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  • Rovindu Ambagolla

Monday Market Musings >>> The UAE is All Set to Say Goodbye to Family Monopoly

Picture Credit: David Rodrigo

The United Arab Emirates has informed some of its biggest business families that due to an effort to attract more foreign investment, they will be removing the laws which protect the monopolies that some of the local business families have over the sale of imported goods.

For years, multinational companies have had to appoint local partners to distribute their goods, but the government’s new legalisation will give foreign firms the flexibility to change their local partners or even distribute their own goods. The new law is set to be passed by the government, however a date is yet to be decided.

This new reform would essentially bring the longstanding social contract between the government and a few wealthy merchants and families to a halt in favour of foreign investments and businesses. An Emirati official commented, “It no longer makes sense for individual families to have such power and preferential access to easy wealth… We have to modernise our economy”.

However, family-owned agencies built over the decades play a vital role in the UAE’s private sector. 90% of the UAE’s private sector consists of family-owned conglomerates and family-owned businesses, which makes up almost three-quarters of employment in the UAE. So, the government still has to be careful when initiating these new reforms as any shortcomings could have a ripple effect over the whole private sector.

Picture Credit: Saj Shafique

The government’s decision to become more competitive was sparked by their economic rivalry with their neighbour Saudi Arabia. The UAE is trying to attract more foreign investment into the country by making new and competitive social and legal changes.

However, leading business families are rallying to oppose the rate at which these changes are being applied. People briefed on the matter have commented that some influential merchant families have lobbied for Sheikh Maktoum bin Mohammed al-Maktoum, the deputy ruler of Dubai. While it is important to reshape the economy to be less lenient on wealthy families, it is also important to make sure the transition isn’t conducted hastily. Al Mulla, executive chair of the law firm Baker McKenzie’s Middle East Branch commented, “The consumer will benefit if the local model moves from one exclusive agent to more than one distributer. However, the local agents have made large investments into these agencies, and it would be fair to at least give them a few years to find a better model with foreign principals or get a return on their investments”.

Whilst there is a need for economic reform in the UAE, the government’s decision is one that also carries a lot of risk, especially as the relationship they have with the private sector is on the line. An executive of a family group commented, “The government needs to think about its relationship with the private sector, especially as it is now seeking to impose more demands on us”. The following decisions regarding these new laws has to be conducted in a delicate and precise manner.

December 27th 2021 | 5:15 PM

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