x Abu Dhabi, UAETuesday 25 July 2017

Private sector reforms are a national priority

"Red tape" is a perennial problem, in the UAE as elsewhere. But a closer look at roadblocks to business reveals the real issues in more detail.

As far back as the 16th century, as Spain's imperial governance grew professional and bureaucratic, officials there began to secure some documents with red tape. Today that substance has become a metaphor for burdensome and officious regulation, especially when it is harmful to business.

So this week's announcement that the Abu Dhabi Department of Economic Development has identified and will proceed with 29 measures to cut red tape is more than welcome.

To be sure, the UAE has already made real progress on this in recent years. The World Bank's International Finance Corporation annually ranks countries on the ease of doing business, and the Emirates has climbed from 40th to 33rd to 26th over the last two years.

But more remains to be done. Business people note that each branch of a retail chain requires its own licence, that import rules can delay the adoption of modern medical technology, that visa rules can force firms to hire someone from overseas rather than a jobless worker already here, that food safety rules vary between emirates, and so on.

However, a closer look at the World Bank figures reveals that the most serious problems are not with applying for licences and filling out forms; the UAE ranks rather well on measures such as time to start a business (22nd) and to get a construction permit (13th). Rather, the biggest obstacle is convincing investors that they are protected. Last year the UAE was 128th out of 181 countries ranked on the matter of protecting investors, 104th on enforcing contracts, and 101st in resolving insolvency.

Those findings suggest that permits and paperwork are not the biggest hurdle to greater investment in private business, with all the economic vitality and diversification - and local jobs - it can bring. Rather, the legal and procedural issues to do with bankruptcy and investor protection are the major bottlenecks.

The issue here is not only foreign investment. Encouraging more Emiratis to start businesses is in the long run a policy goal.

Everyone with money to invest, or with an idea that could be profitable, needs access to capital, a law regulating companies that assures a level playing field, and a way to stay out of debtors' prison if a good-faith venture fails. A countrywide credit bureau, a streamlined companies law and modern bankruptcy legislation are all essential components in building the varied, entrepreneurial economy the country needs.