Like its fellow Gulf Cooperation Council (GCC) members, the United Arab Emirates is taking steps to draw foreign companies across its borders and keep them there. To that end, Abu Dhabi issued a presidential decree on Oct. 24 finalizing a new federal bankruptcy law that will provide greater protection against insolvency to businesses operating in the country. On the same day, the United Arab Emirates issued a second decree announcing that it would establish a federal tax authority at the beginning of next year. Other GCC states will likely follow suit, since Abu Dhabi is spearheading an effort to implement a blocwide value-added tax that would require members to have similar tax authorities. (The new tax structure will also enable Abu Dhabi to drum up more revenue unrelated to oil, an important step toward diversifying the Emirati economy.)

Both measures are designed to make the United Arab Emirates more attractive to international firms. The bankruptcy law, for example, will permit companies to avoid liquidation by restructuring or seeking funds; declaring bankruptcy would only become necessary as a last resort. The law is a departure from previous Emirati regulations, which required indebted business owners to shut down or risk being handed criminal sentences. Under those rules, many business owners who racked up debt during the 2009-10 financial crisis had to abandon their homes and flee the country to avoid being imprisoned.

The new bankruptcy law will have a dramatic effect on how companies operate in the United Arab Emirates. Currently, only firms based in the country's designated "free zones" enjoy such lax regulations on bankruptcy, taxes and ownership. But extending these perks to firms located in other parts of the country has become a priority for Abu Dhabi as it tries to become more competitive in several different markets. Now, businesses operating anywhere in the United Arab Emirates will be less constrained by the need to mitigate every financial risk they face, making room for additional growth. Because Kuwait is the only other GCC member with similar bankruptcy rules, the new law will almost certainly give the United Arab Emirates an edge over its neighbors in enticing foreign firms to set up shop in its territory.