Abu Dhabi A top official has said that a law which sought to end monopolistic practices in the sale of basic food products will be expanded to end other exclusive distribution agreements.
Minister of Economy Sultan Bin Saeed Al Mansouri told the Federal National Council (FNC) yesterday that the Commercial Agencies Law, could be expanded to break other major monopolies, potentially including the sale of cars, a move which could slash the prices of new vehicles.
A change to the law would end the current situation in the UAE, whereby certain distributors or agencies control the distribution of certain brands. The current system has been condemned by the World Trade Organisation and is seen as key to the opening up of the UAE market.
"We are considering cancelling those major commercial agencies in the coming few years," said the minister, without setting a scheduled date.
"The cancellation of some commercial agencies has been carried out recently; yet, it is not easy to carry this out in a short time on other industries in the market including autos as they need guarantees, spare parts and maintenance service," he said, responding to a question in the FNC.
Competitiveness boost
Speaking on the gradual abolition of monopolies in commercial agencies, Al Mansouri said the move would further strengthen the competitiveness of the UAE economy by curbing monopolistic practices and ensuring timely supply of goods and services for consumers without any unjustified price rise.
"The move, which will have far-reaching positive impact on bringing down living costs is aimed at curbing an unjustified rise in prices of some commodities, boost competition in the local markets, and combat all types of monopoly and exploitation."
Commenting on the news, Michael Ayat, CEO of Arabian Automobiles, told Gulf News that liberalisation is very significant for the UAE economy but noted that applying the rules to the auto market would be far more complex than food.
"We are with the government's move to liberalise the market to an extent for the benefit of the customers; yet, this does not apply to all commodities. It applies to some basic items like food but it is not easy to apply on autos," he said.
"We as distributors heavily invest in services, showrooms, training, spare parts, and other customer facilities including the recall of cars which have technical failures. This does not apply to dealers who display 5-10 cars on the pavement," added Ayat.
Cabinet resolution
Al Futtaim and Al Masaood Motors in Abu Dhabi declined to comment on the draft law.
Mohammad Al Asoomi, a UAE-based economist, told Gulf News that the move is in line with the recent Cabinet resolution to liberalise the prices of some items.
"The liberalisation of prices of some items had led to the increase in the number of distributors. This in turn helped to drop the prices of these items due to competition," he said. "The UAE should follow the patterns of Oman and Bahrain which kept the agencies and allowed distributors to enter the market. This has created fair competition which is in favour of the customers and the domestic economy as well."
"The auto agents have better and stronger infrastructure compared to distributors given the fact that they offer better spare parts with guarantees and post-sale service," Al Asoomi said.
Meanwhile, FNC members expressed the hope that the revamp of the Commercial Agency Law would help put an end to monopoly in the market and would bring down prices further.
Abdul Raheem Al Shaheen, a representative from Ras Al Khaimah, said: "When the government of the UAE started partial cancellation of some commercial agencies, particularly for basic materials, a tangible drop in prices had taken place."
