Exporting to the United Arab Emirates represents a significant opportunity for Italian businesses, thanks to their large population and rapidly expanding domestic markets.
The United Arab Emirates (UAE) they are an essential hub for Italian companies targeting not only the Middle Eastern markets, but also those of East Africa and South Asia. In just over 50 years, this federation has transformed itself into one of the most advanced and dynamic economies in the region.
What specific opportunities open up for exports in the country, especially in the construction sector, where the building envelope sector has recorded a global growth of 28,33% in the last five years?
The UAE has consolidated its position as a major magnet for Foreign Direct Investment (FDI), ranking first in the Arab world and 19th globally for inflows in 2021, according to the UNCTAD World Investment Report 2022.
This result was favored by a reform that allows those intending to export to the United Arab Emirates to hold up to 100% of local companies, eliminating the previous limit of 49%. Furthermore, the bureaucratic process for establishing foreign companies has been simplified, and restrictions on the nationality of the president and majority of the board of directors of joint-stock companies have been eliminated.
Let us now explore which other positive aspects are crucial for Italian exports and must be considered in the internationalization strategies towards this confederation, with a focus on the construction sector.
The UAE has invested heavily in Free Trade Zones (FTZs) for businesses to export to the region. In these areas, companies can be entirely foreign-owned and enjoy tax exemptions that last between 15 and 50 years, renewable. There are no corporate taxes for at least 15 years, no currency restrictions or customs duties. Outside the FTZ, the import tax averages 5% on all goods, with some exceptions. FTZs have contributed to economic development, attracted foreign investments and promoted the acquisition of know-how crucial for the country's growth.
To attract and retain qualified professionals from abroad, the Emirates then introduced in September 2021 the “Green Visa” for professionals, investors, entrepreneurs and graduate students, allowing them to sponsor themselves even without a business. The “Freelancers Visa” has also been introduced for self-employed workers in specialized sectors.
The Emirates offers a very favorable tax system for foreign businesses, with no federal corporate income tax. However, the UAE can apply income tax locally up to 55%, but only on entities engaged in the natural resources sector. The 5% general VAT was introduced in 2018, exempting some sectors such as healthcare, education and public transport.
With a high per capita income estimated at over 47,498 dollars (at purchasing power parity), the Emirates offer a market with high living standards, attractive for the luxury sectors. Emirati women, Western residents and tourists significantly influence the market, with 43% of their purchases dedicated to fashion, spending on average 300% more than the average population.
In recent years, the United Arab Emirates has initiated a process of economic diversification to reduce dependence on oil and promote sustainable development. This strategy aims to increase the contribution of non-oil sectors to the country's economy, creating a development model based on innovation, technology and creativity.
Among the key projects is “Operation 300 Bn“, launched by the Ministry of Industry and Technology, which aims to double the contribution of the industrial and manufacturing sector to the national GDP by 2031.
This context, enriched by the positive legacy of Expo Dubai 2020, represents an opportunity to increase demand for Italian goods in non-oil sectors such as construction.
From the latest research by ICE-Agency for promotion abroad andinternationalization of Italian companies, it emerges that Italian exports in the field of technologies for the construction sector in the United Arab Emirates (UAE) reached €60 million in the first half of 2023. A result resulting from the increase in export volume equal to to 98% in the building materials sector and natural stones and 29,89% in construction technologies, compared to the same period in 2022.
The main opportunities for Italian businesses focus on large investment projects, particularly in the infrastructure sector supported by the UAE government. These projects aim to boost international tourism through the construction of ports, airports, road and rail networks, hospitals, schools, tourist facilities, hotels and industrial plants. This offers Italian companies the possibility of obtaining contracts for the construction of civil works in both the public and private sectors, acting as sectoral suppliers or sub-contractors.
The greatest opportunities arise for companies active in construction, metallurgical products and services. This context generates a significant demand for materials, processing and construction machinery, as well as furniture (the residential sector represents the 90% of the market, while the office sector represents the remaining 10%), furnishings and interior design, including accessories and complements.
Italian entrepreneurs who intend to export to the United Arab Emirates can therefore count on an environment full of opportunities. However, to gain or consolidate market share in the UAE and compete effectively in international competitions, a deep understanding of the local market and a well-defined strategy are required.
Octagona provides valid support to companies that want to expand their business in the United Arab Emirates and India, offering specialized and targeted internationalization consultancy for businesses. To explore all the opportunities, including in the construction sector, we invite you to contact us.
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