Dubai: Majority of UAE CEOs (65 per cent) are very positive on the business conditions in the country during the next 12 months according to Oxford Business Group (OBG) Business Barometer UAE CEO Survey.
The survey designed to gauge the business outlook of business leaders is based on face to face interviews by OBG staff with nearly 80 per cent of respondents from the private sector. The survey results showed, overall, 77 per cent of the CEOs were positive on the business environment in the country.
“The country has a robust economic vision supported by strong infrastructure, and competitive advantage in trade and transport. The economy is relatively less reliant on government spending, making the outlook positive among business leaders,” said Oliver Cornock, OBG’s editor-in-chief and managing editor for the Middle East.
The introduction of a flat 5 per cent value-added tax (VAT) on January 1, 2018 is part of ongoing efforts to boost government revenue and increase the overall transparency of the market. Of the nearly 150 executives surveyed 90 per cent said the level of transparency for conducting business was high or very high relative to the broader region.
“Business optimism is very high. This year got off with a great start. Government’s efforts to diversify income is the best thing to have happened to the economy,” said Bernd van Linder, the CEO of Commercial Bank of Dubai.
The survey results showed that the UAE CEOs were more conservative on their expectations on GDP growth compared to many the forecast by multilateral agencies and independent analysts. The survey results showed less than one-quarter saying they thought the economy would expand by 3 per cent or more, below forecasts made by external analysts, which hover around the 3.4 per cent to 3.6 per cent.
Although the GDP estimates made by many of the executives surveyed were more modest than the forecasts given by institutions such as the IMF, Cornock said the benefits of improved oil prices were yet to be fully felt by the business community.
“Sentiment is, of course, about the here and now: what CEOs are experiencing at a particular moment,” he said. “Although some challenges persist, such as translating more stable yet lower oil prices into a new economic model, managing the cost and quality of services and regional political volatility … the conclusions are largely, if cautiously, upbeat,” he said.
In a sign that senior executives are eyeing opportunities further afield, 44 per cent of respondents said they regarded either South Asia (22 per cent) or East Asia (22 per cent) as the region holding the greatest potential for increased trade and investment flows, ahead of the MENA region (30 per cent) when combined and sub-Saharan Africa (14 per cent).
While VAT had been a thorny issue ahead of its implementation, early indications suggests that its impact on retail spending was relatively moderate.
“VAT to be levied at a relatively low rate of 5 per cent compared to 19 per cent in Germany, for example, many executives felt it was unlikely to significantly impact the cost of doing business,” said Cornock.
In addition to generating revenue of an estimated $3.3 billion in 2018, rising to $5.4 billion in 2019, according to IMF estimates, the new tax is expected to play a key role in further enhancing the UAE’s transparency levels, a key criterion for foreign investors.