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Wednesday February 28, 2024

Inside the UAE’s economic growth

By News Desk
December 02, 2023

The United Arab Emirates (UAE) stands at the crossroads of economic dynamism, technological innovation, and strategic diversification. Home to just over 0.1% of the world’s population and contributing a modest 0.5% to the global GDP, this nation harbours nearly 10% of the world’s oil reserves. But, the UAE’s economy extends far beyond its oil wealth, encapsulating a narrative of adaptability, forward-thinking policies, and a concerted effort to keep pace with the rapidly changing global economy.

Ranked as the 24th freest economy in the 2023 Economic Freedom Index with a score of 70.9, the UAE’s economic landscape is shaped by a federation of seven monarchies: Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al-Khaimah, Sharjah, and Umm al-Qaiwain. Sheikh Mohamed bin Zayed al-Nahyan, the ruler of Abu Dhabi, assumed the role of the UAE’s third president in May 2022.

The image demonstrates the gigantic economic progress of the UAE. —AFP File
The image demonstrates the gigantic economic progress of the UAE. —AFP File

The UAE’s economic prowess, with a high per capita income and a substantial annual trade surplus, is driven significantly by oil and gas, constituting around 30% of its GDP. Yet, recognising the vulnerability associated with heavy reliance on the oil industry, the country has strategically pursued economic diversification over the past few decades.

Notable changes include a liberalised visa framework allowing 10-year residency permits, 100% foreign ownership of onshore companies in many sectors, and progressive digital regulations encompassing e-commerce and cryptocurrencies.

Dubai, in particular, has emerged as a beacon of economic innovation, aligning with the government’s ambitious Digital Economy Strategy launched in 2022. The strategy aims to double the digital economy’s contribution to the UAE’s GDP from 9.7% in 2022 to an impressive 19.4% within the next decade. Boasting a flourishing digital business and financial hub, Dubai has attracted technology giants such as Oracle, Cisco Systems, Microsoft, and Hewlett Packard to its renowned “Internet City.”

According to the recent United Nations’ Technology and Innovation Report, the UAE has climbed five spots to become the leading Arab country and is ranked 37th out of 166 countries in the technology index. In alignment with the UAE’s Net Zero 2050 initiative, the nation is spearheading massive clean energy installations, including the Mohammed bin Rashid Al Maktoum Solar Park in Dubai and a new nuclear plant in Abu Dhabi.

Targeting a 44% renewable energy contribution to its total energy production by 2050, the UAE is boosting investments in developing new renewable energy projects, including the world’s largest solar plant in the Al Dhafra region of Abu Dhabi, with a total capacity of two gigawatts, and the 5,000 megawatts Mohammed bin Rashid solar park in Dubai. Moreover, the UAE plans to invest AED 600 billion (approximately $163 billion) in clean energy projects as part of its net-zero 2050 strategy.

The UAE’s capability to host major international events positions it strategically in achieving the ambitious goal of attracting 40 million visitors by 2030. The emirates of Abu Dhabi and Dubai spearhead this initiative, while other emirates like Ras Al Khaimah and Sharjah diligently work to promote their tourism sectors, enriching the diversity of offerings across the country.

The UAE’s success in fostering a start-up culture is another dimension of its economic vibrancy, with over 40% of the country’s start-ups being technology-based. By 2032, the UAE aims to nurture 20 tech unicorns, building on its already successful track record with companies like Careem, a ride-hailing company acquired by Uber for $3.1 billion in 2019, and Souq.com, an e-commerce platform acquired by Amazon for $580 million in 2017.

Employment in the UAE has steadily increased, surpassing pre-COVID levels with 5.5 million employed in 2022 compared to 5.1 million in 2019. The decline in the jobless rate from its peak in 2020 further reinforces the resilience of the UAE’s economic landscape.

From embracing technological advancements to spearheading sustainability initiatives and fostering a vibrant start-up culture, the UAE’s economic trajectory is one of resilience and forward-thinking.