Companies operating in Dubai will invest more in assets if access to land will not be an obstacle, an economic policy paper by the Dubai Economic Council, or DEC, said on Tuesday.

Investments in assets by businesses “will increase by 22 per cent if access to land was not an obstacle to firms while investment in human capital will increase by 35 per cent if firms could expand their operations as result of an improvement in terms of ‘accessing land’,” the DEC paper, based on the results of an “Enterprise Level Survey”, said. The paper suggests that 53 per cent of firms in Dubai find access to land as the major obstacle for their business operations.

“A formal econometric analysis confirms that firms in the free zone are constrained by the prohibition of commercial land ownership in the free zone and this appears to be a more binding constraint than the perceived uncertainty of the land market regulations in Dubai main.”

The paper finds that when access to land is a problem, it has adverse impacts on the investment behaviour of entrepreneurs. “In particular, it seems that the probability of investing in physical and human capital drops by 22 per cent and 35 per cent respectively for firms claiming access to land to be a major obstacle in their operations.”

Enabling foreign entrepreneurs access to land might lead to “reducing uncertainty on investment, increase in capital and human investment and potentially allow for greater employment creation in Dubai,” the paper said.

The paper argued that constraints on access to land could become a major obstacle for regional and economic development as they are likely to have adverse impact on the potential to create new enterprises or expand existing ones.

“In this context the evidence from the recent 2010 Enterprise Level Survey — where 51.3 per cent of surveyed firms find ‘access to land’ to be the major obstacle to their business operation- should merit careful consideration,” it said.

Authorities should also enhance the transparency and predictability of land market regulations and dispute settlement in Dubai, the paper urged.