ECONOMY
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UAE
is a major player in the global oil industry. The emirate of Abu
Dhabi alone contains 10% of the world's oil reserves (98billiob
barrels). Trade
too is booming with each emirate establishing a Free Zone with no
taxes to encourage companies to set up their manufacturing and export
units here.
The
United Arab Emirates (UAE) has one of the most prosperous economies
in the Middle East region and is one of the world’s wealthiest
countries, with a GDP of US$54billion (year 2000). Policies and
incentives to support business, including the ability to transfer
profits tax-free at any time, as well as low crime rates and stable
political and financial systems continue to attract local and foreign
business investment to the UAE.
In
the year 2000, the country's Gross Domestic Product (GDP) rose 20.4
percent due primarily to the strength of the oil sector and the
UAE's policy of economic diversification. The commitment to diversification,
including strengthening the manufacturing, agricultural and service
sectors, has made the UAE one of the few countries in the region
that can prosper without the oil trade. In fact, the non-oil sector
accounted for 66.1%percent of the GDP in the year 2000.
In
1999, the country's Gross Domestic Product (GDP) rose 10 percent
due primarily to the strength of the oil sector and the UAE's policy
of economic diversification. The commitment to diversification,
including strengthening the manufacturing, agricultural and service
sectors, has made the UAE one of the few countries in the region
that can prosper without the oil trade. In fact, the non-oil sector
accounted for 74 percent of the GDP in 1999.
Gross Domestic Products (1997)
Dhs. 176.3 billion
Oil Sector Dhs.
53.5 billion
Non-oil sector
Dhs. 122.75 billion
Per
capita income
Dhs. 67,200
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| Into
The New Millennium |
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The
UAE is expected to increase its industrial diversification drive
in the new millennium. Emphasis on development of the finance, trade
and services sectors will also be accelerated. Globalization will
encourage the formation of larger banking units through mergers
while the move towards emiratisation will also gain momentum. 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.
New corporate, stock market and banking legislation, a review of
the laws governing economic activity and the development of additional
legislative and administrative frameworks that promote efficiency
and transparency will be key factors in economic development.
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| Petroleum |
Oil
and gas production has been the mainstay of the economy in the
UAE and will remain a major source of revenue long into the future,
due to the vast hydrocarbon reserves at the country's disposal.
Proven recoverable oil reserves are currently put at 98.2 billion
barrels or 9.5 per cent of the global crude oil proven reserves.
As for natural gas, the proven recoverable reserves are estimated
currently at 5.8 billion cubic meters or 4 per cent of the world
total. This means that the UAE possesses the third largest natural
gas reserves in the region and the fourth largest in the world.
At the current rate of utilization, and excluding any new discoveries,
these reserves will last for over 150 years. Abu
Dhabi is the only one of the seven emirates to qualify as an oil
state in the same sense as Kuwait or Qatar. Like those two, Abu
Dhabi has diversified into petrochemicals and other oil-related
industries. Dubai is the second-richest emirate. Its oil income
is now about one quarter of Abu Dhabi's; however in the years
before Abu Dhabi became rich; Dubai supported itself as the main
trading and smuggling port in the region. In addition to being
one of the main business centres of the Gulf today, it also has
a huge dry-dock complex, one of the Middle East's busiest airports
and a large free trade zone at Jebel Ali.
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Sharjah
receives a modest income from oil and it also has a very busy airport,
Dubai's nearness notwithstanding. It is the main entry point for
tourists visiting the UAE. Sharjah's airport and its seaport derive
considerable income from cargo.
The
most northern of the emirates, Ras al-Khaimah, is also dependent
upon its oil income. It has also invested heavily in tourism. Fujairah,
the only one of the seven emirates without a coastline on the Gulf,
is also seeking tourists but it remains primarily a cargo port.
Fujairah, Umm al-Qawain and Ajman all receive substantial subsidies
from the federal government.
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| Industry |
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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 (see section on Business Environment) and today, hundreds
of factories covering a wide range of manufacturing are distributed
throughout the country. Cement, building materials, aluminium, chemical
fertilizers and foodstuffs industries top the list, followed by
garments, furniture, paper and carton, plastics, fiber glass and
processed metals. In 1999 the number of factories operating in the
UAE reached 1,695 employing more than 145,000 people and with investments
estimated at more than Dh 14 billion.
Sharjah
has the largest number of firms followed by Dubai, Abu Dhabi and
Ras al-Khaimah. Nearly 140 units were established in 1998 - roughly
the pace at which new manufacturing units were formed in 1997 -
and employment saw a 20 percent increase. The strongest growth was
in chemicals (see section on Oil and Gas). The chemicals and non-metallic
industries had the greatest number of establishments and employed
the most people. Food and beverages -- in the consumer goods sector
- were most successful at substituting imports. Industry in the
Northern Emirates focused on small factories especially textiles,
most of them in Ajman.
Dating back to the mid-1970s, the cement industry is one of the
oldest manufacturing industries in the UAE. The first factory, Al
Ittihad Cement Company of Ras Al-Khaimah, started its commercial
production in 1975. This was followed by the construction of several
other factories in Al Ain, Sharjah, Dubai, Fujairah, Ajman and Umm
al-Qaiwain.
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| Manufacturing
Industries |
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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 (see section on Business Environment) and today, hundreds
of factories covering a wide range of manufacturing are distributed
throughout the country. Cement, building materials, aluminium, chemical
fertilisers and foodstuffs industries top the list, followed by
garments, furniture, paper and carton, plastics, fibre glass and
processed metals.
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| Telecommunications |
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The
UAE is entering the twenty-first century with a sophisticated telecommunications
sector which provides its citizens with a highly efficient and cost-effective
communications network. Emirates Telecommunications Corporation
(ETISALAT), one of the largest and most successful companies in
the Middle East, controls the telecommunications business in the
UAE. Although ETISALAT recorded a a net profit of Dh 2.012 billion
for 1998 and revenues surged by 23 per cent to Dh 5.07 billion surpassing
its performance in 1997 by Dh 157 million, the company faced many
challenges in 1998. Not least of these were the crises in East Asia
and Russia, coupled with the steep fall in oil prices, all of which
had a negative impact on business and trade, regionally and globally.
Nevertheless,
developments in Africa and Asia were of considerable interest to
ETISALAT and decisions were made not only to invest but also to
actively participate in telecommunications projects in Zanzibar
and Sudan as well as in projects closer to home.
ETISALAT
holds slightly over 34 per cent of its associate UAE-based Thuraya
Satellite Telecommunications Company and has continued to expand
its position in global markets through acquisition of a further
3.1 per cent stake in ICO Global Communications Holdings Ltd as
well as 1 per cent in Qatar Telecom (Q-Tel).
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| Business
Environment |
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UAE
government policy recognises that the private sector is of major
importance in the drive for diversified economic growth and full
employment for nationals. The creation of a facilitative business
environment, which encourages local investors to put their wealth
to productive use, as well as attracting foreign investment, has
been an important aspect of this policy. Key elements in the UAE's
incentive strategy have been the provision of first-class industrial
facilities and business support services, the reduction of red tape
and streamlining of administrative procedures, as well as the updating
of commercial laws and regulations to meet international obligations,
increase transparency and ensure effective protection for investors.
Favourable tax laws and political stability also assist in making
the UAE a prime business location.
World
Trade Organisation
The UAE joined the World Trade Organisation (WTO) in 1995 in the
knowledge that developing countries, including Arab states, cannot
ignore WTO-sponsored agreements and their impact on the global economy.
At the time, the Ministry of Economy and Commerce argued that joining
WTO would provide an opportunity for the country to contribute to
future commercial decisions and policies and that, as a country
aspiring to become a regional trade hub, adherence to the General
Agreement on Tariffs and Trade (GATT), a WTO-sponsored multilateral
trade treaty, would help boost the UAE's industries and exports.
Other relevant WTO treaties are the General Agreement on Trade in
Services (GATS) and the Agreement on Trade-Related Aspects of Intellectual
Property (TRIPS).
Although
the WTO prohibits discrimination in investments or shareholding
between nationals and non-nationals, the UAE has been granted certain
exemptions for its financial services sector. Nevertheless, WTO
agreements will have a direct impact on domestic services such as
insurance, banking, transport, tourism, property, brokerage, investment,
construction, communications and information, all of which will
be required to improve performance to be able to compete globally.
Free
Zones
The increased number of free zones operating in the country is serving
to offer a wider range of options to potential investors, including
100 per cent ownership of investments. The massive Jebel Ali Free
Zone (JAFZ) has become one of the largest industrial complexes worldwide
which, together with the adjacent port, the world's largest manmade
harbour, has continued to attract investors.
Fujairah
Free Trade Zone (FTZ), which was awarded an ISO 9002 certificate
in 1999, offers businessmen the locational advantage of an east
coast port as well as the benefits of partnership with the Fujairah
Government. FTZ has been growing at a rate of 20-22 per cent annually
and currently has over 125 projects registered at the zone, representing
sector investment worth Dh 750 million. Trade value out of the zone
by the end of 1999 should top Dh 1 billion.
Arab,
Gulf and international capital investment in Sharjah's Hamriyyah
Free Zone had exceeded Dh 2.5 billion by the end of 1999, with local
investment accounting for 50 per cent. The Sharjah Government has
invested Dh 600 million in infrastructure projects in the zone.
E-Commerce
In order to keep abreast of commercial trends worldwide, the UAE
intends to set up an Internet-based central financial forwarding
and clearance facility known as the Payment Gateway Server (PGS).
Several top companies are working with government departments to
establish the facility which is expected to be the first of its
kind in the AGCC area. PGS, a major step in the introduction of
e-commerce, is the equivalent of central clearing and forwarding
of financial transactions carried out on the Internet. The server,
which will permit secure electronic transactions, is an intermediary
between Web-based merchants, financial institutions and consumers.
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