By Mehmood-Ul-Hassan Khan
The UAE being the world’s third-largest oil exporter is now rapidly moving towards greater diversification of the economy. Thanks to the constant policies of market liberalization along with effective banking reforms, the UAE succeeded to mitigate the bad spillovers of global economic recession and financial crunch started in 2008.
Shaikha Lubna Al Qasimi, the UAE Minister of Foreign Trade
Shaikha Lubna Al Qasimi, the UAE Minister of Foreign Trade said that the UAE economy is headed towards greater diversification and now explores new vital elements such as green and alternative/ renewable energy and technological manufacturing. The current non-oil investment prospects in the UAE are very bright. China is currently the UAE’s second most important partner with bilateral non-oil trade between the two countries reaching $ 14.2 billion in 2010.
The United Arab Emirates GDP crossed Dh1 trillion mark in 2010 due to rigorous diversification drive of the macro-economy consisting of rapid industrialization, vast network of small and medium enterprises, supportive infrastructure, booming trade, strong service sector and tourism. The IMF forecast that the UAE’s macro-economy will grow at a pace of around 4 percent in 2011.
Vibrant Banking System
According to the central bank of the UAE its banking system had successfully weathered the financial crisis and its total assets to liabilities grew 4.2 percent to AED1.5 trillion. Moreover, assets and liabilities of Islamic banks in the UAE grew 6.5 percent in 2009, deposits grew 9.5 percent, while loans and advances rose about 5.5 percent. In 2011, the non-oil sector is projected to recover by nearly 3.7 per cent and accelerate by about 4.1 per cent in 2012. Moreover, the foreign assets of the country’s 23 national banks and 28 foreign units receded by more than Dh two billion to Dh226.2 billion from Dh228.8 billion.
UAE: Ideal for Foreign Direct Investment
Foreign direct investment plays very important role in the macro-economy of the country. Shaikh Hamdan, Shaikha Lubna and Sultan Bin Saeed Al Mansouri, Minister of Economy said that FDIs in the UAE reached to $13.7 billion (Dh50.32 billion) in 2010, Alessandro Golombiewski Teixeira, According to the World Association for Investment Promotion Agencies report (March 2011) the FDI in the UAE is expected to get back to its peak of a few years ago.”
It is hoped that the favourable business and investment climate in the UAE offers multiple benefits to regional and international investors. These important elements and actors have made the UAE home to the regional operations for over 25 per cent of the top 500 companies in the world. It is estimated that business and investment friendly policies and laws will further enhance the local investment environment.
Increase in Central Bank Foreign Assets
According to the latest data of the UAE central bank, its assets have increased by over Dh18b in the first two months of 2011, from Dh228.9b at the end of 2010. Foreign currency assets of the central bank rose 49.8 per cent in the 12 months up to February 2011. According to the data from the bank, total foreign currency assets of the bank stood at Dh171.07b compared with Dh114.2b in February 2010, an increase of Dh56.87b, or 49.76 per cent, in 12 months.
The rigorous strategic planning of the United Arab Emirates is making tremendous inroads in its socio-economy sphere. Diversification of the economy drive is getting momentum which is now noticeable. Small and Medium Enterprises (SMEs) are also substantially contributing in the macro-economy of the country. Service sector is rocking. Infrastructure is speeding up the pace of all the sectors of the economy. Re-exports volumes are skies high. Exports are healthy and stable. Financial and banking sectors are in the comfort zone. To only thing the UAE economy seems to need is the further diversification.