CGE Model helps decision makers create sound policies

Dubai: Dubai should adopt an economic tool that shows decision-makers the possible consequences of implementing a proposed policy, the Dubai Economic Council (DEC) suggested in a new working paper.

Using actual economic data, the Computable General Equilibrium (CGE) model is an instrument that simulates possible scenarios that can unfold when decision-makers set a policy and its consequences on various sectors.

The paper recommends that important sectors such as real estate, construction, oil and gas as well as free zones should be included.

“We call for Dubai to implement it across its decision-making centres such as the local departments and executive council,” Irfan Al Hasani, editor in chief of corporate communications at DEC, told Gulf News.

For example, if Dubai’s decision-makers decided to increase taxes by five per cent, the CGE would display the consequences on the economy from trade to exports, consumer habits, tourism and luxury goods, he explained.

“It’s a tool that helps in economic decision–making, to take not only sound policies but explore the consequences of the policy,” he said. “We rationalise our decisions.”

The UAE has already implemented the CGE model but in a limited scope, according to Al Hasani.

“Now Dubai is a very competitive and global city with a dynamic and vital economy, so it might need such an innovative instrument to help decision-makers take the right decisions,” he said.

Major global economies such as USA and Australia have already successfully used the CGE model for long-term policy analysis.

“A model for a comparable economy like Singapore could be very useful while setting up a model for Dubai. Looking at Hong Kong and its re-export can also be beneficial for modeling the economy of Dubai,” according to the paper. The study was conducted as part of DEC’s strategy to monitor best economic practices internationally and try to apply them locally while taking into account UAE-specific differences, Al Hasani said.