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National Day Feature: UAE economy sets to scale new heights

posted on 01/12/2007: 1367 views

United Arab Emirates will continue to strengthen its position as a primary regional trade, business and investment powerhouse.

The strategy will continue in part thanks to higher oil revenues and zero-deficit budget, while keeping a close eye on sound public spending, economic diversification drive.

Several top-notch international finance institutions and funds have recently issued reports that laud the UAE's dramatic economic boom, and suggesting the trend will continue in the coming years.

The UAE's Gross Domestic Product is projected to rise to DH 697 billion in 2007.

In 2006, the UAE recorded nominal GDP growth of 23.4 percent over 2005, with an overall UAE gross domestic product (GDP) of DH 599 billion, Sheikha Lubna Al Qasimi, minister of economy, has said. She said the non-hydrocarbon sector's contribution has been increasing steadily over the past few years even with the high international oil prices.

"The sector's contribution went up from 46 percent in 1990 to 62.5 percent in 2006, an indicator of the successful economic diversification policy of our government," she added.

"We have already shown evidence of this in the way we have built upon our traditional strengths, and particularly Dubai's role as a regional trading centre and entry port. The UAE is blessed with great wealth from oil and our mission has been to exploit our commercial expertise to develop the economy." She said the rise in oil income has allowed the UAE to create a balanced growth spanning across all economic sectors.

The UAE economy, she added, rests on strong fundamentals that are not merely oil-driven. Sectors like tourism, education, media, health, industry and finance have evolved as ideal platforms for enhanced investment.

'The economy has performed admirably over the past few years, and is poised to forge ahead with assertiveness and confidence. All-round development is perceptible in every emirate offering more opportunities for investors and making rapid strides in developmental initiatives," she said.

The 2006 Growth Competitiveness Index published by the World Economic Forum said: '"The UAE is working aggressively toward economic modernization, diversification into new oil and non-oil based manufacturing and service activities, and encouragement of the private sector." The report added: 'The UAE economy is rapidly growing and is expected to grow even at a higher rate in the coming years. The UAE has become the single most important trade hub in the region and the third largest re-export centre in the world after Hong Kong and Singapore.

According to the UAE central bank governor, Sultan Al Suweidi, the GDP has been growing at a rate of more than 10 percent at current prices in the last 10 years, adding that, with higher world oil prices, the UAE Economy will continue to do well.

"The UAE will continue to be a trade and business centre and a tourist destination in the region and certain economic sectors will continue to grow," Al Suweidi has said.

Last month, the cabinet passed the federal budget for 2008. The budget of Dh34.9 billion is the UAE's biggest and has the highest increase rate in the history of the federation, with a hike of Dh6.7 billion over the 2007 budget, which stood at Dh23.8 billion. It is also the fourth consecutive free-deficit state budget.


The UAE Government Strategy has been launched with a core message to ensure sustainable overall development.

In his launching speech, His Highness Sheikh Mohammad bin Rashid Al Maktoum, UAE Vice-President, Prime Minister, and Ruler of Dubai, said: "The strategy has been inspired by the 'empowerment' speech, delivered by President His Highness Sheikh Khalifa bin Zayed Al Nahyan on the 34th anniversary of the UAE National Day.

The strategy seeks to stimulate economic growth, strengthen the competitiveness of the national economy, and upgrade regulations and legislation to match current and expected economic growth. The capabilities to implement these parameters should also be developed, Sheikh Mohammed said.

The strategy also seeks to establish a national competitiveness council to advise the federal government on competitiveness issues, establish a national statistics office and prepare a federal framework for minimum regulations requirements for both free zones and special economic zones, such as labour rights and environment conservation requirements.


Gross Domestic Product of the emirate of Abu Dhabi is projected to rise by 8.2 percent in 2007 and will maintain a steady growth rate of no less than 13 percent to hit DH 584 billion in 2010, according to a report by the Abu Dhabi Chamber of Commerce and Industry (ADCCI).

The report expected non-oil sectors to keep a vibrant annual growth of at least than 18 percent. The share of non-oil sectors in the GDP is expected, by the report, to rise to DH 163 billion in 2007, up from DH 138 billion in 2006. It will post a phenomenal jump to DH 263 billion in 2010, the report anticipated.

The report attributed future growth in the emirate's non-oil sectors to the huge investments to be made in the coming years to develop and boost the emirate's various economic sectors. These sectors accounted for 37 per cent of Abu Dhabi's GDP in 2006, a contribution that is expected to surge to 45 percent by 2010.

The private sector's significant contribution to the economic growth of Abu Dhabi has accounted for 17 per cent of the emirate's GDP in 2006 and is expected to surge to 20 percent in the years ahead, said the report.


Urban Structure Framework Plan: The Government of Abu Dhabi has unveiled the Plan Abu Dhabi 2030, a comprehensive plan for the development of the city of Abu Dhabi that will guide planning decisions for the next quarter of a century.

Crown Prince of Abu Dhabi General Sheikh Mohamed bin Zayed Al Nahyan, has said: "This urban plan provides a strong and comprehensive foundation for the development of the emirate of Abu Dhabi, in a strategic and coordinated way.

'It will ensure that future generations will continue to enjoy and be inspired by ongoing access to the desert, sea and natural assets that are integral to our national identity, while building a global capital with its own rich cultural heritage."


UAE's commercial capital of Dubai remains to be the country's "key driving force" in the exceptional growth of its non-oil GDP. According to the Dubai Chamber of Commerce and Industry (DCCI), Dubai accounted for 43 percent of UAE's non-oil GDP and 28 percent, or Dh168.78 billion, of the total GDP of Dh599.23 billion in 2006.

Sheikh Mohammed unveiled the Dubai Strategic Plan (DSP) 2015. The EDP will be integrated with federal plans for the development of the UAE.

The Dubai Strategic Plan, despite having its own logic and specific goals, is aligned with the country's overall strategic plan, he has noted. The plan includes maintaining double-digit economic growth, achieving a GDP of $108 billion and increasing real GDP per capita to $44,000 by 2015 by increasing productivity by 4 percent per annum and creating new growth sectors.

The plan includes developing the emirate's most dynamic sectors, which have been the key contributors to Dubai's annual real GDP growth rate of 13 percent since 2000.

'We will focus on economic sectors that we have strong competitive advantage in and that are expected to experience future growth globally. The sectors of strength are tourism, transport, trade, construction, and financial services, in addition to the creation of new sectors with sustainable competitive edge, Sheikh Mohammed has indicated.

'The plan would not be affected by oil price fluctuations. We have succeeded in diversifying Dubai's sources of income and reduced dependence on oil such that oil's contribution to GDP is a mere 3 percent today," he said when unveiling the Strategic Plan.

The Economic Development Plan (EDP) will focus on sectors that have made the most significant contribution to GDP.


To attract more foreign capital, the ministry of economy has launched the "Investors' Guide to the UAE" - the one-stop information source for business investors. The annual guidebook highlights potential investment opportunities in different business sectors of the UAE. It also provides details of the legal requirements and up-to-date information for investors who intend to start a business in the country.

Sheikha Lubna has said this guidebook is a true attempt to compile all essential information concerning the UAE business environment in an easy-to-read format.

"We have tried to provide comprehensive and accurate information, which honestly reflects the industrial economic reality and which will be a useful tool for companies and individuals wishing to invest in the UAE," she added.

The minister said, 'The country has created the necessary conditions for attracting more foreign direct investments. It boasts of state-of-the-art infrastructure, free market economy, political stability, flexible legislation and tax-free policies, among others. All these factors are increasingly attracting direct foreign investment." According to the Berlin-based Transparency International's Corruption Perception Index, published in 2006, the UAE has the highest level of transparency among Arab countries.

'It (UAE) has witnessed a dramatic growth in its economy over the past few years. This has led to a vibrant and dynamic business environment, which is attracting foreign investors. The UAE's three decades of market-oriented economic policy have promoted a liberal and open environment and encouraged the role of the private sector," the report said.

The tremendous increase in foreign investments is a major factor in the development of the UAE and has paved the way for investment in future projects.

In 2006, the UAE attracted 60 percent of the $26 billion total foreign direct investment (FDI) into the GCC, according to the United Nation Conference on Economy and Trade (UNCTAD).


The latest International Monetary Fund country report on the UAE forecasts a 60 percent rise in nominal GDP from $185 to $294 billion from 2007 to 2012.

The study assumes that oil prices will remain in the mid-$60-a-barrel range for the forecast period, and that oil production will rise from 2.58 to 3.05 million barrels per day in 2012. Non-hydrocarbon revenues are set to double to $49 billion, of which a half will be from investments.

Gross domestic investment as a percentage of GDP will continue at the very high level of 21-26 percent for the 2007-2012 period, with national saving as a proportion of GDP expected to be above 40 percent.

The report also commented on the regional spill over effect from the growth in the UAE economy, with nations such as Pakistan, Jordan, Syria, Morocco, Tunisia and Egypt benefiting from UAE direct investment.

In short, the IMF presents a picture of sustainable high growth levels in the UAE, with the diversification of this hydrocarbon based economy proceeding apace thanks to huge domestic investment.


The UAE is the third most supportive economy in the world in terms of entrepreneurial activities, coming after the United States and Singapore, according to a report by UAE's first Global Entrepreneurship Monitor (GEM).

"We are glad to see the culmination of this collective effort that maps out the entrepreneurship environment in the UAE," said Abdul Baset Al Janahi, chief executive officer of the Mohammed Bin Rashid Establishment for Young Business Leaders, which sponsored the study.

The report called, however, for a more understanding of entrepreneurial activity in the UAE at the grass-root level. It also emphasized the role of education in promoting and sustaining entrepreneurship in the country.

Al Janahi said the report converged with the strategic plans for economic development laid out by both the Dubai leadership and the UAE government.

"We believe the GEM report will help set a clear roadmap towards achieving this strategic objective," Al Janahi said. (Emirates News Agency, WAM)


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