Why Abu Dhabi made right call with stimulus

Abu Dhabi's blockbuster announcement promises to deliver a set of initiatives to transform the economy for the better.

His highness Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces and Chairman of the Abu Dhabi Executive Council, has approved a Dh50 billion economic stimulus package for Abu Dhabi.
Let us understand what this means and what it stands to deliver:
Firstly, the rationale. Abu Dhabi, the capital of the UAE and the largest of the seven emirates of federation, sits on over 90 per cent of the huge oil and gas resources of the UAE, with the country being the Opec's fourth-largest producer and has its revenues heavily depend on oil prices.
The International Monetary Fund had said last month that the UAE's economic growth fell to just 0.5 per cent in 2017 from three per cent the previous year, driven by a 2.5 per cent contraction in the oil sector.
The UAE, although being the Middle East's second-largest economy after Saudi Arabia, had in contemplation amid a slowdown not only in the oil sector but also in tourism and real estate.
However, the past year's rebound in crude prices, which climbed back above $70 a barrel, allowed the government more room for spending. Hence was the time to author some path-breaking moves to resurrect demand and thus the economy.
Connecting the dots over the last few announcements, a larger picture emerges:
Early in January, the economy got its first shot of adrenaline with the introduction of five per cent value-added tax (VAT), along with the sin (tobacco) and sugar (cola and energy drinks) taxes. The results were rapid as growth rose by 1.2 per cent in the first quarter of 2018, accelerating from 0.1 per cent in the previous quarter year-on-year per the Central Bank of the UAE.
Then came the day's transit visa, approved in April. This came from a data point that 70 per cent of all passengers passing thru the UAE (data for 2017) are transit passengers. This stands to add 1 million additional tourists per Department of Tourism and Commerce Marketing figures.
In the third addition to the list, coming just two weeks back, the UAE announced new incentives to allure foreign investors that included 100 per cent ownership of companies beyond free zones and a 10-year visa for professionals, investors, scientists and meritorious students.
Now the current blockbuster announcement promises to deliver a set of initiatives not only aimed at transforming the ease of doing business but also bringing about lasting economic benefits to Emiratis, residents and investors. Let us look at how.
 
Cash flow for businesses
Looking at the fine print of the announcement, it reveals the steps to accelerate the settlement of due payments on contracts that shall improve money flow and cash in hand, while a review of various fines for the healthcare and education sectors, as well as all municipalities' affairs, would further go down as some serious concrete measures to encourage businesses and promote fair practice.
The new initiative would also exempt new licences from the requirement of having a physical presence in the emirate in the first two years.
This would reduce costs and improve the chances of business to break even faster. View this in the backdrop of instant licensing systems in most commercial licence types and all the services provided as by the government.
 
Tourism
The package highlights the importance of tourism in establishing Abu Dhabi as a global destination, including not just short-term visits as facilitated by one- and four-day transit visas, but investment and longer-term residence.
This is likely to include establishing camping villages and a variety of areas dedicated to recreation sports, eco-tourism and programmes both on land and water. This will effectively encourage private sector stakeholders and investors to seek out opportunities in booming sectors of tourism, especially eco and aquatic tourism.
 
Building regulations and the rise of real estate
Further proposals invite for a comprehensive review of building regulations for both private and commercial property construction, including infrastructure and residential properties, in a move that could help reduce the costs for citizens, residents and investors, and holds promise to support the urban development of Abu Dhabi.
While keeping tourism as a precursor to fuel demand and enhance spending, it shall also offer a large-scale development of land holdings thereby giving a major boost to real estate. The exemption for all new licences from the requirement of having an office or a work space in the emirate for 2 years and permitting permanent home licences shall encourage small business to also flourish and shall boost the real estate demand.
 
The future
In order to serve Abu Dhabi's diversification efforts, Sheikh Mohamed also ordered the establishment of the Abu Dhabi Accelerators and Advanced Industries Council, rightly called Ghadan, meaning or tomorrow. The council is to interest and encourage value-added investments and technologies holding promise to predict and lead the development of Abu Dhabi's economy on the local and regional stages. This is setting a foresight into the future and should be viewed as a series of steps to bolster the overall economy to ultimately achieve the goals of the vision document UAE Centennial 2071.
The writer is CEO and executive director of NMC Healthcare. Views expressed are his own and do not reflect the newspaper's policy.