JEDDAH, 23 February 2007 — UAE economic growth is expected to remain buoyant this year after robust performance in 2006. The gross domestic product (GDP) is estimated to grow by 14 percent to reach AED553.4 billion while in real terms the economy is estimated to record 9.7 percent growth rate. According to a report by the Kuwait-based Global Investment House (Global), the UAE’s oil sector is to record high growth, as oil production is expected to increase steadily to 3.5 million barrels per day by 2011. On the other hand, non-oil sector will gain more support from the diversification strategy.
Since 1973, the UAE has undergone a profound transformation and currently it has an open economy with a high per capita income, where tremendous growth in the last couple of years has boosted the per capita GDP to an all-time high of $28,147 in 2005 as compared with $24,380 the year before. Within GCC countries, the UAE has the second highest per capita GDP after Qatar.
UAE’s economic reform and liberalization will continue and may pick up pace, as a result of both the new ruler’s leadership and pressure from bodies such as the World Trade Organization (WTO).
The Global report said “Despite record high oil prices, the UAE will focus its efforts on boosting non-oil growth. The government will continue to promote a progressive economic agenda, built around economic diversification and enhancing the role of the private sector,” adding that “the government will take steps to further promote foreign investment, including the abolition of the sole agency law and regulations that restrict foreigners to minority stakes in local firms.”
The report said Dubai remained at the forefront of most new initiatives, and sought to accelerate its diversification process, compensating for the decline of its small oil industry by building on its emerging position as the region’s services hub. Dubai also has started to develop high-class tourism and international finance sectors. In line with this, the Dubai International Financial Center was announced, offering 100 percent foreign ownership, no tax, freehold land and office space. Moreover, 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 percent foreign ownership, no tax office space for the world’s leading information, communication and media companies. Recent liberalization in the property market allowing non-citizens to buy freehold land has resulted in a major boom in the construction and real estate sectors.
Ras Al-Khaima (RAK) too has been working to diversify its revenue sources. Thus, RAK’s government embarked on a plan to develop and upgrade the tourism and industry sectors. This was sought to be achieved through leveraging RAK’s diverse natural features and opening up the industrial sector for local as well as international investors. RAK’s construction activities got a further shot in the arm during the last few years thanks to the rising demand for residential properties, in addition to the growing infrastructure needs of the Emirate.
The UAE continues to rank favorably when gauged by various indices of competitiveness and business climate indicators. This is reflected by the latest rankings contained in the Global Competitiveness Report 2006-07 issued by the World Economic Forum (WEF). According to the report, the UAE is among the most competitive countries in the world and a haven for businesses as it has consolidated its international and regional position in the Growth Competitiveness Index (GCI) for 2006. Out of 125 countries, the UAE ranked 32nd in the world as per GCI. Regionally, the UAE enjoys the second rank in the MENA countries as well as, it is the highest ranked in the Gulf region.
The UAE government has also taken vital steps on the regulatory front such as restrictions on foreign investment in the country are getting progressively relaxed with the expansions of free zones. The country has been recently discussing amendments to the law of commercial agencies in order to comply with WTO regulations. The country is also expected to raise the current 49 percent ceiling on the stake that foreign companies can acquire in domestic companies. The change in laws on foreign ownership of real estate in the emirates of Dubai, Abu Dhabi, Sharjah, and Ras Al-Khaimah also signals the intent of reaching the stage of being seamlessly integrated with the outside world, the Global report said.
