• Home
• /
• Local business

Businesses Hail UAE’s New Federal Budget

The UAE government is sending a positive signal to the business community by unveiling a balanced and forward-looking budget, they argued.

The increased spending on infrastructure development and stress on the education sector will help significantly improve the confidence of the local and international business communities about the robustness of the UAE’s economy and its ability to withstand global slowdown, they said.

Shaikh Sultan Sooud Al Qassemi, Chairman of Barjeel Securities in Dubai, said while 2009 budget was the highest in the UAE’s history, the new budget for 2010 “is even higher without a deficit.”

The new budget reflects that the government is keen on utilising its fiscal policy to make sure that the UAE pulls out of the effects of the global financial crisis as early as possible, Shaikh Sultan said.

He said the approval of the budget two months ahead of the year-end would allow businesses and government agencies to better plan for the year ahead in terms of expenditure. “A large portion of the budget that was allocated to education is probably the most important feature of the budget as it will prepare the UAE’s youth for the demanding job market that they will face as global competition increases.”

The budget “loudly speaks of the resilience of the UAE economy” and the vision of the country’s leadership,” said Paras Shahdadpuri, Chairman of Nikai Group of Companies, and head of the Indian Business and Professional Forum in Dubai.

He said the budget showed that the country’s leadership was determined to take the UAE forward by ensuring comprehensive development with emphasis on the socio- economic sector.

The budget promotes confidence among the business community of the UAE, said Shahdadpuri. “Spending 22.5 per cent of the allocation on education gives a clear indication of the leadership’s emphasis on developing the country’s young children who are the future of the nation. A 41 per cent spend on social development is a laudable commitment of the government for its citizens. I admire the UAE leadership for achieving this feat and for their vision during the difficult economic conditions.”

Dr Ram Buxani, Group President of ITL-Cosmos, said the increased allocation in the new budget underscored the federal government’s determination to press ahead with its social, educational and infrastructure development programmes.

“Although a 3.4 per cent increase in budget outlay may look smaller in comparison with increased allocations in the last two budgets, it does not mean that the overall national spending on new development projects will be low. The federal budget represents only 15 per cent of the public expenditure. We have yet to see allocations for development by Abu Dhabi, Dubai and Sharjah in their new budgets,” Dr Buxani said.

The new federal budget brings lot of confidence in the local market, said Shyam A. Bhatia, Chairman of the Dubai-based Alam Steel Ltd.

“In any economy, the most important thing in business is a positive message from the government to the people. The UAE government has really done it,” Bhatia sad.

He said the increase of 17.5 per cent on infrastructure development projects was a boost to the construction industry.

“Increased allocation for the education sector will enable the building of new schools, enhance literacy and quality of education which is beneficial to the country in the long-run,” Bhatia said.

“Overall the l budget is quite positive. It is a well-funded budget and there is no deficit. It is also commendable with more investments planned in infrastructure development while continuing to focus on health, education and welfare,” said Sanjay Uppal, Group Chief Financial Officer of Emirates NBD.

Yusuffali M.A., Managing Director of EMKE Group & Director of the Abu Dhabi Chamber of Commerce & Industry, described the budget as “a very well-balanced and forward-looking initiative” with stress on social sector development.

“To come up with a zero deficit budget during such challenging times is in itself a commendable achievement and I congratulate the authorities for this. This will send out strong message to both local business community and to the international market about the robustness of the UAE’s economy and how it was able to withstand the global slowdown,” said Yusuffali.

He said during the height of the recession, there was widespread scepticism about the growth prospects of the UAE, especially with the real estate industry taking a big hit. “However, the timely actions and market interventions by the authorities have yielded tremendous results. Investors are looking at the UAE market to act as a catalyst for the region and I am very confident that all these talks of recession and slowdown will be a thing of past soon,” said Yusuffali.

He said with the successful launch of Dubai Metro and forthcoming Formula 1 in Abu Dhabi, UAE had already shown to the world the power of leadership and planning. “With the economy diversifying more towards non-oil based industries coupled with best practices being adopted by the government, the UAE economy is very well poised to meet future challenges and scale new heights.”

The UAE government shows consistency by presenting its sixth consecutive zero deficit budget, said Jitendra Gianchandani, Managing Partner of Jitendra Chartered Accountants.

Dr Qaiser Anis, an Abu Dhabi-based chartered accountant, said the true picture of the UAE’s spending on infrastructure projects would be clearer when Abu Dhabi, Dubai and Sharjah announce their budgets.

Tristan Cooper, Head Analyst for Middle East Sovereigns at Moody’s, said “the most striking aspect of the 2010 federal budget is the sharp slowdown in expenditure growth” compared to the 2009 budget.

“The 2010 federal budget foresees expenditure rising by 3.4 per cent whereas the 2009 federal budget had spending growth of 21 per cent. Given that the federal government, backed by Abu Dhabi, is not resource constrained, this probably reflects the government’s opinion that the incipient recovery of the private sector will allow it to ease back on fiscal stimulus next year,” he said.

The Moody’s Economist said that federal spending accounts for less than a fifth of consolidated public expenditure in the UAE so the overall fiscal outlook depends more on what individual emirates plan to do in 2010. This is yet to be revealed.

Dr Monica Malik, Senior Economist at EFG-Hermes, an investment bank in Dubai, said that the federal budget was spent largely on infrastructure, health care and education.

“The slated level of spending increase has decelerated sharply to 3.4 per cent for 2010, down from over 20 per cent in the last two budgets. Given that this is the draft budget, the level of spending could be revised upwards,” she said.

She said that the increase in spending in 2008 was driven largely by an increase in wages, given the rise in inflation. However, overall government spending will likely remain far more expansionary.

M.R. Raghu, Senior Vice-President Research at Kuwait Financial Centre or Markaz, said that the UAE’s budgetary allocations reflected the cautious mood among policy makers given the lack of visibility on global economic recovery.

Value Added Tax or VAT, he said could a contentious issue. “While its introduction may ultimately diversify the revenue source, the timing may not be appropriate given the harsh financial environment.”

· issacjohn@khaleejtimes.com

· haseebhaider@khaleejtimes.com