United Arab Emirates

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The UAE is a seven states country found in Asia. It is a federal state located in the oil-rich Middle East. It constitutes seven emirates which are Dubai, Ajman, Abu Dhabi, Fujairah, Umm Al-Quwain, and Ras al-Khaimah. The UAE contain an average of 6 million residents with only a million out of the six million being the bonafide citizens. Its capital city is Abu Dhabi. From the start of the 21st century, the UAE has experienced steady economic growth ranging at an average of 7% per annum (Lancaster, 2011).The returns gotten extracted from the sale of oil has been capitalized and recapitalized in both the direct and indirect investments in particular projects that have helped in boosting the growth of the economy.

Conversely, with exceptional economic growth, UAE still faces various problems which range from economic, environmental, to political issues. For example, in the growing industry, the economic front faces threats from the ever-increasing aquatic pollution and the diminishing resources which is depended upon by UAE growing population.

The political leaders anticipated the likelihood of the state exhausting its oil reserves in the near future, and as a result, they have succeeded in turning the economic dependence on petroleum and fishing to world-class tourism, service industry, and mass communication including telecommunication. Unlike its neighbours located at the Gulf who heavily rely on oil reserves, the United Arab Emirates has earned its position in the world scene as one of the forces worth reckoning with on matters economic and lately the shipping business (Alfaki & Ahmed, 2017). They have been trendsetters in their architecture which is uniquely constructed. They have also pushed engineering to its limits by constructing one of the tallest buildings on earth on an artificial Island. UAE is an Arabic speaking nation, but the most commonly spoken languages along the streets are English and some South Asian languages.

The living standards in the United Arab Emirates (UAE) is very high as compared to other countries. Some economists argue that the United Arab Emirates is amongst the fastest world growing economies. The UAE is a free market economy with few restrictions on international trade, capital market and the private sector activities. The UAE is the eighth largest producer of oil in the world. This nation has an abundant supply of natural gas, oil, and other raw materials which makes it easier for a trade surplus and a stronger economy. The UAE does not impose income or corporate tax rates within the free trade zones of the country. This plus the permitted total foreign ownership serves the purpose of attracting the attention of many foreign investors (Delgado, 2016). The presence of the foreign investors strengthens both the economy of the country and the value of the UAE Dirhams (AED). The taxation system within the UAE is also moderated. Overall, the tax can be approximated to be 7.1% of the total income. Personal income tax is also absent. The UAE had a gross domestic product (GDP) OF $379B by 2012 (Alshamsi et al., 2015). The economy has grown by approximately 231 times in the 2013 financial year. The unemployment rate is approximated to be at 4.4%.

Since the discovery of oil over 3 decades ago, the UAE government has spent a lot in an attempt to expand the major sectors and industries located within the country. The significant economic areas of the UAE are natural gas, petrochemicals and petroleum all of which account for the bigger percentage of the country’s GDP output. The country depends heavily on these three major economic sectors for stronger economic growth (Al-Otaiba, 1977). There also exist other economic sectors namely trade, retail and tourism in the country. These sectors come with various opportunities in fishing, cement, aluminium, fertilizers, construction material, construction, commercial ship repair, shipbuilding handcrafts and textiles. There is currently $350billion worth of infrastructure projects within UAE including the national airline “Emirates”.

In the UAE there are strict anti-debt laws, free trade zones with 100% foreign ownership and output that has continued to grow for several months; the UAE is an excellent place to establish or expand operations in the near future. With the government increase in spending for job creation and infrastructure outside of the oil sector, economic growth has reached a 32-month high. Economists presume that if output continues to grow, then inflation will rise to 2.3% in 2014. Reuter’s magazine predicts that the UAE’s GDP will rise in the new fiscal year (2014) by 3.7 per cent, a .1 per cent increase from the estimated GDP of 3.6 in 2013. The real estate sector is expected to grow due to previous economic strength and preparation for the world expo being held in Dubai in 2020. In past years, the average price of a house in Dubai has risen by approximately 19%; a feat only paralleled by the increase in real estate prices in Hong Kong. The federal budget has posted a surplus in the past years. Early statistics predict that the UAE can register a financial surplus between 5-7 per cent of the GDP this year. This financial surplus, created by a steady outflow of funds, allows the UAE government to prioritize education and a booming public sector to continue to grow and raise the standard of living. With the current state of the United Arab Emirates, this is the best time to establish and expand operations. Currently, the UAE is in a period of economic well-being; trading is high, the dollar is strong and economic safeguards within large sovereign wealth funds provide a stable environment for business startups and/or expansions. Employment regulations are incredibly flexible, and it would appear that the inflation rate is under control. The UAE will provide a competitive capital market. Meagre tax rates also make the UAE an excellent choice for businesses. The UAE has continuously had a stable political environment, making it a wise and safe investment within the Middle East.

Dubai is a small state located in the Persian Gulf. It hosts most of the economic zones and hubs in UAE. Over the years, the political structure has initiated massive projects and formulated policies that have been directed towards shifting the oil dependency as the chief driver of the economy to diversification. There is a need to include international tourism which primarily focuses on attracting the world’s richest.

The economy of the UAE is doing well. Over the past 32 months, the output has been increasing, and the UAE has shown economic growth. However, like the rest of the world, the UAE was stricken by the financial crisis in 2009. Many of the government-funded infrastructure projects were cancelled, and the oil sector didn’t produce as much output as hoped. The 09’ crisis also hit Dubai, the UAE financial capital. Many companies suffered severe losses and prompted the Emirate to give a $20billion bailout. It is estimated that Dubai alone may have faced debt up to $ 59billion. Economists believe this massive debt was due in part to the UAE over-borrowing on extremely low interest rates on the USD. Since talks with creditors and the restructuring the AED, Dubai has formulated a plan to lower the debt. Since 09’, construction has begun on some of the projects while some still remain untouched or cancelled. The price of real estate dropped severely and is slowly starting to rise again with the recent upturns in the economy, new infrastructure projects and the world expo.

The UAE is a business hotspot. With low tax rates and very few government barriers, the government has aimed to modernize the economy. This has attracted many people who want to start businesses within the UAE. The government of The UAE is mainly controlled by two families; Abu Dhabi’s ruling Nahyans and Dubai’s Maktoum family. The government has worked towards creating a new system of accountability and sincerity in trying to prevent crises like the one in 09. These are big steps the government has taken to modernize the economy. The problem within the UAE still being that these families still want to be careful not to open up politics too much so that one day they may lose power and control. This government control leads to a lack of rights and a false feeling of freedom. The government and moneymaking families are tied very closely. Laws are created to benefit some business and people. Until recently, the government has shown a lack of care for its people in education and insufficient sanitary precautions. The government easily turns a blind eye to the underpaid foreign workers from Asia who are exploited with very few rights. This leads to the question, how successful will the UAE be when the oil is gone?

The UAE is already a model of a state that needs to be emulated by other world leaders. Despite the existence of regional tendencies overdependence on oil deposit, political instability and presence of unfavourable business operating environment, the UAE has steadily experienced a very strong political stability and a table economy. It is also evident that the enormous goodwill of the existing government which majorly inclines towards the development agenda has heavily contributed to the massive economic growth.

In the 21st Century, the UAE provides a land of promise and opportunity similar to the American Dream. There is a dream of success and opportunity behind the little to no taxes and business-driven economy. While all this sounds prosperous, the lack of government control or care for its people is overlooked by expatriates, who make up the majority of the business ownership, and who are quick to turn a blind eye for the sake of a dollar. In my opinion, the UAE has created an economy that is doomed to fail. The lack of political control by foreigners will not help businesses should the world face another economic crisis like that of ‘08. If another world recession arises, it is important to be able to have a say, in order to take precautions and actions that will better the businesses and control damage. The economy, created behind the money from oil, will eventually disappear as oil sands dry up and the world shifts its focus to new forms of energy. This will be devastating to the UAE and have severe effects on its economy.

In order to counter these emerging challenges, a stronger government system with inclusive rights for all should be created. Therefore, the government must eventually change to a democratic system. With the budget surplus, much of the focus should be pot on funding the education system and other sectors of employment. In addition, extreme capitalism should be moderated and separate the lawmaking and the moneymaking in the country. Both fewer government censorship and extra worker rights should take centre stage (Ell Mallakh, 2015). In a case whereby the oil sands disintegrate, the country requires other economic resources to assist in funding the government and raise GDP. There is also the need to create an economic plan that introduces some taxes to help prepare for the inevitable.

The UAE has no personal income tax and in general very low taxes. A longtime advisor to the UAE government said: “there is nobody in government who isn’t first and foremost a businessman.” With that in mind, the government is in a time of economic growth. However, government spending is still high and increasing, which resembles the expansionary fiscal policy. The UAE is spending billions on infrastructure and its national airline. It is investing its profits from oil in creating a modern society and world financial capital. The fiscal policy suggests its intentions are for domestic growth and self-interest. The fiscal policy is keeping unemployment low, stabilizing prices and promoting high economic growth.  UAE has a trade surplus that has created a budget surplus within the country (Alshamsi et al., 2015). The budget surplus was approximately 5% of GDP in 2013. The government has said that it will focus this surplus on creating a better private and public sector and funding education. I believe these are appropriate actions given the budget surplus. The low interest rate that is expected to jump and the slowly rising inflation rate mean we are on a path towards a fiscal cliff. This means the government should consider contractionary monetary policy. However, the UAE is continuing its expansionary monetary policy and increasing government in attempts to increase prosperity.

The budget surplus and times of economic well-being mean that the government should use contractionary fiscal policy. The government should take some of the extra income to help pay down the debt that it has incurred borrowing on low interest rates. Overall, the government should try and promote private firms and investors to take stakes in new infrastructure projects instead of fully funding everything. It would be healthy for the economy if private companies held stakes in infrastructure projects and other business ventures (Jayaraman et al., 2016). With wholly government-funded infrastructure, the employment rate is heavily tied to government spending. If private companies were to invest in infrastructure or other similar projects, the employment rate wouldn’t be dependent on heavy government spending. If the UAE continues this exuberant spending, then it will inevitably hit a fiscal cliff, and the markets will crash, leaving the UAE in a much worse state then the UAE sovereign funds can bail them out of.



The waning oil deposits have prompted the ruling elites based in Dubai to think outside the box and arrive at practical and effective solutions that will see the country getting revenues once the oil is depleted. Considering the size of its population, UAE has positioned itself among the wealthiest nations. This aspect can be attributed to the oil deposits and the budget surpluses that has enabled it to have a considerable amount in the form of current accounts held by both the government and individuals. UAE has achieved success both from the economic front and the social front. This success is anchored in the common friendly human rights situations which have succeeded in luring foreign investors to Dubai.


















Al-Otaiba, M. S. (1977). Petroleum and the Economy of the United Arab Emirates (p. 39). Croom Helm.

Alfaki, I., & Ahmed, A. (2017). From oil to knowledge: transforming the United Arab Emirates into a knowledge-based economy. Routledge.

Alshamsi, K. H., Hussin, M., & Azam, M. (2015). The impact of inflation and GDP per capita on foreign direct investment: the case of United Arab Emirates. Investment Management and Financial Innovations, 12(3), 53-74.

Delgado, P. A. A. D. L. (2016). The United Arab Emirates case of economic success: the Federal Government Economic Policies (Doctoral dissertation).

El Mallakh, R. (2014). The Economic Development of the United Arab Emirates (RLE Economy of Middle East). Routledge.

Jayaraman, R., Colapinto, C., La Torre, D., & Malik, T. (2015). Multi-criteria model for sustainable development using goal programming applied to the United Arab Emirates. Energy Policy, 87, 447-454.

Lancaster, W., & Lancaster, F. (2011). Honour is in contentment: life before oil in Ras al-Khaimah (UAE) and some neighbouring regions (Vol. 25). Walter de Gruyter.











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