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Fee Cap Decision To Boost Business Confidence and Competitiveness

01/06/2009

Business leaders and top officials have praised a decision by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, to reduce government fees – a move which is expected to give further impetus to any economic recovery.

They said the decision will have a positive effect on many sectors of the economy, benefiting more than 100,000 businesses in Dubai by reducing operating costs and overheads and complements other measures taken in the past few months to stimulate and revive the economy.

Sami Al Qamzi, Director-General of the Dubai Department of Economic Development, said the decision underlines "the government's flexibility during this period in dealing with economic changes", adding that the aim was to more efficiently facilitate procedures for businessmen and to improve the overall working environment in the emirate.

Sultan Butti bin Mejren, Director-General of the Dubai Land Department, said the decision would "boost Dubai's competitiveness".

"Putting a freeze on fees or reducing some of them will give extra reassurances to investors and will help stabilise the economic environment and boost transparency

Bold ideas to start process of recovery

Fee reduction and freeze to help reactivate Dubai’s ecomomic and trade movement, says business leaders.

Writing in the Wall Street Journal early last year, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, said: "We live in a tough neighbourhood… despite all that, Dubai has learned how to reinvent itself and cope."

Since then the world has slipped into what could be the worst recession in more than half a century, leaving most nations facing the reality of living in tough neighbourhoods.

A decision on Thursday by Sheikh Mohammed to freeze or reduce Dubai Government fees is the latest in a raft of far-reaching measures announced in recent months to help manage the impact of the global slowdown.

Tellingly, he also ordered that fees should not be increased even if it meant some services ran at a loss, effectively subsidising some business costs.

The final quarter of last year saw Dubai and the UAE reeling into economic downturn – local property prices began to fall as transactions stalled, question marks were raised over the emirate's ability to meet its financial obligations and stock markets in the region tanked.

The beginning of the year coincided with concerted efforts by Dubai authorities and business leaders to rebuild confidence using all the experience and knowledge that the emirate has gleaned over the years to "reinvent itself and cope".

Of the latest decision by Sheikh Mohammed to revitalise the emirate's business and financial sectors, Sultan Butti bin Mejren, Director-General of the Dubai Land Department, said: "His Highness' decision will boost Dubai's competitiveness and will positively reflect on the emirate's economic and trade movement since putting a freeze on fees or reducing some of them will give extra reassurances to investors and will help stabilise the economic environment and boost the transparency standards in various commercial transactions."

More than 100,000 business are expected to benefit from the decision, which will be implemented in a matter of days, said Hussein Lootah, Director-General of Dubai Municipality.

"The municipality will discuss the rates of reduction in services where the decision will be enforced and which range between 20 per cent and 30 per cent, after reviewing the matter with the Department of Finance," he said.

Sami Al Qamzi, Director-General of the Dubai Department of Economic Development the Department of Finance, had suggested the mechanism of pricing government services, which the Executive Council subsequently approved.

The move will be implemented by small teams made up jointly of the Department of Finance and government bodies concerned that will work independently.

Business leaders were quick to praise the move.

"The initiative comes at a very important time and expresses the Dubai Government's keenness to provide a proper environment for investment and trade and to maintain the emirate's vital position as a world trade and economic centre," Sheikh Khaled bin Zayed Al Nahyan, Chairman of home lender Tamweel, said.

Sheikh Khaled said the decision would have "positive psychological reflections on investors and their commitment to work in Dubai" and it "reflects His Highness' keenness to alleviate the burden on investors at such a difficult time".

Ahmad Al Matrooshi, Managing Director of Emaar Properties, said the decision would "tangibly help reactivate Dubai's economic and trade movement especially with regard to the real estate sector".

"There will be positive results and impact on investment and tourism in the emirate soon," he said.

Cost savings

Some of the services included in fee reduction of up to 30 per cent:

- Issuance and renewal of trade and vocational licences 

- Sale and promotional campaigns 

- Issuance of property ownership certificates

- Registration of a rent contract that expires with the transfer of ownership

- Extension of payment period in a mortgage contract

- Ending a rent contract that ends with the transfer of ownership

- Evaluation of buildings (without land)

- Any charges linked to improvement of services

- Licence of converting a building into a hotel or hotel apartments

- Charges linked to the modification of all kinds of buildings

Achieving stability

A major step forward in achieving stability came in February with the announcement of a $20 billion (Dh73.4bn) bond programme, the first $10bn tranche of which was taken up by the UAE Central Bank.

"This issuance will provide the Dubai Government with the necessary liquidity to substitute the liquidity that has dried up globally in the past 12 months and meet all upcoming financial obligations," the Department of Finance said at the time.

"It will secure the necessary funding for Dubai to meet its financial obligations and continue its development programme."

The news seemed to soothe anxiety over Dubai's economic outlook