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UAE economy thrives on openness, diversification and competitiveness

The UAE economy, on a phenomenal growth trajectory driven by vibrant oil and non-oil sectors for more than four decades in a row, is ranked as one of the best in the world in terms of the efficiency and ease of doing business.

In the 41 years since its inception, the UAE has not only emerged as the second largest Arab economy, but also the most competitive, diverse and investor-friendly nation in the region thanks to prudent policies based on openness and diversification of sources of income.

The economic miracle of the country is unrivalled and is now ranked among the secure and stable economies offering one of the most sought-after investment destinations on the planet.

The Gross Domestic Product, or GDP, of the nation leapt to Dh1,248 billion by the end of 2011 from Dh6.5 billion in 1971, and is on track to grow by four per cent in 2012 defying global headwinds.

Thanks to an aggressive diversification strategy envisioned by the leadership, oil that constituted 70 per cent of the UAE’s economy in 1971, currently accounts for just 29 per cent of the GDP.

“Concerted efforts to diversify the economy and a policy of openness adopted by the UAE’s leadership have been the prime drivers in establishing the UAE as the second-largest Arab economy,” says UAE Minister of Economy, Sultan bin Saeed Al Mansouri.

An artist’s impression of the Mohammed bin Rashid City project announced on Saturday. It will further boost Dubai’s economy. — Wam

The country’s nominal GDP for the first time crossed the Dh1 trillion mark in 2010 and currently the GDP per capita is Dh174,000 per annum. According to forecast, the economy is on track to grow by four per cent in 2012 despite the headwinds posed by the eurozone woes and general bleak global prospects.

Over the past four decades, the value of the UAE’s foreign trade went up from Dh13 billion to Dh1,737 billion in 2011 while the share of non-oil sectors in GDP rose from 30 per cent to 71 per cent.

The UAE has a viable small and medium enterprise sector while the industrial sector has made remarkable achievements especially in terms of the increase in the number of enterprises. Large industrial complexes have been created, drawing in massive investment that has boosted the State’s strategy for developing the productive base of the economy and diversifying sources of income.

Attractive hub

Over the years, the UAE has emerged as an attractive hub for businessmen from all corners of the world and a magnet for foreign investment. With its high-quality investment climate and diverse and enormous investment opportunities that are available, the UAE leads the Arab World in indicators of the macroeconomic environment, the securities market, the corporate and institutional environment, and international financing.

Although the country concentrated on development of oil and gas industries as the backbone of its economy, the UAE at the same time pursued economic diversification. In order to meet the growing demand for energy, it is setting out to invest heavily in renewable energy and nuclear power so as to reduce the consumption of conventional energy sources and to increase oil and gas exports.

The International Monetary Fund has praised the UAE economy for showing impressive resilience.

“The UAE as a whole is responding comfortably to improved non-oil and oil sector growth. However, the medium term challenge for the county is to further build on the good performance to strengthen its resilience, including in relation to GREs,” Masood Ahmed, director of the IMF’s Middle East and Central Asia Department, said.

The real gross domestic product, or GDP, of the UAE is predicted to grow by 3.4 per cent in 2012, accelerating by 3.7 per cent in 2013 and sustaining a growth rate of 3.4 per cent in 2014, the bank said.

The current account balance in 2012 will be 10.2 per cent of the GDP, which will slide to 8.5 per cent in 2013, Standard Chartered said in its latest report.

Hospitality market

The hospitality market in the UAE, the second largest in the GCC region after Saudi Arabia, is expected to record an annual growth rate 10.4 per cent till 2016, driven by strong tourist inflows and steadily strengthening operating metrics, according to Alpen Capital.

While tourist arrivals in the UAE are likely to grow at a compound annual growth rate of 5.3 per cent between 2012 and 2022, hotel supply is expected to increase at 5.3 per cent from 96,992 hotels in Dubai and Abu Dhabi to 125,383 hotels in 2016.

According to the Minister of Economy Sultan bin Saeed Al Mansouri, the economic reality in the world today requires the UAE to play a larger role in shaping a new global economic order, as well as in powering the social development debate.

The minister said the UAE’s growth engines are its non-compromising commitment to innovation and entrepreneurship.

Today, the UAE is the only Arab country defined as an ‘innovation driven economy’ in the World Economic Forum Global Competitiveness Report 2012-13.

The UAE is the first Arab country and 30^th globally out of 187 countries to figure in the Global Human Development Report 2011 issued by the United Nations Development Programme.

The UAE has also significantly enhanced its global competitiveness ranking and also became first in the Arab world in “ease of starting a business.”

Among 183 countries figured in World Bank’s Doing Business Report 2013, the UAE now stands 26^th, improving its position by seven ranks. In ease of starting a business, the country now stands first in the Arab world and ranks 22 globally, up from its 46^th position in the previous report.

The Global Innovation Index 2012 released by Insead, an international business school, has said the UAE and Qatar were leading the Middle East in overall innovation performance.

In the Global Enabling Trade Report 2012 released recently by the World economic Forum, the UAE was ranked first regionally and 11^th globally in terms of the availability and quality of transport infrastructure. With this ranking, the UAE outperforms countries such as the US, Finland and Belgium.

A Dubai Chamber of Commerce and Industry study, which placed UAE as the third most competitive economy in the region, observed that the federal government’s effectiveness is high and the overall freedom to conduct business is well-protected under the existing regulatory environment as the country’s tax regime, which is a major attraction for foreign investors, strengthens foreign direct investment inflows, as both income and sales taxes are non-existent.

Working example

The UAE is ‘a great working example’ of the true power of information and communication technology, or ICTs, for economic growth, social development and modernisation in the 21^st century, the head of International Telecommunication Union, said recently.

According to a new global prosperity index that measures and ranks countries based upon social and economic well-being, the UAE is the most prosperous nation in the Middle East and North Africa (Mena).

Globally, the UAE also ranked 29^th overall out of 142 countries in the 2012 Legatum Institute Prosperity Index.

issacjohn@khaleejtimes.com