ABU DHABI // Thousands of dirhams are being lavished abroad on luxury goods instead of in the UAE because of high prices locally, a Federal National Council member told the Minister of Economy last week.
Afra Al Busti (Dubai) told Sultan Al Mansouri that the high prices charged for luxury goods in the UAE has led to Emirati families spending "extravagant" amounts during their trips abroad where the latest brands can be bought cheaper.
This was detrimental to the local economy, she said.
"We want most of our buys to be from the UAE, to be added to the country's capital," she told the minister. "But we notice a huge difference in prices of luxury items in the country and those abroad. These include accessories, leather goods, shoes."
Ms Al Busti said this was not logical because the UAE was tax-free.
"Even with tax on the goods in other countries, the price in the UAE is still greater by Dh500 to Dh3,000 in one single product," she said. "This is noticed in most places. What is the reason for this huge jump in price even with no taxes here?"
The minister said he was aware of the issue and blamed the added expense on the high cost of rent for mall shops.
"The main problem is most of these goods are brand goods," he said. "Today we notice they are in shopping malls. And the rent prices are very high. These are reflected on the price of the product. They are then sometimes much higher than the cost of these products."
Rents are lower in Europe, he said.
"Does the minister know how much Emirati families spend when they travel abroad on these goods? Huge amounts of money," Ms Al Busti said. "Although they are in the country but at a very high price."
She then told the minister of one bag she came across in a European country marked at €1,000 (Dh4,773), a percentage of which was Value Added Tax. In the UAE, she said, the same bag was on sale for Dh3,000 more.
She stressed that it was important to keep the money spent on luxury goods circulating in the UAE.
According to market experts, however, other factors come into play when shops here set their prices.
Patrick Chalhoub, a joint chief executive of the Chalhoub Group, which handles the wholesale and retail distribution of many of the world's top luxury brands, including Louis Vuitton, Fendi and Saks Fifth Avenue, said warehouse costs, a need for a local partner, and adding Arabic labels to products all contributed to higher prices.
"With two seasons and temperatures sometimes reaching 50°C, the air conditioning in our warehouse is a must-have, and this requires a lot of energy," he told The National previously.
The cost of marketing a product could also be higher in the UAE.
Mr Al Mansouri noted during the session that the costs of employees and utility bills also affected overall product costs.
osalem@thenational.ae
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