UAE Government Reforms and Economic Development

Posted on Mar 28, 2025 in Economy

Chapter 8: UAE Reforms and Economy

Government Reforms Introduction

In line with the UAE’s rapid socio-economic developments, major steps have been taken, both at the federal and local levels, to reform the structure of government. This aims to make it more responsive to the needs of the country’s population and ensure it is better equipped to cope with the challenges of development.

This process has been directed at a federal level by President H.H. Sheikh Khalifa bin Zayed Al Nahyan, and devised and guided at an executive level by UAE Vice-President, Prime Minister, and Ruler of Dubai H.H. Sheikh Mohammed bin Rashid Al Maktoum.

FNC Elections and Public Participation

  • One landmark step in this reform process, designed to enhance public participation in the UAE political system, was the first-ever indirect elections to the country’s parliament, the Federal National Council (FNC), which were conducted in December 2006.
  • The elections were based on the National Program announced by the President a year earlier, which stated that half the members of the FNC would be elected while the other half would be appointed, as part of a new effort to make the Council more dynamic.

UAE Government Strategy Launch (2007)

  • The launch of the UAE Government Strategy in 2007 was another important development in the reform process.
  • A key focus of the UAE Government Strategy is to create synergy between federal and local governments. Other principles include revitalizing the regulatory and policy-making roles of the ministries and improving their decision-making mechanisms, increasing the efficiency of governmental bodies and upgrading their services in accordance with the needs of the people, as well as reviewing and upgrading existing legislation.

Archaeological Discoveries Conference (2009)

  • Some of the major archaeological discoveries over the last 50 years were among topics discussed at a special international conference held in March 2009 to honor the anniversary of the first excavations, focusing on the discoveries of previous work.
  • Organized by the Ministry of Culture, Youth and Community Development and inaugurated by the Minister of Presidential Affairs, H.H. Sheikh Mansour bin Zayed Al Nahyan, the conference brought together academics and others both from the UAE and from the many countries overseas whose archaeologists have been involved in the discovery of the cultural heritage and history of the Emirates.

The UAE Economy

Economic Development Overview

  • Successive developments in the economy of the United Arab Emirates, governed by the Ministry of Economy, and the adoption of free market policies and regulations, have led to impressive growth rates and a trend towards sustainable and diversified development.
  • The UAE government has successfully pursued a strategy to create an enabling business environment that is conducive to economic growth. This has contributed to the UAE’s status as an international center for trade, finance, and services and has attracted global companies.

External Trade and Outward Investment

  • The UAE is a trading nation, as witnessed by its high ratio of imports plus exports (of goods and services) to GDP (around 145%).
  • The UAE is also an important participant in global capital markets through several investment institutions, including the Abu Dhabi Investment Authority, Dubai Holding, and the Abu Dhabi International Petroleum Investment Co. (IPIC).
  • Its current account has been in surplus since independence.

Economic Growth Trends

  • Economic growth in the UAE has witnessed a substantial increase over the last few years.
  • Gross domestic product (GDP) rose from AED 254 billion in 2001 to AED 379 billion in 2004, an increase of more than 14% per year. The GDP trend likely accelerated in 2005 due to the increase in the average oil price and strong expansion in the non-oil economy.
  • The government emphasizes continued diversification away from dependence upon oil and gas towards non-oil industries.

GDP Growth Dynamics (2008-2010)

  • As one of the leading suppliers of crude oil, the UAE had initially been insulated from the global downturn by high oil prices, which soared to a record US$147 in July 2008.
  • However, the country was eventually affected by the deepening global downturn that led to a slump in the demand for oil, dragging prices to less than a third of the July 2008 peak.
  • In the final months of 2008, the effects of the downturn in international economies were finally felt in the region, resulting in a sharp downturn in stock market indices.
  • Further proof of the UAE’s close integration in the global economy was provided by a decline in the country’s construction and property sectors, mainstays of its economic growth. All these factors meant that the UAE’s growth in 2009 was sharply down from previous years.
  • The Ministry of Economy, in October 2009, forecasted growth of 1.3% for the year. The IMF upgraded its GDP prediction in November 2009 to a contraction of about 0.2%, instead of the 0.6% decline it had forecast in May.
  • The IMF predicted, however, that the UAE would return to positive figures in 2010 with an expansion of 2.4% per year.
  • This diversification is evidenced by the export mix of the UAE: non-oil exports were 52.3% of total exports in the five years from 2000 to 2004, compared to 31.9% in the 1970s and 29.5% in the 1980s.
  • The services sector is another policy focus; the growth of services will contribute to increased diversification and broad-based growth.

Investment Climate and Free Zones

  • The UAE strongly believes that the private sector (both local and foreign) is the true engine of growth in the long run.
  • Foreign Direct Investment (FDI) is regarded as crucial in order to transfer knowledge and expertise in areas that are not yet the country’s core competencies, to open new market opportunities by the creation of new networks, and to create employment in all sectors.
  • Following the success of the Jebel Ali Free Trade Zone, the UAE currently boasts 23 Free Zones. Most of these zones are located in Dubai, though others exist in the other Emirates.
  • Some of the zones cater to service sectors (e.g., Dubai Internet City, Dubai Media City, Dubai Health Care City, Knowledge Village, Dubai International Financial Centre), while others are industrial zones (e.g., Hamriyah Free Zone, Ajman Free Zone).
  • The basic success formula in the different zones is 100% foreign ownership, corporate tax holidays, no personal taxes, freedom to repatriate capital and profits, and no import duties or currency restrictions.
  • Outside the free zones, the formula is somewhat different: corporate tax holidays for most sectors, no personal taxes, freedom to repatriate capital and profits, and no currency restrictions. Foreign ownership is generally set at a ceiling of 49%.

Population and Employment Statistics

  • The population in the UAE has been rising over the last few years at a staggering rate of around 7% per annum. The population stood at 4.32 million in 2004 compared to 4.041 million in 2003. In 2004, 3 million people were between the ages of 15 and 60.
  • Expatriates constitute the majority of the UAE population (around 85%), and most expatriates come to the UAE to work or invest.
  • Unemployment does not exceed 4%. Almost 57% of the population were employed in 2004 (2.46 million).