Can it really be true that your employer has the right to keep your passport while you are working for their company?

I discussed this with my colleagues yesterday; they said that this is simply the rules in the UAE and that they could, potentially, refuse to give it back to you upon request. In fact, this recently happened to a colleague when she tried to leave her previous company to join us.

Hm... I have been taught that my passport belongs ONLY to me, and that no one can take it from me. Does anyone have experience with this? I think it is a scary thought that a UAE company could exercise this kind of control over people's personal freedom and, potentially, prevent them from leaving the country.

Thanks!