International Trade in the U.A.E.

News Related to International Trade in the United Arab Emirates

Business outline for the United Arab Emirates

Main Industry Sectors

Agriculture contributes to less than 3% of the GDP. Raw material exploration accounts for nearly 36% of the GDP. United Arab Emirates is the 3rd largest oil producer in the world, with large reserves. Presently, their oil and gas reserves are estimated for 100 years of exploitation.

Manufacturing activities have witneesed an unprecedented growth in the last five years, particularly in sectors such as metal processing, furniture, industrial preparation of food stuffs, aluminum production, cement and construction materials, fertilisers, petrochemical industry, fiberglass and finally real estate.

As for tertiary sector, it contributes around 40% of the GDP and is dominated by international trade, air transport, tourism and financial activities.

Economic Overview

The GDP growth rate was very high during the last decade, as it tripled in 5 years, from 87 to 275 billion USD. The UAE have the fourth highest per capita GDP in the world.

The GDP is dominated by the economic power Abu Dhabi (60%), especially by its hydrocarbon production (this emirate hold 9% of the world oil reserves and 5% of the planet's natural gas reserves) and by its control of nearly all the country's savings. Dubai contributes to up to 26% of the GDP and constitutes the Emirates' commercial platform, mostly due to its port and airport infrastructures. The government is trying to develop new sectors, such as tourism, financial services and real estate. In this perspective, the Emirate of Dubai has multiplied the creation of free zones and is becoming a platform for re-export in the region. There is also a number of great cultural projects (museums, especially an annex of the Louvre museum) and sport projects (Formule 1). Moreover, the country has decided to diversify its energy sources by building a fleet of nuclear power plants by 2017 and massively investing in renewable energies, with 22 billion USD for the €śMasdar€? project.

UAE was nevertheless hit hard by the global economic crisis, which has caused a felt slowdown of the country's growth. Different factors are at cause: falling oil prices, a contraction of private sector activity, the bursting of the housing bubble in Dubai because of overinvestment, the scarcity of supply of bank credit. Moreover, Dubai was the hardest hit, due to its position of a highly globalized platform and very high borrowing rates. However, the authorities have reacted. The banking sector was consolidated through state guarantees on deposits, introduction of liquidity, recapitalization of banks, and an expansionary fiscal policy (to preserve investments and enhance competitiveness).

FDI in Figures

UAE is the primary recipient of direct foreign investments on the Arabian Peninsula. The main investors in the UAE are Great Britain, Japan and India. Although the FDI flow increased in 2007, it decreased in 2008 and especially in 2009. This trend continued in 2010.
FDI stocks are concentrated in hydrocarbons and water and electricity production. The advantages of the Emirates are the country's easy access to oil resources, low energy costs, willingness to diversify the economy and high purchasing power. The absence of direct tax on companies (excluding banks, oil companies and telecom operators) and people, of exchange controls and any limitations on repatriation of capital, as well as the existence of a banking sector that is both solid and profitable and a large pool of expatriate workforce constitute its undeniable benefits. The country's main weakness is the small size of its domestic market.

FDI Government Measures

The government announced a certain number of measures, for example removal of the obligation of the capital holding of 51% by a national or even the opening of banking and insurance sectors for foreign investors. Till now not much progress has been made. However you can notice the flexibility of rules of access to real estate property for foreigners in Emirates of Dubai, Sharjah and Abu Dhabi.

Country Strong Points

The strengths of the country are:
- Not directly taxing corporations (apart from oil, banking and insurance sectors) and individuals;
- absence of exchange control or of any constraint relating to repatriation of funds;
- a solid and profitable banking sector and favourable regulations for foreign investments;
- The geographical situation of the country makes it a potential platform to influence the whole of the Gulf, Iran, Asia and Middle-East;
- Lastly, the country has a cheap foreign labour force, very good transport and production infrastructures (financed by hydrocarbon income) and an access to low cost energy.

Country Weak Points

There are legal obstacles for foreign investments. Effectively, the interdiction (except for free zone) of more than 49% of shareholding of a local company for a foreign investor constitutes a significant hindrance. Moreover, the obligation for recourse to a local service agent for the branches and representative offices of foreign companies represents a limit.

Foreign Trade Overview

United Arab Emirates are amongst the world's most dynamic markets in terms of foreign trade. It is amongst the world's 25 primary exporters and 30 primary importers of commodities. Its imports have grown at a rate higher than 20% on average per year from 2003. Despite the sharp slowdown in trade in 2009, the UAE is considered a central business hub of the Gulf countries, Iran, South Asia and East Africa.
United Arab Emirates has displayed a large commercial surplus in both 2009 and 2010, due to the raising oil prices.
The main UAE trade partners are Japan, South Korea, Thailand, Singapore, China and Pakistan. The main products exported by the country are hydrocarbons, natural gas, dried fish and dates. Its main suppliers are India, China, the United States, Germany and Japan. The United Arab Emirates mainly imports machinery, transport equipment, chemical products and food stuffs.