BUSINESS news

Thursday, May 14, 2009
Laws and regulations that will reduce procedures and lower licensing and registration costs.

Dubai: The worst for Dubai appears to be over in terms of the financial crisis, according to Hamad Bu Amim, Director-General of the Dubai Chamber of Commerce and Industry, (DCCI). His belief stems from a business confidence study conducted by his institution among top business leaders, which signals optimism.

"About 80 per cent of the chief executives in Dubai interviewed in March 2009 believe that the economy might be the same or better, with only 20 per cent saying, it could be worse," he said.

"It is a marked improvement from what we found in the survey conducted in February, when 50 per cent of the same business leaders said the worst is yet to come.

"So, there is a feeling of optimism and I definitely believe the worst is over. However, the economic growth could take anywhere between 12 to 18 months from now, while we could see some clear indications later this year."

He said the liquidity injected by the government has started to bear fruit.

"The major developers have begun to pay contractors, which in turn will help the entire construction supply chain that could trigger the cycle," he said.

According to Bu Amim, the government is working on laws and regulations that will reduce procedures and lower licensing and business registration costs and make Dubai a more competitive place to work and live.

"Plans like VAT are definitely off the government's agenda as it is working on a comprehensive set of rules and regulations that will make our economy more competitive and ease doing business," he said.

"The government is working on a new investment law, which could be announced in the second half of the year. It looks at reducing the number of licensing and business registration procedures by a third from the present 21."

The government has recently set up a Competitive Council to improve regulations and make the business environment more competitive. In an exclusive interview, Bu Amim elaborated on key issues concerning the Dubai economy. Excerpts:

Gulf News: What is your view on the market situation? Is the worst yet to come, or is it over?

Hamad Bu amim: The worst is over and the market is stabilising. We do not want the economic crisis to become a social crisis. That has been prevented.The market has eased with people adjusting to the new realities.

The funds injected by the government have started to trickle down. Major players in the construction industry have already begun receiving dues which in turn is going to have a positive impact. These will bring back confidence.

Our membership number in April stood at 105,000 - almost the same as last year. Certificates of origin have declined 15 per cent in value to Dh60 billion while the number of certificates of origin has declined only seven per cent, which under the current global economic situation is not that bad.

The Chamber has also notched up a 26 per cent increase in the number of visiting delegations during the current quarter and a 65 per cent increase in the number of businessmen in the delegation which proves Dubai's popularity as a strategic business destination in the region.

Our own interaction with the business leaders shows some positive outlook as well. So, business confidence is returning, slowly but surely, as the country's macro-economic fundamentals remains strong.

And then you have the oil wealth to fall back on, if needed.

How do you see the hydrocarbon sector in the current context, especially with oil prices hovering around $40-$55?

As long as the oil prices remain above $40 (Dh147), the Gulf economies will be well-cushioned. With prices currently in the high $50s, I do not think that there is any reason to worry. The Gulf economies will do well under any conditions, as long as the oil demand remains stable.

How does that help Dubai, which is no longer dependent on oil?

Dubai is not an isolated economy. It is essentially a part of the UAE federation and the Gulf region. In recent months we have seen how the country stood together in facing the situation and the negative publicity in the international media.

The UAE federation is very flexible. It allows each emirate to plan its own development strategy and grow. The pace of growth could differ. However, we are essentially part of the same economy.

Apart from that, the growth strategy of Dubai has always evolved around non-oil sectors - especially trade and tourism - in line with the government's vision to diversify the emirate's economy and reduce dependency on oil. Dubai has successfully shown that.

What about the real estate and construction sectors that have driven Dubai's economy?

Dubai is not about real estate. It has largely remained a trade and tourism hub and we have recently reinforced our position as a retail hub.

Real estate and construction have dominated in recent times, as the economy grew, driven by trade and tourism. However, along with that a number of other sectors have also grown, such as building materials, construction equipment, logistics, storage and interiors sectors.

How optimistic are you on the economic recovery and growth?

There are reasons for optimism. With the bailout package, companies and banks are showing signs of recovery. I expect global economies to return to growth mode.

In the UAE, the government's funding is having a positive impact and one could feel this. The banks are re-capitalised. Liquidity is no longer an issue.

Apart from US markets, the Far East and Asia will drive future demand. Once the US economy begins to recover, it will drive worldwide demand and then we could expect a gradual recovery across the world.

When do you expect the economy to recover fully?

Anywhere between 12 to 18 months, depending on a number of factors.

What are your thoughts on regulation or the lack of it? Do you think it is a good time to reflect on what went wrong and how it could have been prevented?

As opportunities opened up, people invested in Dubai regardless of regulations. In fact, investors were too impatient to wait for the regulations as opportunities were too big. Now is the time to reflect and focus on regulations, look at consumer and investor protection.

That is why the UAE Government has recently set up a Competitive Council to look into the laws and regulations and strengthen the country's legal system and fix them to make the economy more competitive for investors and consumers.

What are the problem areas identified by the government?

We lag behind in a number of areas, including enforcement of contracts, dispute resolution mechanisms - especially arbitration and mediation. It takes 50 procedures and two years to settle a dispute through the legal system. It takes 21 procedures to set up a business.

We need to change these, reduce them and lower the fees to make the city more competitive and cost effective for investors and business communities.

For example, we do not have a proper bankruptcy protection law. In the West, this law helps companies to operate in extreme difficult conditions and survive. Here we do not have that. We have a companies law that helps you to set up businesses, but nothing to help you close down.

In recent months, we witnessed an 80 per cent increase in the mediation cases handled by the Legal Services Department of the Chamber and called upon the business groups and councils to take advantage of the mediation services to resolve trade disputes that may arise between the companies.

Various government departments used to levy fees to fulfil their budgetary requirements. The government is looking at changing them. Government departments are not profit centres. They are service providers. If need be, the government could subsidise these services. This is one shift.

Each emirate has its own regulations that differ. To a foreigner, the UAE is one country. Why should there be different rules?

This is where the federal government is collecting data and feedback through the Competitive Council where we all share information so that we could streamline processes and come up with a standard set of rules.

There are a number of changes coming that will improve the business climate and we are working in line with the government strategies to create synergies among various states and across departments so that all are on the same page.

For example, why should a company register under different emirates and chambers of commerce and industry? Going forward, I would like to see a company registered once in the UAE and enjoying freedom to do business anywhere in the country. Why not?

However, whatever we do, I think we need to built in flexibility to address local needs and that's not bad.

Is the federal government apparatus being strengthened to in order to streamline the laws and regulations, as opposed to the emirates formulating their own rules?

The federal government strategy has been introduced to streamline the processes. We are a major regional economy, linked to the global financial system. Our regulations also need to be in line with international best practice. Unfortunately, we lag behind in these areas.

In the coming days, the government is going to create proper synergies between each state's regulations and develop the federal government regulations which would be similar, primarily to help everyone so that all are on the same page and understand the regulations better.

What about the issue of property-linked visas?

On the property-linked visa case, properties and land are within the jurisdiction of the emirates whereas visas are guided by the federal rules and regulations.

The recent enactment of the property visa is a classic example of how the federal government is incorporating new realities and coming up with procedures to help local economies.

These are all done in consultation with the stakeholders and to help the country's economy.

That's the beauty of the UAE federation. It's a unified country with plenty of diversity built-in.

What could we expect in the coming weeks and months?

The government is seriously working to introduce an Investment Law and re-introduce the Commercial Companies Law and the Commercial Agencies Law in line with the global best practices and the World Trade Organisation.

The Ministry of Labour is also getting involved in the new laws, giving its feedback on the new labour regulation. So, we could expect to see a new set of laws and regulations coming in that will change the way people carry out business here.

What about the costs?

We are looking at reducing fees and charges to reduce the cost of doing business and make the UAE a more attractive place for investment. As I said, the government departments collecting fees will no longer be profit centres, but pure service centres.

There will be new guidelines to protect consumers and investors.



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