The UAE is doing very well with following the midday break rules. According to the Ministry of Human Resources and Emiratisation, out of 29,000+ companies subject to the law that was launched last month, a mere 47 have not been following it. This translates into a staggeringly positive 99.8 percent compliance level.
The law is that people are not allowed to work under direct sunlight between the hours of 12.30 to 3.00 pm. Between June and September to “ensure the safety and health of the workers.” Those who violate the law will be fined AED5,000 for each worker found working during those hours and up to AED50,000 for a large amount of workers.
That’s great news but how will the UAE deal with the changes in the upcoming VAT law? At least – according to an announcement by the UAE Government – bicycles, education, 100 food items, health and social services will not be subject to the change.
GCC countries will be expected to follow the VAT changes, a year from their January 1, 2018 implementation. The regions will be given flexibility to introduce VAT within that time frame and according to CEO of Barjeel Geojit Securities, C. A. Krishnan Ramchandran:
“There is still speculation on whether the VAT regime will add to inflation. At the ground level of the common man, the impact will be minimum. However, at the high end and luxury segment, the impact could be much higher (cars, real estate etc.).”
The consumer won’t be impacted too much either as IQI Holdings Malaysia Chief Economist, Shan Saeed said: “It would contribute merely 1-2 per cent in price inflation. It won’t make any impact on the consumer spending.”
Hopefully the law will be followed as well as the midday breaks one is currently being upheld.
While the economic is growing in Dubai, attempts are being made at enhancing its “humanitarian” efforts. At the recent AMF (Arab Media Forum), now in its 15th year, Princess Haya Bint Al Hussain (the UAE’s PM’s wife), commented that, “amidst the political and social disturbances, the humanitarian aspect has been marginalized.” This year the theme was “Media for Good,” and the conference – that took place earlier this month – was held at the Dubai World Trade Centre.
Still, despite Dubai’s issues in the social, political, and humanitarian sectors, economically it is thriving. The IMF has said that the region has encountered a distinct decline in in oil prices and actually the political ambience has stabilized somewhat. Indeed, because of this Emirates Airline was able to report a 56 percent increase in net profit due to the lowered fuel bill.
Further the Dubai Association Centre (DAC) – whose membership in the first quarter of 2016 substantially expanded – recently said its total number of issued licenses now stands at 23, representing a 44 percent increase within three months. According to Steen Jakobsen, Dubai Business Events Director, “In Dubai’s transformation into a knowledge economy, the presence of international associations play an important role. Associations drive education, training and research, and they offer a platform for experts and scientists to network and exchange knowledge.” Echoing this sentiment, Atiq Juma Nasib, Senior VP of Commercial Services at Dubai Chamber said that it was “commendable” how the DAC had bolstered Dubai turning it into a “focal point for professional associations.” The UAE he said has the right “geographical location and advanced infrastructure,” which “offer[s] the right foundation for continued growth,” while working in tandem with Dubai’s Strategic Plan 2021.
Now, 2016 has gone through a bit of a stagnation period, but this is just a minor blip and once that is over with, it is likely Dubai will experience more than a 5 percent yearly growth, IMF’s Mission Chief Zeine Zeidane said. There is work to be done with the construction industry that has encountered a shortcoming but with the weakened dollar and strong performance of trading partners like India, the economy is still thriving.
Around 4 percent of economic growth was recorded in Dubai for 2015, according to a recent article in The Khaleej Times by Abdul Basit. Hamad Buamim said that this was bolstered by “trade, tourism and financial services.” He added that economic growth has been aided by the existence of a diversified economy in the UAE, which has substantially reduced the “impact of the global slowdown’s negative effects on its various economic sectors.”
The Dubai Chamber of Commerce and Industry are anticipating that by next year, there will be an increase in the retail sector of the UAE by Dh200 billion. This will mark a progression by an average of 5 percent each year. with this, consumer spending will likely escalate, stabilizing at around 4 percent on average annually, resulting in a total spending of Dh750 billion+ by 2017 in numerous industries. Euromonitor and ATKearney are coming up with numbers that are indicative that the retail sector in the region is “growing faster than the UAE economy as a whole.” This statement was supported by CEO and President of Dubai Chamber, Hamad Buamim who was quoted in a recent article in The Gulf News to have said:
“The UAE stands out as one of the leading retail centres in the region. Retail is an important pillar of Dubai’s economic diversification strategy. The analysis will not only boost the sentiments of the retail sector in the region, but also help raise investor confidence in the market.”
Thus it is hardly a surprise that data from the eighth annual Asdaa Burson-Marsteller Arab Youth Survey, showed that almost 25 percent of youth in the Middle East view the UAE their preferred country of choice of where to live. In terms of stability, safety and the best environment whereby to launch a business, it ranked even higher than America and many European addresses.
Oman has encountered a substantial growth increase in capital investment for its electricity projects. According to one expert, the growth rate reached 27 percent, resulting in a total of OMR221 million as against OMR174 million in 2014.
There have been some anticipated negative movements for the Egyptian Exchange in recent weeks. Experts in the field have suggested that the EGX could likely encounter “difficulties in attracting foreign and Arab investors in the upcoming period,” caused by performance as well as the competition posed by Gulf stock markets in targeting investors.
If – as is expected – Gulf markets are opened up to foreign investors and trade restrictions on foreign institutions are eased, the Egyptian Exchange will have to provide something else. For example Kuwait is offering a capital gains tax exemption to foreigners. This will not be offered in Egypt now until May 2017. These are just some of the factors that have resulted in Egypt losing its “competitive edge in attracting foreign investors.” When other regions offer more, Egypt loses out. Especially given the fact that Egypt has been levying new taxes on profits. Nonetheless there was still an EGX 30 increase by 0.79 percent.
According to El Marwa Brokerage’s head of research and investment, Mohamed Elnagar, the rally Egypt is experiencing today is actually not an indication of a “real recovery,” given the fact that foreign institutions are strongly being pressured to sell. He further added that for the market to properly recover, the way oil prices go and how global markets perform will be most telling. It has to be noted also that simultaneous to Egypt’s rally are the Gulf rallies.
Also according to its web site, the Egyptian stock exchange at the beginning of the year encountered substantial losses “due to lower global exchanges,” but with the promotion of the bourse, there was some improvement.
Given the recent economic reforms, the economy in Pakistan has encountered significant improvements. According to numbers put out by the IMF, Pakistan’s growth has been bolstered to 4.2 percent, which is a large change since the 3.7 percent figure it was in 2013. There has also been a substantial decline in inflation in the region in the last few years and a “steady” development of foreign exchange reserves. All of these are indicators of a bourgeoning economy.
Perhaps this was why there was news just a few days ago that efforts are being made to “make Pakistan the 25th largest economy of the world in the next ten years.” Vision 2015 has been set up to guide this process. According to Ahsan Iqbal, Federal Planning Minister, it is “the export sector [which] has the key role to achiev[ing] this goal.” Indeed, without the active participation of the private sector, there is no hope for the completion of these economic development projects.
In addition, with the China-Pakistan Economic Corridor project, the region has received a “splendid gift” and with its successful launch, the augmentation of Pakistan will become “irreversible.” Ultimately Iqbal believes that with all the upcoming plans for the region, Pakistan will become an “economic hub for Afghanistan, Central Asian states and China.” And that 2016 has been declared a “Year of Productivity, Quality and Innovation.”
There are many problematic relations between India and other regions, such as with Pakistan and Afghanistan. Recently however, there have been some actions by leaders of these states to suggest that this tension could soon be easing. First, there was the ‘Comprehensive Bilateral Dialogue’ which was an expression of hope from India that this is a first step in “peace and development.” This is due in part to the fact that such estrangement and tension really hampers peace and prosperity amongst the nations.
In addition, there was recent mention of a possibility of the two nations “re-engaging with each other again,” as discussed between Indian Prime Minister Narendra Modi and Pakistani PM Nawaz Sharif.
In other news, just last week, leaders from Afghanistan, Pakistan and India joined the Turkmenistanian President “in a breaking ground ceremony for a major natural gas pipeline.” This could majorly facilitate energy deficits in South Asia. Again, by removing tensions between nations and replacing them with negotiations and joint projects, all the regions ultimately benefit. The pipeline will cross Turkeministan, Afghanistan, Pakistan and India and will thus be named according – TAPI Pipeline. It is hoped it will begin operating in 2019. Ultimately it is hoped that this pipeline will “become a new effective step towards the formation of the modern architecture of global energy security, a powerful driver of economic and social stability in the Asian region.”
Furthermore, there have been developments between India and Afghanistan vis-à-vis bilateral relations. This would be a welcome change from the status quo which has been in place since last year when a National Unity Government was formed. It was mainly caused by “Afghan President Ashraf Ghani’s pollyannaish attempt to forge a modus vivendi with Pakistan.” This was the antithesis of how his predecessor – Hamid Karzi – had approached India, which was very much with ease.
We then have to ask ourselves the question, why is so much energy being put into making relations between India and Pakistan good? Do both nations require this? Well, for India it’s important as it needs to avoid the potential of another Mumbai; the “threat of a chasm between the conventional capabilities of the two countries.” It’s probably possible to sustain the Kashmir dispute but that’s about it. In addition, there would be a need to respond to challenges of the major obstacles to cohesion between the two nations – primarily terrorism.
According to Kaveesh Kanwal, an expert on Indian foreign policy, “India and Pakistan can have good relations only when India solves its own problems first and then try to culturally influence the Pakistani society to such a great extent that the Pakistani public moves greatly towards an idea of inclusiveness, rather than having an idea of exclusivity among themselves.” He concludes that “the onus lies more on India to make things happen for the good of all, as it has always been.”
This was part of the discussion that took place in Abu Dhabi at last week’s World Economic Forum Summit on the Global Agenda 2015. Attended by over 900 leaders from 60+ countries, issues of policy implications and related aspects connected to this “new digital manufacturing paradigm” were addressed.
The digital revolution is already most apparent in the UAE. Indeed, according to UAE digital payments service company, Trriple, by 2020, most people in the region handling money will be doing so not through cash. Mobile payments will be made on a mass scale. As co-founder and CEO of the firm, Ahmad Fasih Akhtar said, “We are poised to usher in the ‘cashless society’ here in the UAE. We see strong nationwide demand for a multipurpose, cross-bank mobile wallet.”
So digital manufacturing in all aspects is ready to go in the UAE region. It is just a matter of time before it is completely set in place.