In a small bowl, combine unbleached white all-purpose flour, baking powder, and salt; set aside.
In a large bowl, mix butter and sugar until combined. Add egg, rose water, and vanilla extract and mix until thoroughly combined then add flour mixture and mix until fully incorporated.
Shape dough into a ball, wrap in plastic wrap, and chill for at least 1 hour. Meanwhile, preheat oven to 325°F. Line baking sheets with parchment paper and set aside.
Remove dough from refrigerator and discard plastic wrap. Place cold dough on a lightly floured work surface and roll out to 1/8-inch thickness. Cut out desired shapes using lightly floured cookie cutters and place on prepared baking sheets, about 1-inch apart.
Bake cookies until edges are slightly golden, 15 – 18 minutes, rotating sheets halfway through baking. Let cool completely (about 30 minutes) before decorating.
While cookies bake, prepare icing and colored sugar. For colored sugar, divide sugar into ¼ cup portions. Add 1 – 2 drops of food coloring per portion and mix thoroughly to distribute color.
To prepare icing, combine powdered sugar, rose water, and milk in a bowl and whisk until smooth. Adjust consistency as needed with extra milk. If desired, divide icing into separate containers and color with food coloring.
Ice cooled cookies with prepared icing and immediately decorate with colored sugar.