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	United Arab Emirates		Info-Prod Country Guide
CHARACTERISTICS   INDICATORS   THE ECONOMY   INVESTMENT ISSUES   PROJECTS   PROSPECTS

The Economy General The UAE economy grew by an estimated 9 percent in 1996. The rise was due in part to the 20 percent increase in oil income, the strong dollar and strong economic growth in the non-oil sector. Inflation was about 3.5 percent Oil Sector The UAE claims to have nearly 100 billion barrels of proven oil reserves, or about 10 percent of total proven world oil reserves, most of it in the Emirate of Abu Dhabi, and 5.7 trillion cubic meters of proven gas reserves, which amounts to 4.6 percent of total world proven gas reserves, again, most of it in Abu Dhabi, which makes the UAE the fourth largest gas reserve country in the world after Russia, Iran and Qatar. UAE oil production is at the level of the UAE's OPEC quota, 2.16 million barrels a day (b/d), with about 0.3 million b/d coming from Dubai and the rest from Abu Dhabi. While Dubai produces at maximum capacity, Abu Dhabi is nearing completion of a US$ 5 billion capacity expansion program that will raise capacity to 2.5 million b/d by early 1997. Largely because of flat or declining oil prices, oil's share of GDP in the UAE has declined from 44.2 percent in 1992 to 33.2 in 1994. Despite this, there is considerable growth potential in this sector. In Abu Dhabi, the government is considering whether to expand capacity further and it may do so, depending on its assessment of future market trends. After years of consideration, Abu Dhabi decided to go ahead with two major downstream projects, petrochemicals and refinery expansion. Abu Dhabi also is in the process of increasing income from its enormous gas reserves. Abu Dhabi was until recently the only producer and exporter of liquefied natural gas (LNG) in the region. In 1994, it doubled the capacity of its LNG plant on Das Island to five million tons per year. LNG accounts for about 5 percent of total UAE export earnings. Non-Oil Sector Several factors have contributed to the growth of the non-oil sector in recent years including government investments in electricity, water, and other infrastructure, development of financial services, and strong demand for re-exports. An open economic system, free movement of capital and financial stability have also contributed. Government support through provision of incentives and subsidies, along with a high level of government expenditure in housing, have also played an important role. The largest contributors, as a percentage of GNP, after oil (about 33 percent in 1994) are, in descending order, government services (12 percent), trade (11 percent), construction (10 percent), manufacturing (8.6 percent), real estate (6.7 percent), transportation, storage and communications (6.2 percent) and finance and insurance (5.6 percent). The Dubai Port Authority's container traffic increased by 10 percent in 1995, from 1.88 million teu in 1994 to 2 million teu. Trans-shipment business also increased to 1.04 teu, a 9 percent rise compared with 1994. Local and re-export business now accounts for 50 percent of the total container volume handled by the DPA. Overall growth in 1995 is attributed to the strong import and export markets in Dubai which rose 13 percent and 21 percent, respectively. Most of the incoming traffic is destined for re-export, although Dubai's growing population, expanding consumer market and construction booms are taking an increasing share of imports. The ten year old Jebel Ali Free Zone has significantly reduced the UAE's dependence on trans-shipment. Nearly 1,000 companies from over seventy countries and major corporations such as Sony, Aiwa, Black & Decker, Nissan, Honda and Coleman are present in the zone. Recent investors include Japan's Shivaki and the US-based General Motors. To attract even more investment, major upgrades are underway, including the addition of another 52,000 square meters of container stacking runway. By the year 2003, the DPA expects its two ports, Jebel Ali and Mina Rashid, will have thirty ship-to-shore cranes. Agriculture The local food processing industry continues to expand offexport opportunities for semi-processed agricultural products. Major growth sectors are beverages (juices and soft drinks), dairy products (ice cream and yogurt), snack foods and biscuits. Public Finance The UAE has a mixed economy, with the most productive assets owned by the government of the individual Emirates, but considerable scope is given to private enterprise. Its legal regime favors UAE nationals over foreigners. In both Abu Dhabi and Dubai, international oil companies maintain equity interests in their operations. Some banks are privately owned. They represent one of the principal types of commercial establishment in which stock is sold to the public. Foreign contractors or service businesses require UAE nationals sponsors, one for each Emirate in which they do business. Foreigners are not allowed to own land in Abu Dhabi or Dubai. The government sector includes the accounts of the federal government as well as accounts of the seven individual Emirate governments. Only the federal budget, a small part of the total, is published. The UAE enjoys a booming re-export trade. In 1995, 34 percent of all exports were re-exported. Traditional re-export markets are the Gulf Co-operation Council (GCC) states and Iran, but UAE traders have aggressively sought out new markets in such areas as Russia, the newly independent states of central Asia and in South Africa. Previous Chapter Contents Menu Next Chapter

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