'A diversified economy is key to growth'


Sharjah is striving to attract more investments into various sectors in the emirate on the back of an ongoing economic boom. Last year, Sharjah's gross domestic product (GDP) increased by a whopping 24.3 per cent over the Dh42 billion it recorded in 2006, and the emirate wants to sustain this by bringing in more investors and capital into all of its economic sectors. Ali Salem Al Mahmood, director general of Sharjah Economic Development Department, spoke to Emirates Business about the department's plans and achievements.

What are the plans of Sharjah Economic Development Department for this year?

We have drawn up five- and 10-year plans for Sharjah aimed to boost the emirate's economy and ensure sustainable development. A diversified economy is the key to achieving this objective. Simultaneously, we are eager to increase Sharjah's contribution to the country's GDP.

We are studying our success so far to go on replicating it, as well as the obstacles facing us. Drawing up appropriate plans to enhance our strengths and remove weaknesses will be our priority in 2008. The plans will be announced soon. We are looking at ways to attract more investors and to promote the emirate as a major business hub in the region.

Can you tell us about the key features of these plans?

Ease of dealing with government departments is a key factor in attracting investments. We have started studying how to further simplify licensing procedures and introduce electronic processing of licence applications. All government departments will be linked electronically to help achieve a paperless government and avoid wasting the time and effort of investors. Also, we will introduce a comprehensive system to reduce the time a client spends at the departments for processing documents.

When are these initiatives scheduled to be implemented?

Hopefully in the third quarter of this year. And electronic processing is expected to be introduced in the fourth quarter. We will be part of the e-government initiative adopted by the Government of Sharjah, whose roll out will be complete within the next five years – the government is working to cut this timeframe down to three years.

Are there plans to attract business to the Central and Eastern Districts?

Yes, indeed. Sharjah is planning to develop the Central District into a commercial and industrial hub, and the Eastern District as a tourist destination. The Planning and Survey Department and the Municipal Council of Al Dhaid are preparing to re-plan the area. And the Tourism and Commercial Development Authority is planning tourist projects in Kalba and Khorfakkan.

As a first stage to this, we have upgraded our branch offices, provided new premises and employed more staff. In addition to the headquarters in the city of Sharjah, we have five branch offices where all the formalities can be dealt with without the need to approach the main office.

We appointed more than 50 employees last year. And new premises were provided for our branch office at Diba Al Hosn. The Khorfakkan branch will be moved to the new premises this year. We are also planning to establish a branch in the industrial area in Sharjah city to help reduce pressure on the main office.

What about legislation? And what is the impact of the agreement your department has signed with the Ministry of Economy?

The Sharjah Economic Development Department is an executive authority. We implement the economic-related legislations of the UAE Government. We implement the company laws of the UAE and, of course, its future revisions and amendments.

Co-ordination between the local government and the federal ministries is essential to ensure the federation of the UAE and having unified policies and regulations positively influence the investment atmosphere in each emirate. The agreement has positively impacted our work as it has clarified matters related to the trade name, trademark and other regulations. The ministry supervises the implementation of these regulations by each emirate.

What sectors does Sharjah focus on in its economic plan?

In the light of the directions from Sharjah's Ruler and the Crown Prince, we focus on all types of businesses and sectors. However, Sharjah is known for its significant contribution to the industrial sector of the country. Last year, its contribution to this sector was about 35 per cent. We are working to facilitate industrial investments to increase this further.

What was the emirate's GDP in 2007?

The figure will be officially announced soon. In 2006 the emirate's GDP was recorded at Dh42bn. It is expected to increase by 24.3 per cent in 2007.

What is the contribution of each sector to the emirate's GDP?

The real estate and business services sectors formed the highest percentage of the total GDP of 2007 with 16.7 per cent, followed by manufacturing and industries with 16.3 per cent, and the wholesale and retail trade sector with 14.6 per cent.

How do you assess Sharjah's economic development over the past five years?

From 2002 to 2006, Sharjah's economy has witnessed continuous growth. In 2002 the rate of growth was 5.4 per cent and it reached 19.9 per cent in 2006.

How many new licences were issued in 2007? And what were their types?

The department issued 6,164 new licences, of which 3,187 were professional, 2,804 commercial and 173 industrial. This proves that the emirate is successfully attracting new investments.

The total number of new and renewed licences has reached 44,009 – a 9.4 per cent increase compared to the 40,215 new and renewed licences reported in 2006. Compared to 2006, the industrial sector has achieved the highest rate of increase at 13.8 per cent, followed by the professional sector at 11.5 per cent rate and the commercial sector with 7.4 per cent.

What are your expectations this year?

We are expecting that Sharjah's GDP will register a similar increase as recorded in 2007. This is already being indicated by the statistics of this year's first quarter. The department has already issued and renewed 12,695 licences so far this year, whereas during the same period last year the number was 10,994. The rate of increase achieved in the first quarter of this year compared to the same period in 2007 was 15.5 per cent. This is significant as it holds the promise that an increase of about 22 to 23 per cent in GDP is very possible in 2008.

The UAE is witnessing very high inflation. What do you think about the government's initiatives for reducing it?

Inflation is an international problem in countries witnessing rapid development. Although the UAE follows a free market policy, the government is taking various steps to help reduce inflation and its impact on the living conditions of UAE nationals and residents. I believe that the measures being taken by the government are effective ones. Controlling prices and preventing hikes, especially of essential foodstuff and commodities, directly affects the living conditions of the people.

Also, lifting or reducing customs duties on such items as cement helps reduce the cost of construction, which is the highest growing business sector in the UAE. Imposing rent caps helps a majority of families to bring down their expenditure to within manageable limits. Some emirates have taken such a decision but in Sharjah there is an urgent need to impose a rent cap in addition to the existing three-year ban on rent increase. A rent cap would help avoid exaggerated rent increases after the lapse of the three-year period.

Does the increase in rents negatively affect Sharjah's economy?

I think the current rent hike is temporary and has resulted from an increase in demand and shortage of available units. In my opinion, rents will go back to their normal levels once more units are ready for delivery. However, the impact of the rent increase on Sharjah's economy was very nominal, as reflected in 6,000 new businesses that started in 2007 in Sharjah and the 24 per cent increase in the emirate's GDP in the same year.

International and local factors have affected prices. What is the department's role in reducing the impact of inflation on people?

We implement the UAE Ministry of Economy's rules in this regard. Joint inspection teams with the ministry survey the markets and report on increase in prices. Fines of up to Dh10,000 are imposed on traders who violate the ministry's rules and increase their prices. However, some traders and manufacturers, such as a few cement and steel factories, do not issue invoices and bills when they sell their wares, leaving no legal documentation that can be used against them. Such practices will also be reported to the ministry. The price of steel has increased from Dh3,400 to Dh4,800 per tonne.

Some investors complain about high fees in Sharjah. What is your comment?

Fees that are collected by our department or the other government departments were decided according to the developmental efforts initiated by the Government of Sharjah and the services being provided to investors. We think these fees are convenient for all, and not exaggerated.


PROFILE: Ali Salem Al Mahmood, Director General of Sharjah Economic Development Department

Ali Salem Al Mahmood has occupied various positions at the Sharjah Chamber of Commerce and Industry, where he was Assistant Director-General for Economic Affairs when he left. In recognition of his initiatives he was appointed the Director General of Sharjah Economic Department in 2003.

Al Mahmood is a member of many councils and administrative boards of Sharjah Government, including the Executive Council, Administrative Board of the Sharjah Commercial and Tourism Development Department and Sharjah Foundation for Pioneering Projects.

He obtained a bachelor's degree in business administration from Dayton University, Ohio, in 1993.