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Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili

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Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili

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arab emiratesBusiness Relations

and Investment Guide

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made in italyin the unitedarab emirates

Business Relations and Investment Guide

ISBN 978-88-99517-15-1

© Copyright Fondazione Nazionale dei Commercialisti. Edition October 2015

Many thanks to the Manlio Masi Foundation and the Commission for the Internationalisation of SMEs Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili (Italian National Council of Chartered Accountants and Accounting Experts) for their valuable contribution.

The translation, adaptation in whole or in part, reproduction by any means (including microfilm, film, photocopies), and electronic storage are reserved in every country.

iii

Table of Contents

Introduction 1

1. The importance of Made in Italy for the UAE market 5

2. Italy’s position in the United Arab Emirates 19

2.1. Economic outlook 19

2.2. The country’s competitiveness 20

2.3. Forecasts 21

2.4. The UAE’s position in global trade 23

2.5. Italy-UAE trade 25

2.6. Direct foreign investments by the United Arab Emirates in Italy 31

2.7. Direct foreign investments by Italy in the United Arab Emirates 33

2.8. Sectors with most potential for Italy 37

3. Commercial relations between Italy and the United Arab Emirates 39

4. How to strengthen and develop trade between Italy and the United Arab Emirates 53

Made in Italy in the United Arab Emirates

iv

5. Country profile 57

5.1. Geographical references 57

5.2. Historical background 58

5.3. Political system 60

5.4. Legal system 61

5.5. Demographic data 63

5.6. Religion 64

5.7. Currency 64

5.8. Education 64

5.9. Customs and traditions 65

6. Investing in the UAE 67

6.1. General situation 67

6.2. Business activity 68

Conditions and limitations 68

Business activity in corporate form 68

The procedure for incorporating a company 69

The Branch or Representative office 70

Doing business as a sole trader or as a professional 71

6.3. The areas dedicated to business development 71

The free trade zones 71

The special economic zones 73

6.4. The protection of intellectual and industrial property 73

Table of contents

v

7. Taxation 75

7.1. General situation 75

7.2. Direct taxes 75

Corporate Income Tax 76

Taxation of individuals 77

7.3. Indirect taxes 77

Property tax 77

Consumption taxes 77

Customs duties 78

Registration tax and tax on property transfers 78

7.4. Social security contributions 78

7.5. Exemptions 78

7.6. Tax relations with Italy 79

Appendix. Investing in Italy 81

1

Introduction

Gerardo LongobardiPresident Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili

Giovanni Gerardo ParenteCNDCEC Council Member in charge of international affairs

Commercialisti carry out their professional activity in a world characterized by speed, by regulations extending beyond the territorial borders and by the mutability of the national and international legislative framework. Our daily work continually offers us possibility to meet different professional realities and learn about the socio-economic conditions of other countries, either through our consultancy services provided to enterprises that operate abroad, or through the increasing competition with colleagues and professional associations of other countries and multinationals, offering any kind of consulting services. The question to be asked regards our level of awareness of these situations – What do we know? How much do we know and what is our organisation like? CNDCEC main objective is to strengthen the role of commercialisti operating as experts and consultants in the process of internationalisation of enterprises. This objective is achieved by promoting the improvement of the competencies of the Italian professionals, and developing communication channels and opportunities to interact with foreign professionals. Our goal is that commercialisti should play an active role in the globalisation of the professional relations, and not merely be subject to it.Hence, the idea of carrying out business missions aimed at internationalisation, the first one will be in the United Arab Emirates. In the international trade scenario, the business relations between Italy and the United Arab Emirates are a paradigmatic example of the great exchange


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potential between a country - Italy - with few natural resources but with great manufacturing skills, including a rich historical and cultural heritage, and the United Arab Emirates, a country with significant natural resources, especially hydrocarbons, but whose manufacturing activity has begun more recently. The Consiglio nazionale dei dottori commercialisti e degli esperti contabili has decided to aim for internationalisation and has chosen the United Arab Emirates for an important international business mission, on account of their high propensity for free trade and their great interest in the Made in Italy.Dubai, one of the most important trading hub of the Emirates and of the whole Middle East, will host EXPO 2020, taking the baton from EXPO Milano 2015. This will be a great opportunity to strengthen the business relations between Italy and the United Arab Emirates.This book, resulting from the synergic collaboration of Fondazione Nazionale dei Commercialisti, Osservatorio nazionale per l’ internazionalizzazione e gli scambi of the Manlio Masi Foundation and of CNDCEC Commission for internationalisation is an important contribution to professional accountants and economic operators of both countries. It deals with topics ranging from the economy to the foreign trade of the two countries, offering to people interested in investing in the Emirates a useful guide to the country, in particular for what concerns trade and fiscal matters, as well as an overview on investing in Italy.

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Introduction

Giorgio SgangaPresidentFondazione Nazionale dei Commercialisti

The business relations between Italy and the United Arab Emirates are characterized by a continuing economic growth that proves the strong relationship between the two countries. This is mainly based on the considerable appeal that the Made in Italy products have on the Emirates, a country that, notwithstanding the international crisis and the fall in oil prices, remains a sound, growing economy. Italy has a firm leadership in the export of products with a high added value, with interesting prospects in the agri-food and machinery industries. The extraordinary multi-ethnicity of Emirati people and the rising stream of international visitors, facilitated also by major airport infrastructures, make the United Arab Emirates a unique showcase for the Made in Italy products, which have a true vocation for the international trade. This book demonstrates the commitment of the Fondazione Nazionale dei Commercialisti to the internationalisation of the profession, a key topic for the future development of the profession itself and for the continuing growth of our country in the world. The wish is that this contribution may encourage the Italian commercialisti towards the international market, above all the United Arab Emirates that runs for becoming the true Middle-Eastern gateway for our best artifacts and products of excellence.

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1. The importance of Made in Italy for the UEA market

Tommaso di Nardo and Andrea RampaFondazione Nazionale dei Commercialisti

International trade is becoming increasingly strategically important for the Italian economy. According to the latest data available, exports, in fact, account for more than a quarter of Italy’s GDP. What is more, the global importance of Made in Italy reveals the importance of our products on the global market for certain sectors. The Fashion sector, for example, accounts for more than 14% and is not the only sector that manages to be a leader in global trade.

Figure 1: Italy’s share of world exports for a number of groups of traditional Made in Italy products (Year 2014).

Furnishings

Machines for agriculture and forestry

Cut, shaped and finished stones

Construction materials in terracotta

Shoes

Tanned and processed leather; travel articles, bags, saddlery and harnesses; prepared and dyed furs

Fur clothing articles

Textiles

Bakes and flour-based products

Live plants

7.3%

8.9%

13.9%

21.5%

8.7%

14.1%

8.9%

7.0%

13.4%

4.9%

Source: ICE-ISTAT Report 2015


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Italy’s exportation vocation continues to grow. According to the ICE-ISTAT Annual Report 2015, there is the potential to export 56% of Italian manufactured “textile products, clothing, leather goods and accessories”; what is more, this is not the only type of product with such a strong international bent: “Pharmaceutical, chemical medicinal and botanical articles” have 87.5% export potential; “Chemical substances and products” 50.3%; “Computers, electronic and optical devices” 57.0%; “Electronic devices” 60.0%; “Machinery and devices n.e.c. (not elsewhere classified)” 77.0%; “Means of transport” 68.2%.Despite the slowdown in world trade, forecast by the International Monetary Fund to fall both in 2015 and 2016, the Italian economy, like most of the advanced economies, is recovering. In its customary annual Outlook, the Fund has revised GDP growth forecasts upwards for 2015, while the Italian government is aiming for an annual growth of 1%. The boost to growth comes both from internal demand and from foreign demand. The recent increase in the value of the euro, after the minimum reached in the spring and the currency devaluations in emerging countries have not seriously affected the Italian foreign trade trend, which remains on a path of growth and development, especially in extra-European markets. The economic and financial crisis that also hit Italy in the period 2007 to 2014 coincided with a strong fall in internal demand and therefore of national consumption levels, while net exports were positive and contributed to maintaining nominal values stable for the economy as a whole. Exports to the euro area have constantly fallen since 2000, albeit remaining at high levels (37%), while exports to other advanced countries (around 25%) and, especially to emerging countries, which can be considered as the new frontier of Italian foreign trade, grew. Since 2013 we have seen a reversal of the global trend which is now also affecting Italy and which sees advanced countries returning to grow, while the emerging countries, due mainly (but not only) to the fall in the prices of raw materials, have begun to slow down significantly. The sectorial composition of Italian exports has remained largely unchanged compared to the beginning of the crisis. There has been no revolution in Italy’s model of sectorial specialisation. There have only been minor adjustments which have partly reflected a strengthening of Italy’s position in international trade, most of all in the leading manufacturing sectors and Made in Italy


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sectors, and are partly the consequence of necessary adaptations to the changed international scenario. Agricultural goods, for example, have increased their relative share of international exports (from 6.7% to 8.2%), and similarly intermediate goods (from 28.4% to 30.4%), while consumer goods have remained stable (23.8% - 24%) and investment assets have fallen (from 41.1% to 37.4%). Made in Italy’s resistance on the global market, therefore agricultural goods and consumer goods, in total 38.6% of national exports, is due to the quality of the products and the ability to intercept the demand of distant markets. Changes in food consumption models, for example, have benefitted products of quality and Italian companies. Being attentive to changes in taste and shifting consumer requirements, for example, with reference to the environment and to diets, they have managed to exploit factors relating to culture and style to their own advantage.In this scenario, the United Arab Emirates is an important market and of strategic value, most of all thanks to the geographical position of the country in the centre of the Arabian peninsula and therefore a potential trade hub for the Middle East, as well as a gateway between east and west. Italy has opportunely signed a bilateral agreement aimed at establishing permanent air travel services: “Abu Dhabi, 3 April 1991”, ratified through Law 202/1997. Dubai airport is the seventh biggest in the world for passenger traffic with 66.4 million passengers transported in 20131, registering an impressive increase compared to 2012 (+15.2%).

1 Figures of the International Airport Council


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Table 1. UAE Airports

Abu Dhabi International Airport. Used by 52 airlines, reaching 93 destinations. In 2013 16.3 million passengers were transported (+12.4% compared to 2012) and 135,213 flights (+11.2% compared to 2012).

Dubai International Airport. Used by 145 airlines, 260 destinations (covering all continents), a flow of 98 million passengers in 2020 is forecast by the operators.

Al Maktoum International Airport (Dubai’s second airport). Open to passenger traffic only since 27 October 2013, in two months it achieved a volume of 65,167 passengers and 12 million tons of goods traffic.

Summary of ENIT 2015 report

These are impressive infrastructures that permit and promote the development and economic growth of the entire area (not only the UAE). The construction of these infrastructures and other works is a strong boost for economic growth. Such economic investment policies (not only public) have had an impact on the country’s entire economic and productive structure. With regards to the solidity of the UAE system in the long-term from a productive, financial and social point of view, it is still too early to arrive at any conclusions. However, from a financial point of view, credit control after the property crisis has become tighter, even if real estate investments continue to be disproportionate. From a productive, and therefore social, point of view, the economy makes heavy use of low cost labour, especially from the Indian sub-continent, but also from North Africa and other Arabic countries. The immigrant population has today reached 88% of the total, but there are no visible “cracks” in the UAE social fabric.In this context Made in Italy manages to position itself in the highest segment, in jewellery, where the best figures regarding exports to the UAE have been achieved; Made in Italy clothing is also much appreciated in the luxury niche of the market. Despite fierce international competition, almost all the brands are already present on the market and Dubai is today recognised as a temple of shopping.As is well-known, the UAE luxury niche market is very important, able to influence the strategic choices of operators. Huge investments have been made in this sense, from the creation of the mammoth artificial archipelagos, to the commercial and financial building complexes oriented towards prestigious markets.


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The United Arab Emirates, in fact, is in a phase of development characterised by enormous dynamism, with the desire to create and show off its recently found affluence. The Italian brand is taking good advantage of this historic phase for the Arab federation. The principle example of this strategy is the construction of the Ferrari exhibition and theme park in Abu Dhabi.It’s the first park designed with themes linked to the Maranello automaker and is today the largest in the world. It was designed by Benoy Architects in 2005 on Yas island, one of the largest artificial islands in the world and where, among other things, there is the racing circuit used for the Abu Dhabi Formula 1 Gran Prix.Other car racing circuits have been created inside the Ferrari park, on which exhibitions are held, as well as a theatre, a 3D cinema, a veteran car museum and a reproduction of a Formula 1 paddock in miniature. The entire structure is immense: 86 thousand m2. It’s owned by a joint venture between Aldar Properties PJSC and ProFun Management Group Inc. (international entertainment organisations) which manage the facilities.

Aerial view of Ferrari World in Abu Dhabi


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A project like this, besides creating profits for the company, obviously transmits a positive and striking image for the Italian economy in general, for its technology and for its products. What is sold is not just a car or a sports and leisure event, but a story, a brand, a piece of Italy.The park is a successful example of the marketing of an Italian product and of how it is possible to position your image in these high segments of UAE demand. Besides providing a model of best practice, the case study makes it clear how substantial investments are needed in this phase of UAE’s development. In addition, the UAE market is also very habit-forming. Establishing loyalty to Italian products today ensures a certain level of return in the future. To gain this position of loyalty it is obviously necessary to invest, construct and participate, and not only be a witness to this incredible desire to create and innovate. In recent decades Italy has kept pace with the competition in global markets, at least with regards to traditional products and products uniquely associated with Made in Italy. As can be seen in table 2, Italy has lost none of its market share in the last ten years, despite a strong euro and despite the problems within the euro area.Table 2 shows world exports of goods linked to clothing, a tradition Italian point of strength, which finds in the United Arab Emirates an outlet of only moderate success. The competition of the big brands is, obviously, very tough, and demand is not as dynamic as for other products. It is, therefore, important to “be present”, also to develop a sort of economic “fortress”, since the UAE, as mentioned above, are a gateway to the east. The country is, in fact, visited by people from all over the world; it’s a centre for trade and for travel, as confirmed by the passenger traffic of the country’s airports.


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Table 2: Italy’s share of world exports for certain groupings of traditional made in Italy products. Years 2005 – 2014 (percentage values on values in dollars at current prices)

CLASSES 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Live plants 3.8 3.7 3.7 4.4 3.5 5.1 4.9 4,8 4.5 4.9

Baked and flour-based products

15.7 15.4 14.7 16.2 15.5 14.6 14.4 13,9 13.6 13.4

Textiles 11.4 11.4 11.4 10.4 9.0 8.3 7.8 7,4 6.9 7.0

Leather articles of clothing 5.7 11.2 13.9 15.1 9.6 8.4 3.5 9,5 10.8 8.9

Tanned and processed leather; travel articles, bags, saddlery and harnesses; prepared and dyed furs

14.4 14.2 14.9 14.6 13.8 13.2 13.4 13,4 13.9 14.1

Shoes 13.1 12.8 12.8 12.4 10.6 10.0 10.2 9,2 9.3 8.7

Building materials in terracotta 35.3 34.6 33.0 30.9 28.7 26.8 25.3 21,9 21.0 21.5

Cut, shaped and finished stones

22.1 20.6 19.5 18.6 16.4 15.2 14.6 14,5 14.5 13.9

Machinery for agriculture and forestry

10.7 10.3 9.8 9.8 9.6 9.1 8.9 8,6 8.9 8.9

Furnishings 11.7 11.2 11.1 10.9 9.8 8.8 8.6 7.4 7.5 7.3

Source: ICE-ISTAT 2015 report

Generally speaking, this policy is applicable both for products with a high image content and for products for which this is not the case in western markets. Participation in trade fairs and exhibitions on the part of sellers is always recommended, therefore. The Arabic consumer, as is well known, is always interested in establishing a personal relationship which, when established, opens up commercial relations, or more simply sales, continuing over time. Italy has a positive trade balance with the UAE, as is, in fact, the case with the entire Middle East (9.0%), but this does not mean that commercial exchange is only one-way. There are also investments towards Italy, besides imports for 1.3 billion euro.The UAE is the main commercial outlet for our products throughout the Middle East and North Africa and is the seventeenth market for Italian exports2; 160 Italian companies currently have a subsidiary in the UAE, while around twenty

2 SACE figure.


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operate in the so-called free-zone, the area in which it is permitted (among other things) to set up businesses entirely with foreign capital.SACE (the Italian insurance and financial group) identifies as “major opportunities” not only the luxury and gold-jewellery market, but also (and especially) the industrial machinery and mechanical industry sectors. Again, according to the insurance group’s survey, there are ample margins for expansion also in the development of the tourism, energy, construction, environmental protection, agri-food, services and health equipment sectors.As a matter of fact, SACE’s analysts estimate the potential increase in exports until 2018 at 2.1 billion euro. Germany is the European competitor that manages to do better than Italy. While the Italian share of exports is currently 2.6%, German products account for 4.0%, while France is 2.1% and Spain 0.7%.

Figure 2. Forecasts of Italian exports to the UAE

SACE Analisys

2013: -0.3%

2014: -3.5%

2015 (p): +3.7%

2016 (p): +3.1%

2017 (p): +3.6%

2018 (p): +3.3%

2013 2014 2015 (p) 2016 (p) 2017 (p) 2018 (p)

€ 6.1 bln

€ 5.9 bln

€ 5.7 bln

€ 5.5 bln

€ 5.3 bln

€ 5.5 bln

Source: SACE country profile

Figure 2 shows SACE’s forecasts which give a positive picture of the growth of our country’s exports to the UAE while, according to the Economist (Economist Intelligence Unit), this expansion will reach 8.4 billion in 2020.This positive picture of exports obviously coincides with an annual growth of the UAE’s GDP of 3.0%. This economic growth will lead to a proportionate demographic increase linked both to an increase in birth rates and the continuing rise in immigration.


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One of the most important sectors for Italian commercial expansion in the UAE is the agri-food sector. The UAE, in fact, import around 90% of their food products consumed (an obvious fact if we consider that UAE farming accounts for 0.6% of its GDP). It is a market, however, that does not recognize the exceptional nature of our products as in other sectors: olive oil, for example, is much less traded than seed oil. However, implementing aggressive strategies and, above all, seeking to increase the quantities of exports could benefit our sales in the future. According to the ICE (the agency for the global promotion and internationalisation of Italian companies), UAE imports of agri-food products is destined to grow due to the increase in the resident population, of the foreigners living in the UAE, and in relation to the growth in tourism. Managing to introduce Italian agri-food products into the UAE catering system would be important since it could “educate” the consumption of Italian excellence also in the large-scale distribution channels where our products currently face many problems in combatting the competition due to our reduced production capacity. The UAE catering sector is itself a very profitable market; there are 11 million businesses in the federation, of which over 4 thousand in Dubai and 3 thousand in the capital Abu Dhabi.Exports of food, beverages and agricultural, fishing and forestry products have experienced a “jump” of 47.5% in 2012 (compared to the previous year) and the trend has remained positive also in the following years, as will be described in detail in the following chapter.

Table 3. SACE FIGURES AND FORECASTS. Percentage changes compared to the previous year.

Italian exports of foods and beverages (in euro)

2013 2014 2015 (p) 2016 (p) 2017 (p) 2018 (p)

122.7 million 132 million 134.8 million 139.4 million 144.8 million 150.1 million

+32.9% +8.3% +1.5% +3.4% +3.9% +3.6%


The universal exhibition EXPO 2020 will be an unmissable opportunity. 25 million visitors are expected, 71% of whom (for the first time in the history of


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Expo) will come from countries other than the hosting country. We are talking about 17 million tourists and it is legitimate to imagine that they could choose to eat and drink Italian agri-food products.Today, imports of Italian foods into the UAE represent around 6% of the total. The strongest competitors come mainly from Europe and the United States, even though Assolatte (the Italian Milk-Cheese Producers’ Association) points to Asian suppliers as the major potential “danger” in the future.According to the Association, in fact, the geographic vicinity and lower prices of products coming from the east may constitute a considerable risk in the long-term. Precisely for this reason, it is necessary to acquire a position on the market in this phase and participation in trade fairs and exhibitions in the sector could generate positive results. A trade fair of food products is held in Dubai every year, in February (Gulfood), scheduled for 21 to 25 February in 2016. More than 3 thousand companies coming from all over the world will be present, and the show is attended by fifty thousand visitors.Among the food products exported, cheeses and dairy products are particularly important. Their exports doubled between 2008 and 20133 and the rate of growth continues to increase. The most appreciated products are mozzarellas and fresh cheeses, followed by Grana Padano and Parmigiano Reggiano.The table below shows Assolatte figures, referring to the years 2012 and 2013.

Tabella 4. Export ITALIA – EAU. Dati in euro

Product 2012 2013 Var.

Mozzarella and other fresh cheeses 1,595,716 1,967,366 +23.3%

Grana Padano Parmigiano Reggiano 1,795,376 1,954,654 +8.9%

Mascarpone and cream cheeses 612,764 673,278 +9.9%

Other hard cheeses 213,630 170,946 -20.0%

Grated cheeses 136,172 178,827 +31.3%

Other soft and blue cheeses 230,204 123,545 -46.3%

Other semi-hard cheeses 220,303 161,233 -26.8%

Pecorino and Fiore Sardo cheeses 113,361 59,029 -47.9%

3 Reference is, once more, to the Assolatte findings.


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Product 2012 2013 Var.

Provolone 63,160 24,557 -61.1%

Gorgonzola 40,482 25,565 -36.8%

Cheeses for processing -- 3,125 --

Processed cheeses -- 1,541 --

Totals 5,021,168 5,367,386 +6.9%

Source: Assolatte

ISMEA (Italian Institute for Studies, Research and Information on the Agricultural sector) has registered further growth in the exports of dairy-cheese products of 28% between 2013 and 2014. The Institute also points to the opportunities for expansion of the meats market. Italian poultry production is, in fact, able to satisfy an expansion in demand and the UAE market could respond positively to a more aggressive sales and distribution strategy. Demographic growth and the continuous increase in immigration from the Indian sub-continent are opportunities for this product, which Italian producers must not miss. The varied ethnic composition of the country (Indian, Pakistani, Palestinian, Somali, Egyptian, Bengali, Philippine, etc. …) also means that the population does not have uniform eating habits, but rather, very diverse ones. This is not a factor of secondary importance, and being present in the distribution chain with your own agri-food products means being present precisely when new food habits are being “constructed”. Becoming part, therefore, of the new food pyramid of a society that is only now about to be formed could be a great opportunity.Pizza, for example, was introduced into American food habits in the last century. Today, almost a century later, it’s one of the highest consumed products in the United States. There are also good prospects for improvement with regards to the textile and clothing sector. It is necessary, however, to focus attention also on the numerous dangers and the strong competition in the market, as well as the various cultural differences that inevitably influence styles of dress. With regards to this particular problem, our stylists have, however, already demonstrated their capacity to face the challenge of Islamic fashions.


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The commercial and financial centres of Dubai and Abu Dhabi have for some time become veritable temples to shopping with expenditure in the sector rocketing, and all the major western brands are present and visible in the infant distribution systems. Estimates and forecasts of the SACE Group regarding Italian exports of products such as textiles and clothing are shown below.

Figure 3. Estimates of textile-clothing exports to the UAE

2013 2014 2015 (p) 2016 (p) 2017 (p) 2018 (p)

317.3 mil(+20.9%)

355.0 mil(+11.9%)

380.5 mil(+7.2%)

399.2 mil(+4.9%)

421.9 mil(+5.7%)

444.7 mil(+5.4%)


The peculiarity and the challenges of the sector in the UAE are, in any case, unique; the male/female ratio in the country, for instance, is 2.2. Women have been permitted to study law only since 2008 and the percentage of the non-foreign working female UAE population is still meagre. This last fact was not caused by any legislative restriction, but rather as a result of the UAE’s social structure. While female fashion, on the one hand, is conditioned by the Islamic culture, on the other hand, the high temperatures strongly influence male fashions. The average businessman walks around Abu Dhabi and Dubai not wearing the classic dark jacket and tie, but light coloured linen clothes.


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This year a French fashion house, Esmod Dubai, opened the first Islamic Fashion Design school. It’s a project with little significance in economic terms but is an example of the innovative approach necessary for penetrating the Arabian fashion world.An Italian investor wishing to penetrate the UAE clothing market must take all these peculiarities into account, besides defending themselves against the international competition. Nothing must be taken for granted, and it’s necessary to have innovative ideas appropriate to the particular aspects of the reference market which do not influence the sale of other products, but with regards to clothing impose a change in the consumer article.

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2. Italy’s position in the United Arab Emirates

Davide del Prete and Silvia SopranzettiManlio Masi Foundation

2.1. Economic outlook

The United Arab Emirates (UAE) is a modern economy with the tenth highest pro-capita GDP in the world (66,000 dollars per person). In 2014, the population of the UAE was around 9 million, growing by 6 million from 2000. Less than 20% of these people are, however, local citizens, a figure that makes the UAE one of the countries with the highest immigration rates in the world: 21.71%.This phenomenon has been facilitated by the strategic geographical position, in the centre of the east-west routes, and also by the abundant reserves of fossil fuels. Despite the importance of natural resources in the basket of exported goods, in the last few years, thanks to strong diversification policies, the weight of petroleum revenues as a proportion of GDP has fallen from 60% in 1980 to the current 25%. The metalworking industry (especially aluminium, steel and iron) and the textile sector are, in fact, expected in the next 40-60 years to overtake revenues from petroleum and the export of natural gas (CIA World Factbook).The global financial crisis of 2009, which particularly hit the real estate market in the Emirate of Dubai causing a fall in prizes of over 60%4, has hit growth potential and persuaded the Government on the one hand, to take greater control of public capital projects and, on the other hand, to increase liquidity in the banking sector and sustain public expenditure to stimulate the recovery.

4 Since then various economic policies have been put in place aimed at preventing new downturns in the market such as an increase in registration taxes on property, which have moved from 2% to 4%, and a greater control on the granting of mortgages in order to avoid speculation.


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The national economy has, however, recently started to grow once more. GDP registered an increase of 4.6% in 2014, while a growth of 3.2% for 2015 and 3.9% for the period 2015-2019 are forecast (Economist Intelligence Unit)5.The Universal Expo 2020 in Dubai could be an important driver (see box 1) as well as the government’s economic plans aimed at stimulating the infrastructures sector, particularly in the production of energy, and in air, land and sea transport, tourism structures, hospitals, schools and residential property.

2.2. The country’s competitiveness

According to the Doing Business index classifications, drawn up by the World Bank to quantify in summary form to what extent a country has a favourable climate for companies, in 2015 the United Arab Emirates were the twenty-second country at a world level for competitiveness, gaining three positions compared to 2014 in which they were at in twenty-fifth place. The UAE obtained a much higher average of points in the ten indicators below from which the index is composed compared to the other countries in the area, arriving at almost doubling the regional average of the Middle East and North Africa.Analysing in specific detail the ten indicators below, the country attains maximum points in the areas relating to the ease of obtaining building licenses, access to electricity, the system of payment of taxes and property protection; good results were also obtained for the facility of trade, but the results were less satisfactory with regards to the ease of starting a business, access to credit and the protection of minority investors. Finally, the two sectors in which the country obtains the worst results are the enforcement of contracts and the ease of resolving disputes. It’s important to point out, however, that in 2015, with the exception of those indices regarding the ease of dispute resolution and the ease of starting a business, none of the positions in the below-listed indicators worsened compared to 2014.

5 The real estate market has returned to growth at substantial rates. An example is the construction of the Palm Islands, the three artificial islands in front of Dubai, where the prices of villas start from 1 million euro.


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Table 1. The United Arab Emirate’s ranking in the Doing Business categories

Indicator UAE Ranking 2015 UAE Ranking 2014

Ease of starting business 58 49

Ease of obtaining building licenses 4 4

Access to electricity 4 4

Property protection 4 4

Access to credit 89 99

Protection of minority investors 43 102

Payment of taxes 1 1

Ease of trade 8 9

Enforcement of contracts 121 121

Resolution of disputes 92 88

Source: Word Bank

2.3. Forecasts

The fall in the price of petroleum in the last year is eroding the margin of tax and commercial surplus that the country had accumulated in the past, but the negative impact has remained limited and the country’s companies have not yet been hit by the phenomenon. With regards to the trend in prices, the increase in rents is pushing inflation upwards despite the fall in the price of real estate. Compared to an annual growth rate in 2014 of 4.6%, a growth of 3.2% is expected for 2015, and therefore indicating a comparative slowdown. In addition, given the persistence of the low level of the price of petroleum, a further shrinking in growth is forecast for 2016, with estimates around 2.5%, to then return to accelerate in the medium term.The unemployment rate will remain steady at 4.2% in 2015 according to forecasts, falling in 2016 as a result of the new infrastructure projects planned for the country. Inflation, on the other hand, will increase in 2015 to then stabilize in 2016 given the probable fall in residential costs due to the construction of new residential projects.


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Box 1 - UNIVERSAL EXPO 2020 DUBAI

Expo 2020 Dubai is planned for the period between 20 October 2020 and 10 April 2021, with an estimated flow of 25 million visitors, 71% of whom will come from countries other than the hosting country: this means that the UAE must be ready to welcome over 17 million tourists. The planned theme for the Exhibition is Connecting Minds, Creating the Future, and a Memorandum of Understanding between Expo Milano 2015 and Expo Dubai 2020 for close collaboration has recently been signed.

Dubai Expo 2020 will be set up on 438 hectares organised in three separate pavilions representing opportunity, sustainability and mobility, with innovative areas and points of best practice in each pavilion. The sectors that offer the best opportunities for companies will by those of infrastructures and transport, hospitality and energy.

According to a recent study, Dubai will allocate 43 billion dollars for infrastructures, of which around 10 billion will be used for improving mobility. A new Al Marktoum International airport will built and those already existing in Dubai and Abu Dhabi will be modernised. In addition, new underground lines will be built which will connect to the railway network under construction, with the result of covering not only the country but all six Gulf states.

In the last few years, the tourism sector in Dubai has acquired new importance. The tourist flows connected to Expo can only increase the centrality of this sector for the country. There are around 603 hotels available in Dubai today, but numerous new structures are under construction. It is forecast that it will be necessary to allocate around 7 billion dollars to face the new demand connected with Expo. With regards to the construction sector, it is also important to consider the new residential projects. Among the numerous projects, the largest of all will be the construction of Sheikh Mohammed bin Rashid City, the new urban settlement which will include a museum of Universal Studios and a new park.

Energy demand is increasing in all the Gulf countries and the United Arab Emirates in particular have been focusing in recent years on the development of solar energy; the Gulf countries have planned to invest 155 billion in the sector by 2017. Three large parks are already under construction.


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Given the probable persistence of the low cost of petroleum, a gradual fiscal consolidation will be necessary to reinforce thee country’s position in the medium-long-term.

2.4. The UAE’s position in global trade

The United Arab Emirates exported around 30 billion of non-petroleum products in 2014 (UAE National Bureau of Statistics).The main market outlet for such exports is India, with 4 billion euro in 2014 and an 18% global share, followed by Saudi Arabia and Oman (respectively 10% and 8%). Italy is in twenty-sixth position with around 300 million euros, after the United Kingdom and Holland among European countries, but before Germany and France (Figure 1).

Figure 1. Main UAE non-petroleum exports in 2014 by country of destination (millions of euro)

India

5000

4500

4000

3500

3000

2500

2000

1500

1000

500

0

Saudi Arabia Oman Switzerland Turkey Iraq China United States Italy Germany

1886

763

1967

893

2432

1404

4420

1606

307 232

Source: UAE National Bureau of Statistics data.

It’s no surprise that in 2014 the basket of goods exported not linked to petroleum is mainly composed of natural resources. Precious stones, base


24

metals and rubber articles account for around 2/3 of all the country’ exports, with respectively, 10. 7 and 3 billion euro (Table 2).

Table 2. Main UAE non-petroleum exports in 2014 by product

Product Percentage of total Value (millions of euro)

Precious and semi-precious stones for jewellery and for industrial use 34 10132

Base metals and metal products 23 6757

Rubber articles and materials in plastic and other 9 2606

Electronic devices 6 1809

Products from the extraction of minerals 6 1793

Food, beverages and tobacco 6 1676

Chemical products 3 995

Wood, paper and print 3 864

Transport vehicles 3 790

Articles of stone, mica, ceramic and glass 2 709

Source: UAE National Bureau of Statistics data.

As a result, despite the desire to diversify exports, the UAE still has substantial specialisation in the production of natural resources. Table 3 shows the Balassa index of exports6, for which a country has a comparative advantage if the ratio between the value of its exports in a certain sector and that of the same sector at a global level is greater than one. In the case of the UAE, in fact, the only two sectors having a specialised export production (>1) are petroleum products and the manufacture of ornamental glass and stone and for construction. In addition, thanks to the already-mentioned government policies, the manufacture of metals and of rubber and plastic material articles is a growing trend with values respectively of 0.94 and 0.59 in the last year of survey.

6 Balassa index: RCAi =(EXPi / EXP)/(EXPW,i / EXPW). It is also known as the index of comparative advantages (RCA). The index can range in values from 0 to infinity.


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Table 3. Production specialisation (Balassa index)

Economic activity

Hunting and fishing 0.27

Manufacture of chemical substances and products 0.21

Food, beverage and tobacco industries 0.43

Shoes 0.06

Manufacture of coke and refined petroleum products 3.42

Skins , leather and accessories 0.08

Manufacture of electronic machinery and devices 0.24

Manufacture of base metals and processing of metal products 0.94

Extraction activities 0.27

Manufacture of products n.e.c. (not elsewhere classified) 0.16

Manufacture of articles in rubber and plastic materials 0.59

Manufacture of ornamental glass and stones and for construction 3.74

Textile and clothing industries 0.16

Transport and storage 0.17

Agriculture and forestry 0.58

Wood, paper and print industry 0.27

Source: WITS data (SITC Rev. 2 classification).

2.5. Italy-UAE trade

The United Arab Emirates is Italy’s main commercial partner in the Middle East and North Africa, followed respectively by Saudi Arabia, Algeria, Tunisia and Egypt. In 2014, the total of Italian exports was 5.3 billion euro, a value in line with the previous year. This figure confirms, also for 2014, the UAE as the major market outlet for our products towards the entire Arab world. Figure 2 shows exports for the first five economic sectors (by value) revealing a net preference for “Products of other manufacturing activities” (which include the manufacture of jewellery and precious stones, musical instruments, sports articles, etc.) and “Machinery and equipment n.e.c. (not elsewhere classified)”, respectively the first and second sectors with 1.5 billion euro and 954 million euro.


26

More marked, however, is the fall in imports from the UAE, which in 2014 registered a decrease of 51.8%, with a value of 628 million euro, compared to a record figure of 1.3 billion in 2013 (when there was a peak for boats and ships: more than 575 million euro, probably deriving from transit movements or clearing entries). Figure 3 confirms that base metals and metal products (excluding plant and machinery) and products from the extraction of minerals from quarries and mines as the main sectors, with respectively 279 and 104 million euro of imports. Overall, the trade balance is clearly in favour of Italy, with a positive balance of 4.7 billion euro, a figure higher than the 4.2 billion euro in 2013.

Figure 2. Italian exports to the UAE by economic sector (millions of euro)

2013

2014

Products of othermanufacturing

activities

1600

1400

1200

1000

800

600

400

200

0

Machinery and equipment n.e.c.

Textile products, clothing, leather and accessories

Base metalsand metal products,

excluding plantand machinery

Electricalequipment

Source: ISTAT-ICE data.

In the first half of 2015 there was, moreover, a positive trend in trade, with an increase of 14.2% in exports (2.99 billion euro against 2.63 in the same period of 2014), and a 71.6% increase in imports (472 million euro against 275 in January-June 2014). In 2015 the “Products of other manufacturing activities” and “Machinery and equipment n.e.c.” continued to dominate exports. With regards to imports, there was a significant jump in coal and products deriving


27

from petroleum refinement, which almost doubled the entire 2014 value in only 6 months (138 million euro against 80 in 2014).

Figure 3. Italian imports from the UAE by economic sector (millions of euros)

2013

2014

Base metalsand metal products,

excluding plantand machinery

300

250

200

150

100

50

0

Products from the extraction of minerals

from quarriesand mines

Coal and refinedpetroleumproducts

Articles in rubberand plastic materials

and others

Articles in rubberand plasticmaterials


In more detail, traditional jewellery and precious metal articles (1.2 billion euros in 2014), refined petroleum products (280 million), other taps and valves (184 million) and motor vehicles (159 million) are confirmed to be among the goods that contributed most to the high level of Italy’s exports to the UAE. All these products have registered steady growth in recent years, demonstrating strong dynamism of the country. With regards to imports, on the other hand, the main heading is aluminium (202 million) followed by crude oil (103 million) (Table 4).


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Table 4. Exports and imports by product 2012-2014 (millions of euro)

Product 2012 2013 2014

EXPORTS

Items of jewellery 946 1239 1197

Refined petroleum products 526 292 282

Other taps and valves 331 199 184

Motor vehicles 94 103 159

Other furnishings 111 125 127

Shoes 87 103 124

Tubes, pipes, hollow profiles and relative accessories 275 187 119

Toiletries: perfumes, cosmetics, soaps 77 97 118

IMPORTS

Aluminium 188 201 201

Crude Oil 54 201 103

Refined petroleum products 167 132 79

Precious metals and relative semi-finished products 20 5 43

Sheets, foils, tubes and sections in plastic materials 48 37 40

Other products in metal n.e.c. 27 32 29

Non-hazardous solid waste 15 9 19

Electronic components 88 7 12

Source: ISTAT-ICE figures.

In 2014, with a global share of 2.9%, Italy stood at eighth place overall among suppliers of the UAE and third among its European partners, behind Germany and the United Kingdom (Figure 4). However, as shown in Table 5, the trend is downwards; Italy is losing market share in favour of more dynamic competitors such as China and India, which in total represent around 30% of the UAE market.


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Figure 4. Market share in 2014 by selected countries

China

18.00

16.00

14.00

12.00

10.00

8.00

6.00

4.00

2.00

0.00

India UnitedStates

Gemany Japan UnitedKingdom

SouthKorea

Italy Qatar France


Table 5. Market share 2012-2014

Country 2012 2013 2014

China 13.65 14.55 16.35

India 16.86 13.92 13.90

United States 10.42 10.65 9.26

Germany 5.11 5.09 5.50

Japan 4.14 3.70 3.98

United Kingdom 3.03 5.91 3.59

South Korea 3.17 2.50 3.02

Italy 3.18 3.15 2.89

Qatar 2.75 2.54 2.60

France 2.13 2.38 2.26


The Italian market share of around 3% can be broken down between various sectors for 2014. Figure 5 shows the market share for the first 6 most important sectors. Arms and munitions and skins have a UAE market share of around 15% even if, as shown by the vertical axis, the values are only 14th and 62nd


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out of 97 sectors, respectively with around 75 million and 2 million euros. The next biggest sectors are cement (10%), cocoa and similar (10%), wool (9%) and leather articles (8%). It’s important, however, to have a sectorial analysis comparing with other competitors. Table 6 shows four representative sectors of Made in Italy. While for leather articles (8%) Italy is second only to China (54%) and France (14%), in the agri-food sector (e.g. fruit and vegetables) the Italian market share is 6%, behind China, Thailand, USA, Spain and Holland. With regards to jewellery, which is Italy’s top export sector to the UAE, Italy has a market share of 5%. Finally, Italy is also in the top seven countries in the machinery and mechanical devices sector.

Figura 5. Market share of Italian exports (in millions of euro) by sector in 2014

Arms andmunitions

0.16

0.14

0.12

0.10

0.08

0.06

0.04

0.02

0.00

Leather,tanned hides

and accessories

Cement, limeand plaster

products

Cocoa, chocolate,sweets and

confectionary

Wool Leather articles;bags and similar

Source: UN-COMTRADE data.


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Table 6. Comparison of market share in 2014 by selected sectors and countries

Fruit and vegetables Leather goods and other

China 0.12 China 0.54

Thailand 0.11 France 0.14

USA 0.10 Italy 0.08

Spain 0.08 India 0.07

Holland 0.07 Hong Kong 0.04

Italy 0.06 Germany 0.02

Egypt 0.06 USA 0.02

Items of jewellery Machinery, mechanical devices and parts

India 0.33 China 0.24

Switzerland 0.11 United Kingdom 0.13

Hong Kong 0.09 USA 0.11

Belgium 0.09 Germany 0.07

Turkey 0.06 Japan 0.05

Italy 0.05 Korea 0.05

Singapore 0.05 Italy 0.05

Source: UN-COMTRADE data.

2.6. Direct foreign investments by the United Arab Emirates in Italy

The UAE’s direct foreign investments in the world in 2014 amounted to 67 billion dollars. The sectors most involved are: financial brokering and insurance 29%, wholesale and retail 14%, transport and logistics 5%, extraction 2.8%, water and electricity 2.2%, agriculture 0.2% and tourism 0.1%. The United Arab Emirates’ total investments abroad accumulated in the last 10 years is estimated at around 217 billion dollars, a figure that puts the country among the world’s top investors. At least half of these investments are managed by the Abu Dhabi Investment Authority.


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Although present as investors in major markets, the flow of direct foreign investments by the UAE towards Italy are below the possibilities that exist between the two countries. Looking at Figure 6, it can be seen how flows between 2009 and 2011 remained substantially stable and then fell drastically following the difficulties in the Dubai real estate market and the debt crisis of the Dubai World holding company, and finally recovered from 2013.As can be seen in the graph, starting from last year there has been a change in the trend and a renewed interest on the part of the UAE in investment opportunities in Italy. Among the most significant transactions between the two countries, worth noting is the national airline Abu Dhabi Etihad Airways, which has acquired a 49% shareholding in Alitalia (with an investment of 560 million euro) and the Abu Dhabi Mubadala investment fund which has acquired control of Piaggio Aero (an operation worth around 100 million Euro). Further to the positive conclusion of the Alitalia-Etihad deal, the Abu Dhabi Investment Authority has also showed new interest in investment opportunities offered by Italy in the financial, infrastructure and real estate sectors.

Figure 6. Direct investment by the United Arab Emirates in Italy

2009

Inward flows

80

60

40

20

0

-20

-40

-60

-80

2010 2011 2012 2013 2014


With regards to the characteristics of the enterprises controlled by the UAE in Italy, we can observe that the number of enterprises in the Italian market, the


33

number of employees of these enterprises and the overall turnover all show a positive trend. The average turnover per enterprise is, on the other hand, more fluctuating, shrinking between 2009 and 2011 and then growing again in 2012 (Table 7 and Figure 7).

Table 7. Activities of enterprises resident in Italy controlled by the United Arab Emirates

Activities of enterprises resident in Italy under foreign control

2006 2007 2008 2009 2010 2011 2012

2006 2007 2008 2009 2010 2011 2012

Number of companies 4 4 5 10 9 16 11

Number of employees 126 140 414 505 497 615 716

Turnover (millions of euro) 129 107 223 228 269 333 462

Average turnover per company (millions of euro)

32.3 26.8 44.6 22.8 29.9 20.8 42.0


Figure 7. Enterprises resident in Italy under UAE control (number and average turnover)

2006 2007

20

15

10

5

0

50.0

40.0

30.0

20.0

10.0

0.02008 2009 2010 2011 2012 2006 2007 2008 2009 2010 2011 2012

Number of enterprises Average turnover of the enterprises


2.7. Direct foreign investments by Italy in the United Arab Emirates

Direct foreign investment in the United Arab Emirates are substantial and amount to 56 billion dollars for 2013.


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With regards to flows of direct Italian investments in the United Arab Emirates, there has been a rather unsteady trend, decreasing in 2011 and then returning to grow in 2012 and stabilising between 2013 and 2014 (Figure 8).

Figure 8. Direct foreign investment by Italy in the United Arab Emirates

2009

Outward flows

1400

1200

1000

800

600

400

200

0

2010 2011 2012 2013 2014

Source: ISTAT-ICE figures.

According to ISTAT (the Italian National Statistics Office), enterprises in the United Arab Emirates under Italian control at the end of 2012 numbered 113, with 4176 employees and a turnover of around 1,207 million euro.The trend in the number of enterprises present between 2007 and 2012 is steadily positive, while their average turnover dropped sharply after 2009 following the worsening of the world economic situation (Table 8 and Figure 9). Table 8. Activities of enterprises resident in the United Arab Emirates under Italian control

2007 2008 2009 2010 2011 2012

Number of companies 62 77 86 86 109 113

Number of employees 901 2372 3044 4333 2124 4176

Turnover (millions of euro) 302 847 1536 1076 1503 1207

Average turnover per company (millions of euro)

4.9 11.0 17.9 12.5 13.8 10.7



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Figure 9. Enterprises resident in the United Arab Emirates under Italian control

2007

120

100

80

60

40

20

0

20.0

15.0

10.0

5.0

0.02008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012

Number of enterprises Average turnover of the enterprises


We can also note from table 9 a significant percentage (around 30% of companies) of shareholdings greater than 10% not carried out for the purpose of control. Adding these enterprises to the previous 113, the number of enterprises in the United Arab Emirates that receive Italian investments rises to 164, with a turnover of 257 million euros.

Table 9. Total and controlling shareholdings

Companies % of total Employees % of total Turnover % of total

Controlling shareholdings 113 70.3 4176 76.2 1207 75.3

Total shareholdings 164 6362 2572


Considering only controlling equity stakes in 2012, it is worth noting that most are concentrated in the services sectors: around 65% of the total. Specifically, the service sector with the largest number of enterprises is wholesale trading. With regards to industry, the sector with the highest number of enterprises is the construction industry (Table 10).The industrial sector with 39 enterprises represents 80% of total employment but only around 22% of the turnover of all the companies. Within this sector, constructions account for more than 50% of the turnover and around 70% of the number of employees. In second place for turnover are enterprises in the sector involving the supply of electricity, gas, steam and air conditioning.


36

Services account for only 19% of total employment but around 80% of the total turnover.In the services area, more than 70% of the turnover comes from professional, scientific and technical activities, followed by wholesale trade with around 21% of the total. This result could be explained by the presence of real estate activities among professional, scientific and technical activities.

Table 10. Number of enterprises under Italian control by sector

Sectors No. companies

Extraction of minerals from quarries and mines 1

Timber industry and wooden and cork products (excluding furniture); manufacture of articles made of straw and plaiting materials; Paper manufacturing

1

Manufacture of chemical products 2

Manufacture of basic pharmaceutical products and pharmaceutical preparations 1

Manufacture of articles in rubber and plastic materials 1

Manufacture of metal products from the processing of non-metallic minerals 5

Metalworking and the manufacture of metal products (excluding machinery and equipment)

2

Manufacture of electrical devices and non-electric domestic appliances 1

Manufacture of machinery and equipment n.e.c. 4

Repair, maintenance and installation of machines and equipment 1

Supply of electricity, gas, steam and are conditioning 3

Constructions 17

Industry 39

Wholesale and retail trade; repair of motor cars and motorcycles 35

Accommodation and catering services 2

Information and communication services 7

Financial and insurance services 9

Professional, scientific and technical activities 20

Education, health and social welfare, artistic, sports and entertainment activities, other service activities

1

Services 74

Total 113



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With regards to the size of the controlled enterprises, it can be noted that around 43% of the total are small enterprises whose turnover account for only 22% of the total. 50% of the total turnover is made by medium-sized enterprises. (Table 11).

Table 11. Enterprises by size

Enterprises Turnover

Large 35% 28%

Medium 20% 50%

Small 43% 22%


Analysing the size classification of the enterprises by sector, it can be seen that, with regards to industry, there is a prevalence of small enterprises followed by large enterprises and only a few medium-sized enterprises. In more detail, by goods type, the construction sector is characterised by the presence of large enterprises while the enterprises in the pharmaceutical sector, tobacco and timber sectors are predominantly small. Overall, the services area is more varied, with an even distribution of small, medium and large enterprises. The professional scientific and technical business sector (which, as we already mentioned include real estate activities) is characterised by large enterprises while retail and postal services have a predominance of medium-small enterprises.

2.8. Sectors with most potential for Italy

The sectors with the greatest potential for Italian export growth include: products in metal, excluding machinery and equipment; constructions; food products; clothing articles; furniture; accommodation and catering services, and the electricity and gas sector.The production of items of jewellery is confirmed as the top product exported by Italy to the UAE, with a demand growth of 11% in 2013 and 13% in 2014. This sector, in fact, will also be able to benefit in the coming years from a high


38

level of income in the country. In addition, the strong presence of elite tourists makes the Dubai market the leading Arabian market in the sector. With regards to food products, the United Arab Emirates import around 90% of food consumed, for reasons of geography. This scenario opens up considerable opportunities for Italian enterprises, especially those positioned in the high quality bracket. Moreover, the presence of numerous luxury hotels and restaurants has led to a further demand for food products. In terms of share of imports, the main imported Italian finished food product is pasta. Other widely imported Italian food products are cheeses, olive oil, coffee, desserts and baked products. The export of Italian food products in 2014 increased by 6.1% against 2013; the export of beverages increased by 20.6% compared to the previous year. The clothing sector in the United Arab Emirates is developing fast, and the major Italian brands are present in the country also with mono-brand shops. In 2014 Italian exports of clothing articles (also in leather and fur) amounted to 197 million euro while, in the same year, Italy exported shoes to the UAE for Euro 87.3 million. The furnishings sector in the UAE is strictly linked to the constructions sector which has recently started once more to grow, both with regards to the residential and to the non-residential sector; in Dubai alone, in the first half of 2013 the real estate and constructions sectors contributed 21% to the county’s GDP growth. The demand for Italian furnishings is constantly growing; in 2014, furnishings exports increased by 8.5% compared to the previous year. Accommodation and catering services, already a key sector for the country’s economy with a growth rate of around 7%, higher than the country’s growth, are destined to grow in view of Expo 2020, which will be held in the United Arab Emirates. In the last few years there has been an increase in demand for gas in the United Arab Emirates of around 5% per year. The increase in demand is caused both by increased productive capacity and by the increase in living standards. The presence of substantial quantities of petroleum and natural gas make this a central sector for the country’ development.

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3. Commercial relations between Italy and the United Arab Emirates

Andrea RampaFondazione Nazionale dei Commercialisti

The United Arab Emirates are Italy’s principle partner in the Arab world. The volume of exports to the UAE exceeds 5 billion euros, 5,316 million in 20147 and 5,508 million in 2013, with a positive balance of trade of 4,208 million. Commercial relations have taken off after the recent real estate crisis that hit Dubai in the two-year period 2009/2010. The decline, in fact, came to an end and has not caused any lasting economic damage.According to the Observatory of Economic Complexity, Italy is the UAE’s eighth trading partner with regards to imports, the third among European countries (behind Germany and the United Kingdom), while it is twenty-fourth for exports; this marks a clearly positive balance of trade between the two countries.The trade balance between Italy and the UAE is positive for 4.2 billion euro in 2013 and 4.6 in 20148 (ISTAT data, ICE 2015 Report); the normalised figures are 61.8% in 2013 and 78.9% in 2014.China, India and Japan are the main partners of the UAE which trade with the rest of the world, especially luxury goods, gold and material with a high technological content, computers, automobiles and tyres.The products principally exported by Italy are those relating to jewellery, which the is the product most imported by the UAE in absolute terms. Again according to the Observatory of Economic Complexity, in 2012 (the latest figures available), the UAE imported more than 17.3 billion US$ of jewellery, that is, more than 10% of its total (10.54%).Italy has managed to grab more than 6% of this enormous cake. Our economy, however, also exports industrial, mechanical, electronic and electronic-electromechanical machinery. The prospects for future growth are considerable,

7 Estimated figure, ISTAT report.8 Expected figure.


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especially in relation to the macroeconomic growth that the country is enjoying (+4.5% of GDP in the last year).Gold is another of the most imported products; in the UAE it was imported for a value of 9,660.64 million US$ (5.56% of total imports). Other major imported products include: refined petroleum, 9,995.89 million US$ (5.74%); Automobiles, 9,025.68 million US$ (5.20%); Materials for telecommunications, 6,642.05 million US$ (3.83%; Computers, 6,169.54 million US$ (3.55%); airplanes, helicopters and/or space vehicles, 4,363.93 million US$ (2.51%); Gas turbines, 2,697.05 million US$ (1.55%); Diamonds, 1,926.71 million US$ (1.11%); Tyres, 1,818.10 million US$ (1.05%).With regards to petroleum, the UAE exported 74,195.29 million US$ of crude oil and 21,319.56 million US$ of refined petroleum; as mentioned previously, imports of refined petroleum were less than ten thousand million American dollars. A further significant figure is exports of gas: 11,817.38 million US$ in 2012.Hydrocarbons are a rich source of income for the UAE and the steep decline in the price of crude oil (occurring after 2012) has not had that much effect, certainly less than for other competitors. Revenues from petroleum are “set aside” in ten sovereign funds9.Details are given below of the UAE’s main commercial relations with the rest of the world. It shows the origins of imports to the United Arab Emirates, while table 2 shows the destination of exports. Commercials relations with countries from the Asian continent stand out. Germany’s strong trading capacity, managing to be the leading exporter among European Union countries, is also evident.

9 Sovereign Fund Dossier. Italian Embassy in the United Arab Emirates.


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Table 1. Origin of imports to the United Arab Emirates (2012 figures)

# Country Millions of US$

% # Country Millions of US$

%

1 India 31,611.33 18.38 26 Pakistan 1,077.48 0.62

2 China 29,120.16 16.77 27 Russia 1,015.78 0.59

3 Germany 12,250.85 7.06 28 South Africa 1,004.54 0.58

4 United States 10,669.62 6.15 29 Canada 972.15 0.56

5 Japan 8,729.00 5.03 30 Sweden 737.24 0.42

6 Turkey 8,113.53 4.67 31 Austria 682.38 0.39

7 United Kingdom 7,896.22 4.55 32 Czech Rep. 623.88 0.36

8 Italy 6,982.59 4.02 33 Egypt 616.76 0.34

9 South Korea 6,860.94 3.95 34 Greece 597.99 0.29

10 France 4,048.34 2.33 35 New Zealand 494.91 0.28

11 Malaysia 3,877.93 1.95 36 Zimbabwe 481.91 0.28

12 Switzerland 3,377.42 1.79 37 Ireland 479.97 0.28

13 Honk Kong 3,101.41 1.72 38 Poland 439.91 0.25

14 Holland 2,986.83 1.39 39 Mexico 422.89 0.24

15 Brazil 2,410.89 1.39 40 Ukraine 413.97 0.24

16 Singapore 2,178.99 1.26 41 Denmark 372.67 0.21

17 Spain 1,937.58 1.12 42 Lebanon 346.73 0.20

18 Oman 1,853.31 1.07 43 Jordan 316.00 0.18

19 Sudan 1,688.95 0.97 44 Finland 296.75 0.17

20 Belgium and Luxembourg 1,645.08 0.95 45 Norway 296.30 0.17

21 Ghana 1,637.54 0.94 46 Argentina 277.24 0.16

22 Indonesia 1,618.96 0.93 47 Romania 261.47 0.15

23 Thailand 1,342.58 0.77 48 Sri Lanka 222.42 0.13

24 Australia 1,297.40 0.75 49 Philippines 220.19 0.13

25 Hungary 1,180.68 0.68 50 Bulgaria 201.75 0.12

Source: Observatory of Economic Complexity

From the above it can be seen that our exports are more robust than French exports, though it’s important to remember that for products of which we are direct competitors (for example: cheeses, wine and perfumes) French exporters outperform Italian ones. French exports of jewellery products are, instead, almost absent.


42

The UAE has a negative trade balance, but it is far from disproportionate. As is well-known, the Arabic country has abundant raw materials and natural resources and this could have led to a much more marked negative trade balance. Making reference 2012 data provided by the Observatory of Economic Complexity, on the other hand, against the 174 billion American dollars of imports there are 161 billion US$ of exports. The trade balance is therefore a negative 13 billion US$.Below are details of the destinations of UAE exports.

Table 2. Destination of United Arab Emirates exports (2012 data)

# Country Millions of US$

% # Country Millions of US$

%

1 Japan 38,384.75 23.89 26 Nigeria 656.51 0.412 India 33,460.22 20.,82 27 Mauritania 634.75 0.403 Singapore 13,567.79 8.44 28 Switzerland 584.83 0.364 South Korea 13,365.55 8.,31 29 Jordan 563.36 0.355 China 9,547.86 5.94 30 Morocco 474.04 0.306 Pakistan 6,580.19 4.10 31 Uganda 422.45 0.267 Oman 6,308.19 3.93 32 Mozambique 417.21 0.268 Malaysia 3,746.49 2.33 33 Lebanon 407.69 0.259 Turkey 3,746.49 2.23 34 Maldives 403.56 0.2510 Hong Kong 3,345.93 2.08 35 Madagascar 356.83 0.2211 Australia 2,739.18 1.70 36 Sudan 349.32 0.2212 Philippines 1,728.69 1.08 37 Ghana 347.84 0.2213 United Kingdom 1,610.88 1.00 38 Belgium and Luxembourg 307.22 0.1914 Indonesia 1,576.21 0.98 39 Spain 278.87 0.1715 France 1,356.92 0.84 40 Brazil 276.86 0.1716 Sri Lanka 1,191.93 0.74 41 Ethiopia 261.08 0.1617 South Africa 1,104.15 0.69 42 Algeria 260.31 0.1618 United States 1,053.35 0.66 43 Russia 251.80 0.1619 Yemen 1,034.34 0.64 44 New Zealand 236.57 0.1520 Holland 1,026.76 0.64 45 Denmark 235.71 0.1521 Thailand 994.07 0.62 46 Mexico 169.07 0.1122 Tanzania 968.43 0.60 47 Georgia 160.97 0.1023 Germany 887.79 0.55 48 Austria 149.29 0.0924 Italy 791.79 0.49 49 Vietnam 145.15 0.0925 Egypt 707.04 0.44 50 Ruanda 114.96 0.07

Source: Observatory of Economic Complexity


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Analysing the details, it is necessary to point out that UAE exports directed towards Japan are almost exclusively of hydrocarbons and raw aluminium, while the UAE also exports gold, jewels and diamonds to India.As already mentioned, Made in Italy is particularly appreciated in the country. Below we will concentrate on the products that represent Italian export to the UAE and on future prospects and the peculiarities of single markets.Below details are shown of Italian exports (official data) to the United Arab Emirates. UNCTAD (United Nations Conference on Trade and Development) figures (shown in table 3) are certainly the most reliable. However, the dataset does not give information on certain products such as jewels and refined petroleum which, according to the Observatory of Economic Complexity, in 2012, were the two top products exported by Italy to the UAE, respectively 1,213.72 million US$ of jewels and 676.30 million US$ of refined petroleum10.

Table 3. ITA -> UAE exports: Goods in thousands of euro (2012 data)

Agriculture, fishing and forestry products 4,757.31

Products from mines and quarries 12,506.08

Food products 2,353.15

Beverages 235.94

Tobacco 373.93

Textile products 2,125.01

Clothing articles (also in leather and fur) 1,028.38

Leather products (excluding clothing ) and similar 129.31

Timber and products in wood and cork (excluding furniture); articles in straw and plaiting materials 197.56

Paper and paper products 620.70

Print products and the reproduction of recorded media 279.90

Coke and products deriving from the refinement of petroleum 118,905.43

Chemical products 5,559.56

Basic pharmaceutical products and pharmaceutical preparations 329.36

Articles in rubber and plastic material 2,178.16

Other products from the processing of non-metallic minerals 2,414.02

10 Again according to the Observatory of Economic Complexity, the UAE export 61.25 billion US$ of crude oil and 197.24 billion US$ of refined petroleum.


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Metalworking products 24,542.54

Products in metal, excluding machinery and equipment 1,566.75

Computers and electronic and optical products; electro-medical devices, measuring devices and clocks 5,780.55

Electronic devices and non-electric domestic appliances 2,419.14

Machinery and equipment 5,198..09

Motor vehicles, trailers and semi-trailers 5,026.68

Other means of transport (ships and boats, locomotives and rolling stock, aircraft and spacecraft, military vehicles) 1,252.04

Furniture 366.63

Products of other manufacturing industries 4,627.53

Electricity, gas, steam and air-conditioning (also from renewable sources) 4,339.67

Other products and activities 65.32

Source: UNCTAD and data of the Italian Embassy in the UAE.

The UAE market, as is well-known, is in a phase in which it is possible to take advantage of different opportunities in a wide range of markets. Italy is managing to export many materials that are subsequently used in the construction sector. The UAE, in fact, in a period of rapid growth, needs strategic structures that allow for correct management of this transition phase. Specifically, the government is implementing a large programme of investments with the aim of providing infrastructural development and the opportunity to obtain public orders (ports, airports, road networks, railways, hospitals and schools) are considerable also for our SMEs as sectorial suppliers and as sub-contractors.It is important, however, to underline that current legislation imposes the obligation to have a UAE partner (49-51% ownership) for the incorporation of foreign businesses. There are various free-zones, however, in the country, where this obligation does not apply.There are also big opportunities in the UAE financial market, which is rapidly developing with good future prospects, such as the project to create an important Islamic International financial centre. In any case, there are already numerous foreign banks, mostly western. The Italian banks present are Unicredit and Banca Intesa.As already mentioned previously, jewellery is the market in which Made in Italy has already gained an important competitive advantage and this is very


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important, especially taking account of the habitudinal nature of the demand, and therefore the tendency of the average consumer to be loyal to suppliers that in the past have generated success. Personal contact is important and it is necessary to repeat it periodically; it is often perceived as a sign of trust. Italian producers manage to sell to the extent they are able to create exclusive designs and to gain access to the shops situated in the large hotels. 21-22k gold has a more widely spread retail distribution, through operators situated in the traditional markets (the most difficult niche to reach). European gold at 18k is only sold in the centres of the highest quality and in the hotel structures. Demand is not only on the part of the Emirate consumers but also many Asian, African and other Arab citizens residents in the UAE account for a good portion of buyers. Among foreign residents, the Indian community is the most interested in our articles in the sector and often buy Italian jewellery products as an investment. In general, in 2014 the demand for jewels and other luxury goods (watches) grew by 13% compared to 2013, especially thanks to tourism. Dubai is the most important marketplace in the Middle East for this market (600 points of sale). The Dubai Gold & Commodities Exchange, which regulates and supervises the trade in gold, has supplied data showing an overall volume of gold trading in 2014 of 75 billion US$ in the UAE.The building sector, despite the recent speculative crisis, is experiencing a new wave of expansion. According to the Construction Report Ventures Middle East 2014, the volume of business in the construction sector increased from 24,792 million US$ in 2012 to 50,591 million US$ in 2015. In addition, at least until EXPO 2020 (planned in Dubai), as much as 40 billion US$ for the infrastructures, transport and hospitality and tourism structures essential for the event, will be necessary. The drive in spending in the constructions sector forms part of the government’s economic policy oriented towards supporting production. Real estate, in fact, accounts for 21% of the gross domestic product. The future appears to be even rosier; projects regarding residential use represent only 3% of those already planned. Other substantial projects dominate, such as the building of Dubailand (91 billion US$), Aviation City of the Al Ain Emirate (37 US$), the reconstruction of 12,500 housing units built before 1990 (2.7 billion US$); there are also important infrastructure works such as the extension of the Al Maktoum airport (7.8 billion


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US$), the Abu Dhabi (6.8 billion US$), the building of a new airport in Ajman planned in 2017 (3.3 billion US$), the renovation of the Dubai underground (5.45 US$) and the completion of the railway network (4.29 billion US$).With regards to food products, it is necessary to consider that the country imports 90% of its needs11; it is also necessary to remember that this figure is influenced by the strong and recent expansion of tourism, the building of large hotel complexes, resorts and other hospitality structures. It is still an impressive figure as well as a great opportunity for the Italian agri-food industry, alongside the future opportunities deriving from the construction of 140 new hotels in view of EXPO 2020. The biggest obstacle to Italian products is the low sales quantity capacity, limiting their presence on shelves in large-scale distribution. Nevertheless, exports of food products reached 137.5 million euro in 2014 (+6.3% compared to 2013) and 23.5 million of euro (+20.6% compared to 2013) with regards to beverages. Catering however, is the easiest outlet to capture, at least in the short term; in the UAE, in fact, there are more than eleven thousand centres where Made in Italy is known and appreciated. The UAE system is based on good quality advanced wholesale centres while the largest sales centres also act as importers for smaller outlets. Italy is a leader in the cheeses and dairy foods sector; with regards to olive oil, our excellence is not well-known, due to food habits oriented towards other types of animal or vegetable oils. The most imported food product to the UAE is pasta, and the supply of kiwis is particularly high in the fruit and vegetable sector.The recognition on the part of the UAE authorities of the Italian Islamic halal certification entity is particularly positive, as well as the elimination of the prohibition of beef and by-products from Italy. ISTAT figures as reworked in the ICE 2015 report of trade with the UAE relating to agri-food products, are shown.

11 Considered as food products, finished foods and ingredients.


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Table 4. Total imports and exports of agri-food products between Italy and the UAE. Values in thousands of euro and variations in percentages. Period of reference 2004 – 2013

2004 2005 2006 2007 2008 2009 2010 2011 2012

2012Jan

Nov

2013 Jan

Nov

Values

Exports 36,031 38,555 59,597 74,228 90,381 90,660 104,611 135,095 199,314 179,755 217,327

Imports 739 1,276 6,388 19,585 35,465 46,473 106,809 109,623 34,473 34,229 6,556

Balance 35,292 37,279 53,209 54,644 54,916 44,187 -2,198 25,472 164,841 145,526 210,771

Normalised balance (%) 96.0 93.6 80.6 58.2 43.6 32.2 -1.0 10.4 70.5 68.0 94.1

Variations on the previous year

Exports 7.5 7.0 54.6 24.6 21.8 0.3 15.4 29.1 47.5 46.3 20.9

Imports -61.8 72.5 400.8 206.6 81.1 31.0 129.8 2.6 -68.6 -65.7 -80.8

Balances (Absolute variations) 3,723 1,987 15,930 1,435 273 -10,729 -46,385 27,670 139,396 122,301 65,245

Source: ICE re-workings of ISTAT data.

Although taxes and customs duties are low in the UAE (around 5%), for many food products, or more precisely, 75% of food products, trade benefits from an exempt regime. This particularity is for strategic reasons, to promote use of the port of Dubai, but also of Port Rashi and Jebel Ali as major hubs for access to other markets in the MENA area.


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Table 5. Italy-UAE trade (food sector). Values in thousands of euro and variations in percentages. Period of reference 2004 – 2013

2004 2005 2006 2007 2008 2009 2010 2011 2012

2012Jan

Nov

2013 Jan

Nov

Values

Exports 28,729 28,056 45,264 57,510 66,137 68,856 72,676 95,665 136,429 124,.517 115,468

Imports 693 1,147 6,310 19,524 35,413 45,717 106,780 109,470 34,386 34,142 6,154

Balance 28,076 26,909 38,954 37,986 30,725 23,139 -34,104 -13,804 102,044 90,376 109,314

Normalised balance (%) 95.3 92.1 75.5 49.3 30.3 20.2 -19.0 -6.7 59.7 57.0 89.9

Variations on the previous year

Exports 7.5 -2.5 61.3 27.1 15.0 4.1 5.5 31.6 42.6 42.7 -7.3

Imports -3.5 65.4 450.3 209.4 81.4 29.1 133.6 2.5 -68.6 -65.7 -82.0

Balance (Absolute variations) 2,040 -1,167 12,045 -967 -7,262 -7,586 -57,243 20,300 115,848 102,660 18,938

Source: ICE re-workings of ISTAT data

In the clothing articles (also in leather and fur) market, it’s important to remember the anti-inflationist choice of the UAE policy-makers to anchor their currency (Dirham) to the American dollar. This puts Italian products at a considerable disadvantage compared to products coming from Asia, which benefit from a sort of indirect competitive devaluation; nevertheless, the Made in Italy brand has already been recognized as a status symbol of wealth and prestige by the so-called “big-spenders”, both locals and foreigners resident in the UAE. Competition remains fierce, and the difficulties are those of any other territory given the presence of 95% of the large international brands. As a result, consumers demand a vast choice and a refined and innovative design able to reflect the Italian nature of the products besides continuous updating of the garments.Electricity, gas, steam and air-conditioning (also from renewable sources). Although the UAE are the fifth producer in the world of petroleum and natural gas and is in third place in the world for petroleum reserves (9.4%), the government has for some time decided to follow an intelligent policy of diversification of its resources so as to reduce the volatility of its economy associated with the price of crude oil.


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Demand for electricity is, obviously, increasing fast due to industrial development and the improvement in the standard of life of the population which is increasingly demanding “more air-conditioning”. The increase in electricity demand in recent years has been 5-6% per year and it is expected that in the next five years the demand will require a doubling in the current productive capacity. The demographic growth also contributes to this trend. 90% of the demand is concentrated in the large cities and in the industrial centres. 97% of production still derives from natural gas; the effects of the aforementioned diversification policy will be seen in the future. The first nuclear plant currently under construction by a South Korean consortium should start operating in 2020, while plants that use renewable sources of energy are still very much marginal (but innovative); numerous solar energy plants are currently being implemented, especially in the northern Emirates.The construction of a power and desalination plant is under construction, which will increase energy production by two thousand megawatt and 105 million litres of desalinated water per day at a cost of around 1.5 billion US$; in addition, the government is strongly promoting eco-sustainable building through a rating system.The strong expansion of building work is a driver and offers great opportunities also for the furnishing sector in which Italian design is recognised all over the


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world and is gradually becoming highly appreciated by the local importers and consumers. Managing to penetrate this sector would also mean opening the door to other markets in the Gulf, in the Middle East and in the Indian sub-continent. Penetration of the market is currently suffering the competition of products with lower quality but with more competitive prices (coming especially from Turkey, China and Lebanon). The opportunities remain, however, also by virtue of the fact that the desire to change decor on the part of the consumer and the diversity of tastes could benefit Made in Italy excellence in the long term.The last area, associated with and resulting from the analyses already made, regards hospitality and catering services, one of the sectors that has experienced unprecedented growth. Before being assigned as the country to host EXPO 2020, the UAE were already constructing 32 thousand new hotel rooms; today the intention is to build 140 new hotels. Dubai will have a total of 750, with 114,000 rooms. A new island, Saadiyat Island, will be built, and will become a cultural centre, like the Louvre and Guggenheim museums, with a Maritime Museum, the National Zayed Museum and other museums dedicated to dance music, opera and theatre. A new urban centre (Sheikh Mohammed bin Rahid City) will be developed which will have the largest shopping centre in the world, bigger than Hyde Park in London.With regards to imports, there was a net fall in 2014 compared to 2013: -51.8%, which could be a “false” figure since in 2013 the figure was 1.3 billion euro, with 575 under the heading of “boats and ships”, probably relating to transit movements or clearing entries.Overall, as already stated, the trade balance is clearly in Italy’s favour with a positive balance of 4.7 billion euro. In the first five months of 2015 there was an increase of 16.2% in exports (compared to the first five months of 2014) and a + 24% increase in imports (again compared to the first five months of 2014). Official figures of imports are shown below with appropriate re-workings carried out by the Italian Embassy in the UAE.


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Table 6. ITA <- UAE imports: Goods in thousands of Euro (2012 figures)

Agriculture, fishing and forestry products 7,891.08

Products from mines and quarries 10,968.13

Food products 5,082.40

Beverages 520.41

Tobacco 582.61

Textile products 5,004.72

Clothing articles (also in leather and fur) 7,062.22

Articles in leather (excluding clothes )and similar 755.59

Timber and products in wood and cork (excluding furniture); articles in straw and plaiting materials 630.08

Paper and paper products 1,231.82

Print products and the reproduction of recorded media 238.28

Coke and products deriving from the refinement of petroleum 11,734.76

Chemical products 7,358.34

Basic pharmaceutical products and pharmaceutical preparations 1,392.79

Articles in rubber and plastic material 4,736.70

Other products from the processing of non-metallic minerals 3,773.67

Metalworking products 25,829.56

Products in metal, excluding machinery and equipment 4,036.00

Computers and electronic and optical products; electro-medical devices, measuring devices and clocks 20,792.67

Electronic devices and non-electric domestic appliances 7,993.49

Machinery and equipment 15,239.28

Motor vehicles, trailers and semi-trailers 11,458.94

Other means of transport (ships and boats, locomotives and rolling stock, aircraft and spacecraft, military vehicles) 7,270.69

Furniture 1,728.41

Products of other manufacturing industries 17,096.81

Electricity, gas, steam and air-conditioning (also from renewable sources) 284.34

Other products and activities 117.99

Source: UNCTAD data and re-working of the Italian Embassy in the UAE.

Overall, commercial relations between Italy and the UAE are in excellent health, especially with a view to future development. Potential opportunities and growth in demand for all markets are very clear, as has been argued.


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There are, however, numerous dangers. First of all, the competition at an international level is extremely fierce; our European partners have great ambitions in the area. Germany, for example, enjoys a volume of trade with the UAE even greater than that of the United Kingdom of which the UAE are a former protectorate (becoming independent only from 1971).In the last few years the German locomotive has been able to penetrate the more unthinkable UAE markets such as “airplanes, helicopters and/or spacecraft”, and only in 2012 they were sold for 3,307.15 million US$. In addition, they manage to cover small slices of almost all the markets. If Italy manages to adopt a good long-term strategy it could significantly intensify its commercial relations with the Arabic country. There are already best practices in place, such as, for example, the linking projects between EXPO 2015 and EXPO 2020. This could be a good opportunity for enabling Italian food products to benefit from the expansion of catering and in hospitality structures, as well as the design of interior furnishings which has an excellent reputation. As already stated, the UAE are a gateway to the Orient, the Middle East and the Islamic world. Being present here with your own products means gaining access to a multitude of international contexts.

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4. How to strengthen and develop trade between Italy and the United Arab Emirates

Andrea RampaFondazione Nazionale dei Commercialisti

Operating in the UAE is not particularly problematic, and can be literally a mine of opportunities. Italian policy-makers have for some time been committed to creating a network of bilateral relations able to promote investments in both directions.It’s important, however, to bear in mind that, besides a certain “desire” to lead a western lifestyle with models and ambitions similar to the collective perception of the western world, the UAE remains a country with a strong Arabic and Muslim culture, in which the Shari’a is in force (not in a fundamentalist version) and in which there is a strong bond to traditions.In all country analyses, recommendations and guides, the advice is to adopt behaviour which is always respectful and appropriate to local values in social, commercial and business relations.This characteristic of the society of being traditionalist and habitudinal has (at times unthinkable) effects on the economy and on trade. For example, it is useful to remember that the distribution activity is seen as an activity with exclusive rights. Signing a distribution contract with a counterparty is therefore equivalent to granting exclusive rights in the sale of their products.Whoever intends to sell their products in the UAE will have to consider what type of distribution agreements to sign and who to sign with. In actual fact, Italian policy-makers have sett up a support channel to speed up the conclusion of trade disputes12. Moreover an Italian citizen resident in Abu Dhabi has been appointed arbitrator (Resolution no.240/62/2013 of 29 January), or rather, included in the list of arbitrators for the resolution of trade disputes in the Abu Dhabi Commercial Conciliation & Arbitration Centre.

12 http://www.ambabudhabi.esteri.it/ambasciata_abudhabi/it/informazioni_e_servizi/fare_affari_nel_paese/fare-affari-in-emirati-arabi-uniti.html


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There are immediate possibilities for expansion in the UAE market. The expansion of the construction sector and the need for western skills and innovation offer Italian exports considerable potential also in the short term. The “proximity” of the Milan EXPO 2015 universal exhibition and the upcoming edition in Dubai in 2010 is certainly a great opportunity in this context.Naturally, completing all the infrastructure projects and running the entire organisation machine for EXPO is a difficult enterprise, even for a healthy economy and in expansion; it does not have the same experience and skills that can be found in a European country such as Italy. In this context Italian policy-makers have to make the most of the opportunity to establish relations which can have a positive effect on the exchange of knowledge, skills as well as on a commercial and political level.The signing of the so-called “Memorandum of Understanding” entered into between the organiser company of EXPO 2015 and the counterpart organiser EXPO 2020 has precisely these objectives. This is a great opportunity for further penetration of the market, as well as of conserving slices of the market acquired through the creation of a sort of EXPO 2015 – EXPO 2020 “alliance”.

Signing the Memorandum of Understanding Important “commercial bridge” between Expo 2015 and Expo 2020

On the left Giuseppe Sala (C.E.O. of Expo 2015 s.p.a.), on the right Sheik Ahmed Bin Saeed Al Maktoum (CEO of Expo Dubai 2020)

It is stated many times in the document that the United Arab Emirates today represent the main gateway for the west to the Arab world. Being absent from

4. How to strengthen and develop trade between Italy and the United Arab Emirates

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this market would make it difficult to penetrate other markets since the country is developing into a trading (and perhaps financial) hub for the entire MENA (Middle East and North Africa) area. It is already a commercial hub, and this is confirmed, among other things, by the figures of air traffic for the main airports in the Federation. With regards to financial development, it is still too early to say; unknown factors and uncertainties, also deriving from the fact that it is a Muslim culture, make it difficult to make accurate forecasts. In addition, the competition of other financial centres such as, for example, the Malay financial centre, raise more than a few doubts. One of the United Arab Emirates’ biggest points of strength is, without doubt, its political stability. It is certainly true that in the MENA area it is always difficult to make forecasts. However, in the case in point many analysts are not afraid to give positive accounts of the country.The indices of risk drawn up by the SACE Group consider the United Arab Emirates relatively free from political and/or civil tensions. The country is classified as the safest in the area at present, safer than all the surrounding countries, including Iran and Kuwait. The strength deriving from its size and its geographical position are permitting the UAE to establish itself in the world in the ways referred to above. Its governance and structure as a federation of seven Emirates allows it to operate in line with Muslim culture and at the same time aspire for a possible future democratic transition.The problems of the Italian production fabric are always the same: dwarfism and a lack of coordination. Any strategies, political and otherwise, put in place must be oriented towards mitigating these problems.It is necessary, for example, for exporters to participate in trade fairs and events since, as mentioned, it’s important for the Arab buyer to “know” their commercial partners and to establish a long-lasting relationship; it’s not outlandish to suppose that this implies significant costs for the small or medium-sized entrepreneur. Italian policy-makers must promote initiatives incentivising such transfers. There are many bilateral air links and our national airline is partly financed by UAE capital (Etihad Airlines has a 49% stake in Alitalia ). Agreements concurrent with trade fairs and exhibitions benefit both parties.


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Italian companies, for their part, must seek to coordinate, join forces in consortia and achieve returns of scale. This approach is especially true for the agri-food sector, in which Italy is unable to handle the large quantities required by the large retail chains.Our excellence and our good taste are already recognised. Now is the moment to be more aggressive, also focusing on quantity and accessing the catering sector and hotel structures through our furnishings, our design and our food products. Looking to the future, it’s necessary to consider that selling only in the high level segments could mean losing important market shares in the long-term. Official data on inequality indices are not available; the International Monetary Fund does not have updated figures. However, such figures should not be as “tragic” as many people think. Moreover, labour cannot continue to be so low cost forever, and a certain increase in salaries is already being reported. In the event that the country’s development continues after 2020 (and today it’s impossible to predict whether this will be case or not), a middle class will emerge in the UAE over the next decade, radically changing demand. Export strategies will have to be oriented much differently.

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5. Contry profile

Chiara RiccitelliCNDCEC - Commission for the Internationalisation of SMEs

5.1. Geographical references

The United Arab Emirates (UAE) is situated in the south-east of the Arabic peninsula, bordering in the south east with Oman, in the south-west with Saudi Arabia and in the north with the Persian Gulf and the Gulf of Oman (with a total coast stretching 1,318 km).


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The surface area is around 83,000 km2, with a mostly flat desert landscape, except for the area bordering with Oman where there is the Hajar mountain range. The biggest emirate is Abu Dhabi (which covers around 87% of the total surface area), while the smallest is Ajman (with only 259 km2).The climate is subtropical arid. The summers are very hot with peaks, in July and August, of 48 degrees and high humidity. The winters are mild and the average temperatures fluctuate between 19 and 28 degrees.The main connection nodes are the two international airports situated respectively in Abu Dhabi and Dubai. There are daily flights to all the European capitals, the United States, North Africa, Australia, India and the Middle East. In recent years the Sharjah airport has become a point of reference, used increasingly by many airlines, while other minor airports used for charter flights, are also present. Emirates Airlines is the main user of the A380 airbus compared to other airlines. The excellent services both on-board and on the ground put the airline in the top class. This airline offers direct flights to and from Italy on three routes: from Milan Malpensa, Rome Fiumicino and Venice Tessera.Etihad Airways is the UAE national airline; it is in sixth place in the world rankings of the best airlines. It offers various travel classes, from economy to business, as far as, for greater privacy, first class suites or first class apartments. Direct flights to and from Italy use the Abu Dhabi-Milan route.Alitalia makes direct flights to and from Rome and Milan and the new Abu Dhabi-Rome route has recently been opened in code-sharing with Etihad Airways.A clear weak point is the connection from the international airports to the traveller’s final destination. It is not very easy, in fact, to move around with public transport and taxis are very expensive.To enter the UAE, travellers (excluding citizens of country members of the Gulf Cooperation Council) need a visa and the regulations for obtaining one depend on nationality. European citizens are issued a visa when they enter the country and these visas are valid for 30 days (renewable for another 30, subject to the payment of a tax). No particular formalities are necessary to obtain one; it is, in fact, sufficient to present your passport on the plane or in customs.

5. Contry profile

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5.2. Historical background

The local population (made up of tribes dedicated to rearing camels, to fishing and farming the oases) converted to the Islamic faith after the arrival of the envoys of the Prophet Muhammad in 630 A.D..In the 16th century it fell under the influence of the Ottoman empire. The colonial period brought the area under the control, first of the Portuguese, then the Dutch and then the British. The latter fought against the Qawasim, one of the most influential tribes in the area, manging to defeat then definitively in 1820, and created a fortress to block the trade of competitors with India. In 1853 the British signed a treat of non-belligerence with the local sheiks that established a “perpetual maritime peace”. In 1992 the “sheikhdoms of the truce” established more stringent conditions, creating a British protectorate, according to which they undertook not to enter into diplomatic relations with any other foreign government and not to use the territory other than in favour of the British. In exchange the United Kingdom undertook to protect the coast from any aggression. During the 19th and 20th centuries the pearl industry prospered, becoming a source of wealth for the population in the Persian Gulf. This market was heavily hit during the First World War and especially in the Great Depression of the world economy, between the 1920s and 1930s. The industry stopped after the Second World War when the Indian government imposed a heavy taxation on pearls imported by the Arab States in the Persian Gulf.Exploitation of underground resources began after the end of the Second World War with the extraction of petroleum, and intense exportation began from the early 1960s. This marked the start of the petroleum era. Thanks to the revenues from this extraction activity, programmes for the construction of infrastructures such as roads, schools and hospitals, were implemented.In the 1960s the British decided to renounce the protectorate, also due to the heavy costs for maintaining a military presence in the territory. The emirate sheiks decided to form the “Trucial States Council”, whose objective was the form and coordinate the union between the emirates. At first there was a lot of disagreement about how to form the Federation. One faction wanted centralisation of administration, another autonomy of the various states. On 2 December 1971 the sovereigns of Dubai and Abu Dhabi


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formed the Union between their two emirates, drew up a constitution and invited the other emirates to join.In the beginning the State of the United Arab Emirates (UAE) was to be composed of nine emirates instead of the current seven, including also Qatar and Bahrein, but in practice the emirates of Ajman, Fujaira, Sharja and Umm al-Qaywayn joined immediately and the emirate Ra’s al-Khaymah only at the beginning of 1972. The other two never joined. The date of 2 December is a national holiday.

5.3. Political system

The UAE is a federated constitutional Monarchy composed of absolute monarchies, with a president who is the highest authority of the State. The Supreme Federal Council, composed of the seven emirates, elects the president of the Federation, the vice-president the council of ministers and the judges of the supreme federal court; it has political power and the power to ratify laws and treaties.The Council of ministers (of which the prime minister is appointed by the president of the Federation) has legislative and executive powers, having heard the National Federal Council (an assembly with a two-year mandate – composed of 40 representatives, appointed by each emirate) which performs a consultative role. Despite the fact that the offices of president of the Federation and prime minister are elective, renewable every five years, they are, in fact hereditary: the president is always the ruling monarch of Abu Dhabi – since 2004 Sheik Khalifa bin Zayed Al Nahayan – while the prime minister is always the sovereign of Dubai – since 2006 Sheik Mohammed bin Rashid Al Maktum.Relations between the Federation and the Emirates are regulated by the constitution. Every emirate, however, maintains its political, judicial and authority and autonomy for local affairs. There is a Union Defence Force (UDF), even though each state can have its own army.The political situation is stable since, thanks to the wealth deriving from the petroleum and to social policies in favour of the citizens, the royal family enjoys the population’s total approval. In recent years action to support less

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developed sectors and regions, a large-scale intelligence operation to monitor the territory, an extension of the elective base of the National Federal Council and an increase in its functions, have been implemented. The country is classified by SACE in the OECD category 2 of country risk (where 0 is the lowest risk and 7 the highest).The UAE are members of all the main international organisations (UNO, WTO, OPEC etc.). They have excellent relations with the western world and with our country, in particular, relations have developed in recent years, becoming solid and stable. They are active members of the Gulf Cooperation Council (GCC) and have participated in various military missions to support the government of Bahrein with riots in the streets and the Yemen government. In the MENA area they have good relations with Egypt and Saudi Arabia while those with Iran remain tense due to problems linked to the dispute over a number of small islets.

5.4. Legal system

The UAE have a court system based on a federal judicial system (in matters relating to defence, foreign affairs, health and education) and a local judicial system (with regards to the regulation of economic activities and individuals).The federal Court system applies to all the emirates except for Dubai and Ra’s al-Khaymah, which have, according to the constitution, decided to keep their own independence. The federal courts have three levels of court (Court of first instance, Court of appeal and the Court of Cassation (Supreme Court of Appeal).The emirates have two types of tribunals that function side-by-side: secular tribunals that rule on civil, criminal and commercial matters, and the Islamic tribunals that rule on family disputes (family rights and succession) and on religious matters. In some emirates, moreover, (including Abu Dhabi), the authority of the Islamic tribunals is also extended to civil and commercial aspects and to serious crimes.


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Administrative Geography The United Arab Emirates are divided into seven emirates: Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al-Qaywayn, Ra’s Al-Khaymah and Fujaira. The capital of the federation is Abu Dhabi.

Emirate Capital Surface Area

Abu Dhabi Abu Dhabi 67.340 km²

Dubai Dubai 3.885 km²

Sharjah Sharjah 2.590 km²

Ra’s al-Khaymah Ra’s al-Khaymah 1.684 km²

Fujaira Fujaira 1.165 km²

Umm al-Qaywayn Umm al-Qaywayn 777 km²

Ajman Ajmān 259 km²

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Abu Dhabi is the biggest, with a surface area of 67,000 km2 covering around 87% of the total surface area of the Federation. Dubai, on the other hand, has a much lower surface area, with 3,800 km2, but the capital of the same name has a population of around 2,415,000 people and is the biggest urban area in the UAE, besides the main commercial and financial centre.

5.5. Demographic data

According to United Nations estimates, the population of the UAE in 2015 was 9,445,624. Considering that from a census in 2005 the population totalled just over 4,000,000 and arrived at around 8,200,000 in 2012 according the National Bureau of Statistics, the rate of growth is clear. This growth is mainly due to immigrant workers – especially Asian, and particularly Indian and Pakistani – which represent more than 80% of the total population. In 2013 the immigration rate was the highest in the world, equal to 21.71. The native (UAE) population is a small minority (less than 20%).85.5% of the population live in the city and the major centres are Dubai, Sharjah and Abu Dhabi.If we consider that most immigrant workers are male and there are no family reunification policies, it is clear why most of the inhabitants are male. In Dubai and Abu Dhabi more than 70% of the population is male and less than 30% female (source: Dubai Statistics Centre, 2012 and Statistics Centre-Abu Dhabi, 2012).Another characteristic is the youthfulness of the population, with an average age of 30.3 years, broken down by age bracket as follows:

0-14 years 20.85%

15-24 years 13.57%

25-54 years 61.38%

55-64 years 3.18%

over 65 years 1.01%

(Source: CIA-The World Factbook 2015)


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The unemployment rate is among the lowest in the world: the employment rate is around 73% but if the immigrants are considered separately from the native populations we have different figures: for the first the employment rate is 79% while for the second it is 45%. In addition, distinguishing by gender, males have a percentage of 89% and females 42%.

5.6. Religion

The state religion is Muslim. Around 76% of the population belong to the Islamic faith, of which 85% are Sunni and the remaining 15% Shia. 8% are Christian and the remaining 15% are of other religions, including Buddhism and Hinduism.

5.7. Currency

The currency is the dirham (the official abbreviation is AED, besides the non-official Dhs or DH) divided into one hundred fil. The exchange rate with the dollar is fixed (one US dollar is equivalent to 3.6725 AED). The exchange rate with the euro is 1 €=4.1110 AED (at 01.10.2015).

5.8. Education

The state education system offers a complete education, from elementary and middle schools to high schools, all paid for by the state. Alongside this is a private system with very variable costs depending on the location and on the services offered; there has been high growth in use of this system in recent years. After Arabic, English is the second language used in the schools.The rate of illiteracy is reducing and is now around 7%. According to the National Bureau of Statistics, 95% of women and 80% of men that have finished the last year of secondary school continue with studies or go abroad.

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5.9. Customs and traditions

Although UAE society is tolerant, and western lifestyles are present with respect to certain aspects, the UAE are strongly tied to their traditions: women wear black tunics (called “abaya”) with a light veil on the head and the men wear a white tunic (called a ”kandura”) with a head cover called a “keffiyeh”.When going to the UAE it’s important to remember that, being a Muslim Arab country, there certain codes of behaviour to respect, especially between men and women; displays of affection in public places are prohibited and heavily sanctioned, in some cases also with imprisonment. It’s not permitted to dress scantily or in a provocative way and its prohibited to drink alcohol in a public place. During religious festivals and during Ramadan it’s not permitted to smoke, drink or eat in a public place. The popular cuisine is Arabic but other types of cuisine can be found, such as European (especially Italian and French) as well as American fast food chains. The supermarkets and hypermarkets have products coming from various parts of the world.The calendar used in the country is the same as that used in the west, except for the religious festivals that follow the Islamic calendar. The latter is composed of twelve lunar months, of 29 or 30 days each, and there are 10/11 fewer days than the Gregorian calendar. The timing of Islamic festivals, such as the Islamic New Year and Ramadan, change from year to year compared to the western calendar.

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6. Investing in the UAE

Liban Ahmed M. Varetti and Donatella VitanzaCNDCEC - Commission for the Internationalisation of SMEs

6.1. General situation

The legal system in the United Arab Emirates is based on a mix between the Shariah (the Islamic Law) and a more conventional type of civil law. The UAE appear to be more liberal compared to other Arabic countries in the Gulf, but their legal framework is still based on strict the moral and ethical codes of Islamic law.The legal system is organised on two levels: one federal and one local. The federal regulations relate to defence, foreign affairs, health and education, while the local system of the single emirates autonomously regulates all the other aspects that affect the economic activities and the individual.The UAE’s Constitution allows every emirate to be autonomous with regards to internal judicial authority; however, with the exception of Dubai and di Ras Al Khaimah, the other emirates make reference to the federal judicial system.Dubai, therefore, has its own independent judicial system that is organised into three levels of courts: Court of First Instance , Court of Appeal and Court of Cassation (Supreme Court of Appeal). These levels of legal proceedings have separate sections: Civil, Criminal, commercial and Islamic Law (Shariah). The latter is applied for the administration of justice for Muslims and mainly operates in the family sphere. Islamic law is, however, applied not only to Muslims, and ignorance of the law (as also in the case of Roman law) is not considered an acceptable justification (Ignorantia legis non excusat). There are also specialist sections with regards to employment law and real estate.Dubai has been influenced by the western legal system. Although its contacts with the United Kingdom have been important, it has not adopted a system based on common law, so the principle of the validity of sentences already issued on future sentences does not apply, Rather, it has preferred to imitate


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the regulatory spirit of the French, Roman and Egyptian legal codes, besides, obviously making reference to Shariah.

6.2. Business activity

Conditions and limitationsIn the UAE the exercise of a business activity, even though substantially free in most sectors, is subject to a number of restrictions for foreign investors. With regards to the management of a business in corporate form, in accordance with art. 22 of Federal Law no. 8/1984, in force in all seven emirates, 51% of the share capital must be held by a UAE citizen. In some cases it is also necessary for locally resident person to a member of the board of directors. In the event that the business is run by an individual (in the form of a “Sole Proprietorship”, as will be seen subsequently), the participation of a “sponsor” is required, who must be a UAE resident acting as guarantor of the foreign individual. The above limitations are generally less in the so-called “free trade zone” (which, according to declared intentions, will increase in number in the future) in which a company may be totally foreign.A foreign investor that does not have a company on site jointly owned by a local person or entity can operate in the UAE only through an UAE agent if they operate as an individual or in corporate form through the setting up of a branch (extension) of the foreign parent company instead of a subsidiary.

Business activity in corporate form The corporate forms useable in the UAE are the following:

› Public joint stock company;

› Private joint stock company;

› Partnership limited by shares;

› Limited liability company (very flexible and low cost).


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It is obviously possible to incorporate a branch as an alternative to a subsidiary; being an extension of the foreign parent company, it is possible not to have a shareholding of a resident individual or entity.There is a further corporate form for doing business in the UAE. That is, setting up a Joint Venture (or consortium company) for which written incorporation is not required ad substantiam, and makes all the participants fully and jointly liable towards to all those to which the existence of the joint venture has been communicated. The existence of a JV may be legally supplied with any form of evidence.

The procedure for incorporating a company One of the essential elements is authorisation for the use of the chosen name. In the UAE it is not possible to incorporate a company if its name has not been approved beforehand. The Memorandum of Association (MoA) must be drawn up in Arabic and authenticated by a notary.The incorporation of the company must be communicated to the local authority together with documentation proving the domicile of the company (for example, by means of a rental agreement for an office or a certificate issued by a qualified estate agent). At the end of the procedure for checking the documents, the company is registered in the equivalent of the Italian “register of companies”. All companies, whether industrial, commercial, service or professional, must have a current bank account and an office, as well as license issued by the competent UAE authority in the emirate in which they are domiciled. The license must be acquired before starting to operate; the authorisation procedures vary from emirate to emirate.The licenses can be classified into three categories:

› Commercial licences: for all trading activities

› Industrial licences: for activities of an industrial nature involving production activities;

› Professional licences: for activities relating to professional services and crafts .

A specific authorisation by the UAE Authorities is required for the following activities:


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› Financial activities of an institutional nature;

› Industrial expansion projects;

› Medical activities;

› Transport and air services;

› Publishing, press, advertising, cinema;

› Education;

› Agricultural or animal farming activities;

› Forwarding and customs brokerage activities;

› Insurance;

› Professional firms and legal advice;

› Engineering and Constructions.

In the Doing Business 2015 classification, the United Arab Emirates are at 22nd place in the general ranking and with regards to the specific Starting a business classification, the World Bank puts the UAE in 58th place, indicating that 6 procedures and 8 days are needed. Italy is placed at 56th place in the general ranking and at 46th place in the Starting a business league table.

The Branch or Representative office A Branch, that is, a stable organisation of a foreign enterprise, is an extraterritorial extension of the foreign enterprise; as a result there is no obligation for an UAE partner and the company can carry on its activities directly. However, to set up a Branch it is nevertheless necessary to obtain a license which has to be requested from the Ministry of the Economy, and if granted, the communication of the issue will be made directly by the UAE Department of the Economy in which the branch or office is going to be opened. Having obtained the authorisation from the UAE department, it will be necessary to pay the sum of $2,700 besides a bank guarantee for $13,000 and to annually renew the license through the payment of Aed 20.000. To open a Branch it is nevertheless necessary to have a local sponsor and to appoint a UAE “Service Agent” who will manage all relations with the authorities without interfering (nor being involved) in the running of the Branch.


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Instead of a branch, a “representative office” can be opened, which is the first step to enter a foreign country on the part of a company that intends to operate in that context. The representative office is subject to limitations specific to this type of structure, more or less valid in all countries, also on the basis of bilateral treaties based on the OECD Convention. In particular, a representative office may not carry on trading or service activities, but only ancillary activities; therefore it carries activities involving the promotion of products and services of the foreign enterprise, market research, etc., but not the acquisition of orders or the undersigning of sales contracts on site. In all events, to open of a representative office it is necessary to appoint a UAE “Service Agent”.The choice between the three above alternatives, subsidiary, branch or representative office, must be carefully assessed, bearing in mind the different implications that these very different structures imply in both organisational terms (accounting and management) and in tax a legal terms.

Doing business as a sole trader or as a professional Foreigners may not carry on commercial activities in the form of a sole trader, but only professional activities are permitted as a “Sole Proprietorship” and, in any case, they are obliged to appoint a local UAE “Agent” who, while not being involved in any way in the management of the business, deals with all the formalities and dealing with the local authorities.Also in the case of a Sole Proprietorship it is necessary to have a license to be renewed annually, besides an administrative office in the Emirate.

6.3. The areas dedicated to business development

The free trade zonesThe Free Trade Zones (FTZs) were created to stimulate the economy, attract foreign investments and create employment, besides being a necessary means to increase industrial and service activity not connected with the petroleum


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industry, and to attract know-how and new professional skills useful for the country’s growth. The main benefits of the Free Trade Zones are:

› The possibility for the company’s registered office inside the FTZ to be entirely owned by the foreign investor,

› Total exemption from customs duties with regards to both exports and imports (obviously for goods intended to remain inside the free zone, or which form part of the production cycle to be subsequently re-exported as part of a transformed product);

› The right of total repatriation of the capital as well as of the profits earned from the business;

› Total exemption from taxation of income for a period that can vary from 15 to 50 years depending on the zone;

› The absence of restrictions in the hiring of employees.

There are more than 20,000 companies distributed over 21 Free Trade Zones in the UAE. The most “populated” FTZs are:

› Jebel Ali Free Zone (6,000 companies)

› Sharjah Airport International Free Zone (3,900 companies)

› Dubai Airport Free Zone (1,300 companies)

› Dubai Media City (1,200 companies)

› Dubai Internet City (1,000 companies)

› RAK Free Trade Zone (7,500 companies)

Setting up business inside a Free Trade Zone must be carefully evaluated, since it may not be suitable for anyone planning a long stay in the country. The possibilities of operations in the internal market are limited; the business can only develop in an area which is difficult to be expanded (since a settlement in a Free Trade Zone is in a physically limited space). This solution is also not suitable for those performing a professional activity.There are a number of specific regulations to comply with in a Free Trade Zone associated with customs procedures, in order to prevent goods exempted from


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customs duties imported for processing in the FTZ from being subsequently distributed in the internal market without customs clearance.

The special economic zonesThe Special Economic Zone (SEZs) have been established to develop small and medium enterprises; the emirate of Abu Dhabi has created the “Higher Corporation for Specialised Economic Zones (Zone Corp.).In the emirate of Dubai the following can be classified as Special Economic Zones: the Dubai Multi Commodities Centre (DMCC), the Dubai International Financial Centre (DIFC), the Dubai Internet City and the Dubai Media Academic City. In the emirate of Sharjah, Emirates Industrial City can be considered as a Special Economic Zone

6.4. The protection of intellectual and industrial property

Regulations exist in the UAE to protect intellectual property involving both registration procedures and punitive measures for the violation of intellectual property rights. The implementation of these regulations has found fertile ground in the principles of Sharia law, which has among the Hadiths of the Prophet also that of permanent protection (and therefore much more than the 20 years usually provided for in western provisions on the subject) of enjoyment of the rights of intellectual property rights, as long as, obviously, they are admissible inventions or creations (Halal) on the basis of Islamic precepts.The theme of industrial property with regards to patents and designs already registered is regulated by Federal Patent Law no. 31 del 2006 and the theme of protection of intellectual and industrial property is controlled at a federal level by the Ministry of the Economy (www.economy.gov.ae); on the whole the regulations that protect such rights are complex and require specific examination for each case in point.


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Taken as a whole, the regulations in force are comparable and adequate, in terms of level of protection and rapidity of action, with the most highly industrialised countries.

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7. Taxation

Liban Ahmed M. Varetti and Donatella VitanzaCNDCEC - Commission for the Internationalisation of SMEs

7.1. General situation

The United Arab Emirates are a Federation composed of seven states: Abu Dhabi, Ajman, Dubai, Ras Al-Khaimah, Sharjah and Umm Al-Qwain, established in 1972. The Federation has legislative authority and powers in the following sectors: foreign affairs, defence, health and education. It does not today have authority regarding fiscal regulations, for which the single emirates legislate independently, albeit in a coordinated manner. In view of an extremely favourable tax policy, the UAE are included in the black list of companies due to the low level of taxation, even though they have signed a convention with Italy against double taxation, for the exchange of information and for combatting tax evasion. The fall in the price of crude oil in the last years is leading the federation to consider implementing a direct taxation system at a federal level, as well as the introduction of value added tax.

7.2. Direct taxes

With regards to direct taxes, of the seven emirates only three have relevant legislation: (i) Abu Dhabi through the Abu Dhabi Income Tax Decree of 1965; (ii) Sharjah with a decree of 1968 and (iii) Dubai with the Dubai Income Ordinance of 1969 and the Dubai Income Tax Decree of 1970. These regulations, however, are only applicable to companies that carry on extraction, exploration and development activities in the petroleum industry, and to a lesser extent in the banking sector.


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It is for this reason that the companies operating in the petroleum and chemical sector that are subject to taxation (not being inside the Free Trade Zone) are the only businesses excluded from the Italian black list.

Corporate Income Tax With regards to direct taxation, the level of taxation provided for in the single emirates, is applied on income in a range that fluctuates from a minimum of 10% to a maximum of 55% on the basis of the following progressive scales used by the regulations of all the emirates:

Income Rate

From zero to 1 million AED 0%

From 1 million to 2 million AED 10%




More than 5 million AED 55%

The tax is applied to entities and companies, with or without legal personality, branches and subsidiaries of foreign persons or entities that have a stable organisation in the UAE. A stable organisation is considered as any type of office physically present, but also an Agent that habitually concludes deals in the name and on behalf of the foreign enterprise in the UAE territory. For tax purposes, the principle of territoriality adopted in the UAE imitates the French concept, that is the territorial nexus approach, as a result of which the profits generated on site are taxed, but not those generated outside the UAE.Corporate taxation is the only type of direct taxation in the UAE, also if limited, as has been mentioned, to companies in the oil & gas and banking sectors, the first with a rate of 55% and the second with a rate of 20%. The tax is not applied to other businesses, even though the legislation exists. Declaration obligations are attributed only to the persons or entities that effectively pay the tax; with regards to financial statements, these must be drawn up, certified and submitted to the Ministry of the Economy before renewal of the license. Companies incorporated in the form of a LLC (limited

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liability company) and holders of a Professional Business licence, however, do not have to submit financial statements.For persons or entities operating in the Free Trade Zones, there is presently no obligation to submit financial statements or tax returns; such entities are subject to the control of the Authority responsible for management of the FTZ.

Taxation of individuals There is no taxation of personal income.

7.3. Indirect taxes

Property tax A tax calculated on the rent of a property unit leased by a person or entity resident there is provided for in many emirates, with a tax rate that fluctuates between a minimum of 5% and a maximum of 10%. In some cases the tax is linked to the commercial license and its renewal (Abu Dhabi) and is also applied to employees. In particular, with regards to employees, this tax is withheld and paid to the tax office directly by the employer and is on average 5% for employees in the professional, commercial and industrial sector and can arrive at 15% for employees in the banking sector.

Consumption taxes The only tax on consumption existing in the various emirates relates to hospitality and catering services that provides for a variable tax between 5% and 10%.


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Customs duties Most of the goods imported are subject to a duty of 5% with the exception of alcohol and tobacco products and by-products, which are subject to higher duties.

Registration tax and tax on property transfers There no registration tax in the emirates, but for the transfer of real estate property there is a tax on sales of 4% divided equally between the two contracting parties.

7.4. Social security contributions

For non-UAE citizens there is no deduction by way of social security contributions; UAE citizens that work as employees are subject to a contribution payable by the employer that varies between 12.5% and 15.00% depending on the sector of work. There is also a part payable by the employee of 5.00%.

7.5. Exemptions

In the UAE there is no taxation or deductions at source with regards to:

› Capital gain

› Dividends

› Transfer of income between subsidiaries and the parent company

› Contributions

› Patrimonial wealth

› Succession

Furthermore, there is no legislation regarding:

› Transfer pricing

› Undercapitalisation

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› Cfcs

› Particular regimes for holding companies

› Foreign tax credit

› Value added tax

7.6. Tax relations with Italy

Although the United Arab Emirates have signed a bilateral convention with Italy to avoid double taxation and for the exchange of information, due to the level of taxation which is considerably lower that applied in Italy (except for companies in the gas & oil sector), they are among the countries for which the Controlled Foreign Company (CFC) regime is applied. On the other hand, they are on the white list with regards to exemption of the application of withholding tax on investment income, since there is an adequate exchange of information. Similarly they have been taken off the black list of countries with regards to the non-deductibility of costs.The application of CFC regulations is governed by art. 167 of the Income Tax Code and in practice is a disincentive for making production investments in the UAE unless there is a favourable opinion of the advance ruling procedure or unless it is possible to demonstrate the justifications as per the cited art. 167 TUIR.The CFC regulations provide that the controlling entity resident in Italy (whether an individual or a legal entity) subjects to taxation in Italy, for the purpose of transparency, the income produced in the UAE by the subsidiary.The calculation of the tax payable is made by applying all the Italian tax rules included in the Income Tax Code and otherwise (and as more fully set out in Leg. Dec. 147/2015 (the so-called “Growth and Internationalisation Decree”). Unfavourable regulations not present in the Income Tax Code, such as, for example, the rule relating to shell companies therefore also apply, but so do favourable and concessionary rules such as, for example Allowance for Corporate Equity. Once the profit for the period has been calculated on the basis of the financial statements of the subsidiary and having applied increasing or decreasing variations for taxation in Italy, the income will be taxed in accordance with the


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shareholding of the parent; the parent will be taxed separately with an average rate applied on the overall income of the resident entity and, in any case, at not less than 27% as set out in paragraph 6 of art. 167 of the income Tax Code. Until Leg. Dec. 147/2015, which repealed art. 168 of the Income Tax Code, for transparency purpose, associated companies as per art. 2359 para. 1 no. 2 of the civil code were also taxed. On the basis of the aforementioned legislation, these shareholdings also generated income taxable for transparency purposes with regards to the parent, calculated through a mathematical derivation mechanism which, in practice, prevented having zero income also in the event of a loss on the part of the subsidiary.In the event that the shareholding in the subsidiary situated in the UAE carries on commercial exchanges with the parent company, there is also the problem of transfer pricing to which the Italian Tax Authorities pay particular attention.

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Appendix: Investing in Italy13

Starting a business

1. The enterpriseAccording to the Italian Law, the term “enterprise” (impresa) defines the engagement in an economic activity organized for the purpose of production or exchange of assets or services. The person engaging in such activity, in a professional, stable and permanent manner, is referred to as entrepreneur (imprenditore). Under the definition of enterprise, there are some sub-categories, which depend on the activity carried out.

Agricultural entrepreneurAn agricultural entrepreneur is whoever exercises an activity aimed at cultivation of land, forestry, stockbreeding and other related activities.Small entrepreneur

Small entrepreneurSmall entrepreneurs are farmers who personally cultivate the land, artisans, small tradesmen, and those who engage professionally in an activity organized mainly with their own (labor-intensive) work and that of the members of their family.

ArtisansArtisans personally and professionally exercise the activity. They are fully liable for the enterprise - with all duties and risks relating to its direction and management - and works mainly, even doing manual work, in the production

13 Excerpt from Fare impresa in Italia. EXPO 2015 publication of the Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili in collaboration with Agenzia delle Entrate and Consiglio Nazionale del Notariato


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process. Usually, the main scope of artisanal activities consists in the production, manufacturing, construction, transformation and maintenance of goods, as well as in producing works and providing services.

2. Establishing a companyIn Italy, entrepreneurial activities can be carried out either:

› individually, by a natural person, or

› through a company.

For setting up a company, there is need to reflect on the real needs, to consider different issues, such as the organisation, the purposes to be achieved and the responsibilities. In particular, referring to the purpose to be achieved, through a company contract two or more persons contribute assets or services for the exercise in common of an economic activity for sharing the profits thereof (for profit). Companies pursuing this objective may be:

› partnerships: informal partnership, general partnership, limited partnership;

› incorporated entities: joint-stock companies, limited liability companies, partnerships limited by shares.

Beyond these types of companies there are cooperatives pursuing a mutual purpose: providing assets, services, job opportunities to their members with better conditions than those that could be obtained on the market.

3. Setting up a businessNatural or legal persons who intend to carry out permanently a business activity in Italy are required to comply with specific requirements aimed at creating a new position for administrative, social security and fiscal purposes. If the activity is carried out in the form of a company, some requirements need to be met in order to establish the company.

Appendix: Investing in Italy

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3.1. Comunicazione Unica (Single communication)Today, in order to start a business, both residents and non-residents in Italy need to file the Comunicazione Unica (so called “ComUnica”), a telematic procedure which allows to fulfill all the obligations and requirements towards several authorities submitting a single application to a single entity, i.e. the Companies’ register. The main fulfilments are:

› registration, modification and winding up of new companies at the Companies’ Register;

› statement of start of business with assignment of VAT number (identification number with 11 figures), modification of data or winding up at the Revenues Agency;

› registration, modification and winding up of handicraft and business enterprises, enterprises with employees and agricultural enterprises and tenant farmers at the Italian Social Security (INPS);

› registration, modification and winding up of the company at the Italian National Institute for Insurance against Accidents at Work (INAIL);

› registration, modification and winding up of the activity at Local commissions for handicraft work (offices in charge of the Register of handicraft enterprises).

3.1.1. CERTIFIED EMAIL (PEC) FOR BUSINESSES Both companies and sole traders are required to indicate their certified email address when they register with the Companies’ Register . The registration of the email address and any subsequent modifications are exempted from stamp duty and administrative charges.The certified email address allows forwarding and receiving messages having the same legal value as a registered letter with a return receipt.

3.2.Permanent organisational structure A non-resident business may exercise its activity in Italy through a permanent organisational structure. This includes: a head office, a branch, an office, a workshop, a laboratory, a building, monitoring or installation yard (provided that this yard lasts more than three months).


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A settled main office is not considered a stable organisation if it is used only for the purpose of buying assets or goods, gathering information or carrying out whatever activity being preparatory or auxiliary, or if it is used as deposit, showroom, for delivering or storing assets and goods, which will be transformed by another enterprise. Finally, it is considered a stable organisation the availability of computer processors and related machinery for the gathering and transmission of data and information aimed at selling assets and services.

Business management

1. Italian tax systemA business operating in Italy is subject to the relevant taxation system.

1.1. Income taxIncome taxes are direct taxes levied on the assets held or produced by an entity.In Italy, income from business activities is subject to tax according to the Consolidated Act on income tax (so called “TUIR”).The tax regime for business activities depends on the nature and legal form of the entity that carries out such activities. The relevant taxes are the following:

› IRPEF – Tax income on natural persons;

› IRES – Tax income on businesses.

1.1.1. TAX INCOME ON NATURAL PERSONS - IRPEFSole traders, both resident and non-resident, are subject to IRPEF (Imposta sul Reddito delle Persone Fisiche).IRPEF is a progressive tax. The tax due is calculated by applying to the overall income (including income other than business income) after deductible expenses, increasing rates based on income classes, as follows:

› up to 15.000,00 euro, 23%;

› between 15.000,00 euro and 28.000,00 euro, 27%;




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› over 75.000,00 euro, 43%.

Specific amounts sustained for different expenses identified by the law are then deducted from the resulting gross amount.

1.1.2. TAX INCOME ON BUSINESSES - IRESCompanies with share capital and similar entities, both resident and non-resident, are subject to IRES (Imposta sul Reddito delle Società).Partnerships are not subject to IRPEF or IRES, since each partner is already taxed on its overall income produced, including their business income and regardless of the fact that they have received it or not (so called “transparency principle”).IRES is a proportional tax. The tax due is 27,5% of net overall income.

1.1.3. ACTIVITIES PRODUCING BUSINESS INCOME Business income is the one resulting from business activities that is the usual, but not necessarily exclusive, exercise of the following activities:

› industrial activities for the production of goods and services;

› intermediation activities in the circulation of goods;

› transport activities, including land, sea and air transport;

› bank and insurance activities;

› other activities supporting the ones listed above (e.g. business agents and sales representatives);

› activities of provision of services other than the ones listed above, provided that they are organized in the form of an enterprise;

› agricultural activities exceeding the limits of the potential of the land on which they are carried out;

› activities of exploitation of the ground and subsoil.

1.1.4. METHODS TO DETERMINE THE BUSINESS INCOMEOrdinary accounting regime The ordinary accounting regime is mandatory for incorporated entities, while for sole traders and partnerships the obligation is effective only for income exceeding the following amounts:


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› € 400.000 for the provision of services;

› € 700.000 in all other cases.

If the income does not exceed these limits, it is still possible to choose this regime.The ordinary accounting regime requires keeping the following accounting books:

› day book, inventory book;

› book of depreciable assets;

› register for VAT purposes;

› any auxiliary inventory books;

› any mandatory books for labor law purposes.

For these entities, the taxable income is determined by increasing or decreasing the profit or loss for the period, resulting from the profit and loss account, according to the tax provisions in force (for entities applying IAS/IFRS, some accounting criteria have tax relevance also if departing from tax regulation).For resident entities, the taxable income comprises not only the income produced in Italy, but also abroad. For nonresident entities, taxable income comprises only the income produced in Italy through a stable organisation. Losses for the first three periods since the starting of the business may be carried forward, with no time or quantity limits. For incorporated entities, losses incurred from the fourth year and on reduce the income of the subsequent tax periods within the limit of 80% of the taxable income of each of them (art. 84 del TUIR). Losses resulting from sole trader activities and holdings in partnerships may reduce the related income earned in the tax periods and carried forward to the subsequent tax periods, not beyond the fifth, for the part that is not used (art. 8 of TUIR).Interests payable are deductible up to the amount of interest receivable. Any exceeding part will be deductible within the limit of 30% of the gross operating result reported in the income statement. Any further exceeding part will be deductible, within the mentioned limits, in future periods. These limits do not apply to sole traders and partnerships. Dividends paid by incorporated entities to non-resident members are subject to a definitive withholding tax of 26% (any more favorable rate foreseen by


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agreements against double taxation apply; this withholding tax does not apply to income related to a stable organisation in Italy of a non-resident entity). The withholding tax equals 1,375% when dividends are paid to a company or to entities subject to the corporate income tax in another EU Member State or in a State that has entered into the Agreement on the European Economic Area, which allows an appropriate exchange of information. An exemption from the withholding tax is finally foreseen on dividends paid to incorporated entities that are resident in another EU Member State, holding, consecutively for at least one year, a minimum shareholding of 10% in the joint-stock company resident in Italy (so called “parent-subsidiary directive”).

Simplified accounting regime Sole traders and partnerships that do not exceed the above mentioned income thresholds (so called “minor enterprises”) adopt a simplified accounting regime which foresees VAT bookkeeping, appropriately integrated in order to consider only those elements that are relevant for the purposes of income taxes. These persons and entities are not required to prepare the financial statements for the period, so business income is directly determined based on the relevant tax law. Losses for the period cannot be carried forward, but can reduce other categories of income, generated in the same tax period.

1.2. Regional tax on productive activities (IRAP)Sole traders, partnerships and incorporated entities are subject to the Regional tax on productive activities (IRAP, Imposta Regionale sulle Attività Produttive). An exemption is foreseen for sole traders not independently organized, i.e. those carrying out the activity without employees or collaborators and with capital goods not exceeding the minimum endowment required to carry out the activity itself.

The taxable amount is made up of the value of net production, generally determined from the difference between revenues and expenses for ordinary management (financial revenues and expenses are not relevant).


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The ordinary rate is 3,90%, with higher percentage for special activities. The single Regions can vary the rate up to a maximum of 0,92% and foresee reductions or increases of the ordinary rate for specific persons/entities or activities.

1.3. VATIn general, the transfer of goods or the provision of services in Italy by persons and entities that carry out a business activity in a professional manner is subject to an added value tax (VAT) which is an indirect consumption tax.

2. Main tax and social security fulfillments The taxation of the company for the above-mentioned taxes involves some fulfillments, among which the certification of the remunerations, bookkeeping, filing of returns and of other communications for tax purposes.

2.1. Certification of the remunerationIn general, from the beginning of the business activity, all operators (including entrepreneurs) are required to certify the remuneration related to sales of goods and services through the issue of an invoice, a receipt or the receipt note for fiscal purposes.

2.2. Keeping accounting books and recordsAfter the start of a business activity, taxpayers need to set up and keep the accounting books and records prescribed for the purposes of direct taxes and VAT, in which purchases and sales must be recorded, as well as every event involving the business. The accounting records to be set up and kept will vary depending on the adopted accounting regime (ordinary or simplified).

2.3. Reporting requirements Every year, taxpayers are required to transmit to the Revenue Agency the statements referring to the previous tax period, in order to certify:

› the revenues relevant to IRPEF/IRES purposes (modello UNICO);


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› the transactions carried out and received for VAT purposes and the yearly paying off of the tax;

› the value of the net production for IRAP purposes;

› the remuneration paid to employees, collaborators and suppliers, deducted of the withholding taxes (in this case the dealer operates as a withholding tax agent).

2.4. Tax paymentIn relation to the amount returned every year, the taxpayer (or the withholding agent in charge) determines the taxes due and pays them to the Treasury through the F24 model.Payment of social security contributions The persons/entities carrying out business activities and required to register with INPS’s (Italian social security) management are required to pay social security contributions according to predetermined rates.Annual payments include:

› a fixed amount of contributions, in instalments to be paid during the year;

› any further instalment calculated on the business income resulting from the yearly tax return and paid together with any direct taxes due.

2.5.Reporting obligationsIn addition, specific information needs to be reported to the Revenue Agency. This information is not aimed at determining the tax to be paid but at supporting control activities.

Favourables rules for specific enterprises

1. Start up and innovative SMEsEnterprises operating in Italy in the field of innovation technology (the so-called innovative start-ups) may benefit from favorable regulations for what concerns corporate, fiscal and employment issues.


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The provisions in force mainly aim at fostering a sustainable growth, technological development, new entrepreneurs and employment (particularly for young people).For the same purpose, the law has defined the so-called “certified incubator of innovative start up”, that is, joint-stock companies providing services in order to support start-up development and, for this reason, they are enhanced and stimulated through the recognition of some of the measures foreseen for these latter. In addition, a new favorable system has recently been introduced to support small and medium sized enterprises having an innovative scope (innovative SMEs), extending some of the provisions already in force for the benefit of innovative start-ups. Both categories of enterprises, in order to benefit from these new favorable provisions (limited in time for innovative start-ups) have to meet specific requirements and register with the special sections of the Companies’ Register.

2. Tax reliefThe Italian jurisdiction provides for specific rules to foster the starting of new entrepreneurial and small activities. In particular:

› tax regime for independent workers;

› tax regime for young entrepreneurs and workers in mobility.

Both regimes apply only to sole traders and independent workers, while companies are excluded.

3. Main tax reliefsIn addition to those already illustrated above, the Italian legislation foresees several other tax reliefs for businesses, including:

› support to economic growth;

› tax credit for investments in machinery;

› tax credit for research and development activities.


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3.1. Support to economic growth (ACE)The support to economic growth, better known by the acronym ACE, is a relief aimed at favoring business capitalisation and it is addressed to incorporated entities, partnerships and sole traders and to the Italian entities, as well as to the same type of companies and entities being nonresident but with a stable organisation in Italy. This relief allows the reduction of IRES and IRPEF, beside the related surtaxes, while it does not affect the IRAP determination, which is done by ordinary means.

3.2. Bonus for investments in capital goodsThe recognition of a tax credit for businesses is foreseen to foster investments in new capital goods for production plants located in the Italian territory, irrespective of the accounting or revenue determination regimes adopted.The relief is recognized for investments made between 25.6.2014 and 30.6.2015, except for any extension.

3.3. Tax credit for research and development activitiesBusinesses investing in research and development activities in tax periods from 2015 to 2019 have a tax credit, irrespective of their legal form, economic industry and accounting regime adopted.

Foreign investments in Italy in reciprocity conditions

1. Foreign investments in ItalyIn order for foreigners to make investments in Italy, the “reciprocity condition” must be complied with.Art.16 of the preliminary conditions of the Italian Civil Code states that “foreigners can enjoy the same civil rights granted to the Italian citizens under reciprocity conditions and in compliance with any provision contained in special laws”.The rule, introduced by the legislator in 1942, was conceived to protect Italians abroad, since it acts in retaliation towards those countries not recognizing on


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their territory civil rights to Italian citizens. As a matter of fact, if a State does not grant Italian citizens some civil rights, foreigners coming in Italy from that State cannot enjoy those same rights denied to Italian citizens in that foreign country. This rule considerably affects foreign investments in Italy, especially for what concerns the acquisition of properties and shareholdings: if an Italian cannot purchase a property or have a shareholding in a company established in a foreign country, the citizens of that country will not be allowed to purchase properties or shareholdings in Italy.

2. Reciprocity and rights granted by the Italian constitutionFrom the legal point of view, the reciprocity condition is a key element, necessary for foreigners in order to get the legal capacity concerning the related right; consequently, if the condition is lacking, any act committed by a foreign person will be null and void.Despite the many rules subsequently introduced by the legislator on immigration and foreigners’ conditions, art. 16 of the preliminary conditions of the Italian civil code – containing the reciprocity rule – has never been abrogated.In particular, the “reciprocity condition” has overcome, until now, the objections of noncompliance with the principles of the Italian Constitution relating to the inviolable rights, the equality of citizen, and compliance with the generally recognized international law rules and right of defense before a court. The decisions of the court have many times confirmed that the constitutional rights that are recognized also to foreigners without the limit of the reciprocity condition are only the inviolable rights. These are personal freedom, inviolability of the place of habitual residence, liberty and secrecy of the correspondence, freedom of religion, freedom of thought, personal criminal liability, freedom of association, right to the work and judicial protection.


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2.1. Exemptions from the verification of the reciprocity condition

UE CITIZENSThe reciprocity rule does not apply to EU citizens. Both the Treaty on the Functioning of the European Union and the Treaty on European Union, contain a set of rules ratifying the prohibition of any discrimination towards EU citizens. Based on these provisions, the Court of Justice has repeatedly stated that the fulfillment of obligations imposed to member States by the Treaty or derived law cannot be subject to the reciprocity condition.

EEA CITIZENSIn addition, countries that have entered into the Agreement on the European Economic Area are exempted from the verification of the reciprocity condition. Even though Norway, Iceland and Liechtenstein are not EU members, they have joined the EU Internal Market through the Agreement on the European Economic Area, undersigned in Oporto on 2 May 1992 and in force since 1 January 1994. It established the principle of equal treatment in the field of capital market and credit and excluded any restriction based on nationality and location of the capitals.

AGREEMENTS FOR THE PROTECTION OF INVESTMENTS The verification of the reciprocity condition is not required for citizens of those countries that have entered into bilateral agreements with Italy concerning the promotion and protection of the investments (Bilateral Investment Treaties, or BITs).The Archivio dei Trattati Internazionali (ATRIO – Archive of International treaties) is available on the website of the Italian Ministry of Foreign Affairs (http://itra.esteri.it/).Special attention needs to be paid to the expiration date of these agreements, considering that they often contain a clause of renewal by tacit agreement, for certain periods, unless denounced by one of the contractor countries; this clause lacking, the expiration of the term is a cause for the termination of the contract.


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FOREIGNERS WITH RESIDENCE PERMITThe verification of the reciprocity condition is not required for foreign citizens with a residence permit provided for by art. 9 of Law on immigration, and for foreign citizens with a residence permit for subordinate or self-employment, for a sole trader, for family, humanitarian and study reasons, and for their family complying with the requirements for residence. Since the law on immigration states that it is not allowed to expel foreigners who required the renewal of the residence permit within 60 days before its expiry, the extension of the regularity of the residence is valid also to continue to benefit from the additional civil rights granted to foreigners. Consequently, in this case, also after the residence permit has expired, the exemption from verifying the reciprocity condition remains valid.

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Members of the board of CNDCEC

PresidentGerardo Longobardi

Vice PresidentDavide Di Russo

SecretaryAchille Coppola

TreasurerRoberto Cunsolo

Board MembersAdriano BarbarisiMaria Luisa CampiseAndrea Foschi Maurizio G. GrossoVito JaconoAttilio LigaGiorgio LuchettaLuigi Mandolesi Raffaele Marcello Marcello Marchetti Massimo Miani Giovanni G. Parente Ugo Marco Pollice Antonio Repaci Felice RuscettaSandro Santi Maria Rachele Vigani

CEOFrancesca Maione

Office holders

CNDCECPiazza della Repubblica, 5900185 – RomaTel. 06.47863300Fax. 06.47863349E-mail [email protected]. www.commercialisti.it

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The National Foundation - FNC

PresidentGiorgio Sganga

Board MembersAlessandro ClòLuigi Carunchio Michele De TavonattiNicolò La Barbera Vittorio RaccamariFrancesco M. Renne

Board of Statutory AuditorsClaudio SolferiniGaetano AmbrogioMaurizio Napolitano

Scientific DirectorGiovanni Castellani

Scientific CommitteeSalvatore BilardoVincenzo BusaMario CicalaMarco ElefantiCarlo Ricozzi

FNCPiazza della Repubblica, 6800185 – RomaTel. 06.4782901Fax. 06.4874756E-mail [email protected]. www.fondazionenazionalecommercialisti.it

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CNDCEC - Commission for the Internationalisation of SMEs

CNDCEC Council Members delegated to international affairs Giovanni Gerardo ParenteUgo Marco Pollice

CoordinatorFilippo Maria Invitti

MembersDaniela BaldiAntonio BevacquaAntonio BorrelliEmmanuele CarandenteAlessandro CianfroneRoberto CorciuloGiorgio De GiorgiFederico DiomedaStefano DucceschiCarla FanelliStefano GallettiAlessandro GiustiGiovanni GranataMichele LocuratoloMaurizio OggioniGiovanna Palermo Di Meo

Renzo PedevillaAlberto PeraniWalter RadiceBruno RastelliAlessandro RiberzaniChiara RiccitelliGaetana RotaLuca SavinoDemetrio SerraPier Luigi SterziNicola StrappaghettiMaurizio TurràLiban Ahmed M. VarettiCarlo VermiglioDonatella VitanzaAndrea Volpe

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Fondazione Nazionale dei Commercialisti

Graphic design

Martino Palladini

ˆˇ ˜˘ ˜ ˙˚ ˜˘ ˇ ˘˜ ˇˆ - cndcec for the uea market tommaso di nardo and andrea rampa...

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