Logistics may get AED2.4-billion stimulus following new UAE labour law

Low-cost insurance program will replace UAE's bank guarantee by employers to sponsor employees, freeing up a potential AED2.4bn for logistics and supply chain sector.
HH Sheikh Mohammed bin Rashid, Prime Minister and Ruler of Dubai, chairs a meeting of the UAE Cabinet.
HH Sheikh Mohammed bin Rashid, Prime Minister and Ruler of Dubai, chairs a meeting of the UAE Cabinet.

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Sheikh Mohammed bin Rashid, Prime Minister and Ruler of Dubai, has announced new legislation approved by the UAE cabinet which includes doing away with bank guarantees for the recruitment of labour in the private sector.

Under the new law, a "low-cost insurance" system of AED60 per worker can be used instead of the current AED3,000 that must be issued as a bank guarantee by employers to sponsor employees.

The new regulations are expected to provide an AED14 billion stimulus for the economy and lower the cost of doing business in the country.

With more than 800,000 people working in the logistics and manufacturing sector in the UAE, according to statista, this will give these sector an extra AED2.4-billion to reinvest.

The new insurance scheme will be priced at Dh60 per year per employee.

The insurance policy in the new system covers the workers’ end of service benefits, vacation allowance, overtime allowance, unpaid wages, return air ticket and cases of work injury, in which the insurance coverage amounts to Dh20,000 a person.

The scheme is aimed at securing workers’ rights in the private sector and reducing the burden on employers, allowing businesses across the UAE to recover about AED14 billion in guarantees, freeing up capital for other purposes such as reinvestment.

Sheikh Mohammed said on twitter the new legislation will support the UAE's goal of “remaining in the highest global rankings for ease of doing business, through an attractive economy based on flexibility, openness and in line with changing trends”.

“The UAE is among the ten most competitive countries in the world and our goal is to remain a top destination for ease of doing business, through an agile economy based on flexibility and openness. A strong economy drives us as a nation to be among the first and best,” he said.

These latest moves come amid a flurry of revised regulations aimed at boosting investor confidence in the UAE economy, including a raft of cancelled fees in aviation, and new business ownership rules that will eventually allow 100% foreign ownership of businesses outside of free zones.

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