"It is a welcome decision. Many businesses raised their prices though they had not been directly affected by the fuel price increase. And in many cases, the increase by these businesses are exaggerated, which translates into huge profits," said an Abu Dhabi-based economist.

According to the decision by the two Abu Dhabi local departments, outlets that have unjustifiably raised prices would be issued a warning and fined Dh1,000 on the first offence. On the second offence, the fine will be raised to Dh5,000 and on the third offence, the establishment will be closed down.

The prompt move by the government to contain unreasonable price increases is being considered as timely even as market watchers believe the complete picture will emerge within a fortnight as businesses try to adjust their price lists in the light of the 30 per cent hike in petrol prices from August 28.

Fruits and fish

An increase of some 15–20 per cent in fruit and vegetable prices was the first to be felt by nationals and expatriates in the capital. Imported fruit and vegetables, like iceberg lettuce and leeks, had their prices increased noticeably, even at big outlets known to be offering quality produce at prices lower than at smaller outlets.

According to officials, the joint teams will keep an eye on the prices of all consumer items, but the main focus will be on food items that are traditionally consumed on a daily basis by residents. This includes fish, whose prices jumped by 15–20 per cent, particularly the favourite local delicacies – Hamour and Sheri. Fishermen claim each trip costs them Dh1,000 after the hike in prices of diesel which rose by 31.50 per cent. They say the rise in fuel prices has badly affected the business of fishing, which relies on the use of modern fishing boats to catch fish from 50-100 nautical miles in the high seas. Some fishermen claimed the returns from each fishing trip do not exceed Dh2,000. Their argument is not convincing to many.

Thursday's decision by the Planning and Economy Department and the Department of Municipalities and Agriculture shows concerns over the effects of price hikes in the consumer sector.

Savings hit

Businesses, almost with no exceptions, claim that the recent 30 per cent hike in fuel price has led to increased cost of transportation and that hit them hard.

Individuals in the medium or low-income groups have been complaining that they can no longer make ends meet, no matter what they do to control spending. Besides, expatriates, the great majority of whom have no pension plans, depend on their monthly or yearly savings to ensure a decent living standard after retirement. To many, there is no more a room for any significant savings.

A recent study by the Abu Dhabi Chamber of Commerce and Industry (ADCCI), showed that there has been a significant rise in the monthly expenditures of the UAE national families as well as expatriate families, due to rampant inflation, caused by euro-dollar differential (87 per cent of UAE imports from Europe are priced in euro), rise in fuel prices and other factors, as against their average monthly incomes.

The study noted these factors had created a gap which needs corrective measures by the government, so that socio-economic complications are avoided.

"The continuous price spiral, the constant increase in rents of residential units, the uncontrollable prices of daily used commodities have forced families and individuals in the emirates to resort heavily to taking bank loans and seeking a way out with special assistance funds and from welfare societies," the study said.

Stagnant incomes

Economists have said income levels of the majority remained unchanged. The monthly expenditure for a UAE national family is estimated at Dh30,628 for the year 2005 compared with Dh24,380 in year 2000, which shows that there was an increase in expenditure during 2000-2005 by 26 per cent.

About 70 per cent of families living in Abu Dhabi solely rely on salaries, as a source of income while the remaining 30 per cent have various sources such as agriculture, businesses, bank interests, dividends from bonds and shares, pensions, financial assistance from government and money transfers.

Last year witnessed a phenomenal rise in prices, and the current indices show a continuation in 2005.

Another study by the Chamber also revealed concerns over price hikes in the consumer sector especially after the upward revision of salaries, and experts recommended linking the salaries with the inflation rate as a mechanism to safeguard the fixed income group against the spiralling cost of living. The prices of essentials went up by 18 per cent following the salary hike for government and private sector employees, according to a recent study. At least 98 per cent of people believe prices of essentials are not reasonable.

There are fears, said the experts in the study, that future problems resulting from the price hike in commodities and services and the increase in inflation and depreciation in the value of currency could lead to inability by families to save, which can effect their economic vulnerability besides negatively affecting national savings, vital for economic growth. The decline in living standards can affect health and productivity and cause social problems.