Both Abu Dhabi and Dubai have a common goal and economic strategy to create a thriving business environment.

Recently the Abu Dhabi Department of Economic Development (ADDED) after having consulted various other government entities including Abu Dhabi Chamber of Commerce and Industry announced reduction in business setup fees in Abu Dhabi emirate to AED1,000 – a reduction of more than 90 per cent. License renewal fees also have been reduced to AED1,000.As per the ADDED’s media announcement, the new fees include six activities within the business license, and will cover all fees from Abu Dhabi Government entities such as ADDED, the Department of Municipalities and Transport, membership fees for Abu Dhabi Chamber, CoC (Certificate of Conformity) issuance fee, and fees required by Abu Dhabi regulating entities dependent on the type of business. Several fees have been removed entirely while others have been considerably reduced.

This is a very welcome move which will further support the small and medium sector enterprises in managing costs during the pandemic resulting dip in revenues. It also supports Abu Dhabi Government’s efforts to create an even more thriving business environment for the private sector, especially for micro, small and medium-sized enterprises.

All GCC governments are endeavoring to diversify their economies away from oil and expending significant efforts in promoting commerce and industry in all non-oil sectors as improving their ranking in Ease of Doing Business Reports will assist in attracting global businesses to set up offices here. In the recent past, Saudi Arabia has developed a new business district in Riyadh and issued an ultimatum to foreign businesses in February that they must locate their regional headquarters there by 2024 or risk missing out on lucrative government contracts.

In such environment, the reduction in set up costs as well as streamlining the renewal expenses by Abu Dhabi will strengthen UAE’s already strong position in the World Bank’s global ranking of countries for Ease of Doing Business. As at 2020, UAE ranked number 16 out of 190 countries that were compared for business regulations and competitive advantages. Abu Dhabi’s current move of fixing the fees will increase transparency and reduce administration for corporates which will enhance UAE’s competitiveness over other GCC countries in attracting regional and international players.

Both Abu Dhabi and Dubai have a common goal and economic strategy to create a thriving business environment that encourages growth and innovation. It is to be noted that greater ease of doing business is associated with increased entrepreneurship and generates better employment opportunities, higher government tax revenues, and improved personal incomes.

In absence of wide corporate and personal income taxes, some would argue that reducing fee will reduce government’s revenue even further and may exert pressure on the country’s fiscal deficit and ultimately its credit rating. However, we believe that increased economic activity in the country on the back of higher business confidence will ultimately reap higher benefits than the loss of revenue from licensing fee.

Also some may see the reduction of licensing fee by Abu Dhabi as a threat to Dubai’s dominant position for business headquarter in the region. Though it is likely that Dubai could lose some businesses to Abu Dhabi, however in the bigger scheme of things, Abu Dhabi’s lower fee will position UAE as a nation in a stronger position compared with other GCC countries and will help in getting a bigger pool of investors/corporates choosing UAE over other GCC countries, which ultimately will be beneficial for both Dubai as well as Abu Dhabi. Also we note that Abu Dhabi is more likely to host businesses related to oil and gas, mining, quarrying and manufacturing while Dubai is better placed for businesses related to logistics, retail and tourism. As such both Emirates are likely to be complimentary to each other instead of direct competition.