Problems relating to Trade and Investment on Gulf Cooperation Council
1. Restrictions on entry of foreign capitals |
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Issue |
Issue details |
Requests |
Reference |
| (1) Restricted Foreign Capital Majority Share Contribution Rate | - UAE and Kuwait restricts up to 49% the capital contribution ratio of foreign funded enterprises (FFEs), while the capital contribution of FFEs is effectively disallowed in many business sectors in Qatar and Saudi Arabia. Restrictions upon FFEs capital contribution doggedly continue. (Company Act amendment reportedly approved by the cabinet in December 2011 remains unpromulgated in detail, as of 25 January 2015.) - In many countries, restrictions remain on foreign capital majority share contribution, barring FFEs' entry in setting up distribution foothold in GCC. (Commercial capital investment solely by FFE's is disallowed.) |
- It is requested that Government of UAE (GOU) repeals the restrictions on FFEs' capital contribution ratio. - It is requested that GCC liberalises the domestic market to allow FFEs' dynamic sales activity as distributor. |
- Company Act, or Foreign Investment Act of each GCC Member State - Distributor Protection Laws |
| (Action) - UAE Company Act was enforced from 1 July 2015, with grace period granted to existing companies up to 30 June 2016. |
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| (2) Protective Policy Favouring Locally Capitalized Distributors | - Due to the compulsion of distribution of 100% locally capitalized distributors, FFEs are unable to make their own direct distribution. Upon occurrence of disputes, FFEs position is extremely unfavorable. (While it is possible to cause the local enterprises with less than 100% FFEs capital ownership to function as an effective distributor, FFEs' majority capital contribution is disallowed.) - Under the domestic industry protection policy, it is imperative to designate indigenous distributor in each GCC country. However, the termination of the distributor agreement drives FFEs into extremely disadvantageous terms (with the demand for payment of outrageous penal sum). |
- It is requested that GCC countries repeal the respective Distributorship Law. - While it is best to have the Agency Act repealed in each country, it is impractical in the light of the history of requests made on this issue. It is requested that each GCC country amends the respective Distributorship Law to enable FFEs and the new local distributor to negotiate favorably termination/change of the local distributor with the premise of appointing a new local distributor, toward the staged solution of the problems, (by applying the principle of competition to the existing local distributor, as well). |
- Distributorship Law of each GCC country |
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