The UAE economy is proving to be extremely resilient in a difficult global economic climate and opportunities to do business in the country are many. The UAE’s currency, the dirham, which is pegged to the US dollar, is secure and freely convertible; there are no restrictions on profit transfer or capital repatriation; import duties are low (less than 4 per cent for virtually all goods) and, in the case of items imported for use in the free zones, non-existent; labour costs are competitive; corporate tax and personal taxes are nil and numerous double taxation agreements and bilateral investment treaties are in place. In addition, the financial risk is minimal. These factors, combined with a strategic, accessible location for major regional markets, an excellent reliable infrastructure and an extremely pleasant, stable and safe working environment are key elements in attracting foreign investment.
The UAE is a contracting party to the General Agreement on Tariffs and Trade (GATT) since 1994 and a member of the World Trade Organization (WTO) since 1996. It is also a member of the Greater Arab Free-Trade Area (GAFTA) in which all Gulf Cooperation Council (GCC) states participate.
The UAE concluded Free Trade Agreements with Singapore and the AFTA bloc in 2008 and 2009 respectively, and is now cooperating with the GCC's negotiating team to conclude Free Trade Agreements with the EU, Japan, China, India, Pakistan, Turkey, Australia, Korea and the Mercosur bloc comprising Brazil, Argentina, Uruguay and Paraguay.
Benchmarking Performance
The UAE has consistently scored well in a wide range of business-related indices. Most significantly, regulatory reforms have increased the UAE's overall global ranking in the
World Bank's Doing Business Index from thirty-seventh in 2011, to thirty-third in 2012, to twenty-sixth in 2013. This index assesses 185 countries in 11 areas that are vital for facilitating business. In particular, the UAE scored highly in the trading across borders category (first in the MENA region and fifth in the world). Other high scores were achieved in the paying taxes category (first in the world); dealing with construction permits (thirteenth); obtaining electricity (seventh); and registering property (twelfth). The UAE has also stressed that it is using the findings of the index to improve in areas where it did not score so highly.
The favourable nature of the UAE's tax regime was also borne out by the
Paying Taxes 2013 study compiled by the World Bank, International Financial Corporation and PricewaterhouseCoopers, which reiterated that companies in the UAE enjoy the world's least demanding tax framework. The UAE and Saudi Arabia ranked first and third respectively in 2013, up from sixth and seventh in 2012, while Qatar remains second for the fourth year.
Increasing its ratings for the fifth consecutive year, the UAE's economy was ranked the third freest of 15 countries in the Middle East and twenty-eighth worldwide among 185 countries in the
Index of Economic Freedom 2013 prepared by the Heritage Foundation in partnership with the
Wall Street Journal. The UAE's 2013 score was 1.8 points higher than in 2012, reflecting substantial improvements in business freedom, management of government spending, freedom from corruption, and monetary freedom. Pointing out that there are very few barriers to trade in the UAE, and commercial operations are aided by regulations that support open-market policies, the index concludes that 'the UAE has created a dynamic environment for entrepreneurs' because of its transparent and favourable business climate and high degree of political stability.
The UAE was classified as the only innovation-driven economy Arab economy in the
WEF Global Competitiveness Index 2012–2013, which assesses the competititiveness landscape of 144 economies, providing insight into the drivers of their productivity. At twenty-fourth, the UAE's overall ranking was up three places from 2011–2012. According to the WEF, the country's competitiveness reflects the high quality of its infrastructure, where it ranks a very high eighth, its very efficient goods markets (fifth) and its efficient labour market (seventh). Strong macroeconomic stability (seventh) and some positive aspects of the country's institutions – such as an improving public trust in politicians (third) and high government efficiency (seventh) complete the list of competitive advantages.
Competitiveness in the UAE is greatly assisted by a very low level of corruption, as is indicated by the
2012 Corruption Perceptions Index produced by
Transparency International.According to this index the UAE is the least corrupt country in the Middle East and North Africa (MENA) region (jointly with Qatar), and the twenty-seventh least corrupt country in the world, out of 183 countries listed, one up on its rankings in 2011.
Moving up six places in just five years, the UAE is now ranked in twentieth place in the 2012 M&A Maturity Index. The annual index, published by the M&A Research Centre at Cass Business School in collaboration with Ernst & Young, ranks 148 countries on their ability to attract both domestic and cross-border M&A deals. The rankings are based on an analysis of the country's regulatory, political, economic and financial environments, along with its technological capability, socio-economic characteristics, infrastructure and assets. The UAE's ranking has improved in recent years due to its attractive investment climate, including positive developments in the financial sector and in infrastructure.
The
IMD World Competitiveness Yearbook (WCY) measures 59 countries on the basis of 329 criteria. However, in this time of economic uncertainty, the criterion singled out by the 2012 Yearbook as the most important is the 'image abroad' of a country. This is depicted as competitiveness 'perceived' versus competitiveness 'measured'. As the Yearbook underlines: 'Financial markets and investors harshly sanction countries which they no longer believe in'. In this context the UAE has again scored a high confidence rating and has been ranked ninth globally, coming before countries such as Korea, New Zealand and Finland, as well as second in the Arab world.
Ranked twenty-ninth worldwide, the UAE maintained its status as the most prosperous country in the Arab world according to the 2012
Legatum Institute's Prosperity Index. The index, describing itself as a unique global enquiry into wealth and well-being, assesses 142 countries in eight distince categories: economy, education, entrepreneurship and opportunity, governance, health, personal freedom, safety and security, and social capital. In seventeenth place worldwide, the UAE ranked particularly highly on the economy subindex, up significantly since 2011, and at 30 relatively high on entrepreneurship and opportunity.
The UAE has joined Australia and the US as one of the most attractive destinations globally for foreign talent and investment, according to the
Measuring Innovation Capabilities of Nations report released in January 2013 by INSEAD, a leading international business school. The report, which was launched at the Global Competitiveness Summit in Abu Dhabi, a gathering of leaders from Competitiveness Councils around the world, explores the UAE's progress towards achieving its strategic goal of becoming a sustainable knowledge-based economy with innovation at its core.
INSEAD's research established five key capabilities that economies should develop to innovate: the ability to access, anchor, diffuse, create and exploit knowledge. The report findings highlighted the UAE's strength in its capabilty to anchor knowledge it has attracted in its economy, not least thanks to its investment-friendly environment and ease of doing business.
Although industrialised economies such as Australia, South Korea and the US lead in terms of diffusing knowledge within their economies, the UAE and Saudi Arabia lead among resource-rish countries in this regard. The UAE is especially apt at spreading innovative skills and techniques among its rapidly developing human capital.
In terms of accessing knowledge, mainly due to its cosmopolitan nature, the UAE displayed a significant ability in relation to both talent pool and presence of international enterprises, as well as adopting advanced information and communication technologies. The UAE, therefore, joins the leaders, alongside Australia, South Korea and the US, among the Global Federation of Competitive Councils' countries.
However, although both the UAE and Australia have a high capacity to attract knowledge in comparison say to South Korea, INSEAD revealed that in the case of the UAE and Australia, performance remains more modest due to the high share of natural resource commodities on their international trade books.
iNSEAD's research also showed that the other capability indicator the UAE could strengthen would be the creation of knowledge within the country and the capacity to further exploit innovations commercially.
