Stability and Sustainability of UAE Macro-Economy
By Mehmood Ul Hassan Khan
According to the latest report of the UAE central bank (September, 2012) the real GDP growth is forecast to increase from 3.3 per cent in 2011 to 3.5 per cent in 2012 and to 6.4 per cent in 2016. Moreover, the non-oil GDP has shown very impressive recovery from an estimated one per cent in 2010 to 6.7 per cent in 2011. On the other hand, construction and real estate are showing positive development. According to the report (September, 2012) about banking and financial sector, UAE banks, which control the biggest asset base in the GCC and Middle East, boosted their net income by nearly 18.2 per cent in 2011 as they continued to mitigate the bad effects of the global economic and financial crises 2008. From around Dh22.5 billion in 2010, the net profits of the country’s 23 national banks and 28 foreign units swelled to nearly Dh26.6 billion in 2011.
According to a World Bank report (September, 2012) indicates that supply chain and logistics sector has increased its contribution in GDP i.e. 14 percent. It is hoped that it would further consolidate UAE drive of further diversification of national economy in the days to come. In modern economic integration and international trade arena, shipping, ports and integrated cargo industries play very important role in the overall economy of the country. It provides strategic cushion to cope with the emerging geographical, physical, social and economic constrains. The total throughput of UAE ports at 14,756,127 TEU in 2008 which has now reached to 15,174,023 TEU, an increase of 748,984 in 2010-2011.
Visionary leadership’s consistent policies have made United Arab Emirates a country, economically sustainable, politically stable and socially dynamic and united. Since its independence it achieved unprecedented socio-economic growth rates, excelled in all sectors beyond other expectations. Now sky is the limit and it is heading towards it by each passing day.
The study by the Washington-based Institute for international Finance (IIF) said that the UAE’s GDP, the second largest in the Arab world, surged by 4.7 per cent in 2011 after recording 3.2 per cent growth in 2010 and 3.7 per cent contraction in 2009. It projected UAE GDP growth to achieve 3.2 per cent in 2012-2013.
According to Global Competitiveness Report 2012-13 the UAE topped the list of Arab countries and ranked 5th globally in the World Bank’s Doing Business Report for ease of trading across borders. Similarly, it ranked 1st among Arab countries and 17th worldwide on the UN’s recent World Happiness Report and 16th internationally in the IMD s World Competitiveness Yearbook.
Most recently depending upon its robust macro-economy performance many regional and international financial institutions and regulatory bodies have bestowed with different distinctions to UAE which are given below as:
(1)Global Competitiveness Report 2012-13
Global Economic Forum has classified the UAE economy for seventh year consecutively among 23rd world economies based on innovation and creativity. The UAE had joined the innovation and creativity driven economies since 2006. As a result it has been ranked ahead of New Zealand, Australia, Italy and Spain. Moreover, the UAE’s labour market efficiency surged by 21 points to seventh globally, reiterating that the UAE would score better results in the next global competiveness reports.
(2)World Economic Forum Report (2011-2012)
In its annual report (2011-2012), the World Economic Forum placed UAE first in the region and 23rd for the sixth consecutive year in the category of the Innovation-based Economy. It is indeed a great achievement on the part of the UAE. Moreover, latest MasterCard Worldwide IndexTM of Consumer Confidence (2012), the consumer confidence score for the UAE is at its highest since 2009, highlighting that the positive performance seen in key sectors like retail and hospitality is trickling down to impact consumer sentiment. Moreover, consumers in the UAE are very optimistic in their attitudes towards the key indicators of the economy including, optimistic about economy, employment, income, stock exchange and quality of life.
(3) 3rd in MENA in the Retail International Programme Expansion: EC Harris, global asset consultancy
The UAE has been ranked 3rd in MENA and 15th overall in the Retail International Programme Expansion (Ripe) Index released by EC Harris, a global asset consultancy. It is indeed a great achievement due to emerging socio-economic trends in the region.
(4)World Bank’s Doing Business Report (2012)
The World Bank’s Doing Business report (2012) placed the UAE at 33 out of 183 countries. UAE has become one of the ideal destinations in the region and lucrative market place for the world. It is a window of opportunity for the west and the east because of its ideal strategic location. It provides every possible facility for doing business in the country. It cares about businessmen investments and all other related issues. Furthermore, the reports rants UAE at 5th in the world for trading across borders, 6th for registering property and 7th for paying taxes.
(5)International Institute of Management Development (IMD)
The International Institute of Management Development report (2012) of Switzerland has placed the UAE at first place globally in the field of efficiency of governmental fiscal policy. It shows that fiscal policies and regulatory mechanism of the UAE government are in good shape. The regional turmoil and global economic recession could not produce any dint in the fiscal soundness of the UAE government. Moreover, regulatory competitiveness of its organs played a remarkable role mitigating the bad spillovers from the regional political uncertainty and global financial church.
(6)World Bank’s World Governance Indicators (2011)
The latest report of the World Bank shows UAE legal and regulatory environment ranking at par excellence. According to the said report, UAE’s regulatory quality is improving and showing an advancing trend in recent years. The research study indicated that the government effectiveness is high and the overall freedom to conduct business is well protected under the existing regulatory environment as the UAE tax regime, which is a major attraction for foreign investors, strengthens Foreign Direct Investment (FDI) inflows, as both income and sales taxes are non-existent.
(7)The World Economic Forum (WEF), “Global Enabling Trade Report (2012)
The latest report of the World Economic Forum (WEF) “Global Enabling Trade Report” placed the UAE 1st regionally and 11th globally in terms of in terms of the availability and quality of transport infrastructure which showed that the UAE outperformed countries such as the USA, Finland and Belgium. According to Sheikh Hamdan bin Mubarak Al Nahyan, Minister of Public Works the UAE’s generous and carefully planned spending on infrastructure projects has resulted in advancing its global ranking in WEF’s Global Enabling Trade Report 2012. It continues to build road networks connecting the country’s cities to further boost the economy. Moreover, the availability and quality of infrastructure in the UAE contributes to the national economy and furthers our commitment to development in the country.
It indicated that UAE achieved 4th rank globally in terms of the quality of air transport infrastructure, 6th in terms of the quality of seaport infrastructure, and 7th transshipment connectivity.
(8)UN e-Government Readiness Survey (2012)
The latest UN e-Government Readiness Survey (2012) has placed the UAE 21 in global rankings. It placed the UAE at 28th place in 2010. UAE was ranked 5th in Asia mainly due to increasing digital literacy. It shows that UAE lead the index has moved upward beyond basic e-services to integrated systems that link different institutions and departments offering a single point of contact to the public.
Right from the beginning, the UAE government has been a driving force in expanding its services online and closing the digital divides, as well as embracing the knowledge economy. It is effectively facilitating the economic and social development of the country.
(9)The International Institute for Management Development (IMD)
The International Institute for Management Development (IMD) report showed that the UAE was placed 1st regionally and 4th globally in Cyber Security. UAE Telecommunications Regulatory Authority (TRA) has played a crucial role in this regard. It places great emphasis on cyber security making it one of the strategic goals in efforts to prepare a leading globally sustainable, secure and competitive digital environment in the country’s ICT sector.
It made significant achievements in activating early alerts notifying members of expected risks in the infrastructure, attacks, and mal-wares that might target its members. It continues to monitor information infrastructure in the UAE providing alerts to members and giving directions of how to mitigate attacks. It also emphasized on educating the UAE people at society at large about cyber security through awareness campaigns. It created the “Salem” character that extends advice through all types of media including print, TV, Radio, and social media in addition to making appearances at specialised conferences and exhibitions.
The latest report (2012) of the United Nations Conference on Trade and Development (UNCTAD) has indicated that the UAE is the largest Arab capital exporter. It has pumped more than $57 billion into foreign markets to emerge as the largest capital exporter in the Arab region. UAE also emerged as the second recipient of FDI in the region attracting nearly $85.4 billion.
(11)Dubai Chamber of Commerce and Industry (2012)
According to the latest report of the Dubai Chamber of Commerce and Industry report (2012), the UAE is the third-most competitive economy in the region which is achieved through the implementation of rigorous macro-economy policies not confined to liberalization of economy, privatization, financial reforms in banking and all other related sectors of the economy, investments and above all business friendly environment. Despite ongoing global economic recession and financial crunch, the economy of UAE remained stable and sustainable which upholds its ranks of most competitive economy in the region.
(12)Inter-Arab Investment Guarantee Corporation (IAIGC), Kuwait
According to official data of the Inter-Arab Investment Guarantee Corporation (IAIGC), based in Kuwait, the UAE emerged as one of the largest global investors in cross-border acquisitions in 2009, accounting for nearly 5.9 per cent of the world’s total transactions in this field. It was around $5.9 billion in 2008 now reached to $14.8 billion in 2009. Furthermore, it was a mere 0.8 per cent in 2008 to nearly 5.9 per cent in 2009. It also accounted for nearly 20 per cent of the total acquisitions transactions of around $73.9 billion in the developing world and as high as 53 per cent of the combined Arab deals of nearly $27.8 billion.
(13)Department of Economic Development (2012, 2nd quarter Report)
The recently published report indicates that overall consumer confidence (CCI) in the UAE remained robust during the second quarter of 2012 because of a positive outlook on personal finance and strong optimism on job prospects. It shows that UAE economy continues to invoke positive sentiment and trust among investors and CCI remained at a higher than average level of 122 percentage points during April-June 2012.
The discipline of economics, consumer continence index is one of the key stockyards about the emerging trends in the macro-economy of any country. It is essential to know the trends and patterns of buying, spending and saving which provides a viable means to know the level of growth in the local market.
(14))Steady Recovery in UAE construction sector
Advanced Construction Technology Services (ACTS) said that UAE’s construction sector is seeing steady recovery after the slowdown in recent years. It is healthy sign for the economy of the UAE which would give dividends in the days to come.
(15)Statistics Center – Abu Dhabi (SCAD)
Most recently, Statistics Center, Abu Dhabi (SCAD) issued its periodic report on the consumer price index (CPI) and the inflation rate in the Emirate of Abu Dhabi for the month of March and the first quarter of 2012. It reveals, average consumer prices edged up 0.9 per cent in Q1 2012 compared with Q1 2011. Both are within manageable limits.
Stability and sustainability are the two main salient features of the UAE macro-economy in 2011-2012. The prospects are even better in the years to come. All the major macro-economy indicators are healthy, positive and productive. Due to timely policy adjustments and rigorous contingencies plans, UAE has succeeded to achieve high rates of GDP, FDI, employment generation and social development ratios in the region. Visionary leadership has been played tremendous role in the overall socio-economic transformation in the last forty years. Due to which it is now termed as one of the well performed, knowledge-based country where doing business and making investments are easy to handle.
Continuation implementation of privatization and liberalization policies and immaculate regulatory frameworks has made it risk-free country. Education, health, housing and above all integrated social development has secured high ranks in global human development index which also shows its rulers love and affectations towards its people at large.