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United Arab Emirates

Key indicators
Total population (millions), 2006........................................................................4.7
GDP (US$ billions), 2006 ....................................................................................177
GDP (PPP US$) per capita, 2006 .................................................................27,610
as share of world total (percent).................................................................0.21
Current account balance (percent of GDP), 2006...........................................21
Human Development Indicator rank (out of 177 economies), 2004.............49
Source: UNFPA, IMF, UNDP

Competitiveness rankings
Rank within
country group 3*
(out of 40)

Overall
rank (out
of 128)

Score
(17)

Global Competitiveness Index 2007...............29..........32 ......4.7

GCR 200506 (out of 117 economies)......................................32 .......4.6

Stage of development
Transition
12

1
Factor
driven

Basic requirements ...................................................26 ...........28 .......5.4

1st pillar: Institutions..................................................24 ...........28 .......5.0
2nd pillar: Infrastructure ...........................................24 ...........25 .......5.0
3rd pillar: Macroeconomy...........................................3 .............5 .......5.9
4th pillar: Health and primary education................40 .........102 .......5.7

Transition
23

2
Efficiency
driven

3
Innovation
driven

Institutions
7

Innovation

Infrastructure

5
4

198

Efficiency enhancers.................................................29 ...........30 .......4.6

5th pillar: Higher education and training................37 ...........59 .......4.1
6th pillar: Market efficiency......................................21 ...........23 .......5.0
7th pillar: Technological readiness .........................26 ...........27 .......4.5
Innovation factors ......................................................32 ...........40 .......4.1
8th pillar: Business sophistication...........................31 ...........37 .......4.6
9th pillar: Innovation ..................................................31 ...........40 .......3.5

Business
sophistication

Health and
primary
education

Technological
readiness

Higher education
and training

Market efficiency

Gender Gap Index 2006 (out of 115 economies)

Macroeconomy

101
United Arab Emirates

Innovation-driven economies

* Country group includes the countries in the same stage of development

as well as those transitioning toward it.

The most problematic factors for doing business

Restrictive labor regulations .......................................16.5
Inadequately educated workforce.............................15.6
Poor work ethic in national labor force ....................13.7
Inflation ...........................................................................13.6
Inefficient government bureaucracy.........................11.4
Access to financing ........................................................9.0
Inadequate supply of infrastructure ............................6.4
Policy instability...............................................................5.9
Corruption.........................................................................2.9
Foreign currency regulations........................................2.2
Government instability/coups .......................................1.4
Crime and theft ................................................................0.7
Tax regulations ................................................................0.5
Tax rates ...........................................................................0.2
0

10

15

20

25

Percent of responses
Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country/economy and to rank them
between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

30

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United Arab Emirates

The Global Competitiveness Index in detail

INDICATOR

I Competitve Advantage

RANK/128

INDICATOR

1st pillar: Institutions

1.01
1.02
1.03
1.04
1.05
1.06
1.07
1.08
1.09
1.10
1.11
1.12
1.13
1.14
1.15

Property rights ...........................................................43 .....I

Diversion of public funds ...........................................17 .....I
Public trust of politicians .............................................9 .....I
Judicial independence ...............................................41 .....I
Favoritism in decisions of government officials ........27 .....I
Government spending .................................................8 .....I
Burden of government regulation ...............................8 .....I
Business costs of terrorism ......................................45 .....I
Reliability of police services ......................................12 .....I
Business costs of crime and violence .......................12 .....I
Organized crime ........................................................18 .....I
Ethical behavior of firms ............................................26 .....I
Efficacy of corporate boards......................................61 .....I
Protection of minority shareholders interests ..........54 .....I
Strength of auditing and accounting standards .........37 .....I

2nd pillar: Infrastructure

2.01
2.02
2.03
2.04
2.05
2.06

Overall infrastructure quality......................................14 .....I

Railroad infrastructure ...............................................74 .....I
Quality of port infrastructure .......................................9 .....I
Air transport infrastructure quality ...............................7 .....I
Quality of electricity supply .......................................13 .....I
Telephone lines*........................................................45 .....I

3rd pillar: Macroeconomy

3.01
3.02
3.03
3.04
3.05
3.06

Government balance* .................................................3 .....I

National savings rate* .................................................8 .....I
Inflation* ....................................................................80 .....I
Interest rate spread* .................................................44 .....I
Government debt* ......................................................8 .....I
Real effective exchange rate* ...................................41 .....I

4.01
4.02
4.03
4.04
4.05
4.06
4.07
4.08
4.09

Business impact of malaria .......................................41 .....I

Business impact of tuberculosis ...............................42 .....I
Business impact of HIV/AIDS ....................................46 .....I
Infant mortality* ........................................................46 .....I
Life expectancy* .......................................................29 .....I
Tuberculosis prevalence* ..........................................37 .....I
Malaria prevalence*.....................................................1 .....I
HIV prevalence* ........................................................51 .....I
Primary enrollment* ................................................112 .....I

5.01
5.02
5.03
5.04
5.05
5.06
5.07

Secondary enrollment*..............................................90 .....I

Tertiary enrollment*...................................................73 .....I
Quality of the educational system.............................32 .....I
Quality of math and science education .....................41 .....I
Quality of management schools................................52 .....I
Local availability of research and training services....42 .....I
Extent of staff training ...............................................38 .....I

RANK/128

6th pillar: Market efficiency

6.01
6.02
6.03
6.04
6.05
6.06
6.07
6.08
6.09
6.10
6.11
6.12
6.13
6.14
6.15
6.16
6.17
6.18
6.19
6.20
6.21
6.22
6.23

Agricultural policy costs...............................................7 .....I

Efficiency of legal framework ....................................35 .....I
Extent and effect of taxation .......................................4 .....I
No. of procedures required to start a business*.......92 .....I
Time required to start a business* ..........................101 .....I
Intensity of local competition ....................................28 .....I
Effectiveness of antitrust policy ................................50 .....I
Imports* ......................................................................9 .....I
Prevalence of trade barriers ......................................15 .....I
Prevalence of foreign ownership...............................94 .....I
Exports*.......................................................................6 .....I
Hiring and firing practices ..........................................23 .....I
Flexibility of wage determination ................................5 .....I
Cooperation in labor-employer relations ....................31 .....I
Reliance on professional management .....................56 .....I
Pay and productivity ..................................................35 .....I
Brain drain....................................................................6 .....I
Private-sector employment of women ......................57 .....I
Financial market sophistication..................................46 .....I
Ease of access to loans...............................................9 .....I
Venture capital availability..........................................17 .....I
Soundness of banks ..................................................36 .....I
Local equity market access .......................................20 .....I

7th pillar: Technological readiness

7.01
7.02
7.03
7.04
7.05
7.06
7.07

Technological readiness.............................................15 .....I

Firm-level technology absorption...............................21 .....I
Laws relating to ICT ..................................................34 .....I
FDI and technology transfer ......................................15 .....I
Mobile telephone subscribers* .................................16 .....I
Internet users* ..........................................................37 .....I
Personal computers*.................................................36 .....I

8.01
8.02
8.03
8.04
8.05
8.06
8.07
8.08

Local supplier quantity...............................................44 .....I

Local supplier quality .................................................35 .....I
Production process sophistication.............................28 .....I
Extent of marketing ...................................................31 .....I
Control of international distribution ...........................35 .....I
Willingness to delegate authority ..............................43 .....I
Nature of competitive advantage ..............................41 .....I
Value chain presence.................................................52 .....I

4th pillar: Health and primary education

5th pillar: Higher education and training

I Competitve Disadvantage

4: Country Profiles

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8th pillar: Business sophistication

9th pillar: Innovation

9.01
9.02
9.03
9.04
9.05
9.06
9.07
9.08

Quality of scientific research institutions ..................60 .....I

Company spending on R&D ......................................42 .....I
University-industry research collaboration.................48 .....I
Govt. procurement of advanced tech products........12 .....I
Availability of scientists and engineers......................83 .....I
Utility patents* ..........................................................44 .....I
Intellectual property protection..................................29 .....I
Capacity for innovation ..............................................72 .....I

* Hard data
Note: For descriptions of variables and detailed sources, please refer to How to Read Country Profiles.

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United Arab Emirates

Reforms Need to Continue to Sustain Growth Momentum
KENNETH WILSON, Economic & Policy Research Unit, Zayed University

The United Arab Emirates is rapidly

diversifying its economy, building
on very good public institutions,
infrastructure, and technological
readiness. Going forward, major
challenges will lie in upgrading
education and incentivizing business to increase R&D activity.

he United Arab Emirates continues to make great strides in

diversifying its economy to
become less dependent on hydrocarbons. However, its performance
is uneven and it still has major challenges and constraints to confront.
These include its modest performance in all areas of education and
innovation, its lack of entrepreneurship, and its high inflation rate. By
contrast it has very good public institutions, infrastructure, and technological readiness.
Considerable improvements
have been made in the rule of law
and corporate governance by the
Ministry of Economy in the past two
years. However, there remain some
obstacles to transparency and efficiency because of the federal nature
of the country (ranking on institutions: 28). Businesses often deal
with three levels of government: the
federal government, the emirate
government, and the municipality.
Currently, under the sponsorship of
the Ministry of Economy and with
the assistance of the Organisation
for Economic Co-operation and
Development (OECD), a new law
and policy is being developed to
facilitate greater foreign investment
in the United Arab Emirates.
In terms of infrastructure
(where it ranks 25th), the United

T
200

Arab Emirates has excellent road

networks, though there are traffic
problems in Dubai and, increasingly,
in Abu Dhabi. Massive airport expansions are currently underway in
Dubai and Jebel Ali. Electricity generation is being expanded with international joint venture partners with
the Dubai and Abu Dhabi local
monopolies, and there are plans to
create a national electricity grid.
On macroeconomic performance (ranked 6th) the record is
uneven. Although the United Arab
Emirates does extremely well on
government surplus, government
debt, and national savings, it is
experiencing excessive inflation
unofficially as high as 15% in
Dubaiwhich is negatively affecting
its real effective exchange rate. The
housing shortage in Dubai and Abu
Dhabi, the major source of inflation,
is expected to be eliminated in the
first quarter of 2008.
The educational system is inadequate and in need of modernization
at all levels. The federal government
is responsible for primary education
(which ranks 112th) and secondary
education, but new reforms will
devolve more responsibility to
school districts. A rapidly expanding
private education system caters for
the children of non-nationals, but
also a growing number of nationals
seeking an alternative. Very little
vocational training is offered and
there are low participation rates at
the tertiary level (the country ranks
60th for higher education and
training). Very little research and
development is undertaken in the
United Arab Emirates, and no major
research centers are linked to
universities, resulting in a ranking
of 42 on innovation.

The United Arab Emirates is a

tax-free economy, but business regulations vary among emirates and
are bureaucratic and tedious. To
address this, various emirates have
established free zones36 are
already operating or planned.
Although the labor market is flexible,
there is strong reliance on nonnational labor and very little privatesector employment of female
nationals. There is considerable
growth in the financial sector, with
the established Abu Dhabi Securities
Market and Dubai Financial Market
leading the way, and the newer markets such as the Dubai International
Financial Centre and the Dubai
International Financial Exchange are
starting to gain traction, resulting in
a ranking on market efficiency of 23.
In terms of technological readiness (ranks 27th), the United Arab
Emirates enjoys excellent IT infrastructure and bandwidth, but prices
for telecommunications services are
among the highest in the world.
Also there are restrictions on
Internet use, and Voice over Internet
Protocol (VoIP) is currently banned
to protect the profits of the local
monopoly telecommunications firm
Etisilat. The arrival of a second
telecommunications firm, Du, scheduled to commence operations in
March 2007, may change things
somewhat.

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United Arab Emirates

GDP (PPP US$) per capita, 19802005

4: Country Profiles

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30,000

United Arab Emirates

MENA

25,000
20,000
15,000
10,000
5,000
0
1980

Source: IMF; World Bank

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

Foreign direct investment (FDI)

10,000

Projected

FDI inflows
(percent of GDP)

12,000

8,000
6,000
4,000

6
4
2

Percent of GDP

10

14,000

I FDI inflows
(US$ millions)

US$ millions

part4.fin

2,000
0

0
Source: UNCTAD; Columbia University; IMF

2,000

2000

2005

2010

201

Trade
Exports by country of destination

Exports by sector

Share of total volume, 2005 (percent)

Share of total volume, 2005 (percent)

Gas, natural and manufactured: 8%

Korea: 15%
Japan: 38%

Thailand: 8%

Petroleum,
petroleum
products: 57%

Non-metallic mineral
manufactures: 5%
Telecom and sound
equipment: 3%

Singapore: 4%
Pakistan: 4%

Gold, non-monetary
excluding ores: 3%

Others: 31%
Others: 24%

Total value of exports (US$ millions): 67,062

Trade diversification

Tariffs

Number of exported product groups out of 261

Percent
10

2001..................................................................................3.2
2005..................................................................................4.5

I MENA countries
I World

6
4
2
0

Average
faced tariff
Source: International Trade Centre; UN Comtrade
Note: For descriptions of variables and detailed sources, please refer to How to Read the Country Profiles.

Average
applied tariff