United Arab Emirates Country Profile

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    United Arab Emirates: Country ProfileCountry Profile | 06 Dec 2013

    The pace of growth will slow in 2013. Gains in construction and realestate are supported by higher levels of public spending but this isoffset by a slowdown in the hydrocarbon sector. Unofficially,unemployment among nationals is thought to be in double - digits and isconcentrated in the northern emirates. The real estate market isimproving but a large property overhang exerts a drag on the economy.Several mega projects that were postponed have recently beenreinstated.

    KEY POINTS

    Real GDP is expected to rise by 4.0% in 2013 down from 4.4% in 2012. Gains in construction andreal estate are supported by higher levels of public spending. The central bank expects that the non-energy sector will grow by 4.3% in 2013. However, growth in the hydrocarbon sector will be only1.5% far below the pace in recent years.

    Abu Dhabis diversification programme has made impressive progress. Its non-oil industries nowaccount for around 48% of real GDP and are larger than Dubais entire GDP. Dubais diversificationefforts were side-tracked by troubles in the financial industry and the real estate market but arecovery began in 2012.

    Officially, unemployment is expected to be 4.7% in 2013, up from 4.6% in 2012. Unofficially, double-digit unemployment (around 14%) persists among nationals and is concentrated in the northernemirates. According to the national statistics agency, foreign workers account for just over 88% ofthe work force. Most are from South Asia, the Philippines and other Arab states.

    The real estate market is improving but a large property overhang still exerts a drag on theeconomy. Several mega projects that were postponed during the global financial crisis have recentlybeen reinstated.

    C h a r t 1 R e a l G D P Gr o w t h a n d P e r Ca p i t a G D P : 2 0 0 5 - 2 0 1 4

    Source: Euromonitor International from national statistics/Eurostat/OECD/UN/IMF

    Note: Data for 2013 and 2014 are forecast. GDP per capita are in constant 2012 prices

    FACTS

    Area

    83,600 square kilometres

    Currency

    UAE dirham (AED= 100 fils)

    Location

    The United Arab Emirates (UAE) is a confederation of nominally

    independent states which form a crescent running along the southernPersian Gulf coast of Saudi Arabia. With the main land area of Oman tothe east, and with the enclave which is the urban capital of Oman lyingat its extreme eastern tip (in the Straits of Hormuz); the UAE occupiesa position of immense strategic importance.

    Capital

    Abu Dhabi

    GOVERNMENT

    Head of State

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    Sheikh Khalifa bin Zayed Al Nahyan (2004)

    Head of Government

    Sheikh Mohammed bin Rashid Al Maktoum (2006)

    Ruling Party

    There are no legal political parties in the United Arab Emirates.

    Political Structure

    The UAE is a federation of seven emirates Abu Dhabi, Dubai, Sharjah,Ajman, Fujairah, Ras al - Khaimah and Umm al - Qaiwain. Political power

    is concentrated in Abu Dhabi, which controls the vast majority of theUAE s economic and resource wealth. The two largest emirates AbuDhabi and Dubai provide over 80% of the UAE's income. In 1996, theUAE s Federal National Council approved a permanent constitution. Theestablishment of Abu Dhabi as the UAE s permanent capital was one ofthe new framework s main provisions. There is a Federal SupremeCouncil, composed of the seven emirate rulers. The Federal NationalCouncil, which consists of 20 members appointed by the emirate rulersand 20 members elected by indirect vote through local councils, has nolegislative powers. The president is elected by the Federal SupremeCouncil.

    Last Elections

    In 2011, voters went to the polls to select 20 members of the FederalNational Council. However, less than 1% of the population were allowedto vote. In December 2005, Sheikh Khalifa bin Zayed Al Nahyan waselected president by the Federal Supreme Council following the death ofhis father, the previous head of state. Sheikh Khalifa also succeeded hisfather as the ruler of Abu Dhabi. In January 2006, Maktum bin Rashid AlMaktoum, the prime minister of the UAE and emir of Dubai, also died.He was replaced by Mohammed bin Rashid Al Maktoum, a member ofthe same clan.

    Political Stability and Risks

    Increasingly alarmed by Iran s growing military prowess, thegovernment of the UAE is spending US$35 billion to modernise its ownmilitary.

    The royal families in the seven Emirates are under pressure to cedemore of their powers to the private sector. Growing unrest in the Arabstates prompted the government to pledge to invest more than US$1.5billion in utilities infrastructure in the poorer members of the federation.Al- Qaeda has repeatedly threatened attacks on western businesses inthe country.

    All the emirates are concerned about the high percentage of foreignworkers residing in the UAE and are trying to reduce this number.Despite their efforts, immigrants continue to flock to the Emirates.

    International Issues

    The UAE and Iran dispute the ownership of three islands which arestrategically located in the Strait of Hormuz. Iran seized the islands in1971 and has rejected proposals by the Gulf Cooperation Council toresolve the dispute. Iran s goal of becoming a nuclear power alsoaffects the UAE. The Emirates fear that they may be the first point of

    an attack b Iran.Page

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    Human rights groups have become increasingly critical of thegovernment. In July 2013, officials sentenced 68 Islamists to jail overan alleged plot to overthrow the government.

    The UAE and Saudi Arabia do not have a precisely defined border andthe Shaybah oil field straddles territory claimed by both governments.The UAE has demanded an agreement to share production fromShaybah.

    Government Finance

    UAE

    s public debt in 2012 was put at AED232,237 equivalent to 17.0%of GDP. In 2013, the real value of public debt will rise by 1.7%. Dubaihas US$85 billion of debt due for repayment in 2014 - 2018.

    Abu Dhabi controls the world s largest sovereign wealth funds, the AbuDhabi Investment Authority (ADIA), with an estimated US$627 billion inassets. ADIA acts much like a pension fund for Emiratis.

    The country expects a budget surplus of equivalent to 8.1% of GDP in2013, down from 8.8% in 2012.The UAE s consolidated fiscal positionshould continue to improve through 2015 as each successive budget isexpected to have a substantial surplus. The non - oil deficit is falling but

    will still be 30.1% of GDP in 2013.C h ar t 2 P u b l i c D e b t : 2 0 0 5 - 2 0 1 2

    Source: Euromonitor International from national s tatistics/Eurostat/IMF/OECD

    Note: Data are in constant 2012 prices

    ECONOMY

    Economic Structure and Major Industries

    Manufacturing makes up 8.6 % of GDP and the government hopes toraise this share to 25% by 2025. The industries singled out to drive thisexpansion are petrochemicals, automobile parts, ship building, aviation

    and energy - based activities. Presently, several large aluminium projectsare under development. The biggest is a US$5.6 billion aluminiumsmelter. Abu Dhabi is making a serious effort to encouragemanufacturing through projects such as the Khalifa Industrial Zonewhich allows 100% foreign ownership. Abu Dhabi is also pursuing adiversification that emphasises financial services, petrochemicals andrenewable energy. In real terms, gross manufacturing output should riseby 4.0% in 2013.

    Abu Dhabi National Oil Co (Adnoc) is halfway through a five - year US$40billion investment plan aimed at boosting oil and natural gas output.

    The company plans to double processing capacity at its 400,000 b/dRuwais plant by the end of 2014. Gas developments will account forUS$25 billion of the planned investment.

    The real value of tourist receipts rose by 5.3% in 2012 and growth of5.8% is forecast for 2013. Meraas, a Dubai - based real estate company,launched a new AED2.2 billion project to build Dubai Adventure Studios,a movie - based theme park. Financial supervision has beenstrengthened. The UAE is now regarded as a best - practice model in thisfield and growth in financial services is strong. Capital flows have beendiverted to the country after the unrest in other Arab states. Driven byimmigrants and tourists, retail spending is buoyant.

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    Overview of the Economy

    The standard of living in the United Arab Emirates is one of the highestin the world. The country also has one of the more diversifiedeconomies among the major oil - producing Persian Gulf states. Thepursuit of a highly liberal, business friendly and market - oriented growthstrategy has reshaped the economy.

    Abu Dhabi and Dubai together contribute about 80% of the UAE sincome. Abu Dhabi s diversification programme has made impressiveprogress. Its non - oil industries now account for around 48% of real GDPand are larger than Dubai s entire GDP. Dubai s diversification effortswere side - tracked by troubles in the financial industry and the realestate market but a recovery began in 2012 when the emirate seconomy grew by 4%.

    The UAE is the second largest FDI recipient among Arab countries afterSaudi Arabia, attracting nearly US$74 billion over the past four decades.As the UAE has developed into a major services hub in the Middle East,its dependency on oil exports has declined.

    Foreign Trade

    The UAE is especially dependent on exports. In 2012, exports accountedfor 80.5% of GDP, up from 76.1% in 2008. Exports (in dollars) grew by5.3% in 2012 and gains of 6.5% are expected in 2013.

    Asia (primarily Japan and India) is the most important market for theUAE s exports, taking 56.6% in 2012. Mineral fuels represented 36.1%of all exports in 2012 while basic manufactures which predominantlyconsist of re - exports account for 12.1%. Dubai is home to the UAE sbusiest airport and sea port and it has long been a transfer point forgoods moving in and out of nearby Iran.

    Members of the existing Gulf Cooperation Council (the UAE, SaudiArabia, Kuwait, Qatar, Oman and Bahrain) still hope to completenegotiations on a common market by the end of 2014.

    Supported by high oil prices and strong non - hydrocarbon exports, thecurrent account surplus was 17.8% of GDP in 2012. It will narrow to15.7% in 2013.

    C h a r t 3 T o t a l F o r e i g n T r a d e : 2 0 0 5 - 2 0 1 2

    Source: Euromonitor International from national statistics/OECD/IMF

    Economic Prospects

    Real GDP is expected to rise by 4.0% in 2013 down from 4.4% in

    2012. Gains in construction and real estate are supported by higherlevels of public spending. The central bank expects the non - energysector to grow by 4.3% in 2013. However, growth in the hydrocarbonsector will be only 1.5% far below the pace in recent years.

    Inflation was 0.7% in 2012 and prices will rise by 1.0% in 2013.

    Officially, unemployment is expected to be 4.7% in 2013, up from 4.6%in 2012. Unofficially, double - digit unemployment (around 14%) persistsamong nationals and is concentrated in the northern emirates.According to the national statistics agency, foreign workers account forust over 88% of the work force. Most are from South Asia, the

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    Philippines and other Arab states.

    Growth of private final consumption (in real terms) was 5.3% in 2012and 5.7% is expected in 2013. Somewhat higher rates of growth shouldbe seen in the medium term.

    The real estate market is improving but a large property overhang stillexerts a drag on the economy. Several mega projects that werepostponed during the global financial crisis have recently beenreinstated.

    C h a r t 4 R ea l GD P Gr o w t h : 2 0 0 5 - 2 0 1 4

    Source: Euromonitor International from national statistics/Eurostat/OECD/UN/IMF

    Note: Data for 2013 and 2014 are forecast

    Evaluation of Market Potential

    Growth rates are expected to rise in the medium term. Growth in thenon - energy sector is expected to average about 4% per year in themedium term as tourism and other diversification strategies bringresults. In the longer term, the target is for 64% of GDP to begenerated in non - energy sectors by 2030.

    Key government entities (such as the Abu Dhabi National Oil Company,

    Dubai Ports Authority, and Dubai Aluminium Company) have massiveinvestment plans to further increase the capacity of upstream activitiesin the petrochemicals sector, improve infrastructure in airports andports, and develop new manufacturing plants in the metals sector. Overthe next five to seven years, oil production capacity in Abu Dhabi isexpected to expand from 2.9 million barrels to 3.5 million barrels perday.

    BUSINESS ENVIRONMENT

    The UAE has no income tax and no corporate tax at the federal level.However, there are different corporate taxes in various emirates. Thericher emirates have taken steps to encourage more private sectorparticipation.

    All members of the Gulf Cooperation Council including the UAE intend to introduce a VAT system by 2016 or before. VAT laws will haveto be harmonised.

    After decades of restrictions, the UAE plans to allow greater foreignownership of some areas in the service sector. Foreign businesses willbe allowed to own 49% of most businesses but some industries such asinsurance are capped at lower shares.

    Following the collapse of Dubai World in 2009, the emirate issued newlaws that allow major firms to file for bankruptcy. Spurred by theexperience of Dubai, Abu Dhabi has established a new committee toprovide oversight of its state - owned companies.T a b l e 1 I n d i c a t o r s o f B u s in e s s En v i r o n m e n t : 2 0 1 4

    Ease of doing business rank (out of 189) 23

    Starting a Business

    Time (days) 8

    Procedures (number) 6

    Dealing with construction permits

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    Source: Euromonitor International based on the World Bank

    Note: Data is sourced from the World Bank s Doing Business 2014.Doing Business presents quantitative indicators on business regulationsand the protection of property rights - and their effect on businesses,especially small and medium - size domestic firms. The data for all setsof indicators in Doing Business 2014 are from June 2012 until June 2013(except for paying taxes data which refers to JanuaryDecember 2012).Rankings are based on data sets across 189 countries.

    ENERGY

    The UAE has proven crude oil reserves of 97.8 billion barrels. Abu Dhabiholds 94% of this amount. Dubai contains an estimated four billionbarrels, followed by Sharjah and Ras al - Khaimah. Proven oil reserves inAbu Dhabi have doubled in the last decade, mainly due to significantincreases in rates of recovery. Under the UAE s constitution, eachemirate controls its own oil production and resource development. TheUAE produced 157 million tonnes of oil equivalent in 2013.

    Proven reserves of natural gas totalled 6.1 trillion cubic metres in 2013.

    Time (days) 44

    Procedures (number) 12

    Getting Electricity

    Time (days) 35

    Procedures (number) 3

    Registering Property

    Time (days) 6

    Procedures (number) 2

    Employing workers

    Standard workday in manufacturing (hours) 8

    Paid annual leave for a worker with 1 year of tenure (in working days) 26

    Tax rate

    Total tax rate (% profit) 14.9

    Labour tax and contributions (% of commercial profits) 14.1

    Time (hours per year) 12

    Payments (number per year) 4

    VAT (%) ---

    Exporting

    Documents for export (number) 3

    Time to export (days) 7

    Cost to export (US$ per container) 655

    Importing

    Documents for import (number) 5

    Time for import (days) 7

    Cost to import (US$ per container) 615

    Protecting investors

    Strength of investor protection index (0-10) 5

    Resolving Insolvency

    Time (years) 3.2

    Cost (% of estate) 20

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    Production in 2013 was 46.8 million tonnes of oil equivalent. The pastfew years have seen the UAE embark on a massive, multi - billion dollarprogramme of investment in its natural gas sector.

    Power generation capacity in the UAE is growing at a higher pace thanconsumption. The trend not only ensures energy security of the countrybut will also make the UAE a net power exporter to neighbouringcountries.

    The UAE intends to launch a nuclear programme, becoming the firstArab state to develop nuclear power. Unlike Iran s present programme,

    the plan does not involve uranium enrichment.Ch a r t 5 P r i m a r y C o n su m p t i o n o f E n e r g y ( % o f t o t a l ) : 2 0 1 2 ]

    Source: Euromonitor International from BP Amoco, BP Statistical Review of World Energy

    SOCIETY

    Population

    Total population in 2013 was 8.4 million, up from just 951,000 in 1980.Median age is rising and is presently estimated to be 33.3 years significantly higher than the regional average. The country s fertility

    rate has fallen sharply over the past three decades. In 2013, it was 1.7births per female, down from 5.4 in 1980. According to the UNdemographers, the decline has been one of the steepest among all Arabstates. They attribute the downward trend to improvements ineducation and better access to various forms of contraception.

    Foreign citizens make up around 80% of total population. Their numberswill be growing slightly faster than that of nationals. Nearly 90% of thecountry s workers are foreigners. Immigration has led to an imbalancebetween the male and female populations there are two men forevery woman in the UAE

    Ch a r t 6 A g e P y r a m i d i n 2 0 1 2 a n d 2 0 3 0

    Source: Euromonitor International from national statistics/UN

    Income and Expenditure

    The UAE s savings ratio has typically been higher than the regionalaverage. In 2013, savings were 14.3% of disposable income and theratio will slip to 14.2% in 2014. An ageing population should keepdemand strong for Islamic savings products.

    Consumer expenditure per capita totalled AED84,041 (US$22,884) in2013. It is expected to grow by 4.2% in 2014 in real terms.

    Total consumer expenditure (in real terms) will rise by 5.2% in 2014. Inthe period 2012 - 2020, total consumer expenditure will grow at anaverage annual rate of 4.3%. It will increase by a cumulative value of40.3% during that period. Total consumer expenditure was 51.4% ofGDP in 2013.

    Disposable income per capita amounted to AED102,782 (US$27,987) in2013. Growth (in real terms) of 4.1% is forecast for 2014.

    During the period 2012 - 2020, total disposable income will increase by acumulative 38.4% in real terms growing at an average annual rate of4.1%.

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    Imports and Exports

    C h a r t 7 P e r Ca p i t a A n n u a l D i s p o s a b l e I n c o m e , Sp e n d i n g a n d S a v i n g s R a t i o : 2 0 0 5 - 2 0 1 2

    Source: Euromonitor International from national statistics/trade sources/OECD

    Statistical Summary 2007 2008 2009 2010 2011 2012

    Inflation (% change) 11.1 12.3 1.6 0.9 0.9 0.7

    Exchange rate (perUS$)

    3.67 3.67 3.67 3.67 3.67 3.67

    GDP (% real growth) 3.2 3.2 -4.8 1.3 4.2 4.4

    GDP (national currency

    millions)

    947,197.2 1,158,580.5 935,765.7 1,055,557.4 1,280,215.5 1,409,502.0

    GDP (US$ millions) 257,916.2 315,474.6 254,803.5 287,422.0 348,595.1 383,799.0

    Population, mid-year('000)

    5,615.7 7,146.3 8,136.8 8,232.0 8,301.3 8,377.0

    Birth rate (per '000) 10.9 8.5 9.3 9.6 10.1 10.2

    Death rate (per '000) 1.2 1.0 0.9 0.9 0.9 0.9

    No. of households('000)

    940.4 1,187.7 1,564.3 1,607.5 1,635.5 1,662.2

    Total exports (US$millions)

    178,630.0 239,213.0 185,000.0 220,000.0 285,000.0 300,000.0

    Total imports (US$millions)

    132,500.0 177,000.0 150,000.0 165,000.0 205,000.0 220,000.0

    Tourism receipts (US$millions)

    4,618.7 6,631.8 6,213.6 6,521.5 6,736.8 7,363.4

    Tourism spending (US$millions)

    7,751.2 10,247.4 10,273.6 10,690.4 11,160.5 12,441.9

    Urban population ('000) 4,155.7 5,183.1 6,759.6 6,889.0 6,963.1 7,042.7

    Urban population (%) 82.9 83.3 83.7 84.0 84.3 84.5

    Population aged 0-14(%)

    16.7 14.8 14.0 13.5 13.1 12.7

    Population aged 15-64(%)

    82.7 84.7 85.6 86.1 86.5 86.9

    Population aged 65+(%)

    0.6 0.5 0.4 0.4 0.4 0.4

    Male population (%) 70.5 72.9 74.8 74.6 74.6 74.5

    Female population (%) 29.5 27.1 25.2 25.4 25.4 25.5

    Life expectancy male(years)

    75.0 75.2 75.4 75.6 75.8 76.0

    Life expectancy female(years)

    77.0 77.2 77.4 77.6 77.8 78.0

    Infant mortality (deathsper '000 live births)

    7.8 7.6 7.5 7.1 7.0 7.0

    Adult literacy (%) 91.9 92.6 93.2 93.8 94.4 95.0

    Major export dest inat ions 2012 Share (%) Major import sources 2012 Share (%)

    Asia-Pacific 56.6 Asia Pacific 48.6

    Africa and the Middle East 21.1 Europe 26.3

    Other countries 14.9 North America 11.1

    Europe 5.0 Africa and the Middle East 9.6Australasia 1.3 Other countries 1.6

    North America 0.9 Latin America 1.5

    Euromonitor International 2014