Dubai government boosts economic stimulus to Dh6.3bn

Extension of fee reductions brings the total amount of support so far to Dh6.3bn

Dubai Municipality fees and tourism fees charged on hotel stays are being halved until the end of 2020. Reem Mohammed / The National
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The Dubai government announced a further Dh1.5 billion worth of economic stimulus measures on Saturday, bringing the total support given to businesses during the pandemic to Dh6.3bn.

The government will extend the reduction of municipality fees paid by hoteliers and restaurants on sales to 3.5 per cent, from 7 per cent, for the remainder of 2020. It will also continue to halve the 'Tourism Dirham Fee' charged on hotel stays. Both measures were originally announced for a three-month period in March and have now been extended.

“We aim to enhance the liquidity of companies … support the continuity of their business and reduce the cost of doing business,” Sheikh Hamdan bin Mohammed, Crown Prince of Dubai, said on Twitter.

Dubai Municipality is also expediting payments to contractors and is returning performance bonds usually set aside until work is completed. These will be replaced "by another system that guarantees all the rights of the contracting parties", Sheikh Hamdan said.

Fees charged to private schools for licence renewals are also being waived until the end of the year, customs clearance deposits are being reimbursed and some fines imposed by customs authorities are being cut by 80 per cent.

"We trust in the flexibility and durability of our economy," Sheikh Hamdan added. "We are keen to return business to normal as soon as possible and we confirm our commitment to support all economic sectors."

Dubai's economy has faced headwinds as a number of industries including tourism, trade and real estate slowed after restrictions on movements were put in place to stop the spread of Covid-19.

However, economic activity is now picking up as Dubai welcomed tourists back into the emirate last week. Dubai's purchasing managers' index rose to the 50-point-threshold last month, up from 46 in May, according to the PMI data released on Thursday.  A reading above the 50-mark is an indicator that the emirate's non-oil private sector economy is expanding, while anything below 50 indicates a contraction.

The headline PMI marked "a notable improvement from the severe downturn seen during the coronavirus pandemic", according to David Owen, an economist at IHS Markit, which compiles the index.

Sub-indexes showed recovery within individual sectors. For instance, the wholesale and retail index moved to 53 from 47.4 in May as selling prices for goods increased. Construction activity also rebounded as movement restrictions were relaxed, although employment in the sector continued to fall, Khatija Haque, an economist at Emirates NBD said at the time.

Activity in the tourism sector also continued to decline, albeit at a slower pace than in the previous two months. Optimism in the sector about the 12-month business outlook also lifted ahead of last week's reopening of Dubai to international tourists.

Dubai rolled out its first wave of economic stimulus measures aimed at supporting companies affected by the Covid-19 pandemic in March with a package of nine incentives for an initial three-month period. These included a freeze on the 2.5 per cent market fees for all facilities operating in Dubai, a refund of 20 per cent on customs fees imposed on imported products sold locally and a 10 per cent cut to water and electricity bills.

A second package worth Dh3.3bn was later unveiled, with the latest announcements representing the third wave of economic measures.

In a statement, Sheikh Hamdan also highlighted the "great strategic value" of Dubai's small and medium-sized enterprises, which account for more than 99 per cent of businesses in Dubai, providing 51 per cent of the emirate's jobs and 46 per cent of its gross domestic product, according to a 2019 study by Dubai SME, part of the Dubai government's Department of Economic Development.

Government-related entities have also extended support to businesses, with Dubai Developments Group stating last week it will extend a rent-free period to about 1,500 commercial tenants to six months, from three months initially.

The Dubai Free Zones Council on Saturday said that it is also considering plans to extend its stimulus package to support companies operating within the city's free zones.

Its stimulus measures have allowed companies to pay fees in instalments, while free zones have also refunded security deposits and guarantees and cancelled fines with a view to improving companies' liquidity.