UAE Econ Min:Annual Inflation At 3.5%-4% By Yr End

Inflation forecast + New Laws relating to Foreign Ownership

The United Arab Emirates is expected to see annual inflation to range between 3.5% and 4% in 2009, and there is no risk of deflation, the country's economy minister said Sunday.

"It is 3.5% to 4% this year, that is what we are expecting," Sultan Al Mansouri said when asked if the ministry of economy has an inflation target for the year.

Last year, inflation in the second-biggest Arab economy hit 12.3%, largely driven by a hike in property rents.

Mansouri added that there is no risk of deflation this year. "No, we don't have that," he said. "We don't worry about it."

In a report earlier this month, EFG-Hermes said the U.A.E. will most likely suffer from deflation in 2009.

Prices of basic commodities in the U.A.E. have fallen by 20% to 40% this year, and the ministry aims to keep them stable, Mansouri told reporters in Abu Dhabi.

"Our objective is as much as possible to keep the prices stable although there are changes in different sectors of commodities," he said. "Definitely there is stability in prices this year as compared to previous years, not only during Ramadan."

NEW LAWS

Two new draft laws, which will be submitted to the cabinet within two months, could see the U.A.E. change its rule on foreign ownership of companies, Mansouri said.

"The industry law provides some options for 100% ownership," he said. "Within two months we will submit it to the cabinet and after that it will go through the legal process."

The law proposes options for complete foreign ownership outside the country's free zones, currently the only areas within the country where foreign companies can set up with full ownership.

The industry law could pave the way for complete foreign ownership outside of the U.A.E.'s free zones, Mansouri said.

"Industry is one of the most important sectors we are trying to attract to the U.A.E. and is a major contributor to GDP," Mansouri said. "We need to create the right environment to attract these industries from worldwide."

A draft foreign investment law is expected to pass by year-end, Mansouri said. When asked if the law proposed increasing the current 49% foreign ownership limit, he said: "everything is open."

Economists expect any relaxation of the foreign ownership restrictions to positively impact the U.A.E. economy.END