Retail outlets across the country have agreed to fix the prices of 400 essential commodities as part of a new initiative to combat inflation, the Ministry of Economy said yesterday.
The campaign, which runs until December 31, features 70 outlets across the UAE including branches of Carrefour, Spinneys, Lulu Hypermarket and the cooperative societies.
The commodities to have their prices frozen include fresh chicken, sugar, vegetable oil, tea bags, Arabic bread and mineral water.
"Retail outlets have responded to the ministry's request and agreed to fix the prices of 400 major commodities at 70 outlets in various emirates until the end of 2011," said Mohammad Bin Abdul Aziz Al Shehi, Undersecretary of the Ministry of Economy.
The process has been divided into three levels: some outlets are fixing commodity prices regardless of fluctuations in the market, some retailers are reducing the cost of selected goods to 50 per cent and others are fixing prices at purchase cost.
"This is purely a corporate social responsibility on the part of the retailers; they are putting some of their profits back into the community," Al Shehi said.
"This campaign is nothing to do with government incentives; we have been working with local retailers for over four years in a bid to tackle price hikes as commodity prices continue to rise in many countries across the world.
"Each vendor is free to choose what product prices they freeze as we understand they have all got contracts with certain suppliers. But the campaign has full transparency; it is the retailers' obligation to do this and we are promoting what they have done," he added.
The ministry said it was up to individual retailers to put controls in place to tackle the issue of bulk buying, whereby smaller groceries buy certain commodities en masse and then selling it at inflated prices.
"Most vendors control their product quantities. It is up to consumers to pay the difference; it is their choice if they want to shop at small groceries or buy certain products. They have the option to drive to one of the larger hypermarkets and pick up the same item at a much cheaper price. Furthermore, the large retailers have mechanisms in place to combat the issue of bulk buying, Al Shehi said.
One of the hypermarkets to guard against such practices is Lulu Hypermarket, which has 88 stores across the Gulf region.
"It is important that the benefit of this initiative is passed on to the customer and not the middle man, who is simply looking to make a profit," said Nanda Kumar, corporate communications manager of the Emke Group, which owns Lulu Hypermarket. "We will place restrictions on the quantities of goods purchased in order to control the phenomenon of bulk buying by smaller groceries looking to sell products at inflated prices."
Kumar says a price freeze has already been implemented on certain products and will apply to all selected commodities by the end of next week.
"The marketplace is witnessing some inflationary pressures that are affecting the budgets of ordinary people. We faced a similar issue three years when prices were going up but Lulu Hypermarket was one of the first retailers to tie up with the Ministry of Economy to tackle the threat of inflation," he said.
The UAE's monthly inflation index declined for the fourth consecutive month in April to 1.1 per cent, according to figures released by the National Bureau of Statistics. The decline in the national inflation index was driven largely by a 1.4 per cent decline in housing costs while food and beverage costs rose five per cent.
The International Monetary Fund said this week that falling property rents would keep the UAE's inflation rate at 4.5 per cent in 2011.
"I expect UAE inflation to remain very low this year," said Simon Williams, HSBC's Chief Economist for the Middle East and North Africa.
"There is not significant strength to support any meaningful pick-up. Price controls [such as the freezing of commodity prices] help for a while but they are only a short term measure," he added.