foreign ownership of businesses in huge and strategic industrial projects, according to its Speaker.
In an exclusive interview with Emirates Business, Abdul Aziz Al Ghurair, FNC Speaker, said as long as small and medium enterprises (SMEs) are protected and allowed to be the domain and preserve of UAE nationals, the government could allow 100 per cent foreign ownership to foreign investors in mega projects of strategic importance to the country.
The Speaker also said it was very difficult to de-peg the UAE dirham from the US dollar and experience has proved that the dollar peg has been beneficial to the UAE in the long run.
Speaking about the domestic economy, he said the UAE was an open market and competition was intense, with no monopolies. Domestic inflation will go down further due to the decline in rents and prices of many commodities, products and raw materials, he added.
Al Ghurair also said economic laws in the UAE need amendments and modernisation to be in sync with the fast-paced growth of the economy. In its last session, the FNC had agreed upon a number of economic bills, whose quick introduction was a necessity.
He said the UAE's economy reached its bottom in the ongoing global recessionary period and will emerge stronger over the next year. The economy needs up to two years to rejuvenate itself and reach levels close to the pre-crisis boom.
You once said the UAE's legislative environment did not fit the country's fast-paced economic growth. Does your stand remain the same today after you headed the recent FNC session that approved a number of laws?
The UAE economy has been growing fast of late, compared to the way things were going in the 1970s and 1980s. Therefore, we need a revision of all economic laws, regulations and measures; and modernise or replace them with new ones. There are calls for a new law for foreign investment. We are currently expediting the execution of the companies' law, as well.
The recent FNC session approved several laws, such as the guaranteeing of deposits and bonds. Do you think such laws came late and to what extent will they support the current economic growth in the UAE?
The role of the FNC is very clear. It commences when the FNC receives draft laws from the government. The issuance of legislations, constitutionally, is not part of the council's activities. And when such draft laws are forwarded to the council from the government, the council studies, discusses and endorses them and then submits them to the government; which in turn submits them to the President and the Federal Supreme Council. Sometimes, the council asks the government to revise a certain law.
The FNC discussed and endorsed 29 draft laws during the last session, leaving no law pending on its table. The FNC continues to review the development process in the country that reflects the co-operation and co-ordination among the country's institutions and corporations.
But some FNC members have expressed their reservations about many of these draft laws being passed quickly; especially, a law related to financial tools. Did it not need more time?
The FNC treats some laws on an urgent basis, especially those related to the national economy, due to certain economic and international reasons. This is where the FNC responds to the government's request to expedite the discussion of such laws and that was what happened.
It is true that more time would have been better – such as two or three months – to hear everyone's perspectives and opinions, especially of the UAE Central Bank, the Ministry of Finance and heads of banks. But sometimes circumstances do not allow time for such further deliberations.
What are the major laws that the country needs but have not been issued yet and why?
The UAE is very active, economically and commercially. It continuously needs development and modernisation of its laws. Recently the government passed a number of economic draft laws the council had discussed and endorsed. We call upon the business sector in the country to continuously present suggestions and proposals on laws relating to the economy. A draft law on commercial companies will be discussed in the council's next meeting and we would welcome suggestions on that
Don't you think the 'commercial companies' law is getting delayed? What are the reasons behind such delays?
The FNC receives draft laws from the government, according to the constitution. And after receiving them, the council refers them to various committees according to each committee's speciality. Each committee then studies the draft laws' contents in detail. Then, the committee writes a report with comments and remarks, and submits them to the council. The council discusses these comments and remarks among its members to reach a decision on them.
The council had recommended amendments to parts of the commercial banks law for 1984 during its first session and the amendments were endorsed after seeking the opinions of all members. Then the cabinet submitted another draft law for amending other parts of the law in May 2009, but withdrew it. Since then the FNC has never received anything on that. So, we hope a draft law on commercial companies would be passed in the next session.
The percentage of foreign ownership is said to be one of the reasons behind the delay or withdrawal. Abu Dhabi had proposed an idea that would allow foreigners to have 100 per cent ownership of some mega projects that would serve the UAE economy. What is your opinion on that, and is such a percentage harmful or useful to the national economy?
The percentage of foreign ownership needs a deep study and evaluation to get to know its effects on the country, its citizens, culture and society. I believe full ownership by foreigners has both advantages and disadvantages. Full foreign ownership in the small and medium enterprise (SME) sector, which attracts UAE nationals, is not economically efficient and may have negative consequences. However, when it comes to mega-size economical and industrial projects, which have an assured positive impact on the economy, then this could be fine. There should not be a law that allows foreigners to have full ownerships in all projects and there should be a pre-determined percentage of ownership. And this is a decision to be made by the cabinet and by the right minister.
What is your evaluation of the impact the global financial crisis has had on the UAE economy after eight months? Has the economy recovered yet?
The UAE economy has strong foundations. Despite the crisis having severe consequences on many developing economies, the UAE was able to bypass many of its negative impacts due to the many measures and interventions taken by the government. That is why we expect faster-paced growth during the coming months. We have reached the bottom of the barrel as far as the crisis is concerned and we have to withstand this situation for sometime and hope to get out of it next year. The economy has started the healing process, but whether it means going back to pre-crisis conditions or it is about adapting and adjusting to the current status quo for sometime, only time will tell. What we feared the most about the slowdown was that it would expedite failures and collapses of companies and business in the UAE. But our companies have adapted and the current situation may last for a year or two before the good times return.
You said the UAE has solid financial foundations and its assets abroad are the cornerstones for such strength, but what is your response to reports that the UAE's assets have lost more than 40 per cent of their value? Will this have an impact on the execution of mega projects?
I am not aware of how true such reports are. But, generally speaking, there has been a decline in local, regional and international markets. If the UAE has invested in international markets, then this is normal and expected. The UAE continues to execute its projects without delays or cancellation.
De-pegging the dirham from the US dollar is one of the demands by FNC members and by local, regional and international financial experts. What do you think of this demand? Why not de-peg as Kuwait has done?
The UAE's GDP depends largely on crude oil. International prices for crude oil are still connected to the US dollar. The biggest volume of trade in the world happens with the greenback as its major currency. There is an agreement among GCC countries on the importance of pegging their currencies with the US dollar. There are important standards that confirm the importance of being pegged to the dollar. No doubt the dollar's value does fluctuate, but if we looked at the past 20 years, we would find being pegged to the dollar was much better for us.
The global recession has caused the prices of many products to decline, but most consumers in the UAE believe prices are still high and some monopolies remain out there to keep such prices high. How true is this, especially since the FNC set a session aside only to discuss this matter with the minister of economy?
The UAE is an open market and does not allow monopoly. It is characterised by competition and this is something good. To my knowledge, the prices of many goods and raw materials have declined nationwide, but surely we don't expect them to fall to where they used to be five years ago.
In addition there has been an inflationary trend both in the country and globally, and the UAE has tried to keep inflation within two to five per cent. Prior to the crisis, we witnessed a rise in inflation in the UAE and a part of it was imported. There was a big demand for housing that lead to rent increases for the past three years. But I have observed that inflation has been declining and so have rents, in general, across the UAE. And this would reduce inflation even more.
The FNC has discussed price hikes in several meetings and issued recommendations and suggestions to control the trend and combat it.
What is the fate of the draft law on the Emirates Bank for Development? Observers say it is strange that even after the cabinet approved it the FNC has delayed its decision, postponing it for further discussions.
A vote took place on the draft law at the FNC after four hours of heated discussions. Several FNC members expressed their opinions and the majority requested a postponement for further study due to the importance of such a draft and the lack of a consensus among members.
The FNC has approved a law for greater freedom of the press and media in the UAE, but international reports say the law includes a section that would still put restrictions on the press and journalists in the UAE. The recent court ruling that suspended publication of the Arabic daily Emarat Al Youm for 20 days confirms this. Do you think such laws need to be revised?
When we received the draft law on media and press activities in the UAE, we contacted heads of media houses and the Association of Journalists for in-depth discussions on all measures. Some attended while others were represented by their deputies. We considered many of their opinions, some of which the FNC adopted. This was the biggest draft law of its kind in the history of the FNC, where half its content was amended. The government approved the amendments and later on the law passed.
Abdul Aziz Al Ghurair
FNC Speaker
Al Ghurair, was elected as the Speaker of the House on February 12, 2007.
He is also the CEO of the publicly traded Mashreq bank and CEO of Mashreq Group. He was appointed to the role in 1990.
He trained as an industrial engineer and gained an honours degree from California Polytechnic State University. He joined Mashreq in 1977. He worked in various capacities until 1988 and took over the responsibility for the bank's international operations, setting up branches in New York, London, Bahrain, Qatar, Egypt, India and Pakistan.
He was appointed Executive Director in 1989 and became CEO the following year.
He is also President of the Al Ghurair Group, one of the biggest and most successful business groups that employ 65,000 people and he sits on the Board of Directors of the Dubai International Financial Centre, Emirates Foundation and Dubai Economic Council.
Al Ghurair is a member of the Governing Council of the UAE HCTs and is Chairman of Masafi, RAK Petroleum and the Endowment Fund. He previously sat on the Board of Directors of Emaar, Dubai Investments, Visa International and MasterCard and Dubai Chamber of Commerce and Industry.
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