UAE, Saudi Arabia announce special stimulus packages to help local businesses
Last week (12 March), His Highness Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum under the directives of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister and Ruler of Dubai, Crown Prince of Dubai and Chairman of The Executive Council of Dubai, launched an AED1.5 billion economic stimulus package for the next three months to support companies and the business sector in Dubai. The package seeks to enhance liquidity and reduce the impact of the current global economic situation.
Saudi Arabian Monetary Authority (SAMA), as part of its role in activating the available monetary policy tools and enhancing financial stability and supporting the efforts of the government in combating the Coronavirus (COVID-19) and mitigating its expected financial and economic impacts on the private sector, especially on SME sector, has now announced the introduction of Private Sector Financing Support Program with a total value of about SAR 50 billion.
In the UAE stimulus package seeks to reduce the cost of doing business and simplify business procedures, especially in the sectors of tourism, retail, external trade and logistics services. The stimulus measures that will be introduced with immediate effect will be valid for the next three months. Following this period, the impact of the measures on the economic situation will be reviewed.
The stimulus package developed by Dubai Government includes 15 initiatives focused on the commercial sector, retail, external trade, tourism, and the energy sector. For the commercial and business sector, Dubai Government has introduced nine initiatives over the next three months including a freeze on the 2.5% market fees levied on all facilities operating in Dubai. The second initiative extends a refund of 20% on the custom fees imposed on imported products sold locally in Dubai markets.
The package also includes the cancellation of the AED50,000 bank guarantee or cash required to undertake customs clearance activity. Bank guarantee or cash paid by existing customs clearance companies will be refunded. Furthermore, fees imposed on submitting customs documents of companies will be reduced by 90%. With regards to measures for boosting external trade, the requirement for providing a banking instrument while submitting customs-related grievances has been cancelled. In addition, traditional wooden commercial vessels registered in the country will be exempted from mooring service fees for arrival and departure, as well as direct and indirect loading fees at Dubai Harbour and Hamriyah Port.
Local commerce will benefit from the cancelation of the 25% down payment required for requesting installment-based payment of government fees for obtaining and renewing licenses. The move seeks to reduce the financial burden on SMEs. In addition, commercial licenses can be renewed without mandatory renewal of lease contracts in a move aimed at stimulating business activity and easing government-related procedures. In addition, companies will be exempted from permits for new sales and offers.
The tourism sector will benefit from four initiatives over the next three months, the first of which is the reduction of municipality fees imposed on sales at hotels from 7% to 3.5%. The second initiative exempts companies from fees charged for postponement and cancellation of tourism and sports events scheduled for the year 2020. The third initiative freezes fees for the rating of hotels. The fourth initiative freezes the fees charged for the sale of tickets, issuance of permits and other government fees related to entertainment and business events.
The stimulus package also features two other initiatives that seek to reduce the cost of living and doing business for citizens, expatriate residents and the business community through 10% reduction in water and electricity bills including those charged in the residential, commercial and industrial sector, for a period of three months. The second initiative reduces deposit paid for water and electricity connections by 50%.
SAMA’s incentives include several incentives including:
Deferred Payments Program: Depositing an amount of about SAR 30 billion for banks and financing companies to delay the payment of the dues of the financial sector (banks and finance companies) from SMEs for a period of six months as of its date.
Funding for Lending Program: Providing concessional finance of about SAR 13.2 billion for SMEs by granting loans from banks and finance companies to the SME sector to support business continuity and sector growth during the current stage in a way that contributes to supporting economic growth and maintaining employment levels in these enterprises.
Loan Guarantee Program: Depositing an amount of SAR 6 billion for banks and insurance companies to enable insurance entities (banks and insurance companies) to relieve SMEs from the finance costs of KAFALA Program for the purpose of minimizing finance costs for entities eligible to utilize from those guarantees during the Fiscal Year 2020 and support finance expansion.
Supporting Fees of POS and E-Commerce: This is accomplished via supporting payment fees of all stores and entities in the private sector for a period of 3 months with an amount exceeding in total SAR 800 million. SAMA will pay these fees to payment service providers participating in the national system.