A Leading Economy

The UAE economy has grown in leaps and bounds, firmly establishing itself as the region’s premier destination as well as a global hub. The UAE is the Middle East's second largest economy after Saudi Arabia.

The government’s highly successful economic diversification program gave rise to a robust variety of industries which now accounts for much of the country’s growth.

A signatory to the General Agreement on Tariffs and Trade, the UAE is committed to free trade and thus promotes a liberal economy. Labor costs are competitive and corporate tax and personal taxes are nil. Along with its strategic location, excellent infrastructure and stable political environment, the UAE is considered a haven by most global businesses and investors. 

The UAE continues to be a strategic hub, a fast growing economy with liberal policies and business-friendly free zones. Over the past five years, the UAE economy has recorded one of the highest growth rates in the world, surging by an average per cent. Growth was high in both the oil and non-oil sectors as strong prices allowed the government to sharply boosted spending and this encouraged the private sector to pump more funds into development and other projects.

Average GDP growth over 2000 to 2006 in the UAE was about 8.4 percent—the highest in the Gulf Cooperation Council, which averaged 6.5 percent. The nominal GDP for 2007 was $192 billion.

Whereas most members of the global community are headed for major economic contraction, the UAE’s macroeconomic fundamentals remain strong helping it cope with through the down time. It is estimated that the GDP can still grow about 3% in 2009.

Massive Foreign Assets

The UAE has secured an enviable financial position with massive external surpluses along with its diversified economy to maintain real growth in 2009 despite lower demand for crude oil. The Abu Dhabi Investment Authority (ADIA)  is still believed to be in control of about $328bn in foreign assets, lower that the nearly $ 453bn at the end of 2007.

Dependendable Oil

The UAE has about 98.2 billion barrels of crude oil or 9.5% of the world’s reserves and 4% of natural gas which places it at 4^th position in the world. These reserves are overwhelmingly located in Abu Dhabi. At the current rate of disposal, these reserves will last for over 150 years.

In the medium term, the UAE economy will continue to rely on its hydrocarbon sector which remains to be the most dominant economic contributor accounting for a third of the GDP.

The Abu Dhabi National Oil Company, ADNOC, is the main organization in charge of Abu Dhabi oil business which operates directly under Supreme Petroleum Council. Production is handled through joint ventures with consortia of international companies. ADNOC’s oil production is around 2 million barrels a day whereas. Dubai produces around 240,000 barrels a day. Sharjah has relatively smaller oil and gas fields.

Japan is the largest customer of UAE oil accounting for about 62 per cent of export. In liquefied gas requirement, the UAE supplies almost one-eighth of Japan's needs.

Highly Diversified Economy

The discovery of oil ushered the UAE into the industrial age. This process of industrialisation gathered momentum following the formation of the Federation. During the last two decades, with the Government's increasing emphasis on diversification and basic components such as capital and energy readily available, the manufacturing sector has made significant progress in the UAE.

Free zones have played an instrumental role in attracting manufacturing industries and today, hundreds of factories covering a wide range of manufacturing are distributed throughout the country. Cement, building materials, aluminum, chemical fertilizers and foodstuffs industries top the list, followed by garments, furniture, paper and carton, plastics, fiber glass and processed metals.

 

The UAE launched a diversification and liberalization program to reduce reliance on oil and transform its economy from a conventional, labor-intensive economy to one based on knowledge, technology and skilled labor. The federal and individual Emirate governments have invested heavily in sectors such as aluminum production, tourism, aviation, re-export commerce and telecommunications.

This resulting infrastructure boom sees virtually every economic sector undergoing rapid redevelopment and expansion.

Having invested heavily in infrastructure since the establishment of the state, the Government is actively encouraging the private sector to participate in further infrastructure development in transport, communications, telecommunications, energy and ports. Private sector investment in industry, involving public shareholding, inflow of foreign capital and technology transfer is expected to increase.

The UAE economy is booming and the opportunities to do business in the country are limitless. The UAE’s currency, the dirham, is secure and freely convertible; there are no restrictions on profit transfer or capital repatriation; import duties are low (around 5 per cent for virtually all goods) and, in the case of items imported for use in the free zones, non-existent; labour costs are competitive; corporate tax and personal taxes are nil and 44 double taxation agreements and 32 bilateral investment treaties are in place. In addition, the financial risk is minimal (Moody’s credit rating Aa3). These factors, combined with a strategic, accessible location for major regional markets, an excellent reliable infrastructure and an extremely pleasant, stable and safe working environment bode well for investment.