Consumer body seeks government intervention

A UAE consumer protection body said yesterday it had urged the government to subsidise basic food items as part of measures to control food price increases, which it expects to reach 40 per cent this year.

The Emirates Society for Consumer Protection is asking the government to raise subsidies on rice, sugar, bread, milk and other basic foods, executive manager Jamal Al Saeedi said. Many Gulf Co-operation Council countries, including the UAE, have introduced price controls, including subsidies and caps on rent increases, to offset the impact of near-record inflation on their populations.

Food prices in the UAE, which pegs its dirham currency to the weak US dollar, rose about 30 per cent in 2007, according to a survey conducted by the consumer protection body, Saeedi said.

“I expect they will go up another 40 per cent this year,” he said. “The government needs to intervene. We made proposals two weeks ago and we are still waiting for a response from the government.”

All Gulf states, except Kuwait, are constrained in their fight against inflation by currency pegs to the weak US dollar, which force them to track US monetary policy when the Federal Reserve is cutting interest rates to ward of recession. By contrast, the economies in the Gulf are surging on a five-fold jump in oil prices since 2002.

Inflation in the UAE hit a 19-year high of 9.3 per cent in 2006, and probably accelerated to 10.9 per cent last year, National Bank of Abu Dhabi said last week. Food price inflation is partly driven by the dirham’s link to the dollar, which hit record lows against the euro and a basket of major currencies this week, Saeedi said.

Rising costs for labour, rents and government fees have also forced retailers to pass on price rises to consumers, he said.

“The dirham has fallen against the US dollar and 85 per cent of the food… is imported,” Saeedi said.

The proposals – which also include a call for tighter controls on rent increases – were submitted to the Higher Committee for Consumer Protection, which will consider them at its next meeting, Saeedi said.

While Dubai and Abu Dhabi have put ceilings of five per cent per year on how much landlords can raise rents, many landlords are “cheating”, Saeedi said.

Rents jumped about 18 per cent and food prices about eight per cent last year, National Bank of Abu Dhabi said in its note. (Reuters)