Investment and inclusion help Dubai transition to a knowledge-based economy

Despite persistently low international commodities prices, Dubai saw a steady GDP growth of 3.2% in 2017 and is expected to reach 3.5% in 2018, with an increased drive towards consolidating its position as a knowledge-based economy. The issuance of the Dubai Open Data Law and the creation of Smart Dubai are among the flagship initiatives driving this transformation, alongside the portfolio of diversification-oriented projects at the federal level.

Achieving Objectives

Not only did 2017 witness the launch of new initiatives, it also saw the advancement of ongoing projects. Dubai recently achieved its first goal on the path towards becoming the global capital of Islamic finance, overtaking the world’s leading financial centres in the listing of sukuk (Islamic bonds) on its exchanges, with sukuk listings in the emirate totalling $52.5bn as of September 2017. Moving forward, new schemes such as the Emirates Global Centre for Accreditation will further bolster Dubai’s status as a centre of Islamic banking.

In 2017 the emirate’s aviation sector continued to expand, with Dubai International Airport consolidating its position as the world’s third-busiest airport for international passenger traffic, according to Airports Council International. Meanwhile, expansion work at Al Maktoum International Airport continues apace, with the new facility set to become the world’s largest upon its completion in 2018.

Future Focus

Dubai was not immune from the economic headwinds that buffeted the global economy in 2008-09, nor was it insulated from the fall in oil prices that began in 2014. Yet 2018 finds the emirate prepared for the current economic environment and looking towards the future, with the establishment of the world’s first Ministry of Artificial Intelligence and the launch of the UAE Strategy for Artificial Intelligence in October 2017. As of November 2017 there were 29 ministers in the UAE Cabinet heading 18 ministries, a reduction that follows consolidation in areas such as foreign affairs and education. After the reshuffle, which took place in October 2017, the average age of the new crop of ministers was 38 years old, with the youngest, Shamma Al Mazrouei, the minister of state for youth, being 23 years old, making her the youngest government minister in the world. She is also one of nine women now serving as ministers.

The government has announced that the Cabinet will be forward facing and focus specifically on youth and happiness, as well a developing education and combating climate change. The Cabinet’s new generation of ministers has been designated the task of taking the country into the future on a firm footing by strengthening relations with citizenry.

The government has shifted how it communicates with the populace, seeking to connect more through social media. For example, when announcing the 2017 Cabinet reshuffle Sheikh Mohammed bin Rashid Al Maktoum, the vice-president and prime minister of the UAE and ruler of Dubai, issued a statement via Twitter. The post went viral, with the US, UK and Canada being among the top-five countries that viewed it. This has been seen as evidence of the emirate’s efforts to better connect with the population at large and with the youth demographic in particular.

Creating Jobs

For 2018 the UAE government approved a balanced federal budget of Dh51.4bn ($14bn). This represents a 5.6% increase on 2017, and focuses on health care, social development and human capital formation. The majority of the budget, 43.5%, has been allocated for social development projects, with 17.1% of the overall budget going to education and 7.4% to health. Of the remaining outlays, 36.5% has been earmarked specifically for government affairs, with Dh3.5bn ($953m) to be spent on federal infrastructure projects, Dh1.4bn ($381m) to housing and Dh1bn ($272m) being set aside to support innovation programmes through the Sheikh Mohammed bin Rashid Al Maktoum Innovation Fund.

History

While little is known about the area that is now the UAE in antiquity, its inhabitants lived a nomadic life sustained through fishing, herding and date farming. In 1959 a team of Danish archaeologists unearthed a settlement and cemetery dating back to the third millennium BCE. The findings at the site belonged to the Umm Al Nar civilisation, which was active between 2600 BCE and 2000 BCE in what is now Oman and the UAE. By the time of the rise of both the Sasanian and Byzantine empires, Dubai had become a regional centre for fishing and trading, situated between trade routes between the West and East.

In the 16th century the Portuguese became active in the Indian Ocean and wider region, commandeering the lucrative commerce of Arab merchants in the area. The decline of Portuguese influence coincided with the rise of Dutch, British and French commercial penetration into the broader region, principally in the form of the Dutch East India Company and the British Empire’s East India Company.

Trucial States

By the 1760s the British were conducting routine patrols of the region to assert their naval dominance, thereby ensuring the protection of their primary trade route to India. In 1820 Dubai, the other local sheikhdoms and some parts of what is modern-day Oman signed a general maritime treaty with Britain to form the Trucial States, an official protectorate of the British Empire. The treaty was considered to be a major defeat for the Ottoman Empire at the time. Concurrently, during the 1800s the area known as Dubai was inhabited by the Bani Yas, a respected nomadic Arab tribe that assumed power in the region. When members of the Bani Yas seceded from Abu Dhabi, the Al Maktoum family, which today rules Dubai, settled in the emirate in 1833.

The Trucial States alliance lasted until the 1960s, when the British announced plans to leave the Gulf by the end of 1971. This provided the catalyst for the political union that gave birth to what is now known as the UAE. Talks regarding the founding of the new federation were first conducted between Sheikh Zayed bin Sultan Al Nahyan, the ruler of Abu Dhabi at the time, and Sheikh Rashid bin Saeed Al Maktoum, the ruler of Dubai from 1958 until his death in 1990. The federation was then extended to include the other Trucial sheikhdoms of Ras Al Khaimah, Sharjah, Fujairah, Umm Al Quwain and Ajman. The UAE was officially formed in February 1972.

Government

Under the constitution of the UAE, which was originally written jointly by the rulers of Dubai and Abu Dhabi in 1971, each of the seven emirates that make up the country retains a substantial degree of political autonomy. The federal government, based in the capital city of Abu Dhabi, manages a number of areas at the national level, such as security, defence, foreign relations, fiscal policy, monetary policy, labour relations, air traffic control, immigration, communications regulation and education standards.

Outside of these areas, each emirate operates on an individual basis. In some cases, federal and local regulators and other government organisations work together. For example, the Dubai Health Authority, which develops and manages the emirate’s health sector, works with the federal Ministry of Health. Each individual emirate is also allowed to set its own pace in terms of local development and diversification.

At the same time, a certain percentage of each emirate’s revenues are put towards the federal budget. In practical terms, Dubai has the freedom to focus almost exclusively on the development of its economy. Furthermore, due to their status as the original founding members of the UAE, Dubai and Abu Dhabi hold a number of additional powers at the federal level and are considered to have more influence over national affairs than the other five emirates. For instance, the rulers of Dubai and Abu Dhabi hold veto power on the Federal Supreme Council (FSC), the presiding national body in the UAE, which is made up of the rulers of the seven emirates. Additionally, as a result of Sheikh Zayed’s leading role in the formation of the country in the early 1970s, the ruler of Abu Dhabi traditionally serves as president of the UAE, while the ruler of Dubai serves as prime minister and vice-president. As such, the current president is Sheikh Khalifa bin Zayed bin Sultan Al Nahyan, who took the position after the passing of his father in 2004. Sheikh Mohammed bin Rashid Al Maktoum has been prime minister and vice-president since 2006.

Political Organisation

The federal government is organised into three branches: the executive, legislative and judicial. The executive branch consists of the FSC and the Cabinet, which is officially known as the Council of Ministers (CoM), and is made up of the nation’s 29 ministers. The CoM is overseen by the prime minister and two deputy prime ministers, and plays an advisory role to the FSC, in addition to supervising the operation of the UAE’s federal ministries. The legislative branch comprises the Federal National Council (FNC), a 40-member, partially elected body consisting of representatives from all seven emirates. Since the UAE’s first public elections in 2006, half of the members of the FNC have been elected by an electoral college, which is composed of prominent citizens selected by the FSC. The other 20 members of the FNC are appointed directly by the FSC.

The number of representatives each emirate sends to the FNC is based on the emirate’s size and population. Dubai and Abu Dhabi, as the most populous and largest emirates, each send eight representatives, while Sharjah and Ras Al Khaimah each send six, and the remaining three emirates send four representatives each. The FNC, which plays an advisory role to the federal government, has the power to review and amend draft federal laws and amendments before they are put before the CoM and FSC for approval. Other tasks carried out by the FNC include reviewing ministers’ job performance, and developing and discussing the federal budget.

Key Body

The FNC has benefitted in recent years from the FSC’s efforts over the last decade to boost public participation in the government. For 34 years, following the creation of the FNC in the early 1970s, representatives were appointed by the FSC. However, in 2006 a 6000-strong electoral college elected 20 members of the council in what were the UAE’s first public elections. By the time the second round of elections took place in September 2011 the electoral college had grown to include 129,000 prominent individuals. The last FNC elections were held on October 2015 with a 35% voter turnout.

In line with this expanded representation, the FSC has also worked to boost the FNC’s powers in recent years. In 2008 a handful of new constitutional amendments both extended representatives’ terms – which had previously been limited to only two years – to four years, and expanded the council’s responsibilities to include oversight of the UAE’s involvement with international conventions, among other changes. The FSC plans to continue extending the FNC’s powers.

The federal judicial branch of government comprises the Federal Supreme Court and Courts of First Instance, both of which operate independently of each other and are separate from the other branches of government, as laid out in the constitution. The Federal Supreme Court engages primarily with federal-level disputes. The Courts of First Instance, which include a variety of local and regional courts that are spread throughout the federation, handle civil, personal status and commercial cases at the local level.

Business Environment

The UAE business environment is regarded as one of the most open in the Gulf, and this is reflected in the country’s rankings in the World Bank’s “Doing Business 2018” report. Overall, the UAE is ranked 21st out of 190 countries on the ease of doing business index, which is an improvement over its position at 26th in 2017. It also ranked highest in the MENA region, including over fellow GCC member states Bahrain (66th) and Saudi Arabia (92nd). The UAE was also well ahead of advanced economies outside the region such as Spain (28th), Japan (34th) and Luxembourg (64th).

The UAE excelled in four areas: paying taxes (first), getting electricity (first), dealing with construction permits (second) and registering property (10th). The country also ranked 10th in terms of protecting minority investors. However, it did exhibit weaker performance in terms of starting a business (51st), resolving insolvency (69th), getting credit (90th) and trading across borders (91st). Starting a new business in the UAE requires, on average, 4.5 procedures and 8.5 days, and will cost 13.4% of income per capita.

Geography

The UAE occupies about 83,600 sq km and borders Saudi Arabia to the west and south and Oman to the east. The country’s coastline stretches approximately 1318 km from the south-eastern shore of the Gulf, nearly reaching the Strait of Hormuz in the north, although Dubai accounts for less than 100 km of the stretch. Most of the country is situated along the Gulf, aside from Fujairah and parts of Sharjah, which sit along the Gulf of Oman. The emirates of Abu Dhabi and Sharjah border Dubai in the south and north, respectively. By area, Dubai is the second-largest of the emirates behind Abu Dhabi, covering around 4110 sq km in total. A series of land reclamation projects beginning in the early 1990s increased the emirate’s geographical area by 200 sq km and also contributed to an expansion of its coastline. Fine white sand and gravel blankets the UAE’s terrain, which is generally flat. To the east of Dubai sand dunes gradually grow larger and redder from the iron oxide found there. The UAE does not have any naturally occurring waterways, except for Dubai Creek, which extends 14 km into the heart of the emirate, dividing that part of the city into Deira to the east and Bur Dubai to the west.

Climate

Dubai’s climate can be described as tropical desert, with the year divided between winter and summer months. The former runs from October to May, with the maximum average temperature reaching 23°C in January and February. The latter runs from June to September, with average maximum temperatures normally peaking in August at 39°C. However, in 2017 the emirate experienced a heat wave, with temperatures reaching highs of 50°C. Near the coast the weather is humid and gets steadily drier further inland. As is typical of desert climates, temperatures can drop substantially at night.

Demographics

According to the Dubai Statistics Centre (DSC), the emirate’s total population reached around 3m in January 2018. Since 2000 Dubai’s population has more than doubled, with this growth coming almost entirely as a result of foreign expatriates settling in the UAE. As of the end of 2016, Emiratis made up around 9% of the population, while expatriates accounted for the remaining 91%.

As a result, the emirate is especially ethnically diverse and dozens of languages are spoken by people from around the world. This multinational workforce has served the emirate well; however, the majority of foreign workers in Dubai are male, which has served to skew the emirate’s gender mix. In late 2016 men accounted for nearly 70% of the population at 1.9m, according to DSC figures.

As is the case with other countries in the Middle East, albeit to a slightly lesser extent, Dubai’s populace is very young. Around 43% of the emirate’s population is 29 years old or younger, while nearly three-quarters (74%) is younger than 39 years of age.

Language

Arabic is the official language of the UAE, but other languages are spoken in daily life. English, as the language of business throughout the region, is ubiquitous, while also being present through all levels of government. Road signs, restaurant menus, and a large portion of the media are all presented in Arabic and English. However, given the significant Pakistani, Indian and Filipino expatriate populations living in the UAE, Urdu, Hindi and Tagalog are all frequently spoken as well. The diverse population in the emirate means a variety of other languages may also be heard, including Spanish, Chinese, Farsi and Russian.

Religion

While Islam is the official religion of the UAE, religious freedom is enshrined in the constitution, and this is reflected in the diversity of religions practised by the country’s large expatriate population. Christians, Buddhists, Hindus, Sikhs and members of other religious communities are all present within Dubai and the wider UAE. As a result of this religious mix, in 2015 the federal government issued the Anti-Discrimination Law, which criminalises all forms of discrimination on the grounds of religion, caste, creed, doctrine, race, colour or ethnic origin.

Islam still strongly influences and informs daily life in the UAE, with the Sunni tradition being the dominant form of the religion practised in the emirate. The country’s legal code was developed as a combination of international legal practices and sharia law.