Economy and Vision 2021
Creating and maintaining a sustainable and diversified economy is a component of 'United in Knowledge, a pillar of Vision 2021. Vision 2021 states: (By the year 2021,) The UAE will benefit from a sustainable and diversified economy, flexible in adopting new economic models, and capitalising on global economic partnerships to guarantee long-term prosperity for current and future generations of Emiratis.
Developing a 'competitive knowledge economy' is one of the pillars of National Agenda in line with Vision 2021. The Government is focusing on the UAE becoming the economic, touristic and commercial capital for more than two billion people. To achieve this, the Government has set 12 Key Performance Indicators (KPIs). They are:
- Non-oil real GDP growth
- Gross National Income (GNI) per capita
- Net Inflow of Foreign Direct Investment as a percentage of GDP
- Global Competitiveness Index
- Share of UAE nationals in the workforce
- Ease of Doing Business Index
- Emiratisation Rate in the private sector
- SME's contribution to non-oil GDP
- Global Entrepreneurship and Development Index (GEDI)
- Global Innovation Index
- Share of 'knowledge workers' in the labour force
- Research and development expenditure as a percentage of GDP.
Economy in the past and present
Before the discovery of oil in the 1950s, the region's economy was driven mainly by nomadic farming, date palm cultivation, fishing, pearling and seafaring.
Since the discovery of oil, the economy has been influenced mainly by the following sectors:
- extraction of crude oil and natural gas
- wholesale and retail trade
- repair services
- real estate
- business services
According to the Economic Report 2015 released by the UAE's Ministry of Economy, the estimated GDP for 2014 at current prices amounted to AED 1.46 trillion and the contribution of non-oil sectors to the national economy reached 69 per cent.
The following table shows the contribution of the economic sectors in the GDP for 2014:
| Economic sector
|| Contribution to the GDP for 2014 (in per cent)
| Extraction of crude oil and natural gas
| Wholesale and retail trade
| Repair services
| Real estate
The GDP for 2013 at current prices amounted to AED 1.415 trillion. This means in 2014, there was a rise of 3.2 per cent in GDP at current prices as against a rise of 3.7 per cent in 2013 (from 2012).
In 2014, non-oil GDP growth was at 8.1 per cent and surpassed the overall GDP growth which clearly exhibits the UAE's diversification of economy away from oil sector.
International trade has been a significant driver of growth for the UAE's economy. In 2014, it reached AED 2.58 trillion; up from AED 2.53 trillion in 2013.
Features of the UAE's solid economy
Despite recent fluctuations in oil prices and the global economic recession, the UAE enjoyed a stable economy. Some of the features of the UAE's economy are:
The UAE enjoys a strategic location between Asia, Europe and Africa. Thousands of Chinese businesses use Dubai as a hub for trading in Africa. Indian traders use the emirate to access the world. Latin Americans see the country as a launching platform into South Asia. Western nationals use Dubai as a hub for the Middle East.
- Strong financial reserves
The UAE maintains strong financial reserves and has a durable banking sector, which makes it safe for investment. According to a report in Khaleej Times, International Monetary Fund forecasts that the gross official reserves of the UAE would grow from USD 76.8 billion in 2015 to USD 118.4 billion in 2020. The current account surplus would grow from USD 17.6 billion in 2015 to USD 33.4 billion by 2020.
According to a report in The National, Standard & Poor's, a financial services company, has rated Abu Dhabi AA indicating that its capacity to meet its financial commitment is very strong in the long term.
Sharjah and Ras Al Khaimah were rated A/A-1 indicating that their capacity to meet its financial commitment is strong in the short term.
- Large sovereign wealth fund
According to the June 2016 figures of Sovereign Wealth Fund Institute, Abu Dhabi Investment Authority is the largest sovereign wealth fund in the Middle East and the fifth largest in the world with USD 792 billion.
- Promising investor home economies
According to an UNCTAD World Investment Report of 2014, the UAE ranks 11th as the most promising investor home economies.
- Consistent government spending
Government spending on infrastructure continues to receive a major injection of capital. Abu Dhabi continues to develop the infrastructure required for one of the wealthiest cities in the world.
Dubai is implementing new projects for hosting World Expo in 2020; AED 30 billion will be spent on infrastructure at the Expo site and the city.
The UAE plans to spend AED six billion on major infrastructure developments across the country, including road networks and federal buildings. Khalifa Initiative in the northern emirates is designed to ensure that inhabitants of these emirates enjoy the same facilities as those living in the larger emirates of Abu Dhabi and Dubai.
The UAE is also working on the Etihad Rail project, which will offer a significant leap in land transport by year 2021.
- Progressive policy of economic diversification
The policy of economic diversification has led into impressive development in key sectors such as tourism, air transport, trade, financial services, manufacturing and alternative energy. The UAE has made progress towards ending its economic dependence on hydrocarbons. Oil industries accounted for around 30 per cent of GDP in 2014, down from 79 per cent in 1980.
The UAE has several multi-specialty free zones which offer several economic incentives such as exemption from corporate taxes and import/export duties and full foreign ownership with 100 per cent profit repatriation. There are about 35 free zones in the UAE. According to a report in Gulf News, free zones contributed to 33 per cent of the UAE's non-oil trade in 2014.
- Increased foreign direct investment (FDI)
According to the Economic Report 2015, the UAE attracted about AED 37.07 billion (USD 10.1 billion) of foreign direct investment during 2014 with an average growth rate of 16.4 per cent during the period from 2010 to 2014. The UAE was ranked first among the countries most attractive to foreign direct investment in the Middle East and Africa region.
Assets of the UAE
UAE Central Bank's total assets stood at AED 332.7 billion in May 2015 compared to AED 322.4 billion in May 2014, i.e. an increase of 3.2 per cent which signals the adoption of an expansionary policy.
Gross assets of banks in the UAE increased by 3.3 per cent in the first quarter of 2015 to reach AED 2,380 billion as against a decline of 0.3 per cent in gross assets in the last quarter of 2014.
Gross credit expanded by more than 2.3 per cent in the first quarter of 2015 as against a decline of 0.3 per cent in credit in the last quarter of 2014.
The UAE's competitiveness level
IMD World Competitiveness Yearbook
According to the IMD World Competitiveness Yearbook, the UAE is ranked 1st regionally and 12th globally amongst 61 countries reviewed for their capability to manage their resources for long-term value creation.
As indicated in the UAE Federal Competitiveness and Statistical Authority, the UAE was ranked:
- 1st in the quality of roads (Global Competitiveness Report)
- 1st in the importance ICT to government vision (Global Information Technology Report)
- 1st in the quality of air and transportation (World Competitiveness Yearbook)
World Bank report 2016
According to the World Bank report which measures the performance of 189 countries in 'facilitating doing business for investors', the UAE was ranked first in the Arab world for the 3rd year in a row. It was also ranked:
- 1st regionally in the general classification and the number of documented improvements
- 1st globally in the category of the impact of non-payment of taxes, which does not affect business
- 2nd globally in the category of the process of construction permits
- 4th globally in the category of electricity delivery.
National development strategies
The UAE has developed several strategies to promote its overall economic and social position and diversify its national income based on a sustainable and knowledge-based economy.
Read about it under strategies and plans.
The UAE Government has recognised the importance of the Islamic economic sector, driven by the increase in the global Muslim population that numbers approximately 1.6 billion.
Dubai was the first to establish Islamic banks worldwide with the opening of Dubai Islamic Bank (DIB) back in the 1970s, in addition to having the Dubai Financial Market (DFM), which is the first global Shari'a compliant exchange.
According to the third edition of the Global Islamic Economy Indicator (GIEI), which covers 73 countries, the UAE is amongst the top three countries as one of the healthiest Islamic economy environments worldwide.
Green Economy for Sustainable Development
By virtue of Vision 2021, the UAE is striving to diversify its income resources by moving away from oil. In January 2012, Sheikh Mohammed launched the Green Economy initiative under the slogan: A green economy for sustainable development . Under this initiative, the UAE seeks to become a global hub and a successful model of the new green economy, to enhance the country's competitiveness and sustainability and preserve its environment for future generations.
Through this initiative, the UAE aims to become one of the world leaders in this area as well as a centre for the export and re-export of green products and technologies, and to maintain a sustainable environment to support long-term economic growth. The initiative includes a range of programmes and policies in the areas of energy, agriculture, investment and sustainable transport in addition to new environmental and constructional policies.
Sheikh Mohammed aims to build an economy that protects the environment as well as an environment that supports the growth of the economy.
The Green Economy initiative includes six major fields covering a wide range of legislation, policies, programmes and projects which are:
- The first field of green energy aims to promote the production and use of renewable energy.
- The second field includes government policies aimed to encourage investments in green economy and to facilitate the production, import, export and re-export of green products and technologies.
- The third field relates to developing urban planning policies that preserve the environment and to raise the efficiency of housing and buildings environmentally.
- The fourth field consists of means for dealing with the effects of climate change, promote organic agriculture, maintain biodiversity and protect the ecological balance.
- The fifth field aims at rationalising the use of water resources, electricity and natural resources and recycle waste.
- The sixth field includes development and promotion of green technology.
Economy and innovation
In 2015, the UAE government injected AED300 billion to foster a knowledge economy, driven by innovation to prepare the UAE for a world after oil. The Emirates Science, Technology and Innovation Higher Policy will launch 100 initiatives with major investments in education, health, energy, transport, space and water. It will include fields such as robotics, solar power, developing intellectual property, stem cell research and biotechnology.
For further reading:
The UAE's post-oil strategy
The UAE retreat on post-oil phase was held on 30 and 31 of January 2016 at Bab Al Shams Resort in Dubai. Federal and local government officials took part in the retreat and discussed ideas and initiatives that would contribute in diversifying the UAE's economy and ensuring its sustainability with an emphasis on human capital, knowledge and innovation.
Currently, the UAE is underway to launch its roadmap for a future after oil. The strategy will include ideas and initiatives concluded in the retreat. It will work to strengthen the competitiveness of the current economic sectors as well as gradually introduce new sectors, which will achieve a giant leap in the UAE's economy in accordance with the highest international standards.
Entities responsible for economic activities
Department of Economic Development in the emirates of:
Updated on 13 May 2018