Page 96 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

80 Dubai & Co.

institutions listing to make a quick buck. The UAE’s minister of
economy stated in a recent interview that new IPO guidelines—yet
to be implemented—will allow families to list only 30 percent
stakes in private businesses (as opposed to the previous minimum
of 55 percent). This change will give them more flexibility in raising
capital while permitting them to retain control of their enterprises. 32
Reform in the transportation sector is under way as well: several
GCC states are implementing “open skies” agreements to enable
foreign carriers to operate more freely. Dubai already follows an
open skies policy, which has been one factor in its airport’s phe-
nomenal growth.
Two of the most crucial areas of regulatory reform are those of
property rights and labor laws. The creation of “free zones” in
which foreigners can own businesses has—as we will discuss at
length later—catalyzed entrepreneurship and made foreign
businesses much more comfortable entering GCC markets. The
UAE’s breakthrough Freehold Property Law allows foreigners to
purchase freehold properties in designated developments:
including the most desirable areas such as the Palm Islands and
Jumeirah Beach Residence. Owners of freehold properties can
receive resident visas in Dubai, and therefore enter the country
freely. The Freehold Property Law has helped solidify the UAE’s
role as the most favored destination in the region for expatriate
talent, as it makes outsiders feel much more rooted and secure.
Labor law reforms have been delicate due to political concerns and
the need to create jobs for young locals. Bahrain, however, has
recently introduced a “levy” system by which employers who seek
to hire foreigners must pay a fee that will be channeled to a
“labor fund.” This fund will be directed toward developing the
skills of the Bahraini-national labor pool. This innovative, market-
based mechanism is a more savvy approach than the classic quota
system for foreign workers and may spread to other GCC countries
as well. 33
As the governments of the GCC states engage in ongoing reg-
ulatory reform, one source of positive feedback for them is the
strong ratings they receive for creating transparency and for curb-
ing corruption. According to Transparency International’s 2005
index, GCC countries are more transparent than most emerging
markets and far more transparent than China, India, and Russia.