Reflecting on 2018, there is no doubt that in the business world, there has been one word on everyone’s lips across the UAE –VAT.
When a country undertakes such a dramatic change in its taxation policy, there is bound to be some degree of apprehension about its potential impact from an operational perspective, and also what implementation may mean for the wider economy.
A year on, I think it is safe to say that the arrival of VAT has become widely accepted and is seen by many as helping to provide the UAE with a source of revenue that will play an important role in improving infrastructure and public services and enhance its global competitiveness.
Arguably, the introduction of a robust, modern taxation system reflects the growing maturity of the nation and strengthens its place as a global economic player.
Underscoring the positive effects of VAT implementation, a report published by Moody’s in September shows that the inflationary impact has in fact been modest. Any major sway on household purchasing power has been mitigated by zero-rated and exempt items, as well as trends in the real estate market.
Meanwhile, the IMF has recently increased its forecast for the UAE’s 2019 GDP growth to 3 per cent – another positive indicator for the country’s economic outlook.
The UAE government announced a number of new business-friendly stimuli in 2018, including 100 per cent foreign ownership of onshore entities and a 10-year visa for professionals and investors. This has the potential to drive increased confidence in the market. It has also announced a reduction in municipality fees and waived a number of fees related to the aviation industry, in order to attract foreign investment.
The introduction of new foreign direct investment (FDI) laws also aims to promote the country’s investment environment in line with national development policies.
But all this optimism must be tempered with some realism, given International Monetary Fund forecasts of slowing growth among several major world economies in 2019. This means that organisations may have to re-examine their business models and find new ways to manage operational costs to maintain profitability this year.
Looking at the UAE, technology is increasingly emerging as a major disruptor, challenging the way businesses operate.
KPMG’s 2018 CEO Outlook report found that the prospect of driving growth from new digital business models and revenue streams, particularly as they replace historical ones, is one of the biggest challenges facing executives today.
Digital innovation has the potential to create significant value across business models, customer experience and operations, but with greater connectivity comes increasing cyber vulnerability. Regional CEOs feel a cyber attack is a case of ‘when’ not ‘if’. Investing in robust cyber defences and a strong cyber strategy will therefore be critical for businesses to secure trust with their stakeholders.
To drive long-term growth, organisations will also need to appeal to consumer markets of the future and millennials, who have spending power but are engaging with organisations and brands in new ways including digital channels.
But while digital is becoming integral to business success, the real test will be to create business value while complementing, not replacing, human interaction.
In this regard, the efficiency of the labour market cannot be stressed enough, as a skilled and productive workforce is the pillar of any economic vision. Fortunately, the UAE continues to attract global talent, seeking to live in a world-class city with exciting career opportunities and favourable working conditions.
Equally, it is imperative to harness the enormous potential of the local workforce. According to the UAE National Agenda, the country plans to increase Emiratisation in the private sector tenfold in the years ahead. A local workforce committed to taking its country to the next stage of growth and evolution is pivotal in fulfilling the national vision.
So what can we expect for 2019? I believe the next year will be one of renewed optimism, as the broader economy starts to witness the impact of these growth stimuli. Some of the initiatives that will set the stage for a digitally inclusive society are the UAE Strategy for Artificial Intelligence, Smart Dubai 2021 and the Emirates Blockchain Strategy 2021.
And as the countdown begins in earnest to Expo 2020, both the public and private sector will likely be re-energised. This is the right time for organisations to embrace change and technological innovation as we enter a new period of national development.