UAE needs to reform further

11 January 2008
As the first female Economy Minister in the region, Sheikha Lubna al-Qasimi is unique. Her private sector background also marks her out. Since November 2004, she has overseen the UAE economy, one of the fastest growing in the world.

But despite her position of power, she is limited in what she can do to remedy some of the less desirable consequences of rapid growth.

The UAE's inflation rate, which is conservatively estimated at about 9 per cent, is one of the highest in the region and a key problem for the government. The Economy Ministry cannot tackle it at the federal level - dealing with it falls to individual emirate governments. But in areas where the ministry has retained control, several issues remain unresolved. A free trade deal with the US has not been signed, despite talks starting almost three years ago. There now appears little chance of progress before a new US president is elected.

The ministry can do more domestically. While the UAE has been successful at attracting international businesses, fresh measures are needed.

Above all else, pushing through the long-awaited companies law would allow foreign investors to enter the market without a local partner. The fresh influx of foreign business that could follow would help to fill supply gaps in the market. It would also prompt local businesses, which are partially shielded from competition by the 49 per cent limit on foreign ownership, to change their ways to compete with the new arrivals.

While there would be short-term pain for some companies, the country would gain in the longer term. It would also be in a better position to take advantage of a free trade deal with the US, if and when it happens.

Sheikha Lubna has enjoyed an enviable period of growth at the helm of the Economy Ministry. She now needs to push through reforms to ensure that the phenomenal growth of the UAE is sustainable.

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