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Newsletter | Articles The Business Climate in the UAE The business climate in Dubai and the other Emirates is set to change over the next few years. Bill Gambrill, director of ILS Daman, based in Dubai, investigates some likely trends. The International Monetary Fund (IMF) reported in September that the UAE’s economic performance continues to be strong with real GDP growth in excess of 9 per cent in 2006. The report said: ‘The medium term outlook is very positive with GDP growth projected to remain strong in 2007 and slightly decelerate thereafter.’ In the property market, demand continues to outstrip supply. In Dubai, we see residential building sites growing daily, but currently the pace of project handovers is slow – slower than the increase in population. Rents increased by 40 per cent in 2005, 30 per cent in 2006 and have risen by 16 per cent so far this year. Local indications are that the market peak will be reached in late 2008, followed by a price correction the following year as more supply hits the market. Best estimates put this in the area of 15-20 per cent. Putting this short-term issue to one side, two other considerations point to a healthier business climate in the medium term. Firstly, the UAE authorities have announced a major reform plan which sets the strategy for the next three years. A key focus will be to improve government efficiency and strengthen co-operation between federal and emirate governments. Progress will also be made to improve the business climate through updates of key legislation, such as labour, company and competition laws. Secondly, the six members of the Gulf Cooperation Council (GCC: comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and The United Arab Emirates) are committed to monetary union by 2010. The objective is for the region to become a more attractive site for small, medium and large companies – the key is to make it easier and cheaper to set up companies and then allow them to operate efficiently. A common currency to further facilitate trade among the different countries makes eminent sense. At the moment all the governments concerned are considering where to set the entry qualifications – similar to the Maastricht criteria pre-2001 Eurozone – in terms of budget deficit, public sector debt, currency reserves, inflation and interest rates. There are still many questions to be answered including the new currency’s valuation in relation to the US Dollar and other major currencies, but there is general optimism and the political will to push monetary union through. ILS’s view is that the region will continue to present a wide range of business opportunities for the foreseeable future. ILS Daman is the first point of contact for international businesses wishing to establish in the UAE. For further information contact Bill Gambrill.