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Why is the UAE cutting more than 1,500 government service fees?

The fees that are being ammended/cut pertain to services provided by Ministry of Interior, Ministry of Economy, Ministry of Human Resources and Emiratization.

GDP will expand only 2% in 2019, compared with a previous forecast for 3.5%, as per the Central Bank of the UAE The Central Bank also projects that non-oil GDP economic growth in 2019 would reach 1.8% Annual inflation in the UAE rose to 3.1% in 2018 compared to 2% in the previous year

The UAE just announced yesterday that it will amend and waiver fees for more than 1,500 government services provided by the Ministry of Interior, Ministry of Economy, Ministry of Human Resources and Emiratization.

The news comes shortly after the Central Bank of the UAE (CBUAE) revealed this month that it has lowered its forecasted increase for GDP in 2019, raising the question as to the timing of the UAE’s fee waivers and amendments.

Boosting the UAE economy    
The UAE economy had generally been performing well, but mounting external pressure has forced the CBUAE to temper its expectations.

Amid falling real estate prices, the ongoing US-China trade war, as well as the instability of the region, the bank has had to go back on its 3.5% GDP growth estimation. The new forecast sits at an estimated 2% growth increment. This number is even lower than the International Monetary Fund’s (IMF) prediction from April, Bloomberg noted

“The IMF sees a pickup to 2.8% from 1.7% last year,” Bloomberg reported. “In a May 2nd statement, the fund said ‘growth could exceed’ 2% this year and approach 3% in 2020-21.”

What about oil and non-oil growth?

Oil production has also taken a slight hit in light of the recent OPEC+ cuts. The CBUAE said that “the overall production in 2019 is projected to be an average of 3.1 million barrels per day, down from an average of 3.285 million barrels per day in Q4 of 2018, resulting in a growth of 2.7% in 2019 in the hydrocarbon GDP.”

CBUAE also projects that the non-oil GDP economic growth in 2019 would reach 1.8%, and continue its upward trajectory in the subsequent years, compared to a growth of 1.3% in 2018.

The CBUAE believes that “the announced fiscal stimulus packages and the new investment law will encourage economic growth, increase consumption, reinvigorate the property market, and improve the labor markets as the investors and consumer sentiments continue to solidify.”

Strengthening FDI 

The new investment law the bank is referring to allows foreign shareholders to own up to 100% of companies in certain designated sectors.

Coupled with long-term 5-10 year visas becoming available for notable individuals such as investors and specialized employees and researchers, this law will allow for unprecedented FDI (foreign direct investment) flows into the country. 

As for the official statement shared by the Emirates News Agency (WAM) regarding the fee cuts, it stated: “The decision contributes to attracting more foreign investments and position the UAE a hub for business by reducing administrative costs and fees. The decision also balances the revenue system of the government in parallel with the tax system (VAT and otherwise).”

VAT, which was introduced during January 2018 at a 5% mark-up, has helped the UAE bolster its non-oil earnings, but it has also contributed to slight inflation in the country. 

“Annual inflation in the UAE rose to 3.1% in 2018 compared to 2% in the previous year, which is higher than its five-year compounded annual growth rate (CAGR) at 2.5%,” the CBUAE report revealed.