27 Feb 2013
United Arab Emirates: Market Profile
|
|
2010 |
2011 |
2012 |
|
Population (million) |
5.2* |
5.38* |
5.54* |
|
GDP (US$ billion) |
283.9 |
338.6 |
392.2* |
|
GDP Per Capita (US$) |
54,411 |
63,626* |
65,377* |
|
Real GDP Growth (%) |
+1.3 |
+5.2 |
+4.0* |
|
Inflation (%) |
0.9 |
0.9 |
1.1* |
|
Exports (US$ million) |
213,510 |
281,602 |
302,387* |
|
Export Growth (%) |
-4.4 |
+11.5 |
+6.9* |
|
Imports (US$ million) |
161,561 |
202,143 |
220,336* |
|
Import Growth (%) |
-2.1 |
+10.2 |
+10.4* |
|
Exchange Rate (UAE Dirham: US$) |
3.67 |
3.67 |
3.67* |
Source: IMF, EIU, Central Bank of the UAE
*IMF / EIU estimates
Recent Developments
- Despite the slower global growth, the UAE1 economy expanded 5.2% in 2011. The IMF estimates the UAE’s real GDP to grow 4.0% in 2012, with continually high oil prices, increased oil production, and expansionary fiscal policies as the main drivers for economic growth.
- The UAE is Hong Kong's largest export market in the Middle East. Hong Kong exports to the UAE rose 24.3% to US$4.35 billion in 2012.
- With a significant recovery in the trade, retail and tourism sectors, the Dubai government succeeded in issuing US$1.25 billion of Islamic bond (sukuk) in June 2012, marking a return to the bond market in almost one year.
- Dubai has approved the restart of a number of large-scale development projects including the first foot bridge across Dubai Creek, and the Dubai Tram project.
Current Economic Situation
With the oil and gas sector accounting for over 38% of the country’s GDP, higher oil and gas prices as well as the increasing oil production capacity will continue to support the UAE’s economic growth despite the uncertain global economic climate. In particular, after expanding by 5.2% in 2011, the UAE is expected to see real GDP growth of 4.0% in 2012 as the IMF estimates. Its economy is projected to grow by 2.6% and 3.1% in 2013 and 2014 respectively.
Of the seven emirates in the UAE, Abu Dhabi and Dubai account for the lion’s share of the country’s GDP. Abu Dhabi, accounting for about 60% of the UAE’s GDP, owns around 10% of the world’s oil reserves and over 90% of the country’s oil and gas reserves, and it focuses on energy-based industries. Meanwhile, Dubai, the second largest economy in the UAE, is known for its commercial and financial services, tourism, logistics and trading.
Economic diversification
With an aim to reduce the contribution from the oil-related sectors, the UAE strives to diversify its economy by developing trading, financial and technological industries as well as tourism. To achieve this goal, the UAE government has invested a massive amount of capital in infrastructure projects in a bid to make the UAE a tourism, business and financial centre in the region.
In 2012, Dubai approved the restart of a number of development projects, including an expansion of the tourism project Madinat Jumeirah (involving cost of US$680 million), building of the first foot bridge across Dubai Creek, as well as the Dubai Tram project. In November 2012, the Dubai government unveiled plans for a new multi-billion-dirham development, the “Mohammed bin Rashid City”, which will host 100 hotels and the largest shopping mall in the world.
The UAE government's diversification effort has achieved some encouraging results, with non-oil trade making a remarkable improvement in recent years. According to the UAE Federal Customs Authority, the UAE's non-oil exports in 2011 expanded by 37% to AED 114 billion (US$31 billion) compared to US$23 billion in 2010. In the first seven months of 2012, the UAE’s non-oil trade expanded by 12% year-on-year (YoY) to AED 594 billion (US$162 billion). Its non-oil exports gained by 45% YoY to AED 95 billion (US$ 26 billion) over the same period. Meanwhile, non-oil imports soared by 12% YoY to AED 339 billion (US$11 billion). Major items of the UAE’s non-oil exports are gold, diamond, jewels and jewellery.
Hong Kong was its 5th largest re-export destination for non-oil exports in 2011. Dubai, the largest container handler of the region, has played as an important role as a trading and transportation hub. Its container throughput more than doubled from 6.4 million TEUs to 13 million TEUs between 2004 and 2011, placing it as the 9th busiest seaport in the world in 2011.
While the UAE is well known for its rapid infrastructure and construction development, many privately-funded projects have been either put on hold or cancelled, particularly those in Dubai, which was deeply hit by the global financial tsunami in late 2008 and 2009. In the face of tighter financial liquidity due to the European sovereign debt crisis, the Dubai government managed to raise sufficient capital through bond issues in the wake of its own debt problems in 2009, reflecting in part the restored confidence of international investors. In January 2013, Dubai issued US$1.25 billion of Islamic bonds at a lower than expected rate, thanks to strong investor demand as reflected by a big oversubscription. The success of the bond sale reflects that investors have regained confidence in Dubai following its gradual recovery from the emirate’s 2009 liquidity crisis.
The UAE government will continue to encourage foreign investment through tax incentives. While the Dubai government keeps focusing on downsizing its debts and fiscal expenditure, most of the large-scale infrastructure projects in the UAE will take place in oil-rich Abu Dhabi, the country’s capital. Despite diversification achievements, growth of the UAE will continue to be driven by the hydrocarbons sector over the next few years.
As part of its diversification program, the UAE government continues its free zone development. Currently, there are more than 30 free zones in the UAE (and over 10 more free zones are currently under development or to be developed) and many of them have specialised themes such as finance, logistics, media, healthcare, textiles and automobile. Companies in free zones can usually enjoy 100% foreign ownership and profit repatriation, with no corporate tax, no custom duty, no currency restrictions, no labour restrictions and no trade barriers or quotas. Dubai’s Jebel Ali free zone (JAFAZ), for example, is one of the largest and most successful free zones. JAFAZ accounts for more than 50% of Dubai’s total exports, 25% of the emirate’s GDP, as well as 20% of all FDI inflows into the UAE.
The UAE government is actively promoting its trade and tourism as drivers of its economic growth, especially since the focus has shifted from real estate sector. The UAE is targeting new markets and expanding the country's airlines, through the purchase of new aircraft and partnerships with other international airlines.
As part of the emirate's US$8 billion master plan to cement its position as the Middle East's largest aviation hub, Dubai will use some of the proceeds from its recent bond issuance to fund the expansion of Dubai International Airport. The opening of a new concourse in 2013 is expected to boost Dubai's flagship airline, Emirates Airline, whose profits slumped in 2011 due to the high fuel costs.
Financial Development
With the economy gradually recovering and inflationary pressures re-emerging, the UAE Central Bank has turned its attention to controlling price rises. Deposits with UAE banks have picked up since November 2011, allowing the UAE to retain the largest base of banking assets in the Middle East.
In June 2012, the Dubai government issued Islamic bonds (sukuk) totalling US$1.25 billion, marking its return to the bond market in almost a year to take advantage of the emirate’s economic rebound, especially in the trade, retail and tourism sectors, and lower financing costs. Since the peak of the Dubai World debt crisis in 2010, the cost of insuring the emirate’s debt has dropped by one-third. With the sukuk issuance of US $4 billion, the Dubai government has greater room for managing its budget deficits and refinancing plans. In 2013, the Dubai government and related entities had US$9.4 billion in debt outstanding, and approximately US$31 billion falling due in 2014.
Trade Policy
The UAE is a member of the World Trade Organisation (WTO), and maintains a rather liberal trade regime. Imports are subject to few controls except for the import of arms and ammunition, alcoholic beverages, agricultural pesticides, narcotics and pork products. Israeli goods are also prohibited. There are no exchange controls in the UAE. However, all importers have to apply for a licence, and an importer can import only those goods specified in the licence.
Customs duty is calculated on the CIF value at the rate of 5% for most products. Imports of intoxicating liquors, however, are subject to a 50% customs duty on their CIF value, while the rate for tobacco products is 100%. CIF value will normally be calculated on the declared value of the shipment. But the UAE Customs is not bound to accept the figures shown, and may set an estimated value on the goods, which shall be final, as far as the duty is concerned.
There is no specific labelling requirement on goods in general, but food labels have to contain product and brand names, production and expiry dates, country of origin, name of the manufacturer, net weight in metric units, and a list of ingredients and additives in descending order of proportion. All fats and oils used as ingredients must be specifically identified on the label. Labels should be in Arabic, or both Arabic and English.
The tie between the UAE and its fellow members of the GCC is strong. In November 1999, the GCC formed a customs union, which took effect from 1 January 2003. The accord establishes a single tariff of 5% on 1,500 imported items from non-member countries. It also provides a list of other essential items that can be imported duty-free. Under the accord, goods imported into the GCC area can be freely transported subsequently throughout the region without paying additional tariffs.
Hong Kong's Trade with UAE ^
The UAE is Hong Kong's largest export market in the Middle East. In 2012, Hong Kong's total exports to the UAE went up by 24% to US$4,348 million. Major export items included pearls, precious and semi-precious stones (US$1313 million, 30.2% of total, +52.5%), telecommunication equipment and parts (US$1022 million, 23.5% of total, +21.3%), and computers (US$407 million, 9.4% of total, +22.7%).
On the other hand, Hong Kong's imports from the UAE increased by 36.5% to US$4,589 million in 2012. Major import items included telecommunication equipment and parts (US$1,351 million, 29.4% of total, +78.8%), pearls, precious and semi-precious stones (US$1,242 million, 21.7% of total, +26.5%) and non-electric engines, motors and parts (US$669 million, 14.6% of total, +37.8%).
|
|
2011 |
2012 | ||||
|
Value |
Growth |
Ranking |
Value |
Growth |
Ranking | |
|
Total Exports |
3,498 |
+35 |
18 |
4,348 |
+24.3 |
16 |
|
Domestic Exports |
95 |
+38.1 |
15 |
102 |
+7.6 |
14 |
|
Re-exports |
3,403 |
+34.9 |
18 |
4,245 |
+24.7 |
16 |
|
Imports |
3,362 |
+52.6 |
17 |
4,589 |
+36.5 |
17 |
|
of which re-exported |
313 |
+127.2 |
38 |
524 |
+67.4 |
30 |
|
Total Trade |
6,860 |
+43 |
19 |
8,937 |
+30.3 |
16 |
|
Trade Balance |
136 |
.. |
.. |
-242 |
.. |
.. |
^ Since offshore trade has not been recorded by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.
The UAE’s involvement in Hong Kong’s economy
According to the Census & Statistics Department of Hong Kong, there were 16 UAE companies with a presence in Hong Kong as of June 2012, comprising 6 regional offices and 10 local offices. UAE companies in Hong Kong include the National Bank of Abu Dhabi (NBAD), Mashreq Bank, and Emirates Airlines.
1 The UAE consists of seven emirates, namely Abu Dhabi, Dubai, Sharjah, Ras Al Khaimah, Fujairah, Umm al-Qaiwain and Ajman.
