The Financial Times reports that the United Arab Emirates government has informed key business families in the country that it intends to end its monopoly on sales of imported goods in an effort to attract more investment.
And the British newspaper reported today, Sunday, that for decades, multinationals had had to hire local partners to distribute their products in the Emirates.
The United Arab Emirates government has now proposed legislation to stop the automatic renewal of existing business contracts, giving foreign companies the flexibility to distribute their own goods or change their local agent during the expiration of the contract.
An Emirati official was quoted as saying, “Prioritizing access to this power and easy wealth for individual Emirati families no longer makes sense. We need to modernize our economy.” Chief, but the time is not yet certain. The United Arab Emirates government has not commented.
According to the Financial Times, the proposed reform could lead to a long-term “break of the social contract” between the government and influential Emirati business families, including names such as al-Futtaim, al-Rostamani and Zuma al-Majid. Protection of local interests in favor of foreign companies.
“This is one of the hardest barriers to touching when it comes to its impact on local family-owned businesses, one of the largest sectors of the UAE economy,” said Habib al-Mulla, CEO of Baker McKenzie’s Middle East branch.
Family-owned businesses, from small businesses to joint ventures built by leading business groups for decades, generate 90 percent of the UAE’s private sector, accounting for three – quarters of all employment.
These changes are part of the UAE’s drive to attract more investment through competitive legal and social changes such as long – term residency plans and restrictions on cohabitation and alcohol.
The pace of reform has accelerated following growing economic competition with neighboring Saudi Arabia. The Kingdom, as part of its plans to eliminate hydrocarbons, has imposed tariffs on Gulf imports and is pressuring multinational corporations to relocate their regional headquarters to Riyadh.
The retail sector, which fuels the city’s growing tourism sector, is dominated by business families in Dubai, and the successful handling of the epidemic is attracting new visitors and residents, according to the Financial Times. Once business agent contracts are concluded, local agents are expected to be compensated for their investment in retail infrastructure and sales networks.
Consumers will benefit if the model switches from an exclusive agent to more than one distributor. However, local agents have made significant investments in these agencies, and according to al-Mulla, it is reasonable to allow foreign school principals at least a few years to find the best model or to reap the benefits of their investment.
In recent years, some foreign newcomers, including Apple and Tesla, have been allowed to open their own stores without local agents. Other multinationals should turn their local partner agency agreements into joint ventures, giving these companies more control over marketing and increasing their potential revenue.
Source: Financial Times