UAE Financial Sector Performance Strong on the Back of 151 Decisions Taken in 2023

March 13, 2024 by Middle East Briefing

The UAE issued 151 decisions in 2023 to enhance the efficiency and sustainability of resources in the country and promote the financial sector. As of 2023, the UAE signed a total of 147 international agreements to avoid double taxation and 112 agreements to encourage and protect investments.

By Lucia Brancaccio

His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai recently conducted an official assessment of the UAE Government’s financial achievements and initiatives for the year 2023.

The review revealed that the UAE’s Cabinet issued a total of 151 decisions related to the financial sector during that year, encompassing the promotion of a variety of new policies and initiatives, laws and legislations, and the approval of international agreements.

According to the evaluation of H.H. Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, First Deputy Ruler of Dubai, Deputy Prime Minister, and Minister of Finance of the UAE, the decisions taken, and the strategies implemented by the UAE’s government significantly contributed to all sectors of development within the UAE, aligning with the country’s development plan.

Additionally, these actions have also proven to be beneficial in improving the efficiency and sustainability of government resources, further supporting the government’s goals.

Legislative measures and regulatory decisions

In 2023, the UAE government took significant steps to strengthen its public financial framework through a series of legislative and regulatory initiatives. These endeavors aimed to enhance financial stability and financial management efficiency across the country.

Specifically, the government:

Introduced 15 federal laws in the financial sector, reflecting a strong commitment to ensuring compliance, promoting transparency, and fostering investors’ confidence in the UAE’s financial markets.
Implemented 62 regulatory decisions crafted to optimize the management of financial resources and cash flow in the UAE.
These regulatory decisions encompass a wide range of areas, including 10 decisions directed to the regulation of tax affairs in the country, 17 regulating government services and fees, and 6 other policies on other financial matters;
Finally, the Cabinet approved 9 projects and national financial initiatives, underscoring the government’s proactive stance towards driving economic growth and development.

As mentioned during the review process, key initiatives include plans to sustain the Federal Government Budget, Sukuk (Islamic Bonds) restructuring, and electronic invoicing. Furthermore, the Cabinet updated the Federal Government Public Debt Strategy of 2021-2023, restructured the Federal Government franchising fees for the firms operating in the telecommunication sector in the UAE, and established a database for real estate assets worth approximately AED62 billion (around US$15 billion).

International agreements

The UAE demonstrated proactive engagement also on the global stage through a series of diplomatic initiatives, solidifying its position as a key player in the international landscape. Notably, the country stipulated eight new international agreements, strategically aimed at bolstering its competitiveness and promoting stronger ties with partner nations.

These international agreements can be categorized into two distinct categories:

Investment protection agreements: The UAE signed four agreements of this kind, aimed at incentivizing, and protecting investments between the parties involved. These agreements, concluded with the Republic of Côte d’Ivoire, the Republic of Mozambique, Barbados, and the Cooperative Republic of Guyana, contributed to the UAE’s growing network of investment protection agreements, reaching a total of 112 by the end of 2023.
Double taxation avoidance agreements: The UAE additionally signed four agreements focused on the avoidance of double taxation and the prevention of financial evasion related to taxes on income. These agreements, signed with Côte d’Ivoire, the Czech Republic, the United Republic of Tanzania, and the Cooperative Republic of Guyana, brought the total number of UAE agreements addressing double taxation to 147.

The ongoing commitment to signing investment promotion agreements and double tax treaties underscores the UAE’s strategic efforts to advance its development objectives, by diversifying its national income and addressing challenges associated with cross-border trade.

Results achieved from these initiatives

The 151 decisions taken by the UAE Cabinet in 2023 displayed successful progress both in strengthening the country’s global competitiveness and in consolidating its partnership with institutions of the international community.

Global competitiveness

Specifically, the UAE achieved first place in four indexes, including for “efficiency of government spending” and “government budget balance” with the GDP in the Prosperity Index report in 2023; the index of “adaptability of the government policy” in the World Competitiveness Booklet 2023, and in the index of “financial openness” in the Travel and Tourism Development Report 2023, published annually by the World Economic Forum.

This performance serves as a testament to the UAE’s successful commitment to creating a resilient and dynamic financial ecosystem conducive to sustainable growth and development.

The UAE benefits from a flexible legislative framework and advanced digital infrastructure, bolstering opportunities for finance, economy, and investment organizations.

Consolidating partnerships with institutions of the international community

In the realm of international relations, the UAE has strategically developed a financial approach to engage with regional and global partners, including international ministries and entities, aimed at positioning the country as the premier choice for global investment destinations. This objective is to be achieved through the creation of a favorable and sustainable investment climate through the removal of barriers, adhering to international standards of competitiveness, transparency, and exchanging tax information, the avoidance of double taxation, and the safeguarding of investments, among other measures.

The UAE aspires to attract around US$150 billion in foreign direct investment (FDI) by 2031.

The country has adopted the accrual basis of accounting in line with the International Public Sector Accounting Standards (IPSAS). The first positive results stemming from this strategy emerged already in 2023, as the UAE ranked among the top 10 countries globally in terms of attracting FDI, thereby suggesting enhanced confidence among investors within the UAE’s financial system.

Now the country is preparing to further consolidate its position as an attractive and sustainable destination for investments by hosting the annual meeting of the Board of Governors of the European Bank for Reconstruction and Development and the Business Forum in 2026.

Looking ahead

Following the positive performance registered in 2023 in the financial sector, the Minister of Finance renewed its commitment to continue promoting UAE’s economic performance also in the coming years, in alignment with the UAE Economic Principles Document.

This commitment is expected to be deployed through the preparation of necessary legislation, laws, policies, and frameworks specifically tailored to protect the stability of the country’s financial systems and ensure sustainable development. As a result, the confidence of investors will continue to grow, thereby encouraging an increased flow of FDI in the country.

The successful attraction of a higher number of FDI would furthermore contribute to UAE’s further development of the non-oil sector, which currently accounts for 70 percent of the country’s total GDP.

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