones the UAE offers (which the KSA doesn’t currently have), the business environment is much more developed in the UAE.

While it’s clear that the KSA is working towards developing a more welcoming business climate for international entrepreneurs, the country still has some way to go. It’s true that super fast business setup – just 10 minutes for companies that meet certain criteria – might be seen a key selling point for KSA-bound companies. But the large amount of capital required mean that only huge international companies are in a position to benefit from such offers.

3. Favourable for foreigners

While the number of expats in both nations are similar (around the eight to 10 million mark), the UAE has a much larger proportion of them – representing around 85% of the population.

So the UAE has a solid reputation for enticing talented individuals from across the world – for both business and pleasure. Dubai’s innovative commercial outlook and global reputation as a luxury tourist destination have cemented its place on the world stage – which has reflected well on the entire nation.

In the KSA – which has long been seen as a land of opportunity in its own right for those working in the oil industry – expats still make up for a sizable proportion: around 30% of the total population.

Tourism has undoubtedly played a major part in helping the UAE ‘internationalise’. And while it isn’t as big a draw in the KSA, the kingdom recently introduced a new tourist visa-on-arrival for many passport holders, which will make it easier to visit and explore for travellers.

Why the UAE is a better choice for entrepreneurs

Given that expats make up the vast majority of the UAE’s population, there can be no doubt that the nation has a much more international and multicultural outlook than the KSA.

The fact that the UAE is listed at number 25 globally for quality of life – and given the availability of family visas, international schools, and leisure activities – it all combines to make it the ideal place for international entrepreneurs to relocate for the long term. Add to that the excellent transport links to Europe, Asia, Africa, and the Americas, and the UAE is the choice.

All things considered, while it’s apparent that the KSA is accelerating its outlook, economy, investment, and overall international standing – evidenced by its Vision 2030 – the UAE is already where the KSA wants to be.

The UAE continues to shine on the world stage as a result of hard work, diversification, and modernisation. Such vision and innovation of this magnitude make a compelling case for any entrepreneur looking to get a foothold in the region.

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