Ministry of Economy and Cement Producers Group sign MoU to stabilize cement prices and local market
MoU to boost UAE’s cement industry
The UAE Ministry of Economy and the Cement Producers Group have today (Monday, May 05, 2008) signed a Memorandum of Understanding (MoU) to implement the necessary measures to ensure the availability of cement in the local market at reasonable prices, in a move to enhance the national economy and boost the country’s comprehensive development process.
The MoU was signed by H.E. Eng. Sultan Bin Saeed Al Mansouri, UAE Minister of Economy, and Mr. Abdulla Mohammed Al Sayah, President of Cement Factories and Producers Group and General Manager of Etihad (Union) Cement Company, in the presence of H.E. Mohammed Ahmed bin Abdulaziz Alshihhi, Undersecretary of the Ministry of Economy; Dr. Ahmed Saif Belhasa, Chairman of the UAE Contractors Association; officials from the Ministry of Economy; and managers of cement companies and factories in the UAE.
Under the terms of the MoU, the Cement Producers Group will increase the production capacity for 50 Kg cement sacks from 150,000 sacks to no less than 250,000 sacks a day, while also reducing the price of 50 Kg cement sacks from AED 17 per sack to AED 16. The Group also pledged to fix the price of an unpacked tonne of cement at AED 340 and update the Ministry of Economy with production volume data and any other necessary information every three months. The MoU has allowed all consumers and contractors to buy cement sacks from the producer directly without any restrictions, on condition that the Cement Producers Group also provide packed and unpacked cement for all emirates without discrimination.
The MoU also requires factory representatives and producers to sign a commitment charter with regards to specific production quotas as dictated by the charter and annexed to the MoU, and which will be an integral part of the MoU. The agreement also includes specific mechanisms to monitor and follow up the execution of the MoU articles and the extent to which the factories should abide by them; these articles will be annexed to the MoU as part of the agreement. The representatives of the Cement Producers Group will designate a communication centre in each emirate to receive comments and suggestions from individual and corporate clients regarding the execution of the MoU, giving the Group priority in selling cement to contractors and final users.
H.E. Al Mansouri emphasized that the signing of the MoU forms part of a series of initiatives and measures taken by the Ministry of Economy to contribute to the reduction of the inflation rate and the control of rising prices of various goods and services, to attain the broader goal of implementing the UAE strategy towards economic and social stability in the local market.
H.E. Al Mansouri also emphasised that the MoU will contribute effectively to the stability of the local cement market by increasing production and reducing cement prices and eliminating monopoly and exploitation which negatively affect the local market and the UAE’s commitment to a free economy.
H.E. Al Mansouri added that some individuals and companies attempted to take advantage of the huge demand for cement and other consumer goods influenced by the UAE’s economic and construction boom, particularly by forming monopolies in the market and thus tarnishing the image of fair competition characterizing the UAE. He stressed that the Ministry will continue to combat all monopolistic activities which contradict the open nature of the national economy and negatively affect free-market principles.
H.E. Al Mansouri expects an increase in cement production capacity shortly due to the large expansions being carried out by cement companies and factories, which will pave the way for higher productivity and contribute to enhanced demand, leading eventually to market stability and price reduction; He likewise confirmed that the Ministry will exert all efforts to support industry in facing obstacles to its enhanced role in serving the market and boosting the country’s economic development.
H.E. Al Mansouri said: “This MoU is the result of the cooperation between the Ministry of Economy as a governmental party seeking the stability of food product prices within the UAE and protecting consumers by adopting various strategies and economic tools, and a group of cement producers representing the private sector in contributing to the development of the industrial sector in the UAE. We are aiming for the stability of prices in the national resale and wholesale markets and creating a higher level of competency away from illegal activities, in addition to highlighting safety and quality.”
H.E. Al Mansouri complemented the decision of H.H. Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President and Prime Minister and Ruler of Dubai, to exempt cement and iron from custom fees throughout the country’s ports.
He also revealed that H.H. Sheikh Mohammed’s decision reflects positively on the local market since it expands the coverage of exemptions to importers; as many contracting companies and ready-mix cement producers import materials directly from neighboring countries. H.E. Al Mansouri mentioned that this decision has played a major role in reducing the number of importers planning to exploit the high demand for iron and cement, who caused the rise of these materials in the first place and created market conditions inconsistent with the UAE’s economic vision as reflected in the open market policies implemented by government.
“Inflation is an international problem, especially for countries witnessing high growing rates; however, our country, through the Ministry of Economy, shall prevent exploitative activities which threaten market stability. All the Ministry’s actions will be fully coordinated with other relevant parties,” added H.E. Al Mansouri.
H.E. referred to proactive measures being taken by government to minimize the steep increase of prices and promote alternative materials and products, especially food items, and preventing monopoly activities in the market by freeing 16 essential food products agencies, in addition to implementing the bulk buying techniques for essential food products. These steps have been significantly supported by the exemption of iron and cement importers from custom taxes, thus increasing the availability of regularly-priced, good quality products.
H.E. Al Mansouri expressed his appreciation for the compliance of cement plants and producers with the initiatives of the Ministry of Economy (MoE), pointing out that this affirms the potential of the private sector and the national companies of various sectors and key verticals within the country in contributing significantly to the development of UAE’s socio-economic status.
In turn, Dr. Belhasa commended the MoU because of its significant impact on the stability of the domestic market and the prices of cement. He also lauded the Ministry of Economy’s efforts to fix cement prices and indicated that the commitment of cement plants to fix their sales prices will be for the benefit of all parties.
"The signing of the agreement is very timely since besides controlling the price of cement, it also positively influences different market trends so that no loss will be incurred by cement plants or contractors. This thus maintains the stability of the market in terms of prices and the ability to provide this important product to construction and infrastructure projects," Dr. Belhasa added.
The MoE has recently signed several similar agreements with major retail companies operating in the UAE, such as UAE Carrefour and Lulu Hypermarket, aimed at fixing the current prices of many commodities to 2007 levels. Moreover, the MoE has signed similar MoUs with cooperative societies in Dubai, many of which have complied with Ministry initiatives to sell tens of their commodities at cost. These initiatives are part of sustained efforts to combat high prices and reduce the inflation rate. The Ministry aims to protect consumers and their rights in accordance with Federal Law No. 24 of 2006 on consumer protection and its related regulations and decisions, as part of its function of overseeing the implementation of government policies for the development of the country’s economy and the protection of the consumers in cooperation with concerned national parties. This shall be achieved by ensuring high-quality services, ensuring that the consumer commodities and items comply with the UAE quality standards, providing support to the national economy and collaborating with the concerned parties to prevent commercial practices that harm the economy; maintain the principle of fair competition; and eliminate monopolies.
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