UAE stays firm on growth path

The UAE economy is expected to grow between 3% and 3.5% in 2016.

The UAE remained resilient to the drop in international oil prices this year, due to the country's diversification policy, says a latest report.
As the country celebrates its 45th National Day anniversary, the UAE has begun to reap the fruits of its economic diversification policy that has been successful in moving the economy from its full dependence on the oil sector to relying on multiple resources.
For Economy Minister Sultan bin Saeed Al Mansouri, the diversification policy, under which the country's dependence on oil steadily decreases year after year, has helped the UAE neutralise the oil price decline.
"Oil has so far had a limited impact on the economy and major infrastructure projects in Abu Dhabi, Dubai and other emirates will continue," he said.
Oil revenues currently contribute 30 per cent to the UAE's gross domestic product (GDP), a drop from 90 per cent in the 1970s.
The International Monetary Fund said the UAE has continued to benefit from diversification and innovation policies that have helped limit negative spillovers from lower oil prices, sluggish global growth and volatility in emerging market economies.
Al Mansouri said the zero-deficit 2016 budget reflected the limited impact of the low oil prices.
"The UAE is the country least affected by low oil prices as non-oil sectors contributed nearly 69 per cent of the GDP," he said.
Despite the steep drop in oil prices, the UAE economy is expected to grow between three per cent and 3.5 per cent in 2016. For 2015, the UAE projected a similar three to 3.5 per cent growth in GDP.
"We have faced similar circumstances and challenges before. We were optimistic and we dealt with those challenges professionally at the level of the government, at the level of leadership, local government and the private sector and we managed the situation to continue our growth," Al Mansouri said.
New rules
The government has issued new rules and regulations to further improve the business environment. The industrial sector, which contributes 14 per cent to GDP, is forecast to expand and contribute 20 per cent in 2021. Big growth will come from non-traditional industries and the knowledge-based economy.
The UAE seeks to attract more than $70 billion in industrial investments by 2025, which will help increase the share of the industrial sector in the GDP to 25 per cent.
SMEs on top
Another sector that is expected to bolster diversification is small and medium enterprises, or SMEs. The government is giving big priority to SMEs across its policies and initiatives with an aim to boost the share of the segment in the national economy to 70 per cent from 60 per cent by 2021.
According to official reports, SMEs account for 86 per cent of the total workforce in the country, and are the chief enablers of economic diversification, innovation and the shift to a knowledge-based economy.
SMEs make up more than 94 per cent of the companies operating in the UAE, totalling 350,000, and 73 per cent of companies in the wholesale and retail trade and 16 per cent in the services sector are SMEs. The manufacturing sector also has an 11 per cent share of SMEs.
Attracting FDI
Open economic policies helped enhance the UAE's attractiveness to doreign direct investment (FDI). The Ministry of Economy announced in 2016 that it aims to increase the contribution of FDI to five per cent of the country's gross domestic product over the next five years. This is in line with the goals of the National Agenda of the UAE Vision 2021.
The UAE is the second-largest FDI recipient in the West Asia region, according to the 2015 UNCTAD World Investment Report.
Increased FDI pushed the UAE to first rank regionally and 22nd globally in the World Investment Report 2015.
The drive for diversification does not come at the expense of the oil sector. With the world's seventh largest proven crude oil reserves, the UAE is a critical partner in global energy markets.
The country has always believed that the long-term demand for oil outstripped supply, and that for companies with strong balance sheets and a long-term view, now was the time to invest, not to withdraw.
"The oil industry is inherently cyclical - this is a basic point that often gets overlooked in the short-term noise - and finding equilibrium between supply and demand is almost impossible," Energy Minister Suhail bin Mohammed Faraj Al Mazroui said.
Six-pillar plan
In 2016, the UAE government launched a six-pillar plan, which was set up in collaboration with the World Economic Forum (WEF) and seeks to transform the Fourth Industrial Revolution into a global movement spearheaded by the UAE.
First pillar: The UAE government will establish the Fourth Industrial Revolution Council, the first of its kind in the world. The council will report directly to the cabinet and will be supervised by the Ministry of Cabinet Affairs and the Future. Council members will include representatives from government, private sector and academic organisations.
Second pillar: Working closely with the WEF and through the Global Future Councils to formulate a global governance framework that regulates legislative and executive efforts to implement Fourth Industrial Revolution technologies.
Third pillar: In collaboration with the WEF, the UAE government will work to establish Fourth Industrial Revolution Councils, which aim to provide advisory support to decision makers.
Fourth pillar: Launching a programme that seeks to include governments from around the region in the network of experts that take part in the Global Future Councils and, consequently, enhancing the event's role in supporting economic development in those economies. The network includes more than 5,000 members and experts from governments, international organisations, private companies and academic research institutions.
Fifth pillar: The UAE will be the first country in the world to experiment with and implement the technologies of the Fourth Industrial Revolution. This builds on the steps the government has already implemented through initiatives promoting technologies such as blockchain, smart transportation, 3D printing and artificial intelligence.
Sixth pillar: The UAE government will be the first in the world to design and build a framework within its national agenda that aims to prepare governments for the future. The framework focuses on measuring the readiness of governments in the next 10 years against six main criteria: technology and innovation, economy, society, natural resources and the environment, security and governance.
"The UAE Government realises the importance of planning for the future," Mohammad bin Abdullah Al Gergawi, Minister of Cabinet Affairs and Future. "With that in mind, it set off to proactively turn the technologies of the Fourth Industrial Revolution into reality," he added.
Government accelerators
2016 also saw His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, launching the world's first government accelerators.
According to Shaikh Mohammed, the accelerators have multiple tasks and responsibilities to boost the pace for achieving the goals of the National Agenda and projects.
Directives have been issued for all government bodies under the umbrella of the accelerators programme to develop initiatives, laws, policies and services that support national indexes and programmes. The government bodies will also be tasked with implementing joint projects in record time in order to shift government services into advanced standards by 2021.The first group of government accelerators will focus on five ministries: the Ministry of Interior, Ministry of Economy, Ministry of Human Resources and Emiratisation, Ministry of Climate Change and Environment, and Ministry of Education. He directed officials to intensify efforts to achieve a 100 per cent completion rate for the National Agenda goals.
Joint responsibility
According to Minister of Climate Change and Environment Dr Thani bi Ahmed Al Zeyoudi, in order to transform the national economy to a green, sustainable and low-carbon economy, the responsibility must rest not only upon the government, but also on the various segments of society, as well as public and private sectors.
"Our government institutions have been working to co-ordinate efforts in leading development and progress, and laying the foundations for their successful implementation. With that in mind, we have adopted a series of strategies and policies and begun implementing them, all working towards raising awareness of the importance of green economy at all levels, in addition to capacity building, and the encouragement of sustainable production and consumption," Dr Al Zeyoudi said. The UAE also started to lend attention to an Islamic economic system. For Shaikh Mohammed bin Rashid Al Maktoum, adopting the Islamic economic system presents a real opportunity to develop management methods, economic growth and trade by specialists in these areas.
Islamic financing offers global investment opportunities estimated to reach $3 trillion by 2020.
Leaving no stone unturned in pursuit of comprehensive and sustainable economic development, the UAE is now looking at innovation to be the next economic breakthrough.
- Wam