UAE: Competitiveness
Published 24 September 2014
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0.1 This publication was archived on 5 August 2016.
This article is no longer current. Please refer to Overseas Business Risk - United Arab Emirates.
0.2 Summary
UAE is now 12th in the World Economic Forum’s Global Competitiveness Index, only three behind the UK, and ahead of 22 EU members. UAE leaders have set themselves the target to enter the top ten. The WEF assessment of the UAE points to the need for further progress on healthcare, primary education, R&D and innovation. The UAE’s current strong economic growth owes much to the government’s (particularly Dubai’s) focus on competitiveness.
0.3 Detail
WEF Assessment
The Global Competitiveness Report of the World Economic Forum (WEF) assesses each country’s competitiveness based on twelve qualitative and quantitative factors such as infrastructure, macroeconomic environment, education, market efficiency and innovation.
Ranking
The latest report has placed the UAE 12th in the world, seven places higher than last year, between Norway and Denmark. The UAE is ranked higher than 22 EU members. It is also the highest rated economy in the Arab world, followed by Qatar at 16th, and close to achieving its goal to be one of the 10 most competitive economies. By way of comparison, Switzerland is now ranked 1st, Singapore 2nd, the United States 3rd, and the UK 9th.
Infrastructure and business environment
The UAE was judged first in the world for the quality of its roads, low inflation and the absence of organised crime. Furthermore, it received favourable scores e.g. for the stable macroeconomic environment, its overall infrastructure, the effectiveness of government institutions, the ease of access to finance and its tax environment (unsurprising, given the UAE’s zero direct tax policy).
Education and workforce
But the UAE does less well on e.g. primary education, female participation in the labour force and investor protection. The Report recommends further investment to boost healthcare and educational outcomes (which is in line with government priorities), as well as a stronger focus on R&D (only 0.5% of GDP compared to 1.7% in the UK) and business innovation.
Data
The WEF relies primarily on data from national institutions. But in the UAE, data provision has some idiosyncrasies. for example, population numbers vary between 6.2m (UAE National Bureau of Statistics) to 9.4m (World Bank and IMF). In the UAE, responsibility for competitiveness is devolved to each Emirate. This creates healthy competition and example setting, especially in the fields of regulation and infrastructure. But there are also downside risks of inter-Emirate rivalry leading to a more complex business environment.
Education and training
The UAE’s education system has been significantly improved by raising the quality of teaching and the relevance of curricula. But it is a difficult market to assess, with Emiratis and expats attending different schools using a range of curricula, and private schools priced according to the widely varying incomes of expatriate workers. The best schools are world class and a core part of the infrastructure which attracts high calibre expatriate workers and high net worth individuals. But local schools and universities must rise to the challenge of providing Emirati students with the skills to succeed in the private sector, which is still largely dominated by expatriates, who account for more than 90% of private sector employees. The quality of education also differs considerably between the seven Emirates.
Transport hub
The UAE has used its oil wealth to undertake several reforms aimed at rapid social and economic development and improved competitiveness. The UAE’s transport infrastructure (both domestic and international) has always been at the centre of these reform efforts, and is one of the country’s key advantages. The UAE’s two international carriers, Emirates and Etihad, provide the connectivity required for a genuinely global hub. Dubai Airport is about to be the largest international airport in the world by passenger numbers. And its planned successor will eventually be three times the size.
Recent economic performance
Also, the UAE has seen continuous economic growth amidst global economic turbulence. In 2013, its economy expanded by 5.2% compared to global economic growth of 3%. The economies of the biggest contributors, Abu Dhabi and Dubai, grew by 5.2% and 4.6% respectively. The construction sector benefitted most from the overall favourable economic conditions growing by 4% in 2013 (the first expansion since 2009). It is expected to continue its upward trajectory with more stalled projects being approved throughout this year.
0.4 Comment
The UAE aims for top ten rankings in various indices. The benefits of this approach are demonstrated by the UAE’s success in attracting business and investment, and their relative success in diversification. Non-oil GDP growth reached 5.4% in 2013 (2012: 3.8 %) with the non-oil sectors contributing close to 70% of the UAE’s GDP. Together, Abu Dhabi and Dubai contribute the vast majority of the country’s GDP (approx. 60% and 30% respectively). But Dubai is primarily responsible for the strong growth in the majority of non-oil sectors.
0.5 Disclaimer
The purpose of the FCO Country Update(s) for Business (”the Report”) prepared by UK Trade & Investment (UKTI) is to provide information and related comment to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.