The UAE has told some of its biggest business families that it plans to remove their monopolies on the sale of imported goods, the Financial Times reported recently.
State news agency WAM quoted a Ministry of Economy statement saying a draft law on commercial agencies was still in its legislative cycle and “it is still too early to give details.”
The FT report said the proposed legislation would end the automatic renewal of existing commercial agency agreements in the Gulf state, giving foreign firms the opportunity to distribute their own goods or change their local agents.
“It no longer makes sense for individual families to have such power and preferential access to easy wealth,” the report quoted an Emirati official as saying. “We have to modernize our economy.”
According to existing commercial agency agreements, foreign companies were required to appoint local partners to distribute their goods.
The proposed reform would tear up the longstanding social contract between the government and influential merchant families, including storied names such as Al Futtaim, Al Rostamani, and Juma Al Majid.
“This is one of the taboos most difficult to touch due to its impact on family-owned local businesses, one of the largest sectors of the UAE economy,” said Habib Al Mulla, the executive chair of law firm Baker McKenzie’s Middle Eastern branch.
Family-owned businesses, from small companies to conglomerates, make up 90% of the UAE’s private sector, which itself accounts for around three-quarters of employment.
The UAE aims to attract more investment and the pace of reform has accelerated amid a nascent 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 have indicated that the new law is expected to be approved by Emirati leadership but the timing remains uncertain.
Alarmed at the speed of the proposed changes, leading merchant families have lobbied the deputy ruler of Dubai, Sheikh Maktoum bin Mohammed al-Maktoum, according to the Financial Times.
Representatives of family groups say that multinationals, instead of taking over operations in the UAE market of 10 million people may instead choose to appoint their agents in other GCC countries, such as more populous Saudi. “The government thinks that international brands will flood the country, but actually GCC agencies will dominate,” one businessman told FT.
The government nonetheless believes that opening the domestic market will lower prices for consumers.