Consequences of Scrapping Business Sponsorship

[kannus]

Did anyone in this form analyzed the consequences of scrapping the "Mandatory Business Sponsor" law in Dubai. If this happens, you think the demand for the business spaces in dubai will increase? Recent figures reveal that commercial office space in Dubai rose 22 percent in the second quarter of'09 over the same period last year to 4.5 million square metres. As of today we can even find 100 Dhs per sq foot price for commercial property on Shk Zayed Road next which is unbelievable.Even though this price has been on display for the last 2 months, still no body is willing to occupy this property. It seems the market is waiting for further reductions in prices? But if this law comes into effect, what would happen to the income of those locals who are fully dependent on sponsorship incomes? Point to be noted is that this is not a federal initiative.

 

[zombie]

I do believe that, in the GCC only Bahrain & Kuwait are taking steps to change their sponsorship system, Qatar is keeping a close eye, don't know much about the UAE looking to modify an age old system which has helped make them richer.

Also I believe this has more to do with employee visa sponsorship & little to do with business sponsorship(local partner requiremnets).

However, even if so, it is a step in the right direction.

 

[DXB_Lawyer]

Any amendments are implemented to the law will probably dilute the holding that a national is entitled to, rather than scrapping the whole JV idea completely. Look for it to fall from a 51% holding to something in the region of 30%.

 

[financier888]

Commercial pricing

Even if they scrapped the need for local sponsorship (which as posted previously may not be 100%) I doubt very much this will have any immediate impact that will get people and business owners flocking to Dubai. As is stands now - you can still operate a 100% foreign owned business in the FZE -

There are still many hurdles ahead that the govt' needs to address and I am sure - in time they shall. It is more a function of the global economy - the fact is, the cost of doing business in Dubai is not cheap - even with lower rents.

The costs of incorporating and annual renewal fees are high as well as the cost of labour - compared to Asain countries... the other main issue is centered around policies that change like the shifting sands.. I think it's safe to assume we will not see any real increase or movements for 18 -36 months... so, those rents may come down further..

Keep in mind that the booming real estate industry and tourism generated most of the jobs - vis a vis - the demands for services and satellite companies that supported them - from event organizers, advertising, design, printing, sales, car dealers, retail sales. contractors, suppliers etc, etc., - ALL of these industries severely contracted with many folding completely. Traders that have operated in Dubai for decades also started feeling the pinch as early as last summer.. So, this begs the question - 'Who is going to come here to set-up shop? and for what business and in what industry?'

Then there's the visa issue... There are many choices at this stage within the context of global and regional business.. It will take some time for Dubai to address these issues and rebound - provided of course they decide to forgo imposing income and corporate taxation which was floated as a real possibility last year...

A complete re-engineering of the economy needs to take place and this takes time, proper planning and execution but before any of that can happen - the powers that be need to recognize and acknowledge this in earnest. The bygone days of people flooding to Dubai with suitcases of cash are over. World over, business owners have to carefully calculate ALL factors before making the 'leap' and in this regard, they need assurances for long term security.

 

[kannus]

You are absolutely right Fin888. As long as the cost of establishing a business doesnt come down, such offers may not tempt the prospective business establishers to set up their business in Dubai. I've heard that the rents in the free zones still remained unchanged...Any news on this? I'm afraid once the Business Bay is fully ready and if no proper measures are taken it will also look like a ghost town. Lately i happend to visit Health care city and i am shocked to see it deserted...I wonder what prompts somebody to setup a Medical/ Pharmaceutical business there?