United Arab Emirates

Economic Freedom Score

25 50 75 100 free
Most Least free

World Rank:

28

Regional Rank:

71.1

he United Arab Emirates economic freedom score is 71.1, T making its economy the 28th freest in the 2013 Index. Its score is 1.8 points higher than last year, reflecting substantial improvements in business freedom, management of government spending, freedom from corruption, and monetary freedom. The UAE is ranked 3rd out of 15 countries in the Middle East/North Africa region, and its overall score is higher than the world and regional averages. Advancing economic freedom for the fifth consecutive year, the United Arab Emirates has regained the rank of mostly free that it last held in 2003. The economy performs competitively in many areas of economic freedom. Barriers to trade are quite low, and commercial operations are aided by regulations that support open-market policies. With a transparent and favorable business climate and a high degree of political stability, the UAE has created a dynamic environment for entrepreneurs. The perceived level of corruption has declined, but respect for the rule of law is undermined by a relatively inefficient judicial system that is vulnerable to political influence. Despite some progress, the overall investment regime remains restrictive. Background: The United Arab Emirates is a federation of seven monarchies: Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al-Khaimah, Sharjah, and Umm al-Qaiwain. The government responded to demands for reform during the Arab Spring by initiating a $1.6 billion program to improve the infrastructure in the poorer northern emirates and expanding the number of people allowed to vote in the September 2011 elections for the Federal National Council. Abu Dhabi accounts for about 90 percent of oil production; Dubai is the center of finance, commerce, transportation, and tourism. Free trade zones that permit 100 percent foreign ownership with zero taxation help to diversify the economy, but UAE nationals rely heavily on public-sector employment and subsidized services. Hydrocarbons account for roughly 80 percent of total government revenues.
How Do We Measure Economic Freedom?

Freedom Trend
74 72 70 68 66 64 62

2009

2010

2011

2012

2013

Country Comparisons
Country World Average Regional Average Free Economies
0 20 40 60 80

71.1 59.6 61.8 84.5

100

Quick Facts
Population: 5.4 million GDP (PPP): $258.8 billion 4.9% growth in 2011 5-year compound annual growth 2.8% $48,158 per capita Unemployment: 12.9% Inflation (CPI): 0.9% FDI Inflow: $7.7 billion Public Debt: 16.9% of GDP
2011 data unless otherwise noted. Data compiled as of September 2012.

See page 477 for an explanation of the methodology or visit the Index Web site at heritage.org/index.

447

United Arab Emirates (continued)

THE TEN ECONOMIC FREEDOMS
Country World Average Rank

RULE OF LAW

Property Rights 55.0 Freedom from Corruption 68.0

0 20 40 60 80 100

50th 28th

The rule of law is generally well maintained, but the ruling families exercise considerable influence on the judiciary. All land in Abu Dhabi, largest of the seven emirates, is governmentowned. Non-citizens are allowed to own, buy, sell, rent, and mortgage property and invest in special areas. The government has improved intellectual property rights training requirements for judges. Corruption is present at modest levels.

LIMITED GOVERNMENT

Fiscal Freedom 99.9 Government Spending 85.1

0 20 40 60 80 100

1st 25th

The UAE has no income tax and no federal-level corporate tax. Different corporate tax rates exist for certain activities in some emirates. There is no general sales tax, and the overall tax burden is quite low at 7.1 percent of total domestic income. Government spending is equivalent to 22.3 percent of total domestic output. Large oil revenues have kept the government budget in surplus and public debt below 20 percent of GDP.

REGULATORY EFFICIENCY

Business Freedom 74.0 Labor Freedom 77.6 Monetary Freedom 83.9

0 20 40 60 80 100

54th 31st 10th

Regulatory efficiency has improved. There is no minimum capital requirement for establishing a business, which takes much less than the world average of 30 days. Licensing requirements have been streamlined and are less costly. Employment regulations are relatively flexible, and the non-salary cost of employing a worker is moderate. Monetary stability has been maintained, with inflationary pressure under control.

OPEN MARKETS

Trade Freedom 82.6 Investment Freedom 35.0 Financial Freedom 50.0

0 20 40 60 80 100

54th 128th 69th

The trade-weighted average tariff rate is modest at 3.7 percent, but some non-tariff barriers add to the cost of trade. Foreign investors do not receive national treatment, and their ability to invest in land is limited. In many cases, at least 51 percent of a business must be owned by a UAE national. The modern and competitive financial sector provides a full range of services, but the state presence is considerable. Capital markets are open and vibrant.

Score Changes
RULE OF LAW
Property Rights Freedom from Corruption
448

LIMITED GOVERNMENT
0 +5.0 Fiscal Freedom Government Spending 0 +5.0

REGULATORY EFFICIENCY
Business Freedom +6.0 Labor Freedom 1.2 Monetary Freedom +3.0

OPEN MARKETS
Trade Freedom Investment Freedom Financial Freedom

0 0 0

2013 Index of Economic Freedom