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UAE a well oiled economy says report

posted on 06/12/2001: 1702 views

The most significant happening in the UAE's economy before the formation of the federation was the first oil exports from Abu Dhabi in 1957, says Mohammed Alabbar, director general of the Dubai Department of Economic Development. This was the catalyst that triggered the now celebrated transformation of the economy.

According to a report in the special supplement published by the Gulf News on the occasion of the UAE's 30th national day: "Abu Dhabi's lead in 1957 was followed by Dubai in 1969 and later, Sharjah. These years had witnessed the oil sector's surge to a pivotal position in the economy, providing vast revenues and dwarfing other sources of national income. "Before the advent of the federation, the seven individual emirates relied on their available natural and human resources, which varied in each emirate in accordance with the area and population.

They were almost wholly dependent on activities such as pearl fishing, trading, fishing, farming and some handicrafts. Each emirate differed from the rest by its relative dependence on a special economic activity. "With the birth of the federation in December 1971, the foundation for a unified economy was laid under the wise leadership of the President, His Highness Sheikh Zayed bin Sultan Al Nahyan, says Alabbar.

The new direction of the economy naturally led to the progressive decline of some of the mainstays such as pearl fishing. The main pillars of subsequent growth, however, fuelled by oil revenue, were a mix of activities such as construction in line with a massive, sustained outlay for infrastructure development, the establishment of state-of-the-art health services, power plants, communication networks, ports and airports, industrial zones. Oil assumed dominance over the economy, says Alabbar, given that the Emirates has very few natural resources. And lacking human resources, the new nation had to turn to expatriate labour, resulting in a demographic structure far removed from what obtained before 1971.

The UAE's economy today, he says, is generally based on the following factors: Free enterprise and an open market system, no corporate or income taxes, no trade barriers or import restrictions, no foreign exchange controls, first class infrastructure through government investment, minimal bureaucracy, a free private sector, a friendly climate for foreign investment.

"The services sector had generally achieved more growth than the manufacturing sector. Real average annual growth rates during 1990-2000 were 11.1 per cent in agriculture, 7.5 per cent in mining and quarrying, 5.7 per cent in electricity and water. The relative share in GDP of these sectors varied little during the period and were in the low ranges of 0.8 per cent, 0.1 per cent and 1.7 per cent respectively in 2000. "From modest beginnings in the early 1970s, manufacturing had grown steadily to become a major sector in the economy.

In real terms, the average annual growth rate achieved by this sector was 15.7 per cent during 1990-2000. "Its contribution to GDP increased from 7.7 per cent in 1990 to 16 per cent in 2000. "_The construction industry grew steadily during 1990-2000 with the real average annual growth rate reaching 10.42 per cent and its contribution to nominal GDP increasing from 6.5 per cent in 1990 to 8.4 per cent in 2000. " Infrastructure plans and residential and non-residential construction plans will have a positive impact on this sector. "Wholesale and retail trade, hotels and restaurants: Dubai is the most important centre for trade in the region, especially for re-exports.

Tourism has further enhanced this sector's growth. In 1990, trade came in second after oil in relative share of GDP. Since 1993, trade replaced oil as the most important contributor to GDP. By 2000, it had risen to 21.4 per cent. "Trade and tourism constitute the backbone of the economy and the Government of Dubai continues to lay great emphasis on securing the requirements necessary for their continual development.

"Transport, storage and communication: These sectors achieved the highest growth rates among all the non-oil sectors during 1990-2000, with an average annual rate of 13.8 per cent in real terms. Their share of GDP in nominal terms has jumped from 6.7 per cent in 1990 to 11.8 per cent in 2000, giving them the third spot. Additions to the infrastructure and increases in trade and tourism greatly contributed to this growth

"Finance and Insurance: Growth in real terms was at an average annual rate of 12.3 per cent during 1990-2000. Consequently, the relative share in GDP has increased from 6.5 per cent in 1990 to 10 per cent in 2000. "Dubai offers advanced finance and insurance services necessary for the smooth operation of all sectors. Dubai has 140 banks, counting the branches, of which 42 are foreign. Foreign banks represent over 25.9 per cent of all banks operating in the UAE.

"The inauguration of the Dubai Financial Market in 2000 is considered a vital step in enhancing banking's role in the development process. Government services: The public services sector grew at an annual average rate of only 5.62 per cent during 1990-2000. After reaching a maximum of 13 per cent of GDP in 1994, this sector's share dropped to 9.4 per cent in 2000.

"While the government offers an extensive portfolio of highly developed services, it has opted to reduce its role in Dubai's economy. This stems from the government's policy of expanding the role of the private sector in development in keeping with its commitment to an open market economy. Real estate: The real estate sector's share in GDP increased from 6.4 per cent in 1990 to 9.6 per cent in 2000 (Dh10.6 billion) a result of the high real average annual growth rate of 11.95 per cent in the decade from 1990-2000. Real estate continues to play a significant role in Dubai's development. "At the federal level, investment in real estate has grown from Dh2.5 billion in 1975 to around Dh11 billion in 2000. (The Emirates News Agency, WAM)


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