Denmark &UAE sign exchange of information agreement

Denmark and the United Arab Emirates (UAE) signed a Tax Information Exchange Agreement during the latter delegation visit to the Scandinavian countries.

The UAE is strategically promoting tighter relations with diverse trade partners. The UAE delegation was led by headed by the UAE Minister of State Affairs, Obaid Humaid Al Tayer. The UAE team visit Copenhagen, the capital city of Denmark.

The Danish Ministry of Taxation, Karsten Lauritzen and the UAE Minister of State Affairs, Obaid Humaid Al Tayer, signed the Tax Information Exchange Agreement between Denmark and the UAE.

While in Denmark, the UAE delegation paid the Amager Resource Centre (ARC) a visit. The ARC is one of the most innovative and modern energy factories across Denmark. The factory specializes in producing energy from waste. Furthermore, the UAE delegation visited the Ramboll Group, a company that engages in green engineering. Ramboll Group’s MENA headquarters are found in the UAE. The Ramboll Group presented various sustainable projects that will take place across the Middle East.

The UAE’s visit to Denmark mirrors the country’s commitment and determination to strengthen ties and boost trade relations with countries across the globe. The UAE is especially focusing on strengthening ties with Scandinavian countries to tighten governmental work mechanisms founded on sustainability principles and innovative policies. 

The UAE stresses the vitality of exchanging tax information, and that the agreement is considered as an important foundation for the future economic collaboration between the two countries. This is because; the agreement boosts economic transparency and ensures justice for both company and individual taxpayers that are members of the Global Forum on Transparency as well as Exchange of Information.

UAE: Willing to Introduce Taxes

The United Arab Emirates (UAE) is willing to introduce taxes. However, before any decision is made, the government confirms it will examine and evaluate the advantages and disadvantages before introducing new taxes.

The UAE government discusses matters and issues extensively before making any decision. The government evaluates each matter and analyzes the affect their decision will have on the general competitiveness of the country. Having said that, the UAE is a member state of the GCC, thus in regards to the introduction of a VAT all the GCC countries need to make a unanimous decision. 

The UAE government has not specified what kind of taxes it plans to introduce and when it plans to introduce them. Currently, tax discussions revolve around the implementation of a VAT, Corporate Tax and a tax on remittances. The introduction of taxes is significant to the UAE as its oil revenues have declined due to the decrease of oil prices.

The GCC have undertaken several studies regarding the introduction of draft VAT legislation. Nonetheless, the GCC has not made a final decision due to the fact the member states have not yet concluded on the rate of the tax and tax exemptions.

Tax & Economic Implications

As aforementioned, several studies have been conducted to evaluate the affect the taxation will have on the economy and society. The latest study began in 2014 and was completed at the beginning of 2015. 

The studies review to what extent taxes will affect the growth rate of the UAE economy and its global competitiveness.

Once a final decision has been made regarding the introduction of VAT, the UAE government will make an official announcement to inform companies and the public. The entities and sectors that will be subject to the VAT will be allowed a period of 18 months after the tax is introduced in order to adjust, fulfil and comply with their tax obligations.

Several studies have been conducted regarding  the Corporate Tax the UAE is planning on introducing in order to evaluate the extent the introduction will influence companies in general. A draft law is still being reviewed and the tax rate has not been set. 

Dubai Open E-Commerce and Design Centres

Dubai’s success is mainly attributed to the fact the emirate continuously launches new free zones which attract businesses and enhance growth across a wide range of sectors. Besides offering business-friendly environments, these free zones focus on particular sectors of business enabling corporations to expand and grow. Currently, the emirate has established the Matajircom and Dubai Design District, two new hubs, which revolve around e-commerce and design respectively.

Promoting Design

The emirate’s luxury, fashion and design sectors are estimated to mark an impressive growth during 2015 as it is anticipated that consumer consumption will reach AED 150 billion. During April 2015, Dubai launched its new design hub known as Dubai Design District (d3), where both local talents as well as internationally known brands are found. The d3 was especially set up to aid local talents to acquire global recognition as well as a means for international corporations to expand within the Middle East and discover local talents. Set up to cultivate and develop design as well as generate profits and economic growth, the d3 is strategically found in the middle of Dubai Mall and the DIFC, Dubai’s renowned financial hub.

The d3 was established to provide free zone and non-free zone licences. Free zone licences offer a tax exemption for 50 years and 100% foreign ownership. The free zone licences are granted by the emirate’s Dubai Technology and Media Free Zone authority. In order to be granted a non-free zone licence, the Department of Economic Department, which is the authority that approves the issuance, requires 51% local ownership. The new d3 hub has been under construction and is anticipated it will be completed by October 2015. Those interested in setting up within the design free and have not yet secured adequate premises may reserve premises that will be completed in later construction stages, allowing them to apply for a free zone or non-free zone licence within d3.

Enhancing E-Commerce

Another sector which has marked remarkable regional growth is the emirate’s e-commerce. It is anticipated that the GCC E-Commerce sector will generate USD15 billion during this year. Dubai strives to maximise its business potential with the launching of Matajircom, the first global manmade e-commerce centre. The purpose of Matajircom is to enhance, attract as well as simplify the setting up of companies conducting e-commerce activities in Dubai. Matajircom is located within TechnoPark, located near Jebel Ali Free Zone. Jebel Ali Free Zone is currently home to more than 7500 corporations. As d3, Matajircom will also provide free zone as well as non-free zone licences.

Matajircom was set up by EconomicZones World. 

The purpose of the new hub is to attract e-commerce orientated businesses to set up within the UAE. The hub will offer rapid company registration, warehouse spaces as well as with agents specialising in logistics. Even though Matajircom will be launched shortly, the free zone will not grant licences till the start of 2016. It is anticipated that Matajircom will grant personalized regulations in order to assist e-commerce activities. Nonetheless, the specific date the legislation will be ready has not yet been confirmed.

Assistance

Dubai is home to more than twenty free zones. The two free zones aforementioned, d3 and Matajircom are amongst the ones which are currently being set up. Dubai continuously establishes new business opportunities for companies looking to expand so as to benefit the emirate economically. Additionally, these ongoing developments also reflect the confidence businesspeople have in both Dubai but also other regional markets.

   

Through the years we have witnessed Dubai grow and develop into a top-notch city. Dubai free zones offer the perfect business environment to corporations seeking to expand their horizons into the region. Our experienced team guides both foreign and local businesspeople through all the procedures and requirements needed to set up companies within the region in order to grow and meet their full business potential.

New Register of People with Significant Control introduced in UK Companies

According to the UK’s Small Business, Enterprise and Employment Act 2015 all UK companies, besides publicly traded companies, must keep a register of people who hold significant control over the specific company. This new policy, known as the register of people with significant control or PSC register will include information on people who are owners or control 25% or more of the company’s voting rights or shares, or who have control over the specific company and management.

Provided that the people who have control over a company tend not to be the same people to those included on the shareholder register, the PSC register will not be the same as the shareholder register.

The PSC register will not only be available to the public but will also be found on the internet under Companies House.

Apart from publicly traded companies, all UKcompanies, both private and public, are subject to comply with the PSC register requirement. Publicly traded companies already report under the DTR 5 regulation.

The UK government has introduced the PSC register in order to create more corporate transparency. The UK is the first to introduce the register, while the EU is also heading towards the same direction in order to comply with the Fourth Money Laundering Directive. 

Dubai Passes Law to create a Free Zone Council

Dubai’s ruler, Mohammed bin Rashid Al Maktoum, recently announced the issuance of two new decrees concerning the creation of Dubai Free Zones Council.

The purpose the Dubai Free Zones Council is to enhance the progression and development of the emirate’s free zones. The council will work towards increasing investment inflows and promoting knowledge exchange and coordination amongst Dubai’s free zones. One of the council’s tasks is to develop and plan a strategy concerning the emirate’s free zones. The council has also been called to reevaluate the free zone legislation.

Dubai is home to many free zones such as the Dubai Multi Commodities Centre (DMCC), the DIFC as well as the Dubai Airport Free Zone (DAFZA). All Dubai-based free zones offer numerous business benefits including exemptions from import and export duties and corporate tax.

The Chairman of the Dubai Free Zone is Ahmedbin Saeed Al Maktoum, which is also the Chairman of the Emirates Group as well as the Chairman of Dubai Civil Aviation Authority.

The Dubai Free Zone Council is made up of esteemed officials including, the CEO of the Dubai Aviation City Corporation, the Director General of the Dubai Creative Clusters Authority, the Secretary General of the Dubai Free Zone Council, the Director General of the Dubai World Trade Centre Authority (DWTCA), the Chairman of Meydan City Corporation, the Governor of the Dubai International Financial Centre (DIFC) and the Chairman of the Ports, Customs, and Free Zone Corporation (PCFC). 

IMF suggests VAT, tax on cars and all companies

After the plunge of oil prices, the UAE is seeking ways to make up for the loss of oil revenue. The International Monetary Fund (IMF) recommends the UAE strengthens its financial position and diversifies its revenue flows by introducing a Value-Added Tax (VAT), impose an excise on passenger vehicles as well as inflict Corporate Income Tax on all firms and companies.

In a recent report, the IMF revealed that the UAE has the capacity to earn additional revenues amounting to 4.1% of Non-Hydrocarbon Domestic Product (GDP) by introducing a 5% VAT, 15% tax on cars according to its value as well as imposing Corporate Tax on all companies.

The UAE is renowned as being a tax-free jurisdiction. The UAE does not impose personal income tax nor VAT o its citizens, which has made it an idyllic destination for working expats looking to increase the income they earn.

Nevertheless, Dubai-based foreign banks are subject to 20% tax, 5% property tax is imposed on rentals by local municipals while a local tax of 10% is inflicted on hotel services.

In an effort to expand government revenue flows, particularly after the fall of the price of oil, the UAE has deregulated petrol price, which has driven prices up by 24%.

Based on the IMF, the UAE’s tax scheme does not generate sufficient funds for its economy. Therefore, the IMF suggests other means should be introduced in order to generate revenue for the country. In accordance to the IMF, the introduction of a VAT will generate additional 2.7% revenue of Non-Hydrocarbon GDP.

The IMF also suggests the UAE generates additional revenue by imposing a tax on passenger vehicle owners. The IMF explains that the use of vehicles causes various expenses for the government including the maintenance costs, road work and productivity losses caused by traffic congestions. In accordance to the IMF, by introducing a 15% ad valorem tax the UAE would generate an additional 0.6% of Non-Hydrocarbon GDP.

In order to avoid imposing Income Tax on UAE residents, the IMF recommends the UAE expands the scale of the Corporate Tax. The IMF suggests that the UAE should impose Corporate Tax on all domestic and foreign companies which conduct business activity in the country, with the exceptions of those based and operating within the free zones.  However, the IMF suggests that the tax rate should decrease to 10% instead of 20%. According to IMF, the UAE could generate an additional 4.1% of Non-Hydrocarbon GDP if it introduces the measure.

The IMF report was drafted as a preliminary paper for the occasional discussions between the UAE and IMF. The report did not reveal when the new taxes would be introduced. Most experts claim that many years will pass till the new tax reforms are implemented.

According to expert economists at the National Bank of Abu Dhabi, VAT will not be introduced in the following three years. the UAE, as well as all oil-based countries are going through a shift at the moment, where oil prices are set to remain around $55-$70 during the next few years.

The IMF states that even though the fall of oil prices has caused some financial fear and upheaval, the UAE has successfully limited the negative impact. The UAE’s beneficial image as a safe haven and foreign buffers has helped the country compensate for the negative impact the drop of oil price has brought.

The IMF also revealed that the UAE’s non-oil based economy has marked a growth of 4.8% in 2014. Nevertheless, due to the drop of oil prices, the growth rate of the non-oil sector is expected to drop to 3.4% in 2015, which is presumed will rise again to 4.6% by 2020 as a result of the World Expo 2020 as well as investment inflows and infrastructure projects. 

UAE economy slowdown in 2015

Analysts estimate that the United Arab Emirates (UAE) economic growth will hit a slowdown period in 2015. According to expert analysts, the UAE will experience the lowest growth rate it has experienced in the last six years.

Analysts use the economic term Soft Landing to describe the UAE’s growth rate. Soft Landing is defined as a slowdown period, which does not aggravate or worsen unemployment or inflation rates of an economy.

Based on analysts’ opinions, the UAE’s economic activities have started to demonstrate signs it is weakening. The UAE is said to face a slowdown period mainly due to the fluctuation of oil prices, which has led to loss of revenues. This fact will inevitably lead to less domestic spending.

In line with the International Monetary Fund (IMF), the UAE will mark a 3% economic growth rate in 2015. The IMF’s initial projections stated the UAE would mark a 4.6% economic growth rate. However, the figure was reevaluated because of the decline in oil prices, which is said will influence the UAE’s the corporate and real estate activity.

Additionally, the government plans to cut down on spending and increase taxes. Both these factors will influence the UAE’s economic growth rate. Some expect the UAE’s GDP rate will fluctuate between 3.5%-4% whereas others project the rate will go as low as 2% in 2015. Overall, economists anticipate the GDP will be lower in 2015 in comparison to 2014.

It is a fact the UAE’s economy is experiencing a slowdown period. On a bright note, the economy is still growing at a healthy rate. As economists confirm, it is better for a country to experience a steady and reasonable economic growth rather than rapid booms and crashes.

 In comparison to other countries in the region, the UAE has created the most diversified economy. In particular, Dubai has succeeded in moving away from the oil sector, creating a diversified economy. Even though Dubai is not as dependent on oil as it once was, the plunge of oil prices has influenced the emirate’s real estate sales, banking liquidity flows, consumer spending as well as the corporate and consumer morale.

Analysts point out that the UAE may reinforce its economic growth through the increase of oil output and state investments. However, the UAE’s home and export demand for oil will influence the economy because oil prices more than halved in 2014.

It is expected that the UAE economic growth rate will fall by 1% every year until 2020 due to government spending cut downs. 

UAE’s Implementation of VAT will boost its Global Competitiveness Level

The UAE plans to implement a Corporate Tax and Value Added Tax (VAT), which has fueled many discussions on what changes the new taxes will bring to both the residents and the country as a whole.

Some argue the introduction of the new taxes will benefit the country’s economy while others hold a different view.

The basic reason the UAE is planning to introduce new taxes is to compensate on the loss of oil revenue the decline of oil prices has brought. The UAE federal government does not generate profits from the sale of oil since it does not sell nor own oil. Abu Dhabi is the UAE’s largest oil-holder; therefore, the fluctuation of oil prices influences the city’s local revenue and not the entire UAE.

Thus, the revenue the federal government will generate from the new taxes will be additional funds that can be used to invest in the country. Finally, the increased federal funds will benefit the country as a whole expand even further.

Simultaneously, a combined approach from all seven emirates towards enhancing the UAE’s economy is beneficial and can only generate profits, as the total amount the new taxes will yield will be more than each emirate would generate individually. 

Most experts argue that the introduction of the VAT on goods will not influence consumer-spending patterns and demand levels will remain steady. Therefore, the VAT will not influence the economy in a negative manner.

In general, when consumer demand drops, consumer spending also falls, leaving producers with less revenue. The aforementioned theory is based on three assumptions, which do not apply in the UAE’s case.

Firstly, it is generally suggested that consumer spending will decline since they will not afford to purchase the same amounts they did before. However, this is only the case when individuals are unemployed or lose many funds in the stock market or investments. The above case does not apply to the UAE. VAT will be imposed on luxury goods and alcohol, therefore the individuals who already afford these goods will still afford them after the VAT is added.

Secondly, most assume that the VAT will increase the general prices of goods and services and that the consumer will have to pay more to cover the tax. However, sellers want to remain competitive, thus cannot increase prices greatly. Therefore, sellers absorb most of the difference the VAT will bring in order for prices to remain steady.

Thirdly, the standard economy model applies to economies where most of the production is domestic. This does not apply to the UAE because the majority of the production is imported from abroad. For instance, if the demand for luxury cars declines in Germany, car manufacturers will go bankrupt.

In basic terms, the revenue generated from taxes will not be transferred out of the economy. The funds simply transfer from the private to the public sector within the economy. If the government uses this money to empower the government, then introducing the taxes is a bad idea. However, if the tax revenue is consumed to expand the country’s infrastructure and social services, than introducing the taxes is a good idea.

When taking into account that the emirates individual governments continuously invest in their economies, experts are positive that the federal government will use the tax funds to enhance the UAE’s economy and general growth.

Other countries impose high tax rates to aid their economies recover from financial difficulties and obstacles. The UAE intends to implement a low VAT and its economy is one of the steadiest in the world. Thus, it is believed the introduction of the VAT will further enhance the country’s competitive level.

UAE Considering Taxes as fiscal reforms

Due to the decline of oil prices, many Middle East and North Africa (MENA) countries have implemented various kinds of subsidy reforms aimed to increase government revenues.

Analysts support the MENA should implement an effective tax regime and cut down on expenditure in order to compensate on the oil revenue losses and increase government funds.

MENA governments are considering introducing new taxes aimed to increase their funds to maintain both economic and social stability. Currently, financial policy ideas aim to increase government revenue, enhance investment concerning projects that generate added value on the existing gas and oil export plans as well as boost investment flows towards non-oil and gas based fields. The majority of MENA countries have undertaken large infrastructure projects including electricity, transport, industrial facilities, water, seaports and rail.

The MENA governments acknowledge the significance of using tax policies to motivate international companies to set up within the region. The decrease in oil prices, and the fact that oil prices may remain low, has influenced countries that usually spend large amounts on infrastructure projects. Countries throughout the region are facing budget deficits because of the loss of oil and gas profits and are now considering introducing new tax schemes to increase their revenue.

GCC countries as well as Egypt are considering introducing VAT. The UAE has recently reported they are working towards introducing a corporate tax and VAT. The GCC have been considering introducing a VAT for many years. Many experts believe that the decline of oil prices, which has led to the loss of revenue, is the incentive the GCC countries needed to introduce a VAT.

It is expected that the new tax regimes will be introduced over the following two to three years. Initially the tax rates will be low and will increase over time. The tax revenues will aid governments make up for the loss of oil revenue.

Countries within the region are concerned that the introduction of taxes will influence their investment inflows and competitiveness. However, experts argue that the implementation of indirect taxes will not affect investments.

Indirect taxes will be added on the price of goods and services. This means the end-consumer will be subject to pay tax on the goods and services he/she consumes. Therefore, the tax imposed will be passed from the business to the consumer, meaning the tax will not influence a business planning to set up in the area. 

First Quarter of 2015- Dubai one of the worst performing property markets

According to a recent report, during the first quarter of 2015, Dubai’s real estate sector performed badly since the average price of houses decreased by approximately 4%.

More specifically, Dubai was ranked 53^rd amongst the 56 property markets that were included in Knight Frank's Global House Price index which evaluates the annual price growth of property. The countries that performed worse than Dubai were China, Cyprus and Ukraine. Ukraine marked a 15.5% drop while Cyprus and China recorded a smaller decline of 8.2% and 6.4% respectively. Based on the index, Dubai’s annual price growth dropped by 6.1%.

Nevertheless, the statistics revealed that during the previous quarter Ukraine’s annual price growth fell even more, while Dubai dropped of 4.6%.

Dubai’s real estate market has been amongst the most unstable over the last ten years, fluctuating constantly. Following the 2008 real estate crash, where prices were at their peak and crashed, the value of property climbed again and is now dropping.

Hong Kong, Turkey and Ireland were the three countries that marked the most increase regarding annual price growth. Hong Kong was ranked first with an increase of 18.7%, while Turkey and Ireland proceeded with an increase of 18.6% and 16.8% respectively.

Additionally, the index revealed that seven out of the ten leading countries ranked according to annual price growth of property are European countries.

The Global House Price index increased by only 0.3% until March 2015, which in fact is the least it has increased out of the last three years.

The Global House Price index takes into account the GDP of the countries included in the evaluation since more developed countries like the US or China have a greater impact in contrast to smaller countries like Malta.

Even though larger markets such as China, France and Japan are all going through a slump regarding the price of property, a larger number of smaller markets are experiencing small yet stable increases.

Three-thirds of the countries evaluated by the index either remained stable or marked a positive annual price growth during the first quarter of 2015. Three years ago, less than half of the countries recorded stability or an increase. 

Dubai’s State of Foreign Investments

In the past Abu Dhabi depended on Dubai as a re-export hub. After Dubai’s oil was discovered, the city developed into a top-notch and luxury destination as well as one of the top business hubs in the world.

The once desert-like area is now over-flowing with luxury hotels, impressive skyscrapers and state-of-the-art shopping malls. Dubai is now considered as one of the top urban jurisdictions in the world and a city that continuously expands and develops.

Even before Dubai discovered its oil in 1966, it was a leading trade hub within the Middle East as well as amongst a variety of  European countries. Dubai’s city life developed immensely after its oil fields were uncovered. Dubai produces more than 65 million barrels of oil annually. Once Dubai’s International Finance Center was launched in 2002, globally recognized financial institutions including Standard Chartered, Credit Suisse, HSBC as well as Citibank set up branches.

General Outline

Based on a study conducted by Dubai-based investment firm, FDI, the emirate attracted more than $7.5 billion worth of foreign direct investment in 2014. Almost 80% of foreign investment was attributed to tourism, information technology, business management, renewable energy, real estate and financial services industries.

Foreign investors from all over the world including Germany, India, Italy, the UK, the Netherlands as well as the USA invested approximately Dhs23.9 billion in 2014. The aforementioned countries comprised approximately 84% of the total 2014 FDI and nearly 60% of projects. It is estimated investments will increase significantly by Dubai Expo 2020, as the event is considered to be one of the most prestigious and prominent exhibitions.

Furthermore, Dubai is viewed as the ideal jurisdiction to do business due to its simple business procedures as well as business-friendly environment.  For the purpose of attracting more investors to the UAE, Dubai FDI teamed up with SHARJAH Investment and Development Authority.

Finally, the most recent A. T Kearney Global Foreign Direct Investment Confidence Index ranked Dubai 14^th internationally. The index measures the present and potentially future foreign direct investments.

Dubai and Investments:

Dubai is internationally renowned as being an investment haven! Investors are presented with endless investment options including infrastructure.

Furthermore, the emirate’s Dubai International Airport is not only considered the fastest growing airport in the world but it has also been ranked as the sixth busiest international airport. Dubai’s airport handled 41 million passengers in 2009. Well above one-hundred international airlines fly to Dubai. leading airlines including United Airlines, British Airways, KLM, Lufthansa, Singapore Airlines as well as the UAE’s local Emirates are some of the airports top air carriers.

Dubai is also home to the world’s largest and busiest man-made port, Jebel Ali Port. The port caters to more than 240 shipping lines recording 19% growth rate. Additionally, Dubai is also home to a variety of Free Trade Zones where each operates within particular industries, infrastructure as well as tax incentives. Some of these include Biotechnology and Research, Media and Technology, Healthcare, Textiles and Logistics, Education, Dubai Free Zones and Outsource Zones as well as Financial Services and Commodities.

Dubai’s Free Zones offer businesses spacious office spaces, warehouses, factories and simple procedures when it comes to obtaining licenses. Dubai Metro is one of the most advanced railways in the world, which run with automatic trains. The metro system links popular tourist destinations, shopping malls and the airport.

 Tourism is another popular industry that attracts investors. During 2014, 11.12 million tourists holidayed in the emirate. In 2013, 10.16 million tourists visited the city. Dubai’s hospitality and tourism industry contributes to 20% of its Gross Domestic Product (GDP).

Dubai’s trade and investment data reveal it is a top jurisdiction for investments as well. During the first three financial quarters of 2014, Dubai’s non-oil based foreign trade generated DH988 billion out of which Dh621 billion, Dh86 billion and Dh86 billion were attributed to imports, exports and re-exports respectively.

Out of one-hundred and sixty countries, Dubai was ranked as the 15^th best location to enjoy quality of life and the first throughout the MENA.

Obviously, based on the above information and statistics, Dubai is considered as the ideal jurisdiction to invest and attract foreign investments. Although, some may under-rate the emirate at the present, Dubai is destined to develop into a world-class city in the near future.

IMF Estimates a 2.3% Fiscal Deficit for UAE in 2015

In contrast to private-sector predictions, the International Monetary Fund (IMF) forecasts the United Arab Emirates (UAE) will experience a 2.3% financial deficit.

The UAE’s Government budget deficit has been anticipated due to the decrease of oil prices. It is the first time since 2009 that the UAE will experience a shortfall in the Government Budget. During the previous year, oil cost approximately $100 per barrel whereas this year, oil has slumped to approximately $60 per barrel.

The IMF predicts that the UAE’s Gross Domestic Product (GDP) will drop by 2.3% in comparison to the 5% surplus it experienced in 2014. The IMF also forecasted that the UAE’s non-oil based sector economic growth rate will increase by 3.4% while inflation rate is also expected to rise by 3.8% due to increased rents regardless of the fact residential prices have stabilised in Dubai. A complete IMF report will be released during the following month which will include all of its forecasts.

Additionally, according to IMF the UAE’s economic growth rate will increase by 3% during 2015 marking a drop of 1.6% in comparison to the previous year’s growth rate which was recorded at 4.6%. On a bright note, the IMF commended the UAE government on continuing to invest on infrastructure as well as implementing innovative policies which eased the negative impact of decreased oil prices. 

Numerous economic predictors within the private sector have forecasted that the UAE will experience a higher shortfall than the 2.3% predicted by the IMF. Even though the IMF has made its predictions based on the UAE’s expenditure plans, it does not mean that its predictions are more precise than those of the private-sector due to the fact the IMF does not take into consideration future oil prices.

Abu Dhabi Commercial Bank predicts the UAE will experience a 4% fiscal deficit during this year. The forecasted deficit is viewed as modest in comparison to the country’s large financial reserves. According to the bank, due to the government’s policies and reforms implemented during the past few years the UAE’s non-oil GDP rate will remain healthy.

Additionally, the government’s focus on housing, transportation, tourism, healthcare as well as education and energy projects in Abu Dhabi and Dubai will support and sustain the UAE’s economy

Although the IMF commended the UAE government for its innovative policies and budget spending it has made some suggestions so as to help regulate the deficit. According to the IMF, the UAE government must sustain investment spending, ease off on subsidies, regulate the public wage bill, increase non-oil profits and minimise transfers towards state-linked entities.

Most of the aforementioned measures are currently being endorsed. The IMF also calls that the financial community of the UAE and the government to be more transparent especially concerning state-linked entities as well as state debts.

According to an Abu Dhabi-based investment company, the National Investor, the UAE’s spending patterns and reforms rely on whether the price of oil will even out or fluctuate. In the past, the UAE government was practical and sensible as it restricted government spending at times when oil prices dropped. In contrast, the UAE government has not followed the same tactic this time and carries on spending. The reason remains unclear as to whether it is due t the fact the state believes oil prices will pick up or whether due to the fact it has implemented new reform policies.

Currently, the UAE government has large amounts of reserves to manage the drop of oil prices as well as to deal with the small shortfall in its budget. However, if oil prices remain low, the government will have to make long-term plans and introduce new policies as a precaution.

The IMF reflects the same views and will include details concerning the UAE’s spending in its report in the following month.

Foreign Labor Influence on the UAE Economy

The United Arab Emirate (UAE) dependency on foreign workers is a subject that dominates any discussion concerning the UAE’s economy. This fact implies that in the occasion that foreign workers depart from the UAE, its economy would be influenced negatively. Some do not realize that an economy is influenced by a variety of important features, not only the labor force.

This article will outline the relation between the economy and foreign labor and to what extent the latter influences the UAEeconomy and its economic growth. The economic cycle of 2002-2012 was quite eventful. The UAE’s economy started to thrive in 2003 where it reached its peak in 2006. After 2006, the UAE’s economy went into a crisis until it finally returned to normal by the end of 2012.

Population Growth

During 2002-2012, the population rate of the UAE seems to follow its economic growth rate, whereby population reached its peak in 2007 and then dropped rapidly to just above 0%. This reveals that the percentage of labor relies on the economy, which is more logical since an economy draws foreign workers as it develops and expands. At times when the economy experiences downfalls, foreign workers decrease.

Emiratis and UAE Residents

A country’s Gross Domestic Product (GDP) per capita is more during times whereby the economy expands and thrives. In reference to the UAE’s GDP, statistics show that following the international financial crisis, the country’s GDP dropped by 40% only to jump up again in 2004.

The above trend reveals that as the UAE expands, foreign labor supports the growth by being employed in positions. Confined labor policies smother the UAE’s economic growth since these restrict the supply of employees. This is especially the case in the UAE’s knowledge-based segments.

On the other hand, during times where economic growth declines or even is in crisis, the workforce adjusts automatically and evens out the GDP. Due to the fact that foreign workers are able to save large proportions of their income during the time where the economy expands as well as the fact workers are not subject to Income Tax means that they have enough saved to use in times when economic growth declines. Overall, foreign workers are interested in working in the UAE until its GDP becomes stable. 

On the other side, during recessions all public services experience budget cuts. This does not necessarily mean the public services sectors do not offer high quality because during recessions, there are less people to cater to so the quality of the services remains the same.

The same supply and demand trend applies in the private sector of the economy. There is less supply which matches with consumers’ decreased demand. Imagine there are 10 opticians throughout the country and people cannot afford to spend money on examining their eyes and purchasing glasses. Thereby, 5 of these opticians leave the country, which means the 5 remaining opticians sustain their business activity and quality of services. In basic terms, the workforce adjusts automatically to the demand and supply of the economy. 

Dubai’s economy growth increased in 2014

Dubai’seconomy grew by 3.8% in 2014 according to Dubai Statistics Centre (DSC). Dubai’s real Gross Domestic Product (GDP) marked AED338 billion by the end of 2014. Dubai’s government officials commend and congratulate the city’s excellent economic performance. According to Dubai’s government, the city’s economic growth is attributed to its diversified economy.

According to the DSC’s report, all Dubai’s economic sectors developed in the previous year leading to increased growth rates, which consequently led to an increased GDP. Government officials assert that Dubai’s increased economic growth reveals that the emirate’s non-oil based sectors are also marking continuous growth. T according to the statistics, the emirate’s non-oil based economy contribution increased by 98.7% during 2014. In fact, Dubai’s oil-based sector contributed an amount of AED4.4billion whereas its non-oil sector’s contribution amounted to AED333.5billion.

These statistics confirm that Dubai’s overall economic diversification, whereby the city focuses on both service and industrial activities, is paying off.  The statistics also showed that 34% of Dubai’s GDP is attributed to the emirate’s communication, storage and transport sector that developed greatly from 2013 to 2014, marking an increase in growth rate of 8.6%. 

New index Measures Dubai’s Economy

According to the new index, Emirates NBD Dubai Economy Tracker, implemented to measure Dubai’s the economic growth rate of its non-oil sector; the emirate marked a slight decrease during April.

The new index was officially introduced by the emirate’s banks a few days ago, and it said to cover more than 600 companies within Dubai’s private sector. The purpose of the index is to measure the performance of Dubai’s private non-oil based sector on a monthly basis.

Dubai’s new index is founded on the Purchase Manager Index, which has been adopted by a variety of other countries. According to Markit, the assembler of the index, all of Dubai’s private companies, regardless of size, will be monitored in order to measure the emirate’s economic growth. The aim to create a precise and accurate picture of the performance of Dubai’s non-oil based economy.

Besides measuring Dubai’s economic performance, the DubaiBusiness Activity Index also records the emirate’s employment rate. According to the index, Dubai’s employment rate dropped slightly from March to April from 60.6 to 57.2 respectively. However, even though the employment rate dropped, it is still above 50.0 indicating the emirate’s economy is expanding rather than contracting.

The index has revealed that although the slight slump Dubai has experienced, its private sector growth rate is resilient and strong when compared to other international economies. It must also be taken into account that the emirate’s economy remains strong regardless of the drop in oil prices that has influenced other oil-based economies.

The Real Estate Tracker results also reveal that Dubai’s property market will experience a slight strengthening. The tracker, which measures the rate of growth of the emirate’s property market, is conducted every two months. The tracker surveys around 600 domestic properties and 70 real estate agents. According to the property tracker, property values will show a small increase in value as well as demand. 

Dubai Economic Growth and Services Sector

Dubai’s services sector is vital to its economic growth as the city is improving and updating its systems by using digital technology. According to Oxford Business Group (OBG) report, Dubai’s intention to increase its tourism is clear, as 2020 Expo is in the horizon, offering countless investment opportunities for investors interested in the hospitality sector and other intertwined infrastructure and sectors. 

While the city’s efforts to recover from the devastating 2009 financial crash are paying off, Dubai’s role as a regional hub is further attracting investors thus increasing capital flow.

Factors that will contribute to Dubai’s Future:

1. Dubai has upgraded

The MSCI upgraded the UAE from frontier to emerging market in 2014, which has led to increased liquidity. At the same time, it is anticipated that an improved trading platform will lead to a greater interest amongst companies that are considering registering. Financial experts believe that the upgrade will aid the UAE attract companies outside the UAE borders. Finally, in 2014, Dubai also raised an equity capital, marking the city’s first offering over a period of five years.

2. Public Offerings

Dubai has planned numerous projects for the upcoming 2020 EXPO including the launching of an Initial Public Offering (IPO ) pipeline. Reevaluated rules and regulations involving listing and resilient prices of the stock market will also contribute as to when precisely the IPO pipeline will be launched. On a bright note, the fact that Dubai’s government has set as priority to strengthen the city in order to become a stronger regional financial centre as well as vigorously progressing with infrastructure plans are both promising factors that will attract investors in purchasing sukuks (Islamic bonds) and equities.

3. Real Estate

Dubai’s construction sector has increased overall contributing 8% to the city’s GDP in 2013, which is a rate well below the 14% increase marked in 2008, which led to the financial crash. Construction loans marked an increase of 40% at the end of 2013, reflecting construction companies’ restored confidence in the real estate market. Statistics revealed that the 40% loan increase was the highest increase since mid-2009.

4. Public-Private Partnership Collaboration

Dubai’s construction market is anticipated to benefit immediately by the emirate’s plans to implement a public-private partnership (PPP) model, which is further encouraged by the government’s vision and plan for getting all its projects on the internet. By presenting PPPs, Dubai intends to attract funding for new and huge business ventures, particularly for residential as well as public ventures. The legislation framework is presently being revised and drafted. If the PPP model is accepted and introduced, it will be the second model in force throughout the Gulf region.

5. Green Economy

Dubai has marked energy saving as its top priority. Dubai Integrated Energy Strategy (DIES) strives to decrease its energy consumption by 30% until 2030, as it intends to make smart use of water and electricity. Additionally, the newly founded Dubai Energy Agency (DEA) aims to increase efficient use of energy by advising consumers, industries as well as the government.