Exporting to the UAE represents a significant opportunity for Italian companies due to its large population and rapidly expanding domestic markets.
The United Arab Emirates (UAE) are an essential hub for Italian companies targeting not only the markets of the Middle East, but also those of East Africa and South Asia. In just over 50 years, this federation has transformed into one of the most advanced and dynamic economies in the region.
What specific opportunities are opening up for exports in the country, especially in the construction sector, where the building envelope sector has recorded a overall growth of 28.33% In the last five years?
The United Arab Emirates 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 was aided by a reform that allows those wishing to export to the UAE to hold up to 100% of local companies, eliminating the previous limit of 49%. In addition, the bureaucratic process for establishing foreign companies has been simplified and restrictions on the nationality of the chairman and majority of the board of directors of joint stock companies have been eliminated.
Let us now explore what other positive aspects are crucial for Italian exports and need to be considered in the internationalization strategies toward this confederation, with a focus on the construction sector.
The UAE has invested heavily in Free Trade Zones (FTZs) for the operation of companies that want to export to the region. In these zones, companies can be wholly 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 FTZs, import tax averages 5% on all goods, with some exceptions. FTZs have contributed to economic development, attracted foreign investment and promoted the acquisition of know-how crucial to the country's growth.
To attract and retain skilled professionals from abroad, the Emirates then introduced in September 2021 the “Green Visa” for professionals, investors, entrepreneurs and graduate students, enabling them to sponsor themselves even without a business. The “Freelancers Visa” for self-employed workers in specialized fields has also been introduced.
The UAE offers a very favorable tax system for foreign companies, with no federal corporate income tax. However, the UAE can charge income tax locally up to 55%, but only on entities engaged in the natural resources sector. The general VAT of 5% was introduced in 2018, exempting some sectors such as health care, education and public transportation.
With a high per capita income estimated at over $47,498 (in purchasing power parity), the Emirates offers a market with high standards of living, attractive to luxury sectors. Emirati women, Western residents and tourists significantly influence the market, with 43% of their purchases devoted to fashion, spending on average 300% more than the average population.
In recent years, the UAE has embarked on 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 national GDP by 2031.
This context, enriched by the positive legacy of Expo Dubai 2020, presents an opportunity for increased demand for Italian goods in non-oil sectors such as construction.
From the latest research by ICE-Agency for Overseas Promotion and the’internationalization of Italian enterprises, it emerges that Italian exports in the field of construction technology to the United Arab Emirates (UAE) reached €60 million in the first half of 2023. This result was the result of an increase in export volume of To 98% in the construction materials industry. and natural stone and 29.89% in that of building technologies, compared with the same period in 2022.
The main opportunities for Italian companies 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 opportunity to obtain contracts for the construction of civil works in both the public and private sectors, acting as sector suppliers or sub-contractors.
The greatest opportunities arise for companies active in construction, metal products, and services. This backdrop generates significant demand for materials, processing and construction machinery, as well as furniture (the residential sector accounts for 90% of the market, while the office sector accounts for the remaining 10%), furniture and interior design, including accessories and complements.
Italian entrepreneurs who intend to export to the UAE can thus count on an environment rich in opportunities. However, gaining or consolidating market share in the UAE and competing effectively in international competitions requires a deep understanding of the local market and a well-defined strategy.
Octagona provides valuable support to companies looking to expand their business in the UAE and India, offering specialized and targeted internationalization consulting for businesses. To explore all opportunities, including in the construction sector, we invite you to contact us.
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