The UAE has told some of its largest business families that they plan to remove their monopolies on the sale of imported goods, according to the Financial Times reported recently.
State news agency WAM quoted a statement from the Economy Ministry saying that a commercial agency bill was still in its legislative cycle and “it is still too early to give details” .
Flight report said the proposed legislation would end the automatic renewal of existing trade agency agreements in the Gulf state, giving foreign companies the option to distribute their own products or change their local agents.
“It no longer makes sense for individual families to have such power and easy preferential access to wealth,” said the report, citing an Emirati official. “We need to modernize our economy.
According to existing commercial agency agreements, foreign companies were required to nominate local partners to distribute their goods.
The proposed reform would sever the long-standing social contract between the government and the families of influential merchants, including historic names such as Al Futtaim, Al Rostamani and Juma Al Majid.
“It is one of the most difficult taboos to touch because of its impact on local family businesses, one of the biggest sectors of the United Arab Emirates economy, ”said Habib Al Mulla, executive chairman of the Middle East branch of the law firm Baker McKenzie.
Family businesses, from small businesses to conglomerates, account for 90% of the UAE’s private sector, which itself accounts for around three-quarters of jobs.
The UAE aims to attract more investment and the pace of reforms has picked up amid emerging economic rivalry with Saudi Arabia.
In recent years, some new entrants, including Apple and Tesla, have been allowed to open their own stores in the UAE without local agents.
Officials say new law should be approved by Emirati leaders but the timing remains uncertain.
Alarmed by the speed of the proposed changes, major merchant families lobbied Dubai Vice President Sheikh Maktoum bin Mohammed al-Maktoum, according to the Financial Times.
Representatives of family groups say multinationals, instead of taking over operations in the UAE market of 10 million people, might instead choose to appoint their agents in other GCC countries, such as Saudi Arabia, more populated. “The government thinks international brands will flood the country, but in reality GCC agencies will dominate,” a businessman told FT.
The government nevertheless believes that the opening of the internal market will lower prices for consumers.