United Arab Emirates

Politics:

• Analysis

  UAE politics: Quick View - Alleged terror plot uncovered

  Event

  The UAE authorities have announced that they have arrested an alleged militant cell consisting of Emiratis and Saudis, which had been planning attacks in the UAE, Saudi Arabia and other Gulf Arab states.

  Analysis

  Information is sparse, but it is notable that the co-operation between Emirati and Saudi officials that apparently led to the arrests follows the formal agreement at the recent Gulf Co-operation Council (GCC) summit of a security pact between the six Gulf Arab states. The summit announcement, which was little more than a signing off on what was agreed by interior ministers in November, reflects the desire of the UAE and its Gulf Arab neighbours to be seen, not least by Iran, to be actively collaborating against perceived security threats. The cell members were described as part of a "deviant group"-a phrase typically used by Saudi Arabia to describe Sunni, al-Qaida-style militants-and were accused of acquiring materials for use in planned violent assaults. A number of such plots have been alleged by the UAE authorities in the past, most recently in July, but the country has escaped any actual terror attacks. By contrast, Saudi Arabia suffered a series of such attacks by Sunni militants between 2002 and 2004.

  The UAE authorities have sought to tighten maritime and internal security over several years, particularly in the poorer northern emirates where both strongly conservative Sunni Islamic sentiment and geographical proximity to Shia-ruled Iran have raised concerns, and Emirati agencies are relatively efficient at monitoring security threats. However, since the Arab uprisings, attention has been increasingly focused on other potential threats to the emirs' political dominance, with more than 60 Emiratis arrested for being members of a local branch of the (Sunni and Arab-oriented) Muslim Brotherhood, a regional Islamist political movement not normally involved in violence.

  December 28, 2012

• Background

  UAE: Key figures

  Sheikh Khalifa bin Zayed al-Nahyan

  Sheikh Khalifa is the president of the UAE, the ruler of Abu Dhabi and the most powerful man in the country. The only checks on his absolute power are the six other rulers of the UAE, who sit on the Supreme Council, although in effect they rubber-stamp his decisions. He is considered to be a moderate reformist who oversees Abu Dhabi's development, but appears to have limited involvement in the day-to-day management of the emirate. As the president of Abu Dhabi's Supreme Petroleum Council, he nonetheless shapes the emirate's policy for the hydrocarbons sector, the main source of revenue for Abu Dhabi's many sovereign investment funds. He favours maintaining the current political system of hereditary autocracy.

  Sheikh Mohammed bin Zayed al-Nahyan

  Sheikh Mohammed bin Zayed is the crown prince of Abu Dhabi, the half-brother of Sheikh Khalifa and the head of the "Bani Fatima", an influential grouping within the royal family made up of the sons of Sheikha Fatima, the favoured wife (akin to a "first lady") of the state founder and revered ruler, Sheikh Zayed bin Sultan al-Nahyan. As the chairman of Abu Dhabi's Executive Council, he has been the chief architect of the transformation of Abu Dhabi into a major hub for investment. He is also (unofficially) responsible for the day-to-day running of the emirate. He holds the rank of general and is the driving force behind the current development of the UAE armed forces.

  Sheikh Mohammed bin Rashid al-Maktoum

  Sheikh Mohammed bin Rashid is the ruler of Dubai and the prime minister and vice-president of the UAE. He has held these titles since the death of his older brother, Sheikh Maktoum bin Rashid al-Maktoum, in early 2006, but in practice he has been running Dubai since Sheikh Maktoum appointed him crown prince in 1994. He is an aggressive businessman and is responsible for building Dubai's image as a trading hub. However, the economic downturn, which in 2009 hit Dubai particularly hard, weakened his business empire and his influence within the federation, and, specifically, weakened the strength of the state-related companies, symbols of the free market that seemingly produced the "Dubai miracle".

  Sheikh Mansour bin Zayed al-Nahyan

  Sheikh Mansour is the deputy prime minister and presidential affairs minister. He is the rising star of UAE politics and the driving force behind several high-profile business deals on the behalf of the Abu Dhabi government. As the brother of Sheikh Mohammed bin Zayed and husband of Manal bint Mohammed, a daughter of Dubai's ruler, he is seen as a key link between the two most influential emirates of the federation.

  Mohammed al-Shaibani

  A member of one of the top merchant families in Dubai, his status rose as a number of senior figures, previously appointed by Dubai's ruler to run the economy, fell from grace during the 2009 recession. Mohammed al-Shaibani is head of the emiri diwan, the ruler's court, which under Mr Shaibani has reasserted itself as the real locus of power in the emirate. This "palace coup" occurred as the Dubai Executive Council, formerly created as a de facto Dubai government, was severely downgraded by Sheikh Mohammed bin Rashid as the blame game started among the elite in Dubai as to who was responsible for the local economic meltdown.

  Sheikh Ahmed bin Said al-Maktoum

  Sheikh Ahmed is the uncle of the ruler of Dubai and holds most of the key business portfolios of the emirate. His career began in 1985 when he was appointed the chairman of Dubai's flagship carrier, Emirates Airline. He is also the chairman of Dubai World and the Supreme Fiscal Committee, the body which is responsible for managing the emirate's fiscal policies. Most recently, in June 2011, Sheikh Ahmed was appointed the chairman of the UAE's largest bank, Emirates NBD.

  August 20, 2012

• Structure

  UAE: Political structure

  Official name

  United Arab Emirates

  Form of state

  Federation of seven emirates: Abu Dhabi, Dubai, Sharjah, Ajman, Ras al-Khaimah, Umm al-Qaiwain and Fujairah

  Legal system

  Based on the 1971 constitution

  National legislature

  Unicameral Federal National Council of 20 appointed and 20 elected members representing the separate emirates; it has a consultative role only

  Head of state

  The Supreme Council, comprising the seven emirs, elects the president from among its members. On the death of his father in November 2004, Sheikh Khalifa bin Zayed al-Nahyan became ruler of Abu Dhabi and was elected president of the UAE

  National government

  The Council of Ministers (cabinet), led by the prime minister, is appointed by the Supreme Council of Rulers. Each state is represented by at least one minister, with senior posts allocated to the larger emirates. The Council of Ministers initiates legislation for ratification by the Supreme Council of Rulers, which is also a policymaking body and meets formally about once a year. The latest cabinet reshuffle was in February 2008

  Main political parties

  Political parties are not permitted

  The government

  President: Khalifa bin Zayed al-Nahyan

  Prime minister & vice-president: Mohammed bin Rashid al-Maktoum

  Deputy prime minister & interior minister: Saif bin Zayed al-Nahyan

  Deputy prime minister & presidential affairs minister: Mansour bin Zayed al-Nahyan

  Ministers of state

  Federal National Council affairs: Mohammed Anwar Gargash

  Financial affairs: Obaid Humaid al-Tayer

  Foreign affairs: Anwar Mohammed Gargash

  Key ministers

  Cabinet affairs: Mohammed al-Gergawi

  Culture, youth & community development: Abdelrahman Mohammed al-Owais

  Defence: Mohammed bin Rashid al-Maktoum

  Economy: Sultan bin Said al-Mansouri

  Education: Humaid Mohammed Obeid al-Qattami

  Energy: Mohammed bin Dhaen al-Hamli

  Environment & water: Rashid Ahmed bin Fahad

  Finance: Hamdan bin Rashid al-Maktoum

  Foreign affairs: Abdullah bin Zayed al-Nahyan

  Foreign trade: Lubna al-Qasimi

  Health: Abdelrahman Mohammed al-Owais

  Higher education & scientific research: Nahyan bin Mubarak al-Nahyan

  Justice: Hadef bin Juaan al-Dhaheri

  Labour: Saqr Ghobash Said Ghobash

  Public works & housing: Hamdan bin Mubarak al-Nahyan

  Social affairs: Mariam Mohammed Khalfan al-Roumi

  Central Bank governor

  Sultan bin Nasser al-Suwaidi

  December 01, 2012

• Outlook

  UAE: Key developments

  Outlook for 2013-17

  • The federation will remain stable in the forecast period. However, a transfer of power in Abu Dhabi from the current ruler to the crown prince may occur, as major government reshuffles have been implemented.
  • Domestic calls for greater political plurality will continue to increase. However, any such requests will be dealt with harshly, as is evident from the recent rise in arrests of activists.
  • Regional tensions are expected to remain high in the short term in spite of a reopening of international talks over Iran's nuclear programme.
  • The government will pursue an expansionary fiscal policy, supported by high oil prices. The fiscal surplus will rise in the second half of the forecast period as the government reins in spending, averaging 4.8% of GDP in 2013-17.
  • We forecast restrained growth in 2013 owing to a moderate growth forecast in emerging-market economies in Asia and modest world trade. Growth will average 5.1% a year in 2013-17.
  • Inflation is estimated to have averaged just over 1% in 2012 and is forecast to remain manageable throughout the forecast period. Inflation is forecast to average 2.9% a year in 2013-17, trending in line with global commodity prices.
  • The current-account surplus is forecast to narrow in 2013-15 as the services deficit widens owing to a surge in services debits in line with a rise in goods imports. The surplus will average 4.7% of GDP in 2013-17.

  Review

  • The British prime minister, David Cameron, visited the UAE as part of a three-day Gulf tour, in an attempt to win a £3bn (US$4.7bn) contract to sell Typhoon jets to the federation.
  • Khalifa al-Kindi has been appointed as the new chairman of the Central Bank of the UAE. His appointment will have been made to increase confidence in the banking sector and may also mean more banking regulation.
  • The federal government has approved a break-even budget for 2013, in which social spending and education are prioritised. The budget envisages an increase of 6.7% in expenditure to Dh44.6bn (US$12.1bn).
  • Banks in the UAE saw an increase in profits for the third quarter of 2012. Net profits of six of the seven largest banks by assets rose by almost 30%. Some banks saw profits rise as provisioning levels fell.
  • Dana Gas is the first UAE company to default on an Islamic bond (sukuk). However, most sukuk issuers are government-related entities, which will continue to issue bonds in 2013 to pay off existing debt and fund projects.

  December 01, 2012

Economy:

• Background

  UAE: Country fact sheet

  Fact sheet

  Annual data	2011a	Historical averages (%)	2007-11
  Population (m)	7.1	Population growth	6.1
  GDP (US$ bn; market exchange rate)	338.6b	Real GDP growth	1.4
  GDP (US$ bn; purchasing power parity)	390.5	Real domestic demand growth	3.6
  GDP per head (US$; market exchange rate)	47,781	Inflation	5.2
  GDP per head (US$; purchasing power parity)	55,098	Current-account balance (% of GDP)	5.9
  Exchange rate (av) Dh:US$	3.67b	FDI inflows (% of GDP)	3.1
  a Economist Intelligence Unit estimates. b Actual.

  Download the numbers in Excel

  Background: As part of efforts to secure its trading routes with India during the 19th century, the UK concluded a series of truces and protectorate agreements with individual sheikhdoms in the Gulf. These agreements eventually gave rise to what became known as the Trucial States, covering much of the present-day UAE. There was little in the way of economic development or outside interest in the area until oil was discovered off the coast of Abu Dhabi in 1958. The UK withdrew from the region in 1968, and the sheikhdoms formed a loose federation. In 1971 the UAE became an independent state.

  Political structure: The Supreme Council is the highest federal authority and comprises the hereditary rulers of the seven emirates. Between 1971 and 1996 the UAE operated under a provisional constitution, which was renewed every five years. In 1996 the seven emirates agreed to make the constitution permanent and accepted the city of Abu Dhabi as their capital. Sheikh Khalifa bin Zayed al-Nahyan became president of the UAE and ruler of Abu Dhabi in 2004, on the death of his father. The council appoints the prime minister, traditionally the ruler of the UAE's second-largest emirate, Dubai, who is currently Sheikh Mohammed bin Rashid al-Maktoum.

  Policy issues: The emirate of Dubai will focus on repaying vast amounts of debt accumulated by government-related entities in the forecast period, while Abu Dhabi will lead the way in diversifying away from oil. The UAE is heavily reliant on expatriate labour (more than 85% of its labour force), which has led to "Emiratisation" employment policies to give preference to nationals.

  Taxation: There is no personal income tax and the only corporate taxpayers are foreign banks and foreign energy firms. Increasingly, the Dubai government is generating revenue by extending fees and charges for services. For example, Dubai charges tenants 5% of their annual rent. Islamic banks and Islamic financial institutions also pay an Islamic tax (zakat) of 2.5% of their net operating capital. Value-added tax (VAT) at 3-5% may be introduced later in the forecast period to supplement revenue.

  Foreign trade: The merchandise trade surplus is estimated to have increased slightly to US$82.1bn in 2012. Export receipts will have increased by a modest 7.4% to US$302bn and import spending by 9% to US$220.3bn. The current-account surplus is estimated to have narrowed to US$28.5bn, or 7.3% of GDP.

  Major exports 2011	% of total	Major imports 2011	% of total
  Re-exports	38.3	Machinery & electrical equipment	14.9
  Crude petroleum	32.2	Precious stones & precious metals	14.4
  Gas	5.6	Vehicles & other transport equipment	7.6
  		Base metals & related products	5.7
  Leading markets 2011	% of total	Leading suppliers 2011	% of total
  Japan	16.1	China	19.8
  South Korea	14.0	India	13.9
  Thailand	10.9	US	8.2
  India	5.5	Germany	4.6

  Download the numbers in Excel

  Download text file (csv format)

  December 01, 2012

• Structure

  UAE: Economic structure

  Data and charts: Annual trends charts

  
  

  

  December 01, 2012

• Outlook

  UAE: Country outlook

  UAE: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The domestic political scene will remain broadly stable in 2013-17. Nevertheless, criticism of the government or requests for greater political plurality will be dealt with harshly as is evident by the rise in arrests of activists. The government is increasingly sensitive about the rising influence of the Muslim Brotherhood in the region.

  ELECTION WATCH: The UAE is governed by the Supreme Council, which comprises the leaders of the seven emirates. The 40-member Federal National Council (FNC) is an advisory body to the Supreme Council. It is responsible for examining proposed federal legislation. Half of the FNC members are elected, with the other 20 being appointed by the rulers of the seven emirates. Although the FNC continues to be denied legislative powers, some of the appointed members, mainly from the poorer northern emirates, are looking to be more assertive in their dealings with the executive. The next election to the body will be held in 2015, but we do not expect any substantial changes to the powers of the FNC.

  INTERNATIONAL RELATIONS: Tensions between the UAE and Iran will remain high over Iran's presence on the disputed islands of Abu Musa and Tunb as well as the concerns over Iran's nuclear programme. However, both countries will maintain relations, as Iran and the UAE benefit considerably from strong trade ties--Dubai is a big re-export hub for Iran. However, Iran will come under increasing pressure as the US rallies support from its key Middle Eastern allies, including the UAE, for its attempts to isolate the Iranian financial sector, which funnels revenue from Iran's oil exports. Trade relations with Iran will also be a cause of tension between the UAE and the US. However, regional unrest has strengthened the bilateral relationship between the two countries as the US seeks to build up the armaments of all six Gulf Co-operation Council countries, so that they can develop a "regional" defence capability. The perceived threat of Iran's rising influence in the region has speeded up plans to boost military capabilities, something that the West will be keen to capitalise on, as shown by the recent visit by the British prime minister, David Cameron, to the UAE. Mr Cameron was in the UAE to secure a £3bn (US$4.7bn) contract to sell Typhoon jets to the UAE as well as to strengthen economic ties.

  POLICY TRENDS: Against the backdrop of weak global economic conditions and forecast slow growth in the euro zone in 2013, the authorities will, in the short term, maintain their focus on protecting the domestic economy to sustain growth. The UAE will continue to diversify away from oil but will also invest in increasing its oil output--the UAE is aiming to increase output to 3.5m barrels/day (b/d) by 2018. Regarding economic diversification, much of the spending on large-scale infrastructure projects will come from Abu Dhabi, with developments such as the Khalifa Industrial Zone Abu Dhabi (Kazid) and Masdar City driving growth. Diversification, as well as continued fast-rising electricity usage, will put pressure on gas supplies, encouraging the government to forge ahead with developing alternative energy sources. As part of this effort, it recently awarded a licence to build the first of four 1,400-mw nuclear reactors.

  ECONOMIC GROWTH: We forecast only moderate economic growth, at 3.5%, in 2013 owing to slower growth in emerging-market economies in Asia and a slowdown in world trade. This is in addition to the existing external risks of the euro zone debt crisis. From 2014 onwards, growth will be boosted by increased non-oil activity, and from 2015 to 2017, will be supported by higher oil production and prices, offset to some degree by slower growth in the Asian markets. The UAE is estimated to have produced an average of 2.65m barrels/day (b/d) in 2012. Production will rise consistently, but at a faster pace in 2016-17, reaching 3.15m b/d in 2017. Export volumes will also expand later in the forecast period, reflecting higher oil production following investment in capacity expansion.

  INFLATION: Inflation is forecast to rise in 2013 in line with higher global non-oil commodity prices; the consumer price index is expected to track commodity prices broadly for 2014-17. The government will maintain subsidies for the first half of the forecast period, owing to fears of prompting unrest in the country, but in the latter part of the forecast period, a consolidation in expenditure could entail the scaling back of some subsidies. The official basket used by the UAE government is representative of prices faced by the local Emirati population, who benefit from extensive subsidies, rather than the expatriate community, who make up more than 85% of the labour force. According to the National Bureau of Statistics, a new household and expenditure survey was to be conducted in 2012, but no further information is available. The results will only be published in 2013. It is therefore unlikely that there will be a revision to the basket before then. We expect inflation to be manageable over the forecast period, averaging 2.9% a year.

  EXCHANGE RATES: The Central Bank of the UAE remains committed to the existing peg of the UAE dirham to the US dollar. The peg has provided stability for decades, and, having ridden out for this long the problems associated with a fixed currency (including a lack of monetary flexibility), the authorities seem keen not to change the system. The dollar strengthened against major currencies for most of 2012 owing to concerns over the euro zone debt crisis as well as an improvement in the outlook for the US economy. However, the announcement of a third round of quantitative easing by the US government has led to the dollar weakening, and this trend could continue into early 2013, assuming that concerns over the euro zone do not intensify. A fall in the value of the dollar would increase inflationary pressures in the UAE, but this will be offset by extensive subsidies and depressed property prices. The peg is not expected to come under threat in the foreseeable future.

  EXTERNAL SECTOR: The current-account surplus as a proportion of GDP is projected to narrow in 2013 owing to a widening of the services deficit, which reflects a rise in goods imports. This trend will continue in 2014-15. The completion of major infrastructure projects such as ports and economic zones in the latter half of the forecast period will boost non-oil export earnings from 2016 onwards. The trade surplus will average a healthy 16.6% of GDP a year in 2013-17.

  December 01, 2012

• Forecast

  UAE: Country forecast summary

  Country forecast overview: Highlights

  • There will be little threat to domestic political stability in the UAE in the forecast period. Power in the emirates will be concentrated within the large ruling families, although relations within these families can sometimes be fractious. The northern emirates present a risk, as the wealth gap between Emiratis there and those in Abu Dhabi and Dubai is widening.
  • Popular demand for democracy from Emirati citizens appears to be minimal, in large part because of the country's energy wealth. However, in light of events unfolding in the region since 2011, there are likely to be more calls for increased political participation, but these will be suppressed quickly. The Economist Intelligence Unit expects small steps towards a more participatory political system to continue in 2013-17.
  • Tensions between Iran and the West remain high owing to the former's nuclear programme, but the risk of a military conflict between the US and Iran has declined after talks on the issue restarted. If Iran were to close the Strait of Hormuz, the US, which has access to military facilities in the UAE, would almost certainly attack the Islamic Republic and the UAE might be drawn into a conflict.
  • Both the Abu Dhabi and federal governments will maintain an expansionary fiscal policy in the forecast period. Dubai, however, will continue to scale back its spending in 2013. We forecast that the fiscal surplus will fall in 2013 as oil prices decline. From 2014 onwards, high oil revenue will increase the surplus. It is forecast to average 4.8% of GDP in 2013-17.
  • The government will continue to attract foreign investment by providing a broadly attractive business environment with low tax rates, imposing few trade or exchange controls, providing solid infrastructure and projecting a positive attitude to private-sector investment.
  • We forecast that growth will average 3.5% in 2013 as the euro zone crisis has a negative impact on world trade and growth in emerging Asian economies, which are the main importers of UAE crude oil. Growth will be robust from 2014 onwards and is forecast to average 5.1% a year in 2013-17. Inflation is forecast to rise in the forecast period, averaging 2.9%, but will remain manageable.
  • The current-account surplus is forecast to narrow in 2013 as the services deficit widens. The trend is set to continue until 2016, when a robust trade surplus boosts the current-account surplus. The current-account surplus is forecast to average 4.7% of GDP in 2013-17.

  Country forecast overview: Key indicators

  Key indicators	2012	2013	2014	2015	2016	2017
  Real GDP growth (%)	3.0	3.5	4.5	5.2	5.9	6.3
  Consumer price inflation (av; %)	1.1	2.2	2.8	2.5	3.1	3.8
  Budget balance (% of GDP)	4.7	3.1	4.1	4.6	5.5	6.9
  Current-account balance (% of GDP)	7.3	5.3	4.8	4.2	4.3	4.9
  Exchange rate Dh:US$ (av)	3.67	3.67	3.67	3.67	3.67	3.67
  Exchange rate Dh:€ (av)	4.72	4.64	4.60	4.55	4.62	4.62

  Download the numbers in Excel

  Download text file (csv format)

  December 01, 2012

View detailed map

Country Briefing

Land area

83,600 sq km; 77,700 sq km excluding islands, of which 97% is desert

Population

5.6m (at end-2008; Economist Intelligence Unit estimate)

Member states

Percentage of population in each emirate (2008; Economist Intelligence Unit estimates)

Dubai: 34

Ajman: 5

Abu Dhabi: 33

Fujairah: 3

Sharjah: 19

Umm al-Qaiwain: 1

Ras al-Khaimah: 5

Capital

Abu Dhabi city

Climate

Coastal areas: home to the bulk of the population; very hot and humid in summer (May-October) with temperatures of up to 46°C and humidity of up to 100%; mild winter (December-March) with temperatures of between 14°C and 23°C. Interior: desert climate, with cool winter and hot arid summer. Average annual rainfall is 42 mm, but Ras al-Khaimah is more temperate, with 150 mm average annual rainfall

Language

Arabic; English is widely understood and Hindi and Urdu are common among immigrants

Measures

Metric and UK (imperial); local measures are also in use

Currency

UAE dirham (Dh) = 100 fils. The dirham is pegged to the US dollar at a rate of Dh3.67:US$1

Time

4 hours ahead of GMT

Public holidays

All Islamic holidays are observed in accordance with the lunar calendar, and so the following dates are approximate: Mawlid al-Nabi (the birthday of the Prophet, February 4th 2012); Eid al-Fitr (end of Ramadan, August 19th 2012); Eid al-Adha (Feast of the Sacrifice, October 26th 2012); Al Hijra (Islamic New Year, November 15th 2012)

Fixed secular holidays include January 1st (New Year's Day); August 6th (Accession of Sheikh Zayed, the late ruler of Abu Dhabi—Abu Dhabi only); December 2nd (UAE National Day)

March 08, 2012