World Expo 2020 will Strengthen the UAE’s Regional Superiority in Competitiveness
Euromonitor International’s United Arab Emirates (UAE) Business Dynamics Country Briefing focuses on the most competitive nation in the Middle East and Africa having a relatively diversified economy and a favourable business landscape. Despite being a small nation, UAE has emerged as being one of the wealthiest and most dynamic countries globally. The country’s demographic dividend adds to its long-term competitiveness, but its low female workforce participation rate and heavy dependence on expatriates concern businesses. Although in the short run soft oil prices might limit infrastructural spending, in the medium term the World Expo 2020 (to be hosted in Dubai), the first World Expo in the region, is expected to drive infrastructure investment in the country; thereby boosting the country’s overall competitiveness.
Business environment is highly favourable, but female participation in the workforce remains low
- Continued progress in attaining broad-based economic growth, relatively low taxes and the absence of a minimum capital requirement for starting a business has helped the UAE rank amongst the top 10 economically free nations globally;
- Over the years, the UAE’s Ease of Doing Business Ranking has improved, thanks to numerous pro-business reforms undertaken by the government in protecting minority investors and reducing the costs associated with dealing with construction permits, helping the country retain its position as the region’s top ranked;
- The country has one of the most favourable tax regimes globally, given the absence of profit as well as value-added taxes (VAT). However, owing to deteriorating government public finances, as a result of low oil prices, the state is planning to introduce VAT of 5.0% in 2018;
- The UAE ranked 24 th out of 176 countries in the Corruptions Perceptions Index 2016, placing itself as the least corrupt economy in the Middle East and Africa region that year, thanks to firm laws against corruption. Despite this, most decisions of any importance are made by the ruling families and the absence of an independent judicial system makes it inefficient;
- The country’s ranking in the Logistics Performance Index has improved over 2014-2017 and is the best regionally, thanks to the government’s continued focus on enhancing its re-export business (which is one of the largest globally) via increasing the efficiency of customs and border clearance, improving the quality of trade and transport setup and increased ease in arranging international shipments;
- In the Networked Readiness Index 2016, the UAE’s rank was the second highest regionally, largely on account of higher network investments which boosted fixed broadband penetration, which is one of the highest regionally;
- Despite having relatively high levels of female literacy, female participation in the UAE workforce remains low, as poor prospects of career progression encourage women to leave the workforce and concentrate on household activities and childcare. Such social norms are highly prevalent in the Middle East and North Africa region.
The World Expo 2020 will continue to drive infrastructure investment in the country
With more and more pro-business reforms, rapidly modernising infrastructure and an advanced information communication and technology (ICT) environment, the UAE has managed to position itself as the most competitive and easiest place to do business regionally, with a rank of 26 th out of 190 nations in 2017. To maintain its overall competitiveness the government plans on investing considerably in infrastructure. According to trade sources, in 2016, Expo 2020 Dubai awarded over 1,200 contracts, costing more than AED2.0 billion (US$545 million) and in January 2017 it has proposed to launch 47 construction contracts worth AED11.0 billion (US$3.0 billion). The World Expo 2020 will not only provide a massive boost to the country’s infrastructural sector but also the hospitality and tourism businesses, as it is expected to attract more than 25.0 million visitors between October 2020 and April 2021. Nonetheless, the government needs to do more to enhance female participation in the workforce to maintain the country’s long term superiority over competitiveness regionally.