The UAE’s economic liberalisation, embracing of tax reforms and comprehensive revamp of the visa rules have provided a strong foundation for the economy, helping to take it to new heights in the next 5-10 years, says a new report.

 

Mashreq, in partnership with knowledge partner MEED, has launched its latest joint research report titled 'Drivers of Change', which provides a detailed assessment of the initiatives being taken by the UAE to diversify its economy and explore new revenue-raising strategies.

 

The report also examines recent strides made with debt and capital markets, and how environmental, social, and governance (ESG) principles are increasingly shaping the government's ability to raise finance.

 

The UAE has been at the forefront of regional efforts pursuing economic liberalisation policies, introducing value-added tax (VAT) in 2018, lifting corporate ownership restrictions, and privatising state assets. These reforms have added dynamism to the market and helped ensure the nation remained relatively insulated during the pandemic, the report says.

 

'Drivers of Change' offers a comprehensive analysis of these reforms, assessing their advantages from the perspective of revenue diversification and expenditure rationalisation.

 

The report provides a prognosis for the market's outlook, highlighting the importance of innovative capital debt market issuance and federal spending, which is playing an increasingly important role in a federation where traditionally individual emirates have followed their own independent fiscal strategies.

 

Feras Al Jaramani, Head of Public Sector and Energy at Mashreq, said: " The UAE's government's commitment towards the path of economic liberalization continues to shape 2023 and beyond, including the introduction of tax regimes such as VAT and corporate tax, has greatly enhanced transparency and disclosure, bringing the UAE fiscal regime in line with global markets. 

 

“Furthermore, the comprehensive revamp of the UAE visa rules, industrial growth plans, and start up support system have provided a strong foundation for the economy, helping to take it to new heights in the next 5-10 years. These initiatives demonstrate the UAE leadership's commitment to fiscal prudence and Economic diversification and will undoubtedly contribute to the country's sustained economic growth and development."

 

IPO Flurry

The year will also see the IPO flurry continue in the UAE amid strong investor demand. Last year saw 12 companies collectively raise over $11 billion, including the $6.1 billion listing of Dubai Electricity & Water Authority (Dewa), the largest IPO in the GCC. The momentum continues in 2023, with the $2.5 billion listing of Adnoc Gas at the outset of the year, followed by $120 million raised by Al Ansari Financial Services and $496 million raised by G42's Presight AI. The UAE's capital markets are expecting to see 11 listings over 2023.

 

However, macroeconomic conditions are expected to moderate growth across the board. Throughout 2023, government entities and sovereign wealth funds will have to brace for external uncertainties in the form of volatile commodity prices, rising inflationary pressures, and business disruption caused by factors such as supply chain issues and the Russia-Ukraine war, the report says.

 

COP28

Hosting COP28 in 2023 is going to mark a new milestone in the UAE’s leadership in the ESG and Green Energy transition, the UAE aims to build consensus and coalitions to achieve a practical, pragmatic, and just energy transition and reform land use and food systems while scaling up adaptation and operationalizing the new loss and damage fund, it says.

 

In line with this, sustainable finance is one of the areas that is expected to rise in relevance as the UAE seeks to become a regional and global hub for investments underpinned by ESG principles.

 

Mohab Nematallah, Head of Public Sector at Mashreq, said: "The UAE is demonstrating its commitment to diversifying funding sources through the introduction of taxes, IPOs of key government-related entities, and the development and enhancement of the debt capital market. This is evidenced by the recent issuance of AED federal debt instruments.

 

“Furthermore, the UAE remains steadfast in its commitment to the ESG mandate, promoting green finance and reducing carbon emissions, which aligns with the country's hosting of COP 28. Sustainable finance is critical in enabling environmentally and socially responsible behaviors throughout value chains, and the UAE is well-positioned to serve as a regional and global hub for investments underpinned by ESG principles." –TradeArabia News Service