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Every year a sizeable sum of money leaves the country, causing a drying
up in financial liquidity. In 1998 over US$21 billion was siphoned out,
mostly by way of expatriate earnings. Last year the figure rose to US$22
billion and it will not reduce unless some specific measures are taken
to encourage expatriates to reinvest their earnings within the country.
This can be done by creating a gradually increasing sense of permanence
or by offering viable options for using at least part of the savings
that they are currently sending out.
What makes the trend even more disturbing is that the expatriate
remittance to their home countries is also reducing. That means that
neither the motherland nor the adopted land are reaping the benefits. It
is going to a third option purely on the grounds that it pays better
dividends. This appeals to the investor and it becomes more important to
him to earn profit than be swayed by any emotional consideration. That
is a fact which cannot be overlooked.
The UAE has always styled itself as the trendsetter, the country that
sets the pace for the rest. Yet there is a definite gap between the
desire to change things and actually doing them according to a time
frame. Instead, it could now risk being left behind and seeing others in
the region taking a lead in creating the right investment atmosphere.
The Saudi investment train is already gathering speed. Comparatively
more conservative, Saudi Arabia has shown the economic commitment to
move ahead and generate a universal financial concept. The new
investment laws, which will allow full ownership rather than the 49 per
cent so far permitted is already exciting investors globally.
The UAE has been on the cutting edge of progress for years and has often
discussed exactly such incentives for the foreign investor. Yet, it now
finds it has to engage in catching up rather than be at the forefront.
It will be recalled that when Hong Kong went back to the Chinese there
was expectation that a large segment of expat business be diverted to
the GCC enclave. If it did not happen as per expectations it is because
there was no offer of ownership of business. Early in June 2000, Bahrain
added a new dimension to the expat equation. It offered a post
productivity permanence in that those who had served the land for 15
years and more could apply for their own residence visas, thereby giving
themselves extended leases in the country where their loved ones might
also have roots. This is exactly the sort of forward thinking policy
that will give expats a sense of comfort and promote the loyalty factor.
So then, how does one move into top gear while still retaining a certain
balance and an element of control? It has to be done in gradual steps,
each decision rowing out of the earlier one.
There is no doubt that the protection of the citizens is of prime
importance and cannot be compromised. It stands to reason that the very
size of the country makes it impractical to have an open door policy on
purchase of immovable property. Which is why there have to be some
limits. One of the basic qualifications would be that the buyer has
established legitimate credentials through his business ventures and is
now consolidating his presence rather than engaging in speculative,
profit oriented property purchases. That action would sideline the fly
by night operators. Such investments could be in factories, warehousing
and residential accommodation for staff but it would accrue to corporate
assets rather than be rental premises or land. Another factor that is
seldom discussed but might deserve attention is with regard to the open
ended number of businesses one person can sponsor. The more powerful the
sponsor the larger the 'collection' and the more intense his monopolist
potential. Many business tycoons have felt that, by limiting the number
of business enterprises given to an individual the country would not
only be opening the doors to a more robust variety but also ensuring a
healthy atmosphere for competition. Also, more locals will be involved
in the industrial field and this sort of on-the-job training can only be
beneficial to the country by increasing the total expertise.
Certainly the prime area of concern holding back the full investment
potential of the multinationals and the individual entrepreneurs is the
way the sponsorship is set up. It is seen as being far too loaded in
favour of the sponsor. There is always that fear that if the person
falls out with the local owner there will be a complete devastation of
years of effort.
There is no other reason why the result should not be attained if these
issues are addressed. The infrastructure is without doubt among the most
technologically advanced in the world. The lifestyle is par excellence
and the standards of the social services superb. There is high security,
a relatively crime free atmosphere, access to the best consumer range of
products in the world, state of the art communications and
transportation facilities. This beautiful country should not be made
home to those who see it as a place to get in, get rich and get out. We
must guard against this tendency.
There is no overnight miracle but a start should be made now. The aim
should be to target at least 50 per cent of the expatriate money that is
leaving the shores so that it could be ploughed back into the nation. It
also makes sense to upgrade investment in the equity market and a
credible stock exchange would be in keeping with the new thinking. This
is sound economic policy and no more time should be wasted.
Khalaf Al Habtoor
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