Last week, The National carried a story about how farmers in Abu Dhabi's Western Region now had to start getting used to the cancellation of the subsidies they previously enjoyed for growing Rhodes grass for animal feed.
One farmer who formerly earned around Dh11,000 a month from the grass he grows has seen his monthly income fall to between Dh4,000 - Dh5,000 with the ending of the subsidy. Nearly 5,000 farmers are affected. The subsidy programme, running since 2006, cost Dh800 million in its first year alone.
Apart from the cost, another justification for the withdrawal of the subsidy - which is in many ways more important - is that three out of every five litres of water used in Abu Dhabi's agricultural sector is used for Rhodes grass cultivation. At 550 litres a day, Abu Dhabi's per-capita water usage is among the highest in the world. We just can't continue like that, and with the Environment Agency - Abu Dhabi, the EAD, and other bodies warning ever more vocally of the need to conserve the emirate's scarce natural resources and to reduce consumption of desalinated water, it's certainly time for farmers to start looking for less thirsty crops.
That, and the withdrawal of subsidies, may mean that some of them give up agriculture altogether, and that may not be a bad thing, either. In a desert, the use of scarce water to irrigate crops isn't necessarily the most sustainable or the most sensible way of ensuring that the country has sufficient food. There's a message, though, behind the withdrawal of subsidies for growing Rhodes grass that goes far beyond the greening of the landscape or the income of Abu Dhabi's farmers or the sustainability of water usage, and that message is something to which all city-dwellers and country dwellers alike should pay heed.
It is, quite simply, the fact that as the country moves forward with its development programme, there will be increasing pressure on consumers to pay a proper amount for what they consume. Much of the whole host of subsidies that can be found throughout much of the economy will, I suspect, gradually be removed. We've already seen steps being taken to bring retail prices for petrol closer to prevailing international prices. While ADNOC has the advantage of producing refined fuels, obtained from its own crude oil, other retailers are obliged to purchase theirs on the international market. As a result, with prices here lower than the world market price, they were losing money on every litre they sold. However unwelcome the recent increases in pump prices may have been, they were essential to bring the market somewhere nearer to a state of balance - and I wouldn't be surprised if there's more to come on that front.
We've been warned, too, of impending increases in the cost of water and electricity in Abu Dhabi. These are heavily subsidised, particularly for Emiratis, who pay a third of the rate for electricity that expatriates pay. As a result, many consumers simply waste enormous amounts of both water and electricity. A gradual set of increases towards the real cost would not only reduce the need for government support but might also prompt an energy-saving and water-saving approach among consumers. If something is costing a lot of money, most people tend to make at least an attempt not to waste it.
Moreover, at a time of rapidly rising demand for electricity, from domestic, commercial and industrial consumers, Abu Dhabi, like much of the rest of the country, runs the risk of power shortages in the years between now and when the country's first nuclear power plants come online. The rate of growth in demand for electricity has to be slowed down even as the population increases and more buildings and factories are built. Making people pay the proper rate for what they consume is one important tool in the strategy to achieve that - and it wouldn't surprise me at all if there was a reduction of the differential between the prices paid by Emiratis and expatriates also.
Another area where we might reasonably expect increases in charges is paid parking - and apologies for coming back to that issue yet again. In London's city centre, where parking spaces are at a premium, charges of around Dh9 an hour are not uncommon, and that is in a city where a plentiful supply of public transport means that the degree of congestion is considerably less than it is here. Once the meters or the carpark barriers are in place, it's easy enough to re-set the charging mechanism.
As is the case with the other examples cited above, though, it's not primarily a matter of trying to reduce subsidies or to increase income. Rather, the driving force is likely to be the search for sustainability. That's going to mean far-reaching changes over the next few years. In the past, governments, both federal and local, spent huge sums on the country's development, ranging from infrastructure to social services to education. Much of what was provided was heavily subsidised. There was a sensible justification for that - the country was emerging from under-development and was growing rapidly. Matters have moved on, however. Government, as a whole, is less willing to subsidise. In a country where direct taxation affects only a few, that's understandable. The private sector has also come to play a much more significant role in the economy as a whole.
It would be an over-simplification to suggest that the catchphrase for the future will be "Subsidies Out; Sustainability In", but that may well, in my view, prove to be an underlying theme. If that means that there's a little less waste of depleting resources, so much the better.
Peter Hellyer is a consultant specialising in the heritage and culture of the UAE
