The UAE’s Trading Sector: Discussing Opportunities and Challenges With Vitaliy Chiryassov
In this engaging interview, we delve into the current state and future prospects of the trading sector in the United Arab Emirates with Vitaliy Chiryassov, the CEO of UPPERCASE, an international consulting firm, and UPPERSETUP, a cutting-edge technological initiative aimed at simplifying business registration and management within the UAE.
Q: Vitaliy, could you provide us with an overview of how trade is currently evolving in the UAE?
A: The trade sector in the UAE is currently thriving, experiencing a growth rate of approximately 5% per year. This is a remarkable achievement, particularly in light of the challenges posed by the COVID-19 pandemic. To contextualize this, the pandemic had a profound impact on oil revenues, and as the UAE continues its efforts to diversify away from an oil-dependent economy, it felt significant repercussions in 2020, affecting its trade market as well. However, the UAE market has demonstrated remarkable resilience, bouncing back rapidly. According to the International Monetary Fund, the market saw a growth of 2.1% in 2021, followed by over 5% in 2022 and similar figures expected in 2023. The driving forces behind this growth are the UAE’s robust trade partnerships with the US, Asia, and Europe. Notably, the UAE has been the top export market for the US in the Middle East and Africa since 2009. As the Emirati government continues to diversify its economy away from oil, we anticipate even stronger growth in the future.
Q: How would you characterize the UAE’s international trade relations?
A: The UAE boasts strong trading relationships with major regions including the US, Asia, and Europe. In terms of its relationship with the US, over 1,500 American companies have established operations in the UAE, utilizing it as a hub for their activities across the Middle East, Africa, Europe, and Asia. The UAE has been recognized as the leading US export market in the Middle East and Africa since 2009. In Asia, the UAE has engaged in trade agreements with key nations such as China and India. For example, a Comprehensive Economic Partnership Agreement (CEPA) was signed with India in 2022, with the ambitious goal of increasing bilateral trade to $100 billion over the next five years. With China, there exists a strategic partnership encompassing various sectors, including energy, technology, and infrastructure. Regarding Europe, the UAE is currently negotiating a free trade agreement with the European Union, and while it remains unfinalized, there are already robust bilateral trade agreements in place with several European countries, including a bilateral investment treaty with Germany and a double taxation agreement with the UK.
Q: What are the advantages of the UAE for starting a trading business in the Middle East?
A: There are numerous advantages to consider, but if I had to highlight the most significant ones for trading businesses, I would emphasize the following:
- Strategic Location and Infrastructure: The UAE’s geographical positioning provides quick access to key markets. For instance, vessels departing from Dubai’s Jebel Ali Port can reach Mumbai in approximately three days, Singapore in seven days, and major European ports within two weeks. This port, along with others like Khalifa Port in Abu Dhabi, manages millions of TEUs annually, establishing itself as one of the busiest container ports worldwide.
- Free Trade Zones: The presence of free trade zones, such as the Jebel Ali Free Zone (JAFZA), offers significant benefits for trading companies, including the absence of import or re-export duties and streamlined customs processes that often allow for shipment clearance within hours.
- Cost Efficiency: The lack of import taxes and the modern logistics infrastructure contribute to lower operational costs for trading companies compared to other regional hubs. For example, the Dubai Logistics Corridor seamlessly connects Jebel Ali Port and Al Maktoum International Airport, facilitating the transfer of goods between sea and air transport in under an hour.
Q: What are some key features or peculiarities to be mindful of when running a trading business in the UAE?
A: It’s important to note that regulations are often subject to change, but they are consistently evolving in a positive direction. For instance, many trading activities that previously required a local partner can now be conducted with 100% foreign ownership. The challenge lies in staying informed and making timely adjustments to comply with the latest regulations. The UAE also enforces strict standards for imported goods, necessitating specific certifications or import permits depending on the product. Some items may require testing or special permissions before they can be sold in the UAE, making thorough research imperative.
Logistics play a crucial role in the success of any trading business. While the country boasts excellent infrastructure, it is essential to optimize your supply chain by selecting reliable suppliers and carriers, organizing efficient shipping and delivery processes, and effectively managing warehouse costs. Lastly, understanding cultural nuances is vital in the UAE business environment. Building relationships is key to unlocking opportunities, as the country places a high value on tradition and personal connections. While the business landscape is notably international, grasping local customs and business etiquette is essential for success.
Q: How difficult is it to open a trading company in the UAE?
A: While establishing a trading company in the UAE is certainly feasible, it is not without its challenges, primarily due to the various licenses and permits required. Entrepreneurs must navigate through multiple government agencies to obtain the necessary permits, which can be dependent on the type of goods being traded. Each agency has its own set of requirements, and the processing time can be considerable. Being well-prepared when submitting paperwork can expedite this process significantly.
This is why many aspiring entrepreneurs opt to engage with a consultant who has the requisite experience and connections to streamline the incorporation process. Such consultants can provide valuable guidance on the specific licenses and permits needed based on the business model, ensure all documentation is accurate, and liaise with the relevant government bodies on the entrepreneur’s behalf. Based on our experience, this approach can save both time and money.
Q: What are the most popular trade areas currently in the UAE?
A: The UAE’s export market is diverse, with several prominent sectors. The oil and gas industry remains dominant, with crude petroleum accounting for approximately 26% of total exports, followed closely by refined petroleum at around 14%. Gold ranks third, constituting about 8% of exports. Other notable exports include diamonds, jewelry, and raw aluminum.
When considering trade partners, India leads the way, representing around 12% of the trading volume, followed by Japan at 10%, China at 8%, and Saudi Arabia at 7%.
Q: What licenses do you need to obtain to start a trading business in the UAE?
A: To initiate a trading business in the UAE, one must secure a Trade License. There are two primary avenues for this:
- Mainland Dubai Trade License: This license typically costs around 13,285 AED and takes approximately 5-7 working days to process. The procedure involves several steps, including reserving a trade name, obtaining initial approval, registering a lease agreement in the Ejari system, signing a Memorandum of Association, and ultimately applying for the license itself.
- Free Zone License: An example is the Meydan Free Zone Trade License, which costs about 14,500 AED and also requires 5-7 working days for processing. This package includes a virtual office. Alternatively, the Ajman Free Zone Trade License is more budget-friendly, priced at around 5,555 AED and taking about 5-6 working days. Ajman offers various packages like Kickstart, Starter, or Visa packages, each providing different office solutions and visa quotas.
It is important to note that the final costs for these licenses can vary. For instance, with the Mainland license, an additional 5% of the annual office rent is required. Free Zone licenses typically include some form of office solution in their base price.
Q: What are some important requirements for setting up a trading company in the UAE?
A: To begin, you must select and reserve a trade name for your company. This name must comply with local regulations, which can be quite specific. For example, in Dubai, using abbreviations or numbers in your company name may incur additional fees ranging from 1,000 to 3,000 AED.
You will also need to define your business activities, which must be chosen from a pre-approved list that varies depending on whether you are operating in a Free Zone or on the mainland. Careful selection is crucial, as these activities determine what your company can legally engage in.
Office space is another requirement. In Free Zones, there are options ranging from virtual offices to physical spaces. For instance, in Meydan Free Zone, a virtual office is included in the license cost, but if you require a greater number of visas, you may need to upgrade to a physical office. The Ajman Free Zone offers different packages that come with various office solutions, from virtual offices to executive offices.
Additionally, you must provide various personal documents, including passport copies, Emirates ID (for residents), and passport-sized photos. If you are a UAE resident, you will also need a No Objection Certificate from your current employer. Some zones might require further documentation, such as police clearance certificates or medical records, especially for higher-risk activities.
Various forms and agreements will also need to be signed, including a Memorandum of Association. Some zones now offer electronic signing options, enhancing convenience. For instance, in Ajman Free Zone, there is a video KYC process where entrepreneurs record a brief video showing their passport and stating their personal details.
Q: Last but not least, how can your company, UPPERCASE, assist with the incorporation process?
At UPPERCASE, we specialize in facilitating business setups in the UAE. Over our 15 years in the international market, we have successfully assisted thousands of companies in establishing themselves in various countries, including trading businesses. We provide legal, accounting, and digital business solutions tailored for both private and corporate clients.
Moreover, we have recently launched UPPERSETUP, an online platform designed to streamline the process of initiating and supporting businesses in the UAE. The platform features step-by-step guides, transparent pricing, and personalized recommendations based on your business aspirations.
One of UPPERSETUP’s standout features is its business dashboard, which centralizes all project information, communications, and documents. It even keeps track of license validity and sends reminders for renewals.
Additionally, we offer essential services for trading companies, such as assistance in opening bank accounts, acquiring resident visas, and providing comprehensive accounting, tax, and legal support.