Maritime Opportunities: United Arab Emirates 2014
James V. Koch Board of Visitors Professor of Economics Old Dominion University Sponsored by the Virginia Economic Development Partnership’s (VEDP) Going Global Defense Initiative This study was prepared under contract with the Commonwealth of Virginia, with financial support from the Office of Economic Adjustment, Department of Defense. The content reflects the views of the Commonwealth of Virginia and does not necessarily reflect the views of the Office of Economic Adjustment.
CONTENTS OVERVIEW ................................................................................................................................................... 2 DOING BUSINESS IN THE UNITED ARAB EMIRATES .............................................................................. 2 GENERAL CONSIDERATIONS ................................................................................................................................................... 2 TECHNOLOGY AND INNOVATION ............................................................................................................................................. 2 SECURITY CONCERNS AND CORRUPTION ............................................................................................................................ 2 PROCUREMENT STRUCTURE................................................................................................................................................... 4
RESOURCES ................................................................................................................................................ 4
OVERVIEW Population (millions) GDP (US$ billions) GDP per capita (US$) GDP (PPP) as share of world total Military expenditure as share (%) of GDP Military expenditures, country comparison to the world Human Development Index 2012 (UN)
7.9 $358.9 $64,848 .33% 6.4% 9 Score: 0.818
Rank: 41/187
DOING BUSINESS IN THE UNITED ARAB EMIRATES GENERAL CONSIDERATIONS Global Competitiveness Index (World Economic Forum) Doing Business 2014 (World Bank) Trading Across Borders (World Bank) Economic Freedom (Heritage Foundation) Trade Freedom (Heritage Foundation)
Score: DTF: DTF: Score: Score:
5.1 74.61 90.14 71.1 82.6
Rank: Rank: Rank: Rank: Rank:
19/148 23/189 4/189 28/177 54/177
Score: Score:
5.2 4.1
Rank: 28/148 Rank: 28/148
Score: Score: Score:
5.5 68 68
Rank: 11/148 Rank: 27/176 Rank: 28/185
TECHNOLOGY AND INNOVATION Technological Readiness (GCI – WEF) Innovation (GCI – WEF)
SECURITY CONCERNS AND CORRUPTION Institutions (CGI – WEF) Corruption Perceptions Index 2012 (TI) Freedom from Corruption (HF)
The United Arab Emirates is a federation of seven monarchies – Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Qaiwain – located adjacent to Saudi Arabia and Oman along the Persian Gulf coast. Founded in 1971, the UAE is the youngest, and also one of the wealthiest, countries considered in this report. Since the discovery of vast oil reserves in the 1950s, the Emirates have undergone a radical transformation to become not only one of the world’s leading oil producers and exporters, but also an ultra-modern hub of global commerce. Dubai is the commercial and business center, home to one of the world’s busiest ports, as well as hundreds of glittering skyscrapers (including the world’s tallest, the Burj Khalifa), that are less than 25 years old. Abu Dhabi is the political capital and center of oil production.
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The UAE is an important American ally within the Middle East, and it hosts “more U.S. Navy ships than 1 any port outside the United States.” It is likewise a key hub for U.S. companies that conduct business throughout the Middle East and North Africa. It has recently overtaken Saudi Arabia as the largest market for U.S. exports in the Middle East. The U.S. Commercial Service’s Country Commercial Guide reports that American exports to the UAE totaled $22.5 billion in 2012, “an increase of 42% over 2011… Overall U.S.-U.A.E. bilateral trade increased 35% in 2012.” In many cases, the UAE is the first point of entry for goods that are re-exported elsewhere in the Middle East. No additional duties must be paid for exports to the UAE’s fellow participants in the Gulf Cooperation Council: Bahrain, Kuwait, Oman, Qatar and Saudi Arabia. The increase in American imports (leading sectors include defense equipment, computers and electronic equipment, and infrastructure-related goods and services) has been driven in part by the UAE’s aggressive push to expand and modernize its oil-producing capabilities, and to diversify its economy through the development of new industrial and commercial sectors. The U.S. and the UAE initiated a formal Economic Policy Dialogue in 2012, seeking to build upon groundwork laid by the 2004 Trade and Investment Framework Agreement (TIFA). A more comprehensive free trade agreement does not yet exist, although overall trade barriers are low, and UAE receives strong marks from the Heritage Foundation and particularly the World Bank for its ease of trade. The UAE is home to 38 specialized free trade zones, which the Country Commercial Guide describes as “home to more than 17,000 companies with a total investment estimated at more than USD 21 billion.” Outside of the free trade zones, doing business in the UAE becomes somewhat more complicated, as the majority foreign ownership of companies is not allowed. Thus, foreign firms that would like to break into the UAE market must have a local agent or distributor. Personal relationships are essential to doing business in the UAE. The Country Commercial Guide advises that “for all types of government procurement and projects, US firms need to have a presence in the UAE… For most civilian purchases, government entities prefer to deal with firms registered in the UAE, or in their particular emirate, and will favor local products over imports. Only when goods or services of acceptable quality are not available locally will the procurement authority seek outside sources.” For all of its economic dynamism, the UAE remains an authoritarian state. Its president is Sheikh Khalifa bin Zayed, Emir of Abu Dhabi, and its vice president and prime minister is Sheikh Mohammed bin Rashid Al Maktoum, Emir of Dubai. Political parties are not allowed, and the government has recently cracked down on Islamist groups, such as the Muslim Brotherhood, accusing them of political subversion. The UAE’s high level of economic prosperity has thus far sheltered it from the pro-democracy protests that erupted elsewhere throughout the Middle East in 2011, although many observers question how long this will remain so. “We are not a democratic country, but we are progressive on various issues, on women and on what I would call tolerance,” Anwar Gargash, minister of state for foreign affairs, recently told The 2 New York Times. Foreign nationals make up more than 80 percent of the population, and the secular, cosmopolitan identity of cities like Dubai coexists sometimes uneasily with the traditional Islamic mores that are upheld and valued by UAE natives elsewhere in the country.
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U.S. Department of State, U.S. Relations with United Arab Emirates Fact Sheet, June 11, 2013, available at: http://www.state.gov/r/pa/ei/bgn/5444.htm 2 Ben Hubbard, “Emirates Balk at Activism in Region Hit by Uprisings,” The New York Times, June 8, 2013, www.nytimes.com/2013/06/09/world/middleeast/emirates-balk-at-activism-in-region-hit-byuprisings.html Virginia Economic Development Partnership – International Trade
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PROCUREMENT STRUCTURE Defense procurement is centralized in the United Arab Emirates under the Ministry of Defence. The UAE government is pursuing development of its domestic defense industrial base through an offset program managed by the Offset Program Bureau (OPB).
RESOURCES » U.S. Department of Commerce, U.S. Commercial Service United Arab Emirates http://export.gov/unitedarabemirates
» U.S. Trade Representative, “United Arab Emirates” www.ustr.gov/sites/default/files/United%20Arab%20Emirates.pdf
» UAE Embassy Washington, Trade and Commercial Office www.uaetradeusa.org/index.php?page=economic-sectors-in-uae&cmsid=59
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