'Cartels behind rise of cement, iron prices'

An aerial view shows the site of the Arabian Canal under construction in Dubai. (Reuters)

Trade cartels are the main reason behind the continuous rise in prices of cement and iron in the UAE even after cement was exempted from customs duties, according to a customs official.

In an interview with Emirates Business, Saeed Abdullah Al Marri, Deputy Director-General of the Federal Customs Authority, said he had expected the prices of commodities to fall, or at least stabilise, after His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, decided to remove customs duties on cement.

This week, though, the prices of cement and iron have risen again. A tonne of iron now sells at Dh5,830, while a bag of cement is priced Dh28, which, Al Marri said, are unprecedented in the history of the UAE. And they could rise even further, he feared.

Al Marri said over the past seven years, illegal and unlicensed traders have appeared and have been able to put pressure on the market to raise prices or at least stop them from a downward correction. "We noticed the pressure that can be exerted by such illegal trade blocs in the case of Basmati rice. They were open and public in pressurising the Ministry of Economy, which responded in the end by increasing the prices," Al Marri said.

He said a confrontation between the government and such unlicenced blocs was imminent. This confrontation, if and when it does occur, will not contradict the government's position on the private sector, because the government encourages the private sector and supports it at times of crisis, he said.

Speaking about the role of the private sector in the society and the nation, Al Marri said: "Unfortunately, most dealers in the sector are only interested in making money. Their sense of social responsibility seems to be absent, though the private sector in most countries plays a big social role – such as the establishment of universities, financing scientific research and supporting charity foundations. Here, we have not seen anyone making donations to federal or local establishments."

Al Marri said cement and iron dealers reap a high percentage of profit and yet complain repeatedly about the high cost of importing cement. "Some dealers' justifications are logical. There is a local cost and an external import cost. The local cost is related to rents of factories and warehouses and salaries of the labour force and transport costs," he said.

Speaking about evading customs duties, especially the higher ones on goods of a special nature, such as cigarettes, Al Marri said: "At the moment we are bringing in new mechanisms to totally end customs duty evasion, and our role is not only to punish evaders but train our employees to be able to stop it happening."

He also quoted studies and statistics by the Federal Customs Authority as saying the rate of customs duty evasion in the UAE is one of the lowest in the world, as it does not exceed three per cent.

Al Marri said the authority is in no hurry to approve its five-year strategy, as intensive studies are underway to find the best organisational structure and boost employee potential. The studies will also try to find ways of co-ordination between local customs administrations as well as on backing up the authority's role and adding new members to its board representing the UAE foreign and interior ministries.

Emphasising the huge nature of operations at the customs outlets of the country, especially Dubai Customs, Al Marri said it annually receives some 14 million containers. He added the UAE is ahead of the US and many European countries in its container inspection regime. Huge activities in this field are also taking place in Abu Dhabi, followed by Sharjah, he said.

The value of goods entering the UAE over the last nine months of 2007 exceeded Dh120 billion and the total annual customs tariffs collected on goods entering the country was Dh6 billion.

Al Marri said his department is jointly studying with bodies in other GCC countries ways and means to collect duties on goods that enter other GCC countries via UAE customs points.

He said 25 countries have been asked to sign customs agreements with the UAE, including distant ones, such as Argentina. An agreement has been signed with Pakistan and others are on the way with Turkey, Algeria, Tunisia and Morocco. The agreements were important as they facilitate smoother customs procedures and exchange of information on goods, Al Marri said.

The numbers

Dh120: In billions is the value of goods entering the UAE over the last nine months of 2007.

The total annual customs tariffs collected on goods entering the country was Dh6bn

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