Day: May 7, 2008

World learns from Abu Dhabi

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World learns from Abu Dhabi
James Bennett

Abu Dhabi has been identified as the ultimate “power city” of the next millennium in a survey of 130 global cities drawn up by one of the world’s largest property advisory firms.

In its fourth biennial World Winning Cities study, Jones Lang LaSalle unveiled Abu Dhabi as the “power city” that would become one of the world’s fastest growing “urban stars” and be on the “radar screen of the real estate industry” for the next decade.

The company also predicted that Abu Dhabi would be a “city of substance” by 2010, a “regional hub” by 2015 and a “world winning city” by 2020, a decade ahead of its proposed Plan 2030.

“In our first study in 2002, we highlighted Dubai, Dublin and Las Vegas as being among a new wave of city winners. However, this year’s winner is Abu Dhabi, [which] in the past used to learn from other cities, but now other cities are learning from Abu Dhabi and its approach and impressive vision for the future,” said Blair Hagkull, the managing director for the Middle East and North Africa at Jones Lang LaSalle.

“It now has a lot to teach the world and in a decade, it has gone from being a student to being a teacher,” Mr Hagkull said.

The company chose Abu Dhabi after extensive research assessing more than 130 countries and cities. It assessed 10 principles of city competitiveness: performance, population, planning, power, place making (events, culture, meeting places), purity (sustainability, quality of life, environment), people, physical and property.

The report stated that Abu Dhabi offered one of the most favourable combinations of ingredients to become an emerging world-winning city, as well as having a chance to learn from the successes and challenges of Dubai.

“The predominant factor is its ambition to become a truly sustainable world-class city based on massive infrastructure investment, large real estate development, world-leading cultural facilities and major events, underpinned by significant population and employment growth,” said Mr Hagkull.

The report said the city was fully embracing urban master-planning with the launch of Plan Abu Dhabi 2030. This, it said, was unique to the region and created a “structured and clearly articulated framework for the city’s long-term growth”.

It added that the city epitomised a fresh spirit of city building, which is almost “unmatched anywhere else in the world”.

“We believe that Abu Dhabi is a city to watch over the next decade with an importance and influence that is expected to extend well beyond its immediate geography,” Mr Hagkull said.

“It is not often you get a city of fewer than one million people that has so much global influence. How many countries with such a small population have as much power as Abu Dhabi? Virtually none. It is one of the most influential cities in the world in the fact that it is a city that is not only building itself, but also helping to build others around the world.

“Historically, it learnt lessons from other places around the world, but now people are coming to Abu Dhabi, international firms like ours, to learn from what it is doing. Its influence is now being applied to other cities around the world. It is not only the capital city that is growing, but it is emerging as a global investor.”

The report said Abu Dhabi was chosen as this year’s winning city despite Dubai’s growth and proximity.

“Abu Dhabi’s city planners have clearly watched Dubai’s less controlled growth and, arguably, an erosion of its local heritage to formulate their own expansion agenda,” the report said. “One that puts culture and community ahead of pure commercialisation.”

Mr Hagkull said: “Abu Dhabi is complementing Dubai. It is not often you get two very different cities 150km apart growing at such a rate. Both have different focuses. Abu Dhabi is in a unique position that it can learn from what Dubai has done well and the mistakes it has made and build on them.”

The research also identified the challenges ahead for the city and emirate.

The main challenges, said Mr Hagkull, would be for the city planners to carefully manage its ambitious expansion plans and, from a property perspective, to ensure the market was transparent.

The city would also have to cultivate indigenous growth and ensure sufficient differentiation in its offer from neighbouring Dubai, he said.

“Not only does a transparent market attract global property investors, but crucially it is a key constituent of an open and globally connected city,” the report said, adding that it was imperative the city attracted top quality multinational corporations to “feed” it with intellectual capital.

“The challenges for Abu Dhabi are that it is a very young and very fast growing city. There is a lot of pressure being put on some very young institutions and some that are only just being formed,” said Mr Hagkull.

“Infrastructure could hamper its progress. The challenge for any city is infrastructure.

“There are many things under one vision, but the key will be for that to be effectively distributed to the right people. It will need organisations like the Urban Planning Council to take the pressure off the leadership.

“Usually, the biggest risk is that ambition and capital don’t meet. Abu Dhabi has laid out a very clear and defined vision and the risk is not being able to achieve that. Abu Dhabi has the chance to be the epitome of a 21st century city, but you won’t have to wait until 2030 to see the city being completed. The majority of its ambitions will be achieved well before that date.”

jbennett@thenational.ae

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Plans for tax on goods ready by end of 2008

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Plans for tax on goods ready by end of 2008
Robert Ditcham, THE NATIONAL

Last Updated: May 07. 2008 1:56AM UAE / May 6. 2008 9:56PM GMT
The introduction of VAT is likely to be unpopular with Emiratis, residents and businesses, who have enjoyed years of tax-free conditions. Jeffrey E Biteng / The National
The UAE will be ready to introduce a system of value added tax (VAT) by the end of the year.

Abdul Rahman al Saleh, the executive director of Dubai Customs, said the “infrastructure” for an Emirates-wide taxation system would be put in place between October and December.

Dubai Customs was commissioned by the Government two years ago to look into a potential VAT and is finalising the strategy. If implemented, it would be the first time VAT, which is applied to the sale of goods and services and not income, has been imposed in a GCC nation.

However, a government source said although the mechanics would be in place, it was “very unlikely” that VAT would be introduced this year because Federal approval and GCC co-operation, on several related issues, would be required.

VAT would be introduced to replace customs duties, which the UAE must phase out as part of the free trade agreements (FTAs) it is signing with a number of major trading partners, Mr Saleh said.

The government source, who declined to be identified, said a GCC-wide agreement on these FTAs is still some way off.

Mr Saleh told a seminar at the Arabian Travel Market in Dubai that VAT was likely to be set at a flat rate of between three and five per cent. It would be applied to all goods and services.

The introduction of VAT is likely to be unpopular with Emiratis, residents and businesses, who have enjoyed years of tax-free conditions.

If the UAE were to introduce it before other members of the GCC, analysts warned the tax could drive business away from the UAE.

Although the proposed three to five per cent rate is lower than in many other countries – the rate in the UK, for instance, is 17.5 per cent – residents are likely to oppose any measure that could increase already rising food and accommodation costs.

But Mr Saleh said prices were unlikely to climb because of the removal of customs duties.

“I don’t expect a negative reaction from the public because the providers of the services and the goods will take care of this [VAT expense],” he said.

“They would not be paying customs duty so they should not need to increase their prices.” Mr Saleh said if Federal authorities decided to press ahead with VAT, there would be a provision for tourists to claim back the tax they paid on purchases over a set amount. Small businesses with revenue of less than a specific annual figure – expected to be about Dh3.67 million (US$1m) – would also be exempt, he added.

Customs officials have said the VAT would be necessary to replace the “lost revenue” from the removal of customs duties. The funds would be required for investment in health, education and public infrastructure, they said.

The International Monetary Fund is backing the initiative.

Mr Saleh said Dubai Customs had been working for the past two years to develop a VAT system that could be applied across the Emirates.

He said research was conducted in countries such as the UK and New Zealand, many of which use different forms of the taxation system. While some countries apply a low flat rate to all goods and services, others tax certain goods heavily but exempt others.

“We will put in a low rate and have direct aids to the right people, rather than having exemptions. Products and services in certain areas, such as education and health, can be looked at by the Government.”

rditcham@thenational.ae