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23 December, 2021updated 20 Dec 2021 14:50

Will the UAE’s 4.5-day working week make it more attractive to foreign investors?

The move to a more Western working week in the UAE should give the country an edge over its Gulf peers when it comes to attracting FDI.

By Ruth Strachan

The United Arab Emirates (UAE) is stepping into 2022 with a new 4.5-day working week. The adjustment will see the UAE align more closely with Western standards, with weekends now comprising Friday afternoons, Saturdays and Sundays, instead of just the whole of a Friday to Saturday (which is common in the majority of Muslim countries).

David Parker, director of alternative investments and corporate at Vistra – a corporate service provider and fund administrator based in the UAE – says: “The switch to a 4.5-day working week is the latest in a series of measures aimed at improving the UAE’s investment attractiveness.” These measures also include the golden visa, which allows foreign citizens to live, work and study in the UAE with complete business ownership, and more flexible working visas.

Investment in UAE is strong

The UAE has been an attractive proposition for overseas investors for many years, with investment in greenfield projects sitting at an impressive count of more than 300 since 2007.

This performance is particularly impressive given the impact of the Covid-19 pandemic on global investment flows. That said, the issues brought on by Covid-19, as well as continued intense competition for investment in the Gulf region, could have been a factor behind the UAE's decision to change the structure of its working week.

“It is not an earth-shattering move, but it is totemic of ever greater competition between the UAE and its larger neighbour Saudi Arabia, and that the exceptionalism that has characterised Gulf economies is steadily eroding in the face of the realities of global competition,” says Richard Banks, principal at Middle East-focused advisory firm Soling Partners.

He predicts that Saudi Arabia will eventually mimic the move in a bid to keep up with its regional competitor when it comes to attractive foreign direct investment. For now, however, the UAE has a head start when it comes to making the most of the advantages served by its more Western working structure, but how is the new system going to be implemented?

Government leads, but will private companies follow?

The 4.5-day working week only officially applies to UAE government entities and it remains to be seen if private companies will follow suit, although many already operate a flexible work schedule in order to suit the markets they serve.

Krysta Fox, partner and director of EZDA Alliance, an economic zone specialist based in Abu Dhabi, says: “The discussions I have had with many small and medium-sized enterprise leaders indicates the prevailing opinion is that private enterprise will adopt the Monday–Friday work week from 1 January 2022 and they will continue to observe full working hours.”

The move is widely regarded as a step in a positive direction for the UAE's reputation as being business friendly when it comes to foreign investors, but Fox argues that there could other benefits, particularly for smaller businesses.

She believes that a better work-life balance has become more important to workers during the Covid-19 pandemic, and the new, longer weekend could attract new talent to the country, attracted by the shorter work week.

Parker agrees, adding: “If business locations wish to remain competitive and attract the best talent in the future, they will need to develop compelling policies for employee happiness and wellness.”

The pull to new talent combined with the existing investment incentives could help the UAE remain competitive in FDI while the world economy continues to recover from Covid-19.

Shane Phillips, CEO of executive search company the Phillips Groups, believes that this added attractiveness to talent, combined with other incentives to investors, could give the UAE an all-important edge when it comes to bringing in FDI in what will be a global post-Covid recovery period.

He says: “We see this as a quintessential edge that will help tip the scale, providing a business advantage for those companies looking to hire top performers who will decide to migrate to the UAE for tax advantages and government initiatives." Phillips adds that other factors such as easier visa regulations, the UAE's relative safety, its standard of living and the country's technology expertise will combine with the 4.5-day working week to make the UAE stand out among its Gulf peers.

Is the UAE moving too fast on working week change?

While a 4.5-day working week should offer all workers a better work-life balance, many support the theory that it could also improve productivity.

Fahad Al Gergawi, CEO of Dubai Investment Development Agency, is one of those people. "The key strengths of the UAE are its adaptability to change and the lack of bureaucracy." he says. "The introduction of a shorter working week will further drive 'working smarter' rather than 'working longer'."

However, such positive sentiments around the idea of a 4.5-day working week have been tempered by concerns that the move has come about too suddenly.

“Many businesses have been caught short with scheduled events and meetings that will now need to be shifted," says Fox. "The UAE government acts decisively, but often without sufficient notice to allow businesses to adjust in a measured way.”

This decisive attitude can be appealing to investors that are looking for agile destinations for their operations, but such a sudden move can also worry business leaders, who may question the lack of collaboration between government and companies when it comes to such impactful decisions.

So, is this move to a 4.5-day working week hasty? Ruthless? Yes, such accusations have strong groundings. More importantly, however, this change could give the UAE a significant edge over Saudi Arabia and other regional competitors simply by pulling it in line with the rest of the world's working practices. Although some expats may be saying a wistful goodbye to their quiet working Sundays, the move appears to be a positive step when it comes to maintaining the UAE's attractiveness to foreign investors.

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