Making the path clear for UAE’s businesses

Cutting down on government-related costs sends out a strong message encouraging new investments

In the season of giving, the UAE Cabinet has made a decisive statement of intent with the removal of the Dh3,000 bank guarantee that companies needed to put up for each of their workers. In an instant, this effectively returns Dh14 billion —lying fallow as bank deposits — to UAE businesses, which can now repurpose the money for operational or investment needs.

The cost of funds has been going up for businesses, and in a tight economy, they were also finding that lenders were taking their time to release much-needed cash. This is why the UAE Cabinet decisions related to visa changes will prove decisive in the medium term. It releases capital that businesses can use to expand their workforces, or convinces them that this is a good time to invest in expansions or new endeavours.

From a longer term perspective, it will also have a telling impact on the UAE’s status as the destination for businesses, particularly overseas entities. In recent years, the cost of setting up a venture in the UAE had been on the rise, brought on by a combination of factors, including rents.

Plus, there was the recent introduction of a value-added tax, which is a factor businesses will take time to factor into their costs. Anecdotal feedback from the markets all through first five months was that local businesses were worried about costs and that they were going slow in committing to new investments. There was a wait-and-watch approach in evidence.

By drastically reworking the visa regime, including those related to prospective jobseekers, the UAE Government has addressed such concerns head-on. And most specifically allayed concerns about the costs businesses have to bear on government-related clearances and paperwork.

This should be seen in context with the decision made by the Executive Council in Dubai to put a freeze on government fees, and even those related to private schools. Abu Dhabi came up with its version of a Big Bang economic reform, in the form of a Dh50 billion stimulus package.

Again, most notably, it provides clarity for those business owners who want to launch operations here but do not want to be hurried into taking up commercial purposes as well.

The message from the UAE Government is clear — the cost of doing business in the country will be rationalised, made simpler wherever possible. Businesses just need to sign up.