Sharjah has been rated as an A-class economy with stable outlook by two leading international credit rating agencies.
While Moody’s assigned Sharjah a long-term rating of A3 with a stable outlook, Standard & Poor's has assigned Sharjah a long-term rating of A, also with a stable outlook. In both cases, Sharjah was rated as a sovereign government entity.
The ratings were presented on Wednesday in the presence of Chairman of Sharjah Finance Department and Member of the Sharjah Executive Council Sheikh Mohammed bin Saud Al Qasimi by the Sharjah Finance Department, after the two agencies conducted a study on the economy of the emirate as a sovereign entity.
Speaking at a press conference at Sharjah Finance Department, Sheikh Mohammed said: "These credit ratings firmly establish Sharjah within the top tier of sovereigns globally, affirming our position as a leading investment destination."
He further noted: “The credit rating process is a complex and testing one, and I am grateful for the hard work and dedication of both the agencies and my own staff… That hard work has paid off, as we were able to demonstrate to the credit rating agencies the very best of Sharjah.”
According to the Department, the nominal GDP growth of Sharjah has been strong and steady, averaging 11 per cent from 2001 to 2012, with only a limited and short-lived impact from the global financial crisis.
In a presentation it elaborated on the various factors contributing to this growth. Economic growth has been spread across a wide range of sectors, and in the financial year 2012 no individual sector represented more than 20 per cent of GDP. As such, Sharjah has one of the most diversified economies in the GCC region, it noted.
Sharjah’s strong government finances hold its public debt very low, with the government's gross debt standing at less than 6 per cent of GDP at the end of 2012, offset by shareholdings in listed companies worth 2.7 per cent of GDP.
New borrowing is used only to finance capital spending, with a focus on investments that generate a financial or economic return.
A range of quasi-governmental bodies, such as the Sharjah Electricity and Water Authority (SEWA), Sharjah Airport Authority and free zones, carry out commercial activities that are aligned with the Government strategy as well as raising revenue, while the Government holds significant strategic shareholdings in private companies such as Air Arabia, Bank of Sharjah and Sharjah Islamic Bank.
Government revenues come from a diverse range of sources, with just 21 per cent of revenues depending on hydrocarbon production in 2012.
Sharjah provides an affordable environment for people to live and do business with no income, sales or general corporate tax applied by the government, and only modest duties on imports and municipal services, it continued to explain.
Relatively low property prices combined with streamlined labour legislation keep business operating costs and wage bills down, and annual CPI inflation has remained below 5 per cent for the last five years.
Human capital development is a major focus of the government, with particular priority given to education. Facilities in University City offering some of the best learning and research opportunities in the Middle East will be supplemented with the opening in 2014 of Al Qasimia Islamic University. Literacy rates were 92 per cent in 2010, and nearly half of Sharjah’s local citizenship holds post-high school qualifications.
Sharjah is well known for its focus on Islamic culture, heritage and values, and has turned this into an economic strength, with nominations such as the Sharjah Islamic Culture Capital of the Arab region for 2014 and Capital of Arab Tourism 2015, that are expected to boost the tourism industry and the emirate's profile globally.
According to Sheikh Mohamed bin Saud Al Qasimi, the ratings will strengthen Sharjah’s position as it embraces the economic opportunities and challenges of the future."
Waleed Al Sayegh, Director General of Sharjah Finance Department, explained that the Government of Sharjah expects the rating to demonstrate that Sharjah is a modern, open state, managing its finances in line with international best practice.
The department is hoping to open up the emirate to new investors and give confidence to existing ones, reduce the cost of borrowing for the emirate, and strengthen entities in the wider Sharjah public sector, and Sharjah-based private sector businesses.