Economy of the United Arab Emirates

Economy of United Arab Emirates

Dubai skyline and world's tallest building Burj Khalifa
Currency United Arab Emirates dirham
Trade organisations
 OPEC and WTO
Statistics
GDP $570 billion (2013)[1]
GDP growth
 4.6% (2013)[2]
GDP per capita
 $63,181 (2013) (7th)
GDP by sector
 Agriculture (0.8%), industry (56.1%), services (43.1%) (2012 est.)
1.4% (2012 est.)[3]
Population below poverty line
 0% (2014 est.)[4]
Labour force
 4.34 million (2010 est.)
Labour force by occupation
 Agriculture (7%), industry (15%), services (78%) (2000 est.)
Unemployment 4.6% (2012)[5]
Main industries
 Petroleum and petrochemicals, fishing, aluminium, cement, fertilizers, commercial ship repair, construction materials, Aerospace parts, Financial services, Tourism, pharmaceuticals, steel, handicrafts, textiles.
26th[6]
External
Exports $368 billion (2013)[7]
Export goods
 Crude oil, natural gas, reexports, dried fish, dates
Main export partners
  Japan 15.4%
 India 13.4%
 Iran 10.7%
 Thailand 5.5%
 Singapore 5.5%
 South Korea 5.3% (2012 est.)[8]
Imports $273.5 billion[7]
Import goods
 Machinery and transport equipment, chemicals, food
Main import partners
  India 17.0%
 China 13.7%
 United States 10.5%
 Germany 5.1%
 Japan 4.2% (2012 est.)[9]
$151.8 billion (31 December 2010 est.)
Public finances
40.4% of GDP (2012 est.)
Revenues $130.3 billion
Expenses $99 billion (2012 est.)
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.

The economy of the United Arab Emirates is the second largest in the Arab world (after Saudi Arabia), with a gross domestic product (GDP) of $570 billion (AED2.1 trillion) in 2014. The United Arab Emirates has been successfully diversifying its economy.[10]

Although UAE has the most diversified economy in the GCC, the UAE's economy remains extremely reliant on oil. With the exception of Dubai, most of the UAE is dependent on oil revenues. Petroleum and natural gas continue to play a central role in the economy, especially in Abu Dhabi. More than 85% of the UAE's economy was based on the oil exports in 2009.[11][12] While Abu Dhabi and other UAE emirates have remained relatively conservative in their approach to diversification, Dubai, which has far smaller oil reserves, was bolder in its diversification policy.[13] In 2011, oil exports accounted for 77% of the UAE's state budget.[14]

Dubai suffered from a significant economic crisis in 2007-2010 and was bailed out by Abu Dhabi's oil wealth. Dubai's current prosperity has been attributed to Abu Dhabi's petrodollars.[15] Dubai is currently in extreme debt.[16] Tourism is one of the main sources of revenue in the UAE, with some of the world's most luxurious hotels being based in the UAE. Although the UAE is now less dependent on natural resources as a source of revenue, petroleum and natural gas exports still play an important role in the economy, especially in Abu Dhabi. A massive construction boom, an expanding manufacturing base, and a thriving services sector are helping the UAE diversify its economy. Nationwide, there is currently $350 billion worth of active construction projects.[17]

The UAE is a member of the World Trade Organization and OPEC.

Overview

UAE has the second-largest economy in the Arab world (after Saudi Arabia),[18] with a gross domestic product (GDP) of $377 billion (AED1.38 trillion) in 2012.[7] A third of the GDP is from oil revenues.[18] The economy was expected to grow 4–4.5% in 2013, compared to 2.3–3.5% over the previous five years. Since independence in 1971, UAE's economy has grown by nearly 231 times to AED1.45 trillion in 2013. The non-oil trade has grown to AED1.2 trillion, a growth of around 28 times from 1981 to 2012.[18]

Prior to independence from the UK and unification in 1971, each emirate was responsible for its own economy. At the time, pearl diving, seafaring and fishing were together the mainstay of the economy, until the development of Japanese cultured pearls and the discovery of commercial quantities of oil.[19] Previous UAE President Sheikh Zayed Bin Sultan Al Nahyan is credited with bringing the country forward into the 20th century and using the revenue from oil exports to fund all the necessary development. Likewise, former UAE vice-president Sheikh Rashid Bin Saeed Al Maktoum had a bold vision for the Emirate of Dubai and foresaw the future in not petroleum alone, but also other industries.[20]

External trade

Emirati exports in 2006

With imports totaling $273.5 billion in 2012, UAE passed Saudi Arabia as the largest consumer market in the region. Exports totaled $314 billion, which makes UAE the second largest exporter in the region.[18]

UAE and India are each other's main trading partners, with the latter having many of its citizens working and living in the former. The trade totals over $75 billion (AED275.25 billion).[21]

The report, GCC Trade and Investment Flows, found that China and India in particular have the greatest potential to drive the region’s economic profile. China especially is touted as a “game-changer”: GCC-China trade grew faster than with any other significant trade partner in the three years to 2013, according to the study by the Economist Intelligence Unit (EIU). Asia as a whole accounted for 67 per cent of GCC exports and 40 per cent of imports in 2013.[22]

The UAE is the main trading partner of Africa within the GCC, with approximately 80% of the UAE’s imports from Africa being primary products, such as food produce and beverages. In Q3 2014, Dubai’s total non-oil trade with Africa reached a value of AED89 billion, according to Dubai Customs. Vision (Magazine) stated that total non-oil trade between Dubai and Africa has grown by over 700% over the last decade.[23]

The UAE also has significant economic ties with the USA, UK and other European countries.

Diversification

Graphical depiction of UAE's product exports in 28 colour-coded categories
Madinat Jumeirah hotel in Dubai

Although UAE has the most diversified economy in the GCC, the UAE's economy remains extremely reliant on oil. With the exception of Dubai, most of the UAE is dependent on oil revenues. Petroleum and natural gas continue to play a central role in the economy, especially in Abu Dhabi. More than 85% of the UAE's economy was based on the oil exports in 2009.[11][12] While Abu Dhabi and other UAE emirates have remained relatively conservative in their approach to diversification, Dubai, which has far smaller oil reserves, was bolder in its diversification policy.[13] In 2011, oil exports accounted for 77% of the UAE's state budget.[14]

Dubai suffered from a significant economic crisis in 2007-2010 and was bailed out by Abu Dhabi's oil wealth. Dubai's current prosperity has been attributed to Abu Dhabi's petrodollars.[15] Dubai is currently in extreme debt.[16] The UAE government has worked towards reducing the economy's dependence on oil exports by 2030.[24] Various projects are underway to help achieve this, the most recent being the Khalifa Port, opened in the Emirate of Abu Dhabi at the end of 2012. The UAE has also won the right to host the World Expo 2020, which is believed to have a positive effect on future growth, although there are some skeptics which mention the opposite.[25]

Over the decades, the Emirate of Dubai has started to look for additional sources of revenue. High-class tourism and international finance continue to be developed. In line with this initiative, the Dubai International Financial Centre was announced, offering 55.5% foreign ownership, no withholding tax, freehold land and office space and a tailor-made financial regulatory system with laws taken from best practice in other leading financial centres like New York, London, Zürich and Singapore. A new stock market for regional companies and other initiatives were announced in DIFC. Dubai has also developed Internet and Media free zones, offering 100% foreign ownership, no tax office space for the world's leading ICT and media companies, with the latest communications infrastructure to service them.[26] Many of the world's leading companies have now set up branch offices, and even changed headquarters to, there. Recent liberalisation in the property market allowing non citizens to buy freehold land has resulted in a major boom in the construction and real estate sectors, with several signature developments such as the 2 Palm Islands, the World (archipelago), Dubai Marina, Jumeirah Lake Towers, and a number of other developments, offering villas and high rise apartments and office space. Emirates (part of the Emirates Group) was formed by the Dubai Government in the 1980s and is presently one of the few airlines to witness strong levels of growth. Emirates is also the largest operator of the Airbus A380 aircraft.

As of 2001, budgeted government revenues were about AED 29.7 billion, and expenditures were about AED 22.9 billion.

In addition, to finding new ways of sustaining the national economy, the UAE has also made progress in installing new, sustainable methods of generating electricity. This is evidenced by various solar energy initiatives at Masdar City and by other renewable energy developments in parts of the country.[27][28]

Human Resources and Employment

Construction workers from Asia on top floor of the Angsana Hotel & Suites

Emiratisation is an initiative by the government of the UAE to employ more UAE Nationals in a meaningful and efficient manner in the public and private sectors.[29][30] While the program has been in place for more than a decade and results can be seen in the public sector, the private sector is still lagging behind with citizens only representing 0.34% of the private sector workforce.[31]

While there is general agreement over the importance of Emiratisation for social, economic and political reasons, there is also some contention as to the impact of localization on organizational efficiency. It is yet unknown whether, and the extent to which, employment of nationals generates returns for MNEs operating in the Middle East. Recent research cautions that localization is not always advantageous for firms operating in the region, and its effectiveness depends on a number of contingent factors.[32][33]

In December 2009 however, a positive impact of UAE citizens in the workplace was identified in a newspaper article citing a yet unpublished study,[34] this advantage being the use of networks within the evolving power structures.

Overall, however, uptake in the private sector remains low regardless of significant investments in education, which have reached record levels with education now accounting for 22.5% – or $2.6 billion – of the overall budget planned for 2010.[35] Multiple governmental initiatives are actively promoting Emiratisation by training anyone from highschool dropouts to graduates in a multitude of skills needed for the - essentially Western - work environment of the UAE, these initiatives include Tawteen UAE,[36] ENDP[37] or the Abu Dhabi Tawteen Council.[38]

There are very few anti-discrimination laws in relation to labour issues, with Emiratis – and other GCC nationals – being given preference when it comes to employment.[39] Unions are generally banned and workers with any labour issues are advised to be in touch with the Ministry of Labour, instead of protesting or refusing to work. Migrant employees often complain of poor workplace safety and wages based on nationality, although this is being slowly addressed.[40]

Beyond directly sponsoring educational initiatives, the Emirates Foundation for Philanthropy[41] is funding major research initiatives into Emiratisation through competitive research grants, allowing universities such as United Arab Emirates University or Dubai School of Government to build and disseminate expertise on the topic.

Academics working on various aspects of Emiratisation include Paul Dyer[12] and Natasha Ridge from Dubai School of Government, Ingo Forstenlechner[13] from United Arab Emirates University, Kasim Randaree from the British University of Dubai and Paul Knoglinger from the FHWien.

Investment

The stock market capitalisation of listed companies in the UAE was valued at $109.9 billion in October 2012 by Bloomberg.[42]

Corporate Governance Code

The Securities and Commodities Authority (SCA) introduced a new corporate governance regulation (the Corporate Governance Code), which applies to all joint stock companies and institutions whose securities are listed on Dubai Financial Market (DFM) and Abu Dhabi Securities Exchange (ADX) in 2009.[43]

See also

References

  1. ↑ List of countries by GDP (PPP)
  2. ↑ "UAE poised for another year of strong growth". Retrieved 3 March 2015.
  3. ↑ http://www.marketresearch.com/Oxford-Economics-v3791/UAE-Country-Economic-Forecast-Feb-6824030/
  4. ↑ List of countries by percentage of population living in poverty#Countries
  5. ↑ "Unemployment rates in UAE are safe for now, economists say". Al-Shorfa. 13 June 2012. Retrieved 3 March 2015.
  6. ↑ "Doing Business in United Arab Emirates 2013". World Bank. Retrieved 2012-10-21.
  7. 1 2 3 "GDP to hit $474.2b in 2018". Khaleej Times. 4 July 2013. Retrieved 5 January 2014.
  8. ↑ "Export Partners of UAE". CIA World Factbook. 2012. Retrieved 2013-07-22.
  9. ↑ "Imports Partners of UAE". CIA World Factbook. 2012. Retrieved 2013-07-22.
  10. ↑ "Diversification raises non-oil share of UAE's GDP to 71%".
  11. 1 2 "The World Factbook". CIA.
  12. 1 2 "WTO Trade Statistic 2009". Stat.wto.org.
  13. 1 2 "United Arab Emirates profile". BBC News. 14 November 2012.
  14. 1 2 "Economic diversification in the GCC countries" (PDF). p. 13.
  15. 1 2 "Speaking of Water".
  16. 1 2 "Dubai Drowning in Debt".
  17. ↑ 3
  18. 1 2 3 4 "UAE's economy growth momentum set to -pick up". Khaleej Times. 27 December 2013. Retrieved 5 January 2014.
  19. ↑ "UAE History & Traditions: Pearls & pearling - UAEinteract". Retrieved 3 March 2015.
  20. ↑ "The Hong Kong of the Middle East". Retrieved 3 March 2015.
  21. ↑ "UAE and India sign crucial investment protection pact". Gulf News. 13 December 2013. Retrieved 5 January 2014.
  22. ↑ "GCC-Asian economic ties set to soar". Retrieved 3 March 2015.
  23. ↑ "Is Africa the new frontier for the UAE?". Retrieved 3 March 2015.
  24. ↑ "UAE Industry Builds Capability". Retrieved 3 March 2015.
  25. ↑ "Dubai world Expo bid stirs worry of second bubble". Retrieved 3 March 2015.
  26. ↑ "Dubai Media City free zone". Business-Dubai.com. Retrieved 23 November 2015.
  27. ↑ "Renewable energy across the MENA region : Clyde & Co (en)". Retrieved 3 March 2015.
  28. ↑ "Masdar City: A Rising Star". The Ecologist. 8 April 2013. Retrieved 3 March 2015.
  29. ↑ Gulf News - New emiratisation drive
  30. ↑ Gulf News - Call for cautious Emiratisation
  31. ↑ Kerr, S. and A. England (2009). UAE to safeguard jobs of nationals. Financial Times. London
  32. ↑ Mellahi, K. (2007). The effect of regulations on HRM: private sector firms in Saudi Arabia. International Journal of Human Resource Management, 18(1): 85-99.
  33. ↑ Forstenlechner, I. (2010). "Workforce localization in emerging Gulf economies: the need to fine-tune HRM." Personnel Review 39(1): 135-152.
  34. ↑ http://www.thenational.ae/apps/pbcs.dll/article?AID=/20091203/NATIONAL/712029856/1010
  35. ↑ http://www.uaeinteract.com.
  36. ↑ "UAETAW TEEN". UAETAW TEEN. Retrieved 3 March 2015.
  37. ↑ ":: Emirates Nationals Development Programme ::". Retrieved 3 March 2015.
  38. ↑ http://www.tawteencouncil.ae
  39. ↑ Emiratisation won't work if people don't want to learn | The National. Thenational.ae (2013-03-18). Retrieved on 2014-01-26.
  40. ↑ "Indian workers jailed in Dubai over violent protest". Retrieved 3 March 2015.
  41. ↑ "Welcome to Emirates Foundation". Retrieved 3 March 2015.
  42. ↑ "Bloomberg". Bloomberg. Retrieved 3 March 2015.
  43. ↑ "Ministerial Resolution No. (518) of 2009 Concerning Governance Rules and Corporate Discipline Standards"

External links

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