Dubai tries hard to boost business
Between temporary licenses, pension funds and mandatory insurance and credit rating schemes, Dubai is pulling all the stops to look better in the business world.
March 26, 2012 2:45 by kippreport
Ten years ago, it was all about creating infrastructure in Dubai. And no one will argue that this basic strategy worked. But what most people were unwilling to admit during those times of construction windfall is that the ‘build-it-and-they-will-come’ attitude was not going to be enough to create a solid, sustainable economy.
Whether those people were busy lining their pockets to notice or they were counting on the overflowing government coffers for emergency bailout is another discussion. For now, it looks like Dubai is in intent on reinventing itself, with the introduction of new processes, new services, stricter regulations and perceived accountability. So now that they’ve built the infrastructure, it looks like they’re hoping creating a more organised, incentivised and protected market will make the emirate more alluring to foreign investment than ever before.
It’s no secret Dubai’s doing it to help boost its profile across global rankings, from the World Bank’s ease of business rankings to MSCI’s coveted ‘emerging-market status’. Increased foreign investment in business is the name of the game now.
This Sunday, Dubai’s Department of Economic Development (DED), for example, is running feasibility studies for a pension fund for expatriates, said to be launched at the end of the year. DED has also launched a 120-day temporary business license that will enable start-ups to begin operations while waiting for the proper paperwork.
And this Monday, the Dubai Chamber of Commerce is pushing companies to use a credit ratings service to help bring in more foreign investment and to encourage more transparency in the business sector.
Most recently, authorities running the Free Zones across Dubai have announced their intentions to make it compulsory for companies to take out third-party liability—something local insurers welcome and is intended to protect companies in the case of mishaps and damages.
It’s not surprising that one after another, announcements are trickling through, as Dubai recently announced its ‘Dubai means Business’ marketing campaign in hopes of attracting foreign businesses to set up in the region.
But how exactly do these changes affect local, and more importantly, smaller business in the UAE?
While we’ve already discussed what we thought about the 120-day license, we can’t help but thing about concerns that might crop up for smaller businesses when it comes to the pension funds. Companies, for example, will have to allot extra budget for the pension fund—something that some start-ups may not necessarily be able to afford. If implemented, this could mean companies will be forced to offer less competitive salaries and lose out on talent recruitment.
In addition, when it comes to the third-party insurance, some smaller companies are taking issue with having to pay for the high minimum insurance coverage of 500,000AED, which they say could lead to over-insuring of properties.
It’s irrefutable that these initiatives will make Dubai’s investment landscape much more appealing. But hopefully these actions come with considerations for the extra costs that will now be too much of a burden to fledgling landscape of entrepreneurs in the UAE.