How the UAE cut fuel sub­si­dies in four steps

The Pak Banker - - OPINION - 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.

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