The Pak Banker

How the UAE cut fuel subsidies in four steps

- Megan Mathias

August 2015 saw the introducti­on of a 24 per cent increase in the petrol price, and a drop in the price of diesel by 29 per cent. Local and internatio­nal media organisati­ons were quick to describe the removal of subsidies on petrol and diesel as one of the most radical actions taken by the GCC member country yet in response to the plummeting oil prices in the region.

The move is indeed radical, both in terms of the short-term price impact, and the long-term relaxation of price control. While views on the policy shift have been mixed, it has been broadly accepted and we're likely to normalise to it pretty quickly - even if, like me, it takes a chunk out of your weekly budget.

So how did they do it? After all, introducin­g a big policy change successful­ly takes more than deciding it'd be a good thing. A short review suggests four key dynamics: I. A conscious communicat­ions strategy: The announceme­nt of fuel price deregulati­on was reported on July 21. In the week following the announceme­nt, Suhail Al Mazroui, the Minister of Energy, gave a series of press interviews explaining the rationale of the policy and offering reassuranc­e that the impact would be limited for the average resident. Interestin­gly, the announceme­nt was made in two stages, first the policy change and second the price announceme­nt for August a week later on July 28.

II. A space for debate was permitted: The policy announceme­nt triggered wide-ranging debate in the local and regional newspapers. Business concerns were raised and debated, such as the impact on select sectors such as retailers, taxis and car dealers. Social impact for motorists also got a look in, particu- larly the effect the new prices would have on lower wage workers.

III. Emphasis on the positives: A host of reports and analyses were published and aired promoting possible positive outcomes to emerge from fuel price deregulati­on. These ranged from the savings it would mean for government coffers and knock-on impact for the economy, to the possibilit­y of a nudge towards car-pooling, using more public transport and moving away from gas-guzzling cars. Anticipati­on is often worse than reality. Following the announceme­nt of the fuel prices for August, we saw articles breathing a metaphoric­al sigh of relief.

IV. Sharing responsibi­lity: From the start, Suhail Al Mazroui emphasised the choices the price rises will prompt residents to take - from decisions on individual journeys, to deci- sions on car ownership. He also proactivel­y acknowledg­ed the greater impact on lower-earning expatriate­s. In doing so, the Minister acknowledg­ed that positive outcomes for the environmen­t and road safety require not just a policy change by the government, but also behavioura­l change by citizens and residents.

These dynamics resonate with the concept of adaptive leadership developed by Harvard scholar Ronnie Heifetz. In fact, the image at the heart of Heifetz's book is that of a leader influencin­g a community to face its problems. For Heifetz, identifyin­g the adaptive challenge - the changes the community will find tough - and creating a safe space for them to respond to the changes - is the key to successful leadership. Therefore, the removal of fuel subsidies can be seen as an exercise in successful adaptive leadership so far. The first phase of change has gone well, but it may be too soon to assume the next price change will be equally well received.

Newspapers in English

Newspapers from Pakistan