Utility costs prove to be a headache for business



From recycling water to using natural lighting, Kimoha Entrepreneurs has taken bold steps to cut its utility costs at its warehouse in Jebel Ali Free Zone.

The maker of drinks labels, baggage tags and other paper goods has even installed meters throughout the 18,000 square metre building to try to control energy use. Kimoha needs to keep the temperature at a constant 25°C to ensure its products do not spoil.

Despite its energy-saving efforts, however, the Dubai firm's utility bills have risen 50 per cent over the past two years. Rajan Menon, the general manager, puts that down to Kimoha's rapid expansion, but also an increase in the unit rates Dubai Electricity and Water Authority (Dewa) applies to its bills.

"The utility rates have increased this year again and that's a big pain for us," he said. "We have been doing our best to reduce our energy costs, but it's tough."

Nobody was available to comment from Dewa.

To help manufacturers, the UAE should follow the lead of many developed countries by giving preferential energy rates to big energy-guzzling industries, Mr Menon said.

High utility costs are one of the many challenges facing the emirate's small and medium enterprises as they seek to expand and drive the economy. They account for 85 per cent of employment in the UAE and almost half of GDP.

Cutting government fees was the biggest concern of Dubai traders when it came to easing the cost of doing business, according to a survey conducted by the Dubai Chamber of Commerce and Industry last month. Visa costs were the next most common issue raised by traders followed by cutting ports' costs and simplifying licensing procedures.

Dozens of different business fees are listed on the Dubai Department of Economic Developmentwebsite, ranging from Dh5,000 (US$1,360) for conducting "additional mixed activities" to Dh3,000 for "working round the clock".

Government officials defend the cost of doing business. "The cost is still reasonable and the 14,000 licences we issued for new companies last year is a good indication that the impact of the cost is still minimal," said Sami Al Qamzi, the department's director general.

The UAE jumped two places to 33rd in the World Bank's latest Doing Business report for last year, which compares economies on business regulation and cost.

It costs 5.6 per cent of income per capita to set up a business in the UAE, much less than the 35 per cent average for the Middle East and North Africa region but higher than the 4.7 per cent for Organisation for Economic Cooperation and Development (OECD) countries. Similarly, the 13 days needed to set up a business in the UAE was less than the regional average, but worse than the average for the OECD.

Dubai chamber officials are pushing for more progress in lowering barriers to business.

Growth in exports of Dubai members this year was expected to be similar to last year's 15 per cent increase, said Hamad Buamim, the chamber's director general.

"If we want to improve growth even further beyond whatever the business community is putting in their plans, we need to address a couple of important issues," he said. "Liquidity is one and ease of doing business is another."

Getting access to letters of credit and working capital, and lowering interest rates, were concerns highlighted by traders in the chamber's survey.

Private sector credit growth has rebounded slowly since the global financial crisis as banks consider government-related firms as a safer bet to lend to. The latest data for private sector lending showed growth in September of 1.9 per cent from the year-earlier month.

Kimoha, meanwhile, continues to foster its growth by looking for creative ways to cut costs, including not turning on the factory's overhead lamps.

"We have a huge skylight and right through the day, we do not use lights," said Mr Menon.

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Real estate tokenisation project

Dubai launched the pilot phase of its real estate tokenisation project last month.

The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.

Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.

The specs: 2018 BMW R nineT Scrambler

Price, base / as tested Dh57,000

Engine 1,170cc air/oil-cooled flat twin four-stroke engine

Transmission Six-speed gearbox

Power 110hp) @ 7,750rpm

Torque 116Nm @ 6,000rpm

Fuel economy, combined 5.3L / 100km

yallacompare profile

Date of launch: 2014

Founder: Jon Richards, founder and chief executive; Samer Chebab, co-founder and chief operating officer, and Jonathan Rawlings, co-founder and chief financial officer

Based: Media City, Dubai 

Sector: Financial services

Size: 120 employees

Investors: 2014: $500,000 in a seed round led by Mulverhill Associates; 2015: $3m in Series A funding led by STC Ventures (managed by Iris Capital), Wamda and Dubai Silicon Oasis Authority; 2019: $8m in Series B funding with the same investors as Series A along with Precinct Partners, Saned and Argo Ventures (the VC arm of multinational insurer Argo Group)

If you go

Flights

Emirates flies from Dubai to Phnom Penh with a stop in Yangon from Dh3,075, and Etihad flies from Abu Dhabi to Phnom Penh with its partner Bangkok Airlines from Dh2,763. These trips take about nine hours each and both include taxes. From there, a road transfer takes at least four hours; airlines including KC Airlines (www.kcairlines.com) offer quick connecting flights from Phnom Penh to Sihanoukville from about $100 (Dh367) return including taxes. Air Asia, Malindo Air and Malaysian Airlines fly direct from Kuala Lumpur to Sihanoukville from $54 each way. Next year, direct flights are due to launch between Bangkok and Sihanoukville, which will cut the journey time by a third.

The stay

Rooms at Alila Villas Koh Russey (www.alilahotels.com/ kohrussey) cost from $385 per night including taxes.

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Group A: Palmeiras, Porto, Al Ahly, Inter Miami.

Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.

Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.

Group D: Flamengo, ES Tunis, Chelsea, Leon.

Group E: River Plate, Urawa, Monterrey, Inter Milan.

Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.

Group G: Manchester City, Wydad, Al Ain, Juventus.

Group H: Real Madrid, Al Hilal, Pachuca, Salzburg.

Messi at the Copa America

2007 – lost 3-0 to Brazil in the final

2011 – lost to Uruguay on penalties in the quarter-finals

2015 – lost to Chile on penalties in the final

2016 – lost to Chile on penalties in the final