Knowledge Center

I am delighted that Kreston Global is having their Annual conference in Spain. While the UAE-Spain trade and business corridor is quite active, I would like to talk here a bit about the India-Spain economic & commercial relationship.

India and Spain share a very close relationship, both being strong democracies and without any bilateral, geopolitical irritants. Relations between India and Spain go back to the 20th century and Christopher Colombus, who discovered America, was actually sent by the Spanish Queen to look for a route to India. In 1937, Rabindranath Tagore wrote a Pamphlet titled “Conscience of Humanity”, which appealed to Indians to help in the fight for democracy during the Spanish civil war. In modern times, we established democratic relations in 1956 and today we have a vibrant political and economic relationship, which also encompasses considerable interaction in the field of Education, Science & Technology, Culture and other fields.

Economic & Trade relations have been extremely vibrant and Spain is India´s 6th largest trading partner in the EU. Bilateral trade, which registered a drop of 19 per cent during the pandemic, has rebounded and crossed 2019 figure of US$ 6.5 billion. India has a surplus of about

US$ 3 billion in its trade balance with Spain, but this is offset to a large extent by the large number of Spanish companies present in India who are doing very good business.

There are about 250 Spanish companies in India, with multi-sector presence across infrastructure & construction, auxiliary products and industrial engineering, renewable energy and environmentally sustainable products, EICT (electronic information and communication technologies), automotive components and automotive accessories. Spain has also invested more than US$ 3.56 billion as cumulative FDI in India. Recently, the Ferrovial Group of Spain invested US$ 425 million in the infrastructure sector through Prime Minister’s Gati Shakti Master Plan.

In addition, India has recently signed a major contract with Airbus Spain for procurement of 56 C-295 military transport aircrafts. This is one of the biggest ´Make in India´ contracts signed as 40 of the 56 aircrafts would be completely made in India with almost 13,000 plus parts of the aircrafts to be manufactured and assembled in India. This will see a relocation of the entire supply chain for Aerospace industries, especially for the C-295 aircrafts to India.

As I had mentioned before, India has a surplus in its bilateral trade with Spain with the main items of export being organic chemicals, textiles and garments, steel, fuels & mineral oils, aluminium and other articles, leather and leather goods, marine products, vehicles, auto components, pharmaceutical, pigments, inorganic chemicals, etc.

India has also made considerable investment in Spain of almost US$ 1 billion. There are more than 50 Indian companies in Spain mainly in Software & IT services, automotive parts & automobile industries, pharmaceuticals, chemicals and logistics.

The future looks bright for India-Spain collaboration and there are many sectors in which there is considerable scope for cooperation among entrepreneurs of Spain in India, with a maximum potential being in the start-up business. Spanish entrepreneurship ecosystem increased between 2015 to 2021 from €10 billion to €46 billion. This provides considerable opportunity for start-ups in India to upscale in Spain and Spanish speaking countries as well as for Spanish start-ups to do the same in India. The future is bright for India-Spain relations and companies and organizations active in this corridor, especially in UAE should take advantage of this opportunity.

What Is A Name?

We all have our favourite brands, don’t we? Ones that resonate with us, that speak to us and to whom we are loyal regardless of our “sensible” heads telling us that we could probably find a cheaper or better alternative elsewhere.

But why do we get so “hooked” on certain brands? Have you ever tried to analyse why something generates an “emotional” response when we are able to be very factual and pragmatic about other aspects of our lives?

I quite like this definition of a brand from Investopedia. “A brand is the collective impact or lasting impression from all that is seen, heard, or experienced by customers who encounter a company and its products and services. In creating a brand, a business is managing the effect that the product or service is having on the customer.”

In my younger days, it was always the consumer brands that shaped branding theory (although these days we have incredibly powerful business brands); then it was all about being a “bundle of wants and desires in the mind of the customer.” Either way as we know, it is so much more than the visual. What we talk about now is the “experience” that we, the consumer, have when we use the brand/s that we love.

What do we mean by experience? It is every single activity, online manifestation, printed brochure, customer interaction that had with every part of our product that will create that “lasting impression”; the “collective impact” we seek in a strong and compelling brand. It’s that “managing the effect” as the definition above articulates.

When it comes to professional services brands, what is being “used” or purchased is the deep technical, specialist, business advice that is customised to our clients’ specific problem. So, creating a differentiated brand in this case means ensuring every single point at which our customer interacts with us reinforces those special characteristics. This is really saliant when clients need advice and solutions from different parts of the network. Managing that experience for our clients across international boundaries and jurisdictions is hyper-important.

The word “Kreston” means “responsible, trustworthy” in ancient Greek, and our member firms take that very seriously. Our name is fundamental to the promise our brand offers our clients and the experience we need to give them.

Kreston: Our Whole Is Greater Than The Sum Of Our Parts

As a worldwide network of accounting and business advisory firms, Kreston advisers want to be compelling to ambitious, entrepreneurial, interesting clients who seek to expand their business operations around the world. These sorts of clients want to move fast, need on-the-ground support, and require local savvy business advisers who know how to get the job done, and the right business connections to make that happen. Independent, ambitious, and fiercely entrepreneurial, Kreston firms are ideally placed for clients like these across the world. The key is to manage that experience so that it is consistent and reliable for our clients wherever they are in the world.

Kreston has a powerful backstory that reinforces the drive and energy that exists in the network today. Formed in 1971 by 2 entrepreneurial accountants, one from our German firm, Kreston Bansbach, and one from an English firm, Finnie & Co, that is now part of BDO, these 2 accountants were early pioneers of both an international mindset and the concept of a network of firms around the world who collaborate to help clients expand overseas. Fifty years on, Kreston is an energetic community of like-minded people who love working together to help their clients succeed.

Five Steps to Building a Global Brand

We know from member surveys and feedback that building our global brand is a key priority for our membership.

As a network we have wide and varied audiences. Our people, our firm leadership, our firms’ clients, our potential clients, our potential future recruits and all the people involved in helping us deliver work and value as suppliers and referrers.

That’s a lot of people to try and influence. Which is why we are in this together and we are working on a 5-step programme to build that worldwide global brand.

1. A shared vision and ambition – one brand worldwide
2. A compelling proposition that unites us – a purpose that we all agree with
3. A consistent experience across our people and our clients – online is now king
4. A reputation and narrative that is compelling to our clients and our people
5. Ambassadors and advocates who help create and spread our culture

There isn’t the space to go into the detail for all these steps now. But we already know our shared ambition is a strong worldwide brand: entrepreneurial firms united in a collegiate, collaborative, community-minded enterprise, fuelling ambition and walking shoulder-to-shoulder with our clients. Our members will hear more in October about our shared vision, ambition, and purpose at our first world conference for 3 years in the wonderful city of Madrid.

Let’s take a closer look at steps 3, 4 and 5 and how we work on these essential areas of the digital challenge, a strong narrative to clients, and engagement of our younger people involved in the network, so they feel a sense of ownership, pride, and opportunity.

Why Digital is King in the Battle for Hearts and Minds

The Covid pandemic changed our lives fundamentally. We were becoming digitally adept, used to doing research online, fact finding, comparing providers. But suddenly in early 2020, that was the only way we could work – the only way we could buy – and the only way we could find out any information. And we haven’t looked back. Statista.com’s April 2022 analysis confirms “As of April 2022, there were five billion internet users worldwide, which is 63 percent of the global population. Of this total, 4.65 billion were social media users.” We will never return to a world where we are not “digital first.”

Although accounting firms may rely heavily on personal recommendations to grow business locally, growing a business regionally and globally takes a robust digital brand. 62% of businesses make decisions about who to do business with using just digital content to make their shortlists (Forrest Group, 2021). There are almost 2 billion websites in the digital landscape. Getting people to come to our websites is important – creating campaigns and stories that are interesting to read and add value to our clients’ research is critical. We have a great bank of client case studies that demonstrate the way that Kreston firms help their clients and regularly send our international clients update on tax, audit, and other international topics of interest.

Lynsey Thornthwaite, Kreston Global Digital Brand and Content Manager, gives us a view of our digital performance so far, “The Kreston Global website is growing rapidly; we have doubled the organic traffic in six months, and we could do that again over the next six months. Watching how users on the website clearly indicates that these new users are in that research phase, top of the funnel. They are navigating through the website, checking the “Doing Business In” pages, then navigating the country firms’ pages.”

“The traffic coming from member websites to the Kreston Global website is a great example of buyer intent in that research phase. The Kreston Menon website is the number one firm website referring traffic to the Kreston Global website. This is due to a combination of offline activity; there is an incredible amount of work going in to raising the profile of the firm – and the online activity, and a simple to navigate website that signposts users through the customer journey effectively. We can see that users from Kreston Menon are finding the journey fluid and the content meets their needs. The audience locations are not just regional, but global and the percentage of those visitors who return is third highest overall, a positive indication of interest and engagement.” Kreston Menon is part of our group of firms who really understand the power of digital engagement.

Understanding the “Interpreneur”

A professional brand stands and falls on the quality of its reputation and the way it shows how it understands its core client buyer. So, we focus a lot on enhancing our reputation with media and content creation. Our global group experts in Corporate and HNWI Tax, VAT, Audit, Transfer Pricing, Global Mobility and Corporate Finance write and publish expert advice to demonstrate our collective knowledge in these areas. This helps our reputation as a strong business advisory brand.

As well as topical and expert content, we have recently commissioned research across 6 main global markets to probe the way in which business owners decide to expand their businesses globally, what challenges they see as key and what are the characteristics found in successful “interpreneurs.”

We call these types of business owners/investors and directors “Interpreneurs,” and the results were fascinating, giving us real insight into what type of geographies, age and gender profile makes a more likely interpreneur and what they want from governments and advisers to help them success.

We will be running a series of podcasts with our advisers and clients looking more closely at the steps to success and have developed a web tool so that clients and prospects can see if they share the characteristics for success.

Ambassadors and Advocates

Our culture is forged and strengthened the more our members interact with each in communities of interest. By building more ambassadors for Kreston through involving our younger people more in the network, we gain so much from their input and energy. It is so important that they can see Kreston as a network of opportunity for future career development, where they can work on interesting and ambitious clients and with enthusiastic committed professionals and peers from around the globe. All of whom are important advocates for the Kreston brand.

We are fortunate to have Kreston Menon in our network as they are true exemplars of what it means to have a strong, strategic brand focus – it is not by chance that they have a recognised “Superbrand” status in the UAE. They are energetic business builders in their own country of course, but through forging strong relationships with government bodies in the region, by investing in an international strategy abroad to get the most out of the network, and by being very supportive and involved in Kreston’s community building activities, they have gained a big following and strong relationships with colleagues across the world in the Kreston network.

“You have to invest to see a return” is the mantra of many business advisers when helping their client to think long-term. This is very much our attitude at Kreston Global – when our firms invest in the network and in helping us to build our global brand – like Kreston Menon – then together we will be stronger, compelling, and connected together by our shared ambition.

This year, 2022, marks fifty years of bilateral relations between the United Arab Emirates and the Kingdom of the Netherlands. Our ties are warm and friendly, and we are full of anticipation for the next fifty years. With our successful Expo 2020 Dubai participation still fresh in mind, we have a lot to look forward to.

Food Security

As I am writing this article, H.E. Minister Mariam Almheiri is heading a trade delegation to the Netherlands, focused on food security and horticulture. More than 30 representatives from the Emirati horticultural sector joined her to visit GreenTech – a leading 3-day horticultural technology exhibition in Amsterdam – and the Floriade Expo 2022. On the first day of her visit, Minister Almheiri addressed the pressing topic of food security in her keynote opening speech at GreenTech: “Just as the Netherlands have looked at innovation and technology, we are doing the same — to really look into what kind of foods make sense to grow in the UAE, harnessing the power of technology.”

The Netherlands is the second largest exporter of agricultural produce in the world, while also one of the most densely populated countries. By co-creating technologies with partners from the private sector and knowledge institutions, we work to find solutions to global challenges, using expertise from areas such as artificial intelligence and robotics. Optimizing local production with a minimal usage of scarce resources, is key in what the Netherlands stands for.

Being a partner for other countries in increasing food security, be it through knowledge or technology transfer, is very important for the Netherlands. Logistical costs make global supply less economically feasible. The pandemic has shown us how fragile supply chains can be. The war in Ukraine not only impacts the people of Ukraine. In our region, food prices are increasing and foreign powers knock on the door to secure energy supply.

Floriade Expo 2022

The city of Almere in the Netherlands is the stage for the seventh edition of the international horticulture exhibition – Floriade Expo 2022. Floriade is organized only once every ten years and the main theme of this edition is ‘Growing Green Cities’. This outdoor Expo lasts six months and is open till October 9th, 2022.

The UAE is a prominent participant, with a stunning 3D printed pavilion, with the theme ‘Salt Water Cities: Where land meets the sea’. The pavilion exhibits how the UAE has been resilient and was able to overcome the challenging environment of desert and sea to grow into sustainable and thriving communities. Featuring interactive sculptures and immersive installations, the UAE pavilion is a living lab encouraging visitors to learn about the abundance of salt-loving plants that thrive in the country’s challenging arid climate.

Uniting Water, Energy and Food

The UAE and the Netherlands share many commonalities, including the importance of innovation and “making the best of what we have”. The UAE has done an outstanding job in the execution of the mega project Expo 2020 Dubai, especially given the challenges the pandemic posed. It was an honor to be part of this world exhibition, where the whole world was represented, highlighting the aspirations of humankind. Our participation in Expo 2020 Dubai is exemplary of the Dutch approach when it comes to innovation. With the multi-year, regional strategy themed “Uniting Water, Energy and Food”, architect V8 led a consortium that put together a fully circular biotope in the Dubai desert. The “SunGlacier” machine on the roof of the pavilion captured 1,200 liters of water per day from the air.

This water was used for three purposes: cooling the pavilion, as drinking water, and for watering the edible herbs and leafy greens that grew on the central cone in the pavilion. On the inside of the cone, we grew delicious oyster mushrooms. The water harvesting machine was powered by beautiful organic solar cells, built into the skylights of the pavilion. All the construction materials for the pavilion were sourced locally. We are deconstructing the pavilion and repurposing all the materials, preferably in the form they were originally intended for. The characteristic sheet piles, for instance, will be used in other construction projects up to ten times!

As a result of all the innovation and hard work done in the Netherlands pavilion, we can proudly share with you that we have received over 10 awards including the “Best Sustainability innovation” and “Best Architecture & Landscape”.

Continued Focus

In our journey to unite Water, Energy and Food, Expo 2020 Dubai was instrumental. We have had the honor to host many VVIPS, delegations and over 950,000 visitors. Our national day was an absolute highlight, with the visit of our royal couple, as well as a trade mission headed by our minister for Foreign Trade and Development Cooperation. The MoU for the Joint Economic Committee was signed during this visit, with the aim to intensify bilateral trade. We have hosted 125+ events at our Expo pavilion, all with a focus to further develop the ties between the UAE and the Gulf region and the Netherlands.

With the progressive measures the UAE takes to be an even more business friendly destination, we see increased interest in the UAE by our Dutch clients, the Netherlands’ businesses. Building on the facilities freezones have to offer, the initiatives taken facilitate FDI and 100% foreign ownership, and the excellent positioning as a hub, we see a steady increase in business set-up and expansion. The UAE is an important trading partner for the Netherlands, ranking 3rd in the EU as trade partner and being one of the top priority countries in our foreign economic policy. Moreover, the Gulf region is a priority region for the Netherlands, providing the proverbial magnifying glass for all opportunities that arise here.

Momentum

Building on the strategy of Uniting Water, Energy and Food, where Expo 2020 Dubai has proven to be an accelerator for our bilateral interests, we’re now in the midst of celebrating our 50 years of bilateral relations with the UAE. This momentum is worth treasuring, especially with more relevant events coming up. With anticipation we’re looking out to the next big climate conference COP28. This theme is at the core of what drives us; jointly developing solutions for global challenges, that make a difference for the generation of today as well as for those to come.

The Ministry of Finance (MOF) has released high level details on the proposed UAE Corporate Tax (CT) regime in the form of a press release and Frequently Asked Questions (FAQs) published on web portal of tax authorities i.e. UAE MOF and the Federal Tax Authority (FTA). This is motivated by UAE’s desire to integrate into the global business community and meeting international tax standards, while minimizing compliance burden for UAE businesses and shielding small businesses and start-ups.

His Excellency Younis Haji Al Khoori, Undersecretary of MOF, stated that “the certainty of a competitive and best in class Corporate Tax regime, together with the UAE’s extensive double tax treaty network, will cement the UAE’s position as a world-leading hub for business and investment”. The relevant legislation for the CT regime (UAE CT Law) is currently being finalized and is expected to be promulgated during 2022. Once released, the UAE CT Law will provide details and guidance on several critical aspects.

UAE businesses will be subject to UAE Corporate Tax in a staggered manner from Financial Years (FYs) beginning on or after 1 June 2023. An entity having a FY beginning on 1 July 2023 and ending on 30 June 2024 will be subject to CIT from 1 July 2023. While, entities having a FY beginning on 1 January 2023 and ending on 31 December 2023, will be subject to UAE CT from 1 January 2024.

Scope

UAE CT is a federal tax and consequently, will apply to all businesses and commercial activities in the UAE except for extraction of natural resources which will continue to be taxed at the Emirate level. Likewise, the UAE CT regime will apply to individuals to the extent that they hold (or are legally required to hold) a business license or permit to carry out commercial, industrial and/or professional activities in UAE. This includes income earned by freelance professionals for activities carried out under a freelance license or permit.

Rates and Computation

Adopting a slab rate system, the headline UAE CT rate has been fixed at 9% to be calculated on taxable income as below:

An increased UAE CT rate would be applicable for large multinationals that meet specific criteria set with reference to pillar two of the OECD BEPS 2.0. Taxable income for a tax year is to be computed based on accounting net profit/income of a business reported in financial statements prepared in accordance with internationally acceptable accounting standards, after the prescribed adjustments. With a 9% standard tax rate, UAE CT regime will remain one of the most competitive tax jurisdictions in the world.

Exemptions from UAE CT

As per the issued FAQs, certain incomes have been kept outside the ambit of the UAE CT including:

• Foreign investors will not be subject to UAE CT if income is not earned from a regular trade/business in UAE;
• UAE CT will not apply on capital gains and dividends received by a UAE business from ‘qualifying shareholdings’; and
• UAE CT will not be applicable to qualifying intragroup transactions and restructuring subject to certain conditions to be specified under the legislation.

It has also been announced that UAE CT will honour tax incentives committed to businesses located in Free Zones, to the extent that eligible entities comply with applicable regulatory requirements and do not conduct business in mainland UAE. Further, current business models for trade in goods and/or provision of services may need to be restructured once further guidance is released by MOF. Free Zone businesses will nevertheless have to comply with certain obligations under UAE CT regime, including the obligation to register and file a Corporate Tax return and claim exempt as applicable.

Other Key Noteworthy Aspects From The Announcement

The UAE CT regime will allow a business to utilize tax losses incurred (from the date UAE CT is effective) to offset taxable income in subsequent tax years. Based on current guidance, it seems that eligibility for tax losses would be applied on a prospective basis i.e. from the first tax year onwards. Further, a ‘Fiscal Unity’ concept would be implemented as part of UAE Corporate Income Tax (CIT) law i.e. eligible UAE group of companies may elect form a tax group and file a single (consolidated) tax return subject to conditions to be specified.

A tax withholding regime has not been included in proposed UAE CT law. In other words, there will be no withholding tax on domestic and cross border payments. This can be seen as a substantial relief to UAE business as introduction of a withholding tax regime increases compliance burden and other administrative complexities. Foreign Tax Credit (FTC) will be allowed against UAE CT liability. This is in line with corporate tax regimes followed by most of the countries across the globe.

UAE businesses will need to comply with international Transfer Pricing (TP) rules and documentation requirements contained in OECD TP Guidelines (as amended in 2022) for related party transactions. It would be interesting to see if domestic transfer pricing rules are introduced similar to other tax jurisdictions in the region.

Accounting Considerations

As per the FAQs, accounting profits/income of a business (which is the starting point of a taxable income computation) should be as per internationally acceptable accounting standards. Hence, it will be obligatory for all businesses under UAE CT regime to maintain accounting records as per International Financial Reporting Standards or prevalent GAAP in UAE. It would be interesting to see whether UAE CT law mandate annual financial statements to be audited in the absence of a mandatory requirement under commercial law for a large section of businesses in the UAE.

Key Takeaways and What Business in UAE Should Do In The Interim

The announcements and guidance released by UAE MOF has clarified key design features of UAE CT, however, several uncertainties remain awaiting clarity in UAE CT law and its implementing regulations. Whilst the announcement implicates that large multinational groups (MNEs) will be taxed at a higher rate, it remains to be seen how this will be implemented from a policy perspective (e.g., increase in tax rate or a domestic minimum tax/ parallel tax) which is yet to be announced.

Businesses operating in UAE should consider the following to get ready well in advance of the UAE CIT go-live date:

• Finance functions should begin preliminary assessment of existing business operations to identify broad areas which could pose challenges from UAE Corporate Tax perspective
• Discuss the issues identified with relevant departments and plan an approach/ methodology to be adopted for implementing UAE CT
• Identifying possibility to restructure business operations and optimize the current business structure to minimize the impact of the proposed UAE CT and envisaged TP regulations
• Perform gap analysis to identify required system changes to meet financial information requirements for UAE CT compliance.

The United Arab Emirates government published the Federal Decree No. 32 of 2021 concerning UAE Commercial Companies Law (CCL 2021) which came into force on 2nd January 2022, on which date the Federal Decree Law No. 2 of 2015 and its amendments (CCL 2020) were repealed.

Prominent provisions and amendments to the Law:

Public Joint Stock Companies (PJSC)

(a) Allows the establishment of companies for the purposes of acquisition or merger, and SPVs, and establishes a legal framework for these new legal forms and excludes them from some provisions of the Companies Law through a decision issued by the SCA to regulate the work of these forms of companies.

(b) Abolishes the maximum and minimum percentage of the founders’ contribution to the company’s capital at the time of the public offering as well as cancels the legal limitation of the subscription period and leaving the two matters to what is specified in the prospectus.

(c) Eliminates the requirement for the nationality of the members of the board of directors and upholds the organization shareholders’ decisions in the election of board members, in accordance with the terms and conditions set by the competent authority.

(d) Allows companies to transform into a Public Joint Stock Company and sell its shares or offer new shares in a public subscription without being restricted to a certain percentage by following the price-building mechanism of the security.

(e) Allows companies to divide and create legal rules governing division operations, thus contributing to diversifying the company’s activities and fields of work and increasing its projects and growth opportunities.

(f) Allows companies to determine the face value and to determine the percentage of the offering. The CCL 2021 allows shareholders to determine the nominal value of shares as specified in accordance with the PJSC’ Articles of Association thus removing the range of AED 1 to AED 100 prescribed by the CCL 2020.

(g) Finds financing solutions for companies through the issuance of other types of shares.

(h) Allow companies to issue discounted shares in case the market value of a company’s share price falls below the nominal value subject to (a) passing a special resolution; and (b) obtaining the approval of the Securities & Commodities Authority (SCA). However, the result of issuance of shares at a discount will cause a negative reserve, which must be settled from its future profits before any profit can be distributed amongst the shareholders.

Limited Liability Companies (LLC)

(a) Expiration of the Board of Managers’ term If the term of the Board of Managers expires, and a new Board of Managers is not appointed, then the existing board will continue to manage the LLC for a period of 6 months. At the end of this term a new board must be appointed by the LLC, and if not appointed, the Department of Economic Development (DED) can appoint a board whose term will not exceed one year, during which, the LLC must appoint a new Board of Managers. Therefore, the appointment of the Board of Managers by the DED is a stopgap arrangement that will be regularised if the LLC fails to appoint the board itself.

(b) Appointment of the Supervisory Board CCL 2020 obligated LLCs to appoint a Supervisory Board when the company consists of more than 7 shareholders. CCL 2021 has increased the number of required shareholders to 15. The Supervisory Board is appointed from at least three shareholders to supervise the company’s annual reports, budgets, distribution of profits and to also supervise the LLCs’ managers and submit a report in this regard to the General Assembly.

(c) Decrease in Legal Reserve CCL 2021 has decreased the extent of allocating a legal reserve from 10% to 5%, and as prescribed by the CCL 2020, the CCL 2021 emphasized that shareholders can stop this allocation if the legal reserve reaches 50% of the share capital.

Foreign Company Branches

Allows branches of foreign companies licensed in the country to transform into a commercial company with UAE citizenship.

In this year of 2022, Japan and the United Arab Emirates are celebrating the 50th anniversary of the diplomatic relations which was established on 4th May 1972. The two nations have been fostering strong and friendly relationships for the past 50 years.

The trade relationship between Japan and the UAE have been traditionally highlighted by the cooperation in the energy field. However, in recent years both the governments have worked together on expanding the scope of cooperation in various fields such as education, renewable energy and space explorations. Let me point out the importance of the “Comprehensive Strategic Partnership Initiative (CSPI)” between our two countries, which is designed as a new cooperation framework based on the Joint Statement issued on the occasion of the visit by the then Prime Minister, Mr. Shinzo ABE to the UAE in 2018. The CSPI framework covers 12 fields of cooperation, not only traditional fields such as energy and business but also advanced technologies and women empowerment.

The bilateral cooperation has now flourished beyond the earth to the space. The UAE became the first Arab country to reach Mars in February last year with its Mars Mission named Hope Probe, and this made the people in the UAE and Japan excited. The HOPE was launched from the Tanegashima Space Center in Japan with an H2A rocket which was made in Japan by the Mitsubishi Heavy Industries, a renowned Japanese company. This is one among many contributions by Japan to the UAE’s space explorations, and the achievement gives us literally a “hope” for the future of our bilateral cooperation.

When we turn our eyes to the Expo, we can find interesting links between the two countries. The Emirate of Abu Dhabi participated in an Expo for its first time, even before the founding of the UAE, when the City of Osaka in Japan hosted the Expo in 1970. Half a century later, the UAE hosted the Expo 2020 Dubai, the very first Expo in the MENA region which saw the largest global gathering since the start of the pandemic, came to an end on March 31, 2022. Then, the baton of the Expo-host was handed over from Dubai to Expo 2025 Osaka, Kansai.

Relations on Trade and Commerce

Let me give you an overview of the trade relations between Japan and the UAE. The total value of imports from Japan to the UAE was USD 7.1 billion and that of exports from the UAE to Japan was USD 26.2 billion in 2019, which was before the pandemic. While the total value of both imports from Japan and exports to Japan dropped to USD 5.5 billion and to USD 16.3 billion respectively in 2020, the UAE is still one of the ten biggest importing partners for Japan and maintains strong trade ties with Japan. Transportation equipments account for the majority of Japan’s exports to the UAE. For Japanese industrial products, the UAE is an important destination because it has always been a re-exporting base to the markets abroad for these products. The importance of the UAE for Japan as a close trading partner would remain unchanged in the foreseeable future.

As for business and commerce relationships between our two nations, approximately 290 Japanese companies are currently operating in Dubai and the Northern Emirates, which cover a wide range of industries including manufacturing, wholesale and retail and transportation services. Many Japanese enterprises have established their regional headquarters for business in the Middle East and Africa in Dubai, owing to business-friendly environment for foreign companies created and enhanced by the UAE over the past 30 to 40 years, which consists of the stable social and political situation, the well maintained public safety and security and excellent infrastructure such as electricity, water, telecommunications, medical care and educational system, to name a few.

Furthermore, there are many free zones with much less restrictions for foreign investors and English is widely spoken as a business language in the UAE. These are the factors that have contributed to the UAE ranking first in the MENA region and 16th in the world in the business environment ranking issued by the World Bank. However, I believe the most important reason is that Dubai has created a diverse and tolerant society where people from different cultures and backgrounds find it easy to reside. The expat business community finds it welcoming that they have access to non-halal food and alcoholic beverages at select places in the emirate.

In addition, Dubai has succeeded in mitigating socio-economic impact of the pandemic since the early 2020, by starting PCR tests widely in the emirate while strengthening its medical systems, by having resumed to accommodate travelers including tourists from abroad as early as July 2020 and by accelerating the vaccination process at the fastest pace possible. Then, the Expo 2020 Dubai opened doors to the world, adopting effective preventive measures against the COVID-19 in October 2021. The event which was forced to be postponed for a year due to the pandemic, came to the grand finale with a great success at the end of March 2022. This success proved that those preventive measures by Dubai were correct and appropriate.

The government of Dubai has been standing firm with its policy of managing society “with COVID-19” since the early stage of the pandemic. This policy has made it possible for Dubai to continue to be a valuable and attractive investment destination not only for Japan, but also for countries all over the world.

Contribution to FDI from both sides

We, Japanese, welcome the trend of revamping the regulations on foreign investments in the UAE over the past few years. The abolishment of the required majority shareholding ratio of the UAE nationals in the foreign investments with the amendment to the Commercial Companies Law in September 2020 could be a tailwind policy for Japanese corporations who generally prefer 100% capital investments. Even the Japanese companies who have established their offices in the free zones see the new policy as a positive development in the UAE as it allows them to operate their businesses not only inside but also outside of the free zones.

It is noteworthy that each emirate is very proactive in attracting start-up companies from abroad. In this context, I could mention a few examples in Dubai – the Dubai Silicon Oasis, the Dubai Start-up Hub, and the Dubai International Financial Centre. Moreover, events such as GITEX and the Sharjah Entrepreneurship Festival are being held at various locations in the UAE to bring together the latest technologies and ideas from around the globe and Japanese start-ups are also turning their attention to the UAE.

Furthermore, I would like to point out that there is a growing business relationship between Japan and the UAE, not only at the national level but also at the local level, for example between Dubai and the Osaka Prefecture or the City of Osaka, the next host city of the Expo and the sister city of Dubai. Last December, the Osaka Chamber of Commerce and Industry co-hosted an online event with the Dubai Chamber of Commerce and Industry for business exchanges including a pitch session by enterprises located in Dubai and the other Middle Eastern countries who are keen to entering the Japanese market. Also, the Osaka Prefecture hosted a symposium in February 2022 connecting Japan and Dubai to encourage Japanese corporations to expand their operations into overseas as part of the commemoration events of the 50th anniversary of the diplomatic relations between Japan and the UAE.

Future Vision

As aforementioned, this year marks the 50th anniversary of the establishment of the diplomatic relations between Japan and the UAE. I, as the Consul-General of Japan in Dubai and the Northern Emirates, would like to emphasize my efforts in the following areas to make our relationship more multilayered and multifaceted towards the 50 years to come.

First, let me take up the economic area. I would like to bring new Japanese companies, especially start-up companies to the UAE, in addition to supporting Japanese enterprises who have been already operating in the UAE. On one hand, I believe that there are many start-ups in Japan which could provide solutions to the needs of the governmental organizations as well as private companies in the UAE.

On the other hand, I strongly feel that efforts have to be taken to make Japanese start-ups aware of the attractiveness of the UAE as an operation base and the business opportunities which the UAE is offering to foreign entrepreneurs. I would, therefore, like to promote exchanges between companies including start-ups from both nations and contribute to further economic development of our countries.

Secondly, I would like to increase the number of inbound tourists from the UAE by introducing them to various charms of Japan, especially food related ones such as wide variety of culinary in Japan and high-quality Japanese ingredients. We offered Saroma Wagyu which is one of the premium beef produced in the Hokkaido prefecture, Anpogaki (persimmons) from the Fukushima prefecture, and Crown Melon from the Shizuoka prefecture, when I hosted our Emperor’s Birthday Reception on the occasion of the 62nd birthday of His Majesty the Emperor Naruhito in February. After witnessing the long queue and receiving positive feedback from the guests, I found once again the tremendous market potential our food products have.

Lastly, I would like to develop platforms for further exchanges between the youths of Japan and the UAE who will lead the next generation of our great nations. In this context, I am strongly interested in promoting exchanges in new areas such as e-sports and e-games. The UAE Olympic Committee has recently recognized e-sports as an official event, and this proves the growing popularity of e-sports in the UAE. I have high expectations for young people to play a key role for deepening mutual understanding between Japan and the UAE and for being the driving force to further enhance our existing harmonious relationship for the next 50 years.