How the UAE cut fuel subsidies in four steps
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.