Incentivising economy will spur UAE growth
Government moves to cut cost of doing business and facilitate investment will help stabilise momentum
The UAE government has never hesitated to provide a helping hand whenever the economy faced headwinds. The latest moves by the Cabinet and the Government of Dubai reaffirm that commitment to a stable and sustainable economy. In a typical conventional form of economic stimulus package, a number of incentives and tax/fee rebates can be offered by governments to boost spending in a bid to pull a country out of recession and to prevent an economic slowdown. Towards that end, a stimulus package can either be in the form of a monetary stimulus or a fiscal stimulus.
Since the UAE’s dirham is pegged to the US dollar, a monetary stimulus in the form of cheap money is a difficult option. So the government is largely inclined to line up fiscal boosts through lower government fees and waivers, and enhance ease of doing businesses through business-friendly policies. On the monetary front, limited options like easing of macro-prudential norms in lending (relaxing loan to value ratios and debt burden ratios) could be considered.
The UAE has opted for the fiscal stimulus option, freezing both the federal and Dubai government fees for the next three years. In a recent move, Government of Dubai, in coordination with key departments and the private sector, including foreign companies, has a gone a step further to incentivise economic growth and business confidence in the emirate.
The Department of Economic Development (DED) in Dubai is implementing four initiatives to stimulate competitiveness and achieve sustainable economic development. They are related to exempting businesses from fines and trade violations, reducing operational costs in the retail sector, supporting local production and procurement, as well as attracting the best startups to Dubai and promoting them. The Government-led stimulus plans in Dubai also include proposals to allocate 20 per cent of government tenders to small and mediumsized businesses, developing low-cost family tourism systems on a time-share basis, and enacting a mortgage law for enhancing demand and prices in the real estate sector.
Incentivising the economy at a time when some of the key sectors, such as the small and medium enterprises, real estate, tourism, wholesale and retail, are stressed by macro-economic headwinds is a move that needs determination and political will.
Other emirates should also adopt and implement similar measures. Reducing the cost of doing business and facilitating inward investment will go a long way in stabilising and building on the growth momentum.