GULF STATES| ECONOMICS & FINANCE
UAE expats say Pakistan budget is balanced but unexciting
Pakistani expatriates in the UAE feel that overseas community has been left out of the Imran Khan-led government’s first budget as no incentives or tax rebates were offered. But the business community termed it a balanced budget with focus on fixing gaps and austerity measures.
Residents and business community members said that akin to the previous government, the current PTI government failed to offer any incentives to overseas Pakistanis.
Iqbal Dawood, president of the Pakistan Business Council, Dubai, said there is no particular incentives for overseas Pakistanis, however, there were some measures taken for the benefit of industries.
“Taxes are plenty in the budget but there was no other option for the government. Pakistan’s Chamber of Commerce had demanded relief on imports of raw material of 3,000 items. And the government awarded rebate on 1,600 items. It is a good step and we appreciate it,” he said.
Hammad Azhar, Pakistan’s Minister of State for Revenues, presented 2019-20 fiscal budget on Tuesday with an outlay of Rs7.022 trillion.
“Expatriates should support present government’s initiatives as the country is facing difficult financial situation, which is caused by the financial mismanagement of previous governments,” said Ahmed Shaikhani, senior vice-president at the Pakistan Business Council in Dubai.
Dr Ashfaq Hassan Khan, member of the Economic Advisory Council, which is headed by Prime Minister Imran Khan, said this is the IMF budget and it will lead to inflation and further devaluation of the currency.
“In fact, economic growth under the IMF Programme for the next year is targeted at 2.4 per cent, exactly equal to Pakistan’s population growth,” he said.
Dr Hadi Shahid, managing partner, Alliott Hadi Shahid Chartered Accountants, said it was a very challenging economic time and required a strong decision-making.
He pointed out that there was no measure to encourage new investments into the country.
“The positive signs are the increase in basic salary of common employees, control of government expenditures and overall austerity steps,” he said.
Muzzammil Aslam, former chief executive of EFG Hermes Pakistan, said it is a tax reform budget, but there is no respite in deficits.
“With tax-loaded budget, some sectors will be affected. We believe, the impact on stock market will be largely lesser than the initially anticipated. Markets have already priced in aggressive tax measures therefore, market will enter into the phase of certainty. Higher tax on fixed income will attract investors towards equities,” he added.
Moeen Saleem, a Dubai resident, said he was dejected because there were no incentives for overseas Pakistan when investing in the country or sending remittances.
Pakistan budget 2019-20: minister hails UAE’S deposit
The UAE’s $3 billion deposit with the State Bank of Pakistan has contributed to alleviating the country’s financial crisis and easing pressure on foreign exchange reserves, according to Pakistan’s State Minister for Revenues.
Hammad Azhar made the remarks on Tuesday as he presented to the National Assembly Pakistan’s general budget with a total outlay of Rs 7.022 trillion for the fiscal year 2019-20, registering a growth of 30 per cent against the revised budget of Rs 5.385 trillion for current fiscal year.
The minister underlined the importance of the financial aid received by his country from Saudi Arabia, which totaled $6 billion, and the UAE, as well as $6 billion from the International Monetary Fund, which, he said, have all helped stabilise Pakistan’s economy in general and the rupee in particular.
Emirates offers special summer discount for flights to Pakistan
UAE travelers who are yet to plan a summer getaway can now take advantage and book a last minute holiday with Emirates.
Travellers can choose from various destinations such as Mauritius, Barcelona, Karachi, Munich or Melbourne. Travelers can also fly back home to visit family during the summer to Emirates destinations in North America and Europe.
The offer is valid for bookings made from June 10 until June 24, applicable for travel until April 30, 2020.
Emirates customers who book their flights will also have the chance to win a five-star Emirates Holidays staycation in the UAE. Passengers who book during the promotional period will enter a draw for a chance to win a fantastic staycation package in the UAE at one of 14 luxurious hotels including Palazzo Versace, W The Palm, Emerald Palace Kempinski The Palm and Address Marina.
Dubai unveils new insolvency law
The Dubai International Financial Centre (DIFC) has introduced a new insolvency law, which will place the financial centre in line with best practices and at the forefront of complicated debt restructurings.
In his capacity as Ruler of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minster of the UAE, has enacted a new DIFC Insolvency Law.
The insolvency law is aimed at balancing the needs of all stakeholders in the context of distressed and bankruptcy related situations in DIFC. It has been issued following the collapse of private equity firm Abraaj Group, which had a DIFC-regulated entity Abraaj Capital.
The firm that had been the Middle East and North Africa’s biggest buyout fund unravelled after a row with some investors over the use of money in a $1-billion healthcare fund.
“Ensuring that businesses and investors can operate across the region with confidence is crucial to our role in connecting the economies of East and West. We are committed to continuously enhancing our legislative infrastructure in order to give leading global institutions the certainty and access they need to capture the opportunities within the MEASA region, through Dubai,” said Essa Kazim, Governor of DIFC.
The new law, coming into effect on August 28, 2019, introduces a new debtor in possession bankruptcy regime in line with best practice globally. The law also provides for a new administration process where there is evidence of mismanagement or misconduct.
The law also enhances the rules governing winding up procedures; and incorporates the UNCITRAL Model Law on cross border insolvency proceedings with certain modifications for application in the Centre.
The new law was subject to substantial research and global benchmarking, as well as thorough public consultation.
UAE stays on growth path
Growth forecast for the UAE and most of the Gulf economies has been revised down for 2019 and 2020 due to cuts in oil production. The growth for the wider Mena region is projected to remain subdued.
According to the World Bank’s latest report, the UAE’s growth was cut by 0.4 per cent and 0.2 per cent to 2.6 per cent for 2019 and 3 per cent for the next year, respectively, from its January 2019 forecast. While growth rate for 2021 was maintained at 3.2 per cent.
However, the 2019 forecast by the World Bank is higher than the UAE Central Bank’s forecast of 2 per cent, which it predicted in its 2018 annual report released last month.
FocusEconomics expects the UAE’s GDP to grow 2.6 per cent in 2019 and 3.1 per cent in 2020.
“Growth should ramp up this year, supported by a large fiscal stimulus focused on infrastructure investment for Expo 2020, as well as by a swathe of business-friendly reforms to attract foreign investment. Nevertheless, the evolution of Opec+ output decisions will be key to the outlook, while lower global growth and a fragile real estate sector pose additional risks,” FocusEconomics said in the note.
The World Bank noted that the UAE’s reform of financing liberalisation for the small and medium enterprises will help relieve constraints in the corporate sector and support investor confidence.
Shan Saeed, chief economist, IQI Global, is cautiously optimistic about the growth outlook of the UAE and Gulf region.
“GDP growth should meander around 2.5 to 3 per cent in the coming 12-18 months. The economy will have structured growth taking into account the global headwinds. Recently, the UAE has made a strategic move and become an important player in the Belt and Road equation. This would bolster the relevance and significance of the UAE as a major hub of economic and infrastructure development,” said Saeed.
He pointed out that the UAE continues to be on the global investors’ radar due to business-friendly policies of the government, connectivity to three continents in less than 7 hours and above all highly-skilled labour force talent readily accessible.
The factors that would contribute significantly to the overall GDP growth are massive FDI inflow, modern infrastructure, higher energy prices, liberal visa policies and an important player in the Belt and Road equation, he added.
The World Bank in its Global Economic Prospects 2019 report said that an improved regulatory and business environment in the GCC would remain supportive of private sector activity.
The overall GCC growth forecast for 2019 was slashed by half a per cent to 2.1 per cent for 2019 but revised upward for the next year by half a per cent again to 3.2 per cent. While 2021 forecast remains unchanged at 2.7 per cent for the region.
“Growth in the Middle East and North Africa is projected to remain subdued in 2019, at 1.3 per cent. Activity in oil exporters has slowed due to weak oil sector output and the effects of intensified US sanctions on Iran, despite an easing of fiscal stance and positive prospects in non-oil sectors in some countries. Many oil importers continue to benefit from business climate reforms and resilient tourism activity. Regional growth is projected to pick up to around three percent a year in 2020-21, supported by capital investment and policy reforms,” said Lei Sandy Ye, economist, Word Bank.
UAE business optimism remains robust in May
The UAE Purchasing Managers’ Index, a gauge designed to give an overview of operating conditions in the non-oil private sector economy, recorded its third successive monthly increase in May to hit its highest since October 2014.
The PMI rose to 59.4 in May from 57.6 in April. Companies responded to the expansions in business activity and near record-high new orders by increasing purchasing activity sharply, but employment was left broadly unchanged, Emirates NBD said in its report.
Stronger market demand, marketing activity and the start of new projects all contributed to the latest increase. Companies largely expect growth to continue over the coming year, with business optimism only fractionally weaker than the previous month’s record high, the bank said.
The report said the rate of growth in new business in the non-oil private sector also quickened markedly, and was at a near-record pace. Companies indicated that price discounting helped them to secure new orders besides improving underlying demand. New export orders rose at the fastest pace in the near ten-year survey history, spurred by new business from Saudi Arabia and Oman.
Khatija Haque, head of Mena research at Emirates NBD, said while the rise in the headline PMI indicates faster GDP growth in the non-oil private sector, the environment remains a challenging one for businesses.
The World Bank has said the UAE is expected to be among the fastest-growing Gulf economies this year with a projected 2.6 per cent expansion on the back of continued infrastructure spending and economic stimulus. It also forecast 3 per cent GDP growth by 2020.
The International Monetary Fund in its latest circular on the UAE observed that strengthening the enabling environment for small and medium-sized businesses and encouraging foreign direct investments were additional priorities. The IMF urged levelling of the playing field between government-backed entities and the private sector to foster productivity and diversification of the economy.
According to the Washington-based fund, the UAE’s economy is at a turning point as government-led stimulus, Expo 2020 investment, higher oil prices and a pause in monetary tightening by the Federal Reserve, accelerate growth momentum.
Domestic credit growth, higher employment and greater tourist numbers will continue to underpin economic activity, even as the real estate sector faces overhang of supply.
“New growth drivers that are decoupled from oil prices would be needed to sustain strong growth after Expo 2020, with the onus on the authorities to continue building on ongoing structural reform,” said the IMF report.
The Emirates NBD PMI report said the strong rise in both output and new orders in May was on the back of continued price discounting by firms as well as stronger growth in export orders.
“Moreover, when the headline PMI was last at a similar level [in October 2014 and January 2015] the survey showed solid growth in private sector jobs, which is not the case this time,” the report said.
The May employment index was only fractionally above the “no-change” level and wages were stagnant as well, so the sharp rise in the volume of business activity is not yet benefitting households. Positive expectations regarding future workloads encouraged stock building midway through the second quarter. Inventories of purchases rose to the greatest extent since March 2018.