New UAE employee fees and visa scheme set to aid private sector

New measures introduced by the UAE to encourage business competitiveness are set to provide a boost for private sector growth, as the country eases back on spending restrictions following a recovery in oil prices.
The UAE introduced a string of business reform measures late on Wednesday, including the reworking of business fees to hire private sector workers and more flexible visa regulations.
“With oil recovering, the UAE is in one of the best positions to loosen fiscal policy as it has massive savings and sovereign wealth,” said Jason Turvey, Middle East analyst for Capital Economics.
A key measure introduced is the scrapping of fees businesses pay to hire private sector workers, many of whom are expats. Fees have been replaced by an insurance system.
Businesses will now pay an annual tariff of 60 dirhams ($16.34) per worker instead of a deposit of 3,000 dirhams, according to the state-owned WAM news agency.
Sheikh Mohammed Bin Rashid Al Maktoum, the UAE’s prime minister and ruler of Dubai, tweeted that the move would save billions.
“In a cabinet meeting today, we approved reforms including replacing the bank guarantee system for private sector employees with a low-cost insurance scheme. This will release 14 billion dirhams back to the private sector companies and will further lower the cost of doing business,” he tweeted late on Wednesday.
The latest announcement comes on top of a recently announced stimulus package worth $13.6 billion for the emirate of Abu Dhabi, including plans to ease restrictions on full foreign ownership of UAE businesses and to let some foreigners stay longer, thereby reducing the amount of earnings sent out of the country.
The latest batch of measures is also linked to tourism and hospitality with a pledge to exempt transit passengers from entry fees in the first 48 hours. A transit visa extension will be made available for up to 96 hours for a fee of 50 dirhams.
“Tourism should be supported by this and other measures at a time when the industry has faced headwinds such as the strong dollar,” Monika Malik, chief economist of Abu Dhabi Commercial Bank, told Arab News.
Other measures include the introduction of a six-month visa for jobseekers who overstay their visa but want to work in the country, and a temporary visa to enhance the UAE’s position “as a land of opportunities, a destination for talents and professionals,” according to Sheikh Mohammed.
Lower oil revenue and weaker regional economies have hurt growth in the UAE, where expatriates make up about 80 percent of the population. Last year, growth slumped to an inflation-adjusted 0.5 percent after OPEC nations agreed to production cuts, down from 3 percent in 2016.
“Visa reforms are part of overall measures to improve the business environment and boost economic competitiveness,” said Malik.
An immediate lift to employment was unlikely, she said, but the measures would improve company liquidity and profit margins, and possibly lead to increased capital expenditure.
Sheikh Mohammed said: “The UAE is among the 10 most competitive countries in the world and our goal is to remain a top destination for ease of doing business, through an agile economy based on flexibility and openness.”
“Gulf countries want to encourage new industries and attract foreign capital. The rebound in crude prices has given them more room for spending,” Turvey told Arab News.
“Saudi Arabia has also announced plans to revive growth as austerity is reined back,” he said.
“With oil recovering, UAE and others can afford to loosen fiscal policy.”
Measures taken recently by Dubai have included a one-year freeze on school-fee hikes, and a waiving of some fees on aviation and real estate transactions that will help cut the cost of living and doing business.
A research note from Emirates NBD said the latest UAE measures should offer some relief for businesses across all sectors, boosting the key transport and logistics sector.
“The measures were broader in scope than we had expected following the instructions to reduce the cost of doing business in the emirate,” the bank said.