Economy

United Arab Emirates has the fifth highest GDP per capita in the world. Though current GDP per capita contracted by 42% in the 1980s, successful diversification helped register positive growth of 48% in the 1990s.

Overview

The UAE has an open economy with a high per capita income and a sizable annual trade surplus. Its wealth is based on oil and gas output as well as tourism (about 33% of GDP), and the fortunes of the economy fluctuate with the prices of those commodities. Since 1973, the UAE has undergone a profound transformation from an impoverished region of small desert principalities to a modern state with a high standard of living. At present levels of production, oil and gas reserves should last for over 100 years. Despite higher oil revenues in 1999, the government has not drawn back from the economic reforms implemented during the 1998 oil price depression. The government has increased spending on job creation and infrastructure expansion and is opening up its utilities to greater private-sector involvement.

Expatriates from India and Pakistan perform a significant role in the local economy. However, to control illegal immigration into the country, on November 9, 2002, the UAE immigration ministry announced that all Indians visiting the country must have a return ticket.

Economy in Depth

Prior to the first exports of oil in 1962, the United Arab Emirates economy was dominated by pearl production, fishing, agriculture and herding. Since the rise of oil prices in 1973, however, petroleum has dominated the economy, accounting for most of its export earnings and providing significant opportunities for investment. The UAE has huge proven oil reserves, estimated at 98.2 billion barrels (16 cubic km) in 1998, with gas reserves estimated at 5.8 cubic km. At present production rates, these supplies would last well over 100 years.

In 2003, the UAE produced about 2.3 million barrels (370,000 cubic m) of oil per day (of which Abu Dhabi produced approximately 85%) with Dubai and Sharjah to a much lesser extent, producing the rest. Indeed, estimates say that Dubai has less than 10 years of oil left at current production levels and Sharjah has less. Sharjah however, does have some gas reserves remaining. Dubai's small remaining gas reserves are earmarked for use by Dubai, which is one of the largest aluminium smelters in the world, with a very low cost per tonne of production, thanks in part to its energy needs being met by these gas reserves.

Major increases in imports occurred in manufactured goods, machinery and transportation equipment, which together accounted for 70% of total imports. Another important foreign exchange earner, the Abu Dhabi Investment Authority (which controls the investments of Abu Dhabi, the wealthiest emirates) manages an estimated $360 billion in overseas investments.

Industry

More than 200 factories operate at the Jebel Ali complex in Dubai, which includes a deep-water port and a free trade zone for manufacturing and distribution in which all goods for re-export or transhipment enjoy a 100% duty exemption. A major power plant with associated water desalination units, an aluminium smelter and a steel fabrication unit are prominent facilities in the complex. The complex is currently undergoing expansion, with sections of land set aside for different sectors of industry. A large international passenger and cargo airport, with associated logistics, manufacturing and hospitality industries, is also planned here.

Except in the free trade zone, the UAE requires at least 51% local citizen ownership in all businesses operating in the country as part of its attempt to place Emiratis into leadership positions. However, this law is under review and the majority ownership clause will very likely be scrapped, to bring the country into line with World Trade Organisation regulations.

Other Revenue

Recently, the Emirate of Dubai has started to look for other sources of revenue. High-class tourism and international finance are the new sectors starting to be developed. In line with this, the Dubai International Financial Centre was announced, offering 100% foreign ownership, no tax, freehold land and office space and a tailor-made financial regulatory system with laws taken from best practice in other leading financial centres such as New York, London, Zürich and Singapore. A new stock market for regional companies and other initiatives were announced in DIFC.

Dubai has also developed Internet and Media free zones, offering 100% foreign ownership, no tax office space for the worlds leading ICT and media companies, with the latest communications infrastructure to service them. Many of the world's leading companies have now set up shop there.

Recent liberalisation in the property market allowing non citizens to buy freehold land has resulted in a major boom in the construction and real estate sectors, with several signature developments such as the 2 palm islands, the World, Dubai Marina, Jumeirah Lake Towers and a number of other developments, offering villas and high rise apartments and office space.

Gulf Cooperation Council

As a member of the Gulf Cooperation Council (GCC), the UAE participates in the wide range of GCC activities that focus on economic issues. These include regular consultations and development of common policies covering trade, investment, banking and finance, transportation, telecommunications, and other technical areas, including protection of intellectual property rights.