• $4bn: expected trade between UAE and Israel
  • 0% tax in free zones
  • 1bn AED incentive scheme for agri-tech companies in Abu Dhabi
  • Smart Dubai 2021
  • CAGR of pharma in the UAE exceeded Israel’s by 2.2x last year (8.5% vs 3.9%)

A momentous agreement and opportunity

The UAE has become the first Gulf nation to normalise its relations with Israel, on 28 August 2020, UAE President Sheikh Khalifa Bin Zayed Al Nahyan issued Federal Decree Law Number 4 of 2020, ending a ban on business and trade dealings with Israel that had stood since 1972.

“Dubai is in many ways the economic capital of the Arab world, of South Asia and of East Africa. It is one of the four greatest business hubs in the world, where people put aside disagreements and prefer personal connections.” – Dorian Barak, an Israeli-American fund manager and venture capitalist

Positioned in a highly strategic location, between East and West the UAE has been able to establish itself as world-class hub for international commerce, particularly through its focus on logistics (e.g. the success of the country’s primary airlines Emirates and Etihad and the development of free zone ports). This, in addition to an extremely progressive approach to foreign investment and an extensive double taxation treaty regime the UAE has become a highly enticing country of opportunity for foreign businesses.

The UAE market is incredibly versatile and open to investors. In fact, Abu Dhabi’s Chamber of Commerce and Industry has forecasted that the growth rate of the UAE economy over the coming years is 13%. The Emirates have been liberalizing their policies, to encourage foreign individuals and companies to invest and take part in this exciting growth process. One of the biggest incentives for foreign companies to invest is tax exemption, drawing many foreign companies to establish activities in the country’s world-renowned free zones.

Which sectors will benefit from this new relationship?

In particular, the tech and innovation, tourism, oil, and pharma sectors are expected to flourish:

In reality, the normalisation of relations between the UAE and Israel will provide universal benefits for businesses in each country. Initial estimates show trade between the two countries should be in excess of $4bn per year. However, there are certain industries in particular that are expected to thrive:

Tech and Innovation

In recent years, the UAE has started to focus heavily on tech and innovation with a notable desire to attract tech companies from around the globe. With ‘Smart Dubai 2021’ just around the corner and a focus on key sub-sectors such as cloud computing, cybersecurity, IoT, artificial intelligence and Smart Cities the UAE has set out its plans to become a pioneering hub in the tech industry.

The well-established expertise of the Israeli tech industry would be a perfect fit for the trajectory that the UAE is heading in.

Agriculture

In a world with increasing temperatures and growing concerns with the sustainability of farming, Israel has firmly established itself as the world leader in sustainable desert agriculture. With innovations in hydroponic farms, drip irrigation and agri-tech Israel has pioneered the industry.

This expertise is much needed in the comparably junior agriculture industry in the UAE. With a policy of industry specific farming grants and cheap licensing the UAE is committed to revolutionising its agricultural presence to reduce its reliance on International food imports.

Health and pharmaceuticals

Despite no formal international agreement, the UAE and Israel have reportedly been cooperating in healthcare for a while, coming to a head with a mutual collaboration on the treatment of Covid-19.

To achieve sustainable growth for the healthcare and pharmaceutical industry the U.A.E. government has adopted several long-term plans. The Dubai Industrial Strategy 2030 and the Abu Dhabi vision 2030, for instance, consider the pharmaceutical industry as one of the main priority sub sectors to develop due to its, export potential, future growth prospects and mid to long-term economic impact.

The UAE is also focusing on enticing international pharmaceutical companies to establish and expand their presence in the country. To bolster their infrastructure the UAE has formed several free zones throughout the country that have become hubs for the pharmaceutical industry such as Dubai Healthcare City, Dubai Science Park and Jebel Ali Free Zone.

When comparing the two nations the CAGR of pharma in the UAE exceeded Israel’s by 2.2x last year (8.5% vs 3.9%) which means that the Israeli pharmaceutical industry can benefit hugely from working with the UAE market.

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Sources:

https://www.arabianbusiness.com/technology/451717-how-the-gulf-is-turning-to-agritech-to-boost-food-security-ambitions

https://www.israelhayom.com/2020/08/28/historic-breakthrough-paves-way-for-launch-of-uae-israel-business-council/

https://www.arabianbusiness.com/business/453049-welcoming-opportunities-the-benefits-of-uae-israel-cross-border-investment

https://www.ft.com/content/55127d22-d2e6-4ab7-81e6-cf5658467ccc

https://www.bbc.com/news/business-54574022

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