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Abu Dhabi: The Ministry of Economy's Industrial Affairs Department will support the local industries that are suffering losses due to the UAE's monetary policy, especially the pegging of the dirham to the weakening US dollar, by subsidising services, a top official said on Wednesday.
The UAE dirham lost 37 per cent of its value in the last five years, according to NCB Capital, the investment banking division of National Commercial Bank.
"This is only one of many problems facing the industrial sector in the UAE, and what we are seeking now is to find comprehensive solutions, to help these industries and harmonise the sector throughout the country," Sultan Bin Saeed Al Mansouri, Minister of Economy, said.
Many major industrialists expressed concern about the losses they incur due to the present exchange rate and its regime, which results in higher production costs.
Nevertheless, some industries that provide for a high added-value, such as aluminium sheets, seemed more comfortable with the peg.
"Of course we incur more costs in importing raw material such as iron billets, which have already doubled in price compared to the same time last year," said Husain Jassem Al Nowais, Chairman of Emirates Steel Industries.
"But we are seeking to overcome this hurdle through establishing this industry here, and hence cutting the cost by importing iron oxide pellets and processing them here," he added.
Hurdles
Other export-oriented industries, such as Abu Dhabi National Industrial Projects (ADNIP), are facing difficulty expanding into new markets.
"In addition to the more expensive cost of importing raw material in currencies other than the dollar, the relative competitive advantage that we have is only helping us in Western Europe, while the peg limits this advantage in the east, and hence ties our hands when it comes to expanding our export base," Mohammad Jawaan Al Badi, group chairman, told Gulf News.
Most industrialists agree that the introduction of the GCC common currency will help, yet some are seeking the UAE to take the initiative of revaluation.
"In Europe, Germany took the initiative and then the rest followed, someone has to start," said Sanjay Mehta, chief executive officer of Al Nasser Industrial Enterprises, as a revaluation of the dirham alone can give a competitive advantage to products from Saudi Arabia, the largest economy in the region, and hence hurt local industries.
Meanwhile, Mohammad Obaid Al Jaber, CEO of Al Jaber Group, defended the peg on grounds that revaluating the dirham at the present level will only increase the losses of the economy.
"This is happening throughout, and the UAE is better off taking such a step when the dollar is stronger," he said.
See also Page 40
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