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UNITED ARAB EMIRATES Economic Freedom Score 25 World Rank: 25 Regional Rank: 2 Least free 0 United Arab Emirates is competitive in many areas Tandheofregulations economic freedom. Barriers to trade are quite low, support open-market policies. With a 50 75 Most 100 free 72.6 Freedom Trend 74 favorable business climate and political stability, the UAE has created a dynamic entrepreneurial environment for international investors. The financial sector’s overall soundness has improved substantially since the Dubai debt crisis of 2009. ECONOMIC FREEDOM SNAPSHOT • 2016 Economic Freedom Score: 72.6 (up 0.2 point) • Economic Freedom Status: Mostly Free • Global Ranking: 25th • Regional Ranking: 2nd in the Middle East/North Africa Region • Notable Successes: Open Markets and Regulatory Efficiency • Concerns: Property Rights and Corruption • Overall Score Change Since 2012: +3.3 Despite regional political and security instability, the rule of law has been relatively well maintained. The perceived level of corruption has declined, but the judicial system remains inefficient and susceptible to political influence. 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 Federal Supreme Council (the seven rulers of the individual emirates) selects the president and vice president for five-year terms with no term limits. Abu Dhabi ruler Sheikh Khalifa bin Zayed al‑Nahyan has been president since November 2004. In 2011, the government responded to protests for greater political plurality with a multi-year infrastructure investment in the poorer northern emirates and by expanding the number of people allowed to vote in September 2011 elections for the Federal National Council. Since 2012, the UAE has clamped down on social media activism. Home to many multinational firms that operate in the region, the UAE has a modern communications and transportation infrastructure. How Do We Measure Economic Freedom? See page 467 for an explanation of the methodology or visit the Index Web site at heritage.org/index. 73 72 71 70 69 68 2012 2013 2014 2015 2016 Country Comparisons 72.6 Country World Average 60.7 Regional Average 62.6 Free Economies 83.9 0 20 40 60 80 100 Quick Facts Population: 9.3 million GDP (PPP): $599.8 billion 3.6% growth in 2014 5-year compound annual growth 4.0% $64,479 per capita Unemployment: 3.6% Inflation (CPI): 2.3% FDI Inflow: $10.1 billion Public Debt: 12.1% of GDP 2014 data unless otherwise noted. Data compiled as of September 2015. 437 UNITED ARAB EMIRATES (continued) THE TEN ECONOMIC FREEDOMS Score RULE OF LAW Property Rights Freedom from Corruption Country World Average 55.0 70.0 0 20 40 60 80 Rank 1–Year Change 50th 26th 0 +1.0 100 Although the UAE is considered one of the Middle East’s least corrupt countries, most decisions of any significance are made by the various emirates’ ruling families. The judiciary is not independent, and court rulings are subject to review by the political leadership, but the rule of law is generally well maintained. Each emirate is allowed to decide on how ownership of land may be transferred within its borders. Fiscal Freedom 95.0 GOVERNMENT Government Spending 76.1 SIZE 10th 63rd 0 20 40 60 80 –4.5 –9.7 100 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 equals 22.4 percent of total domestic income. Government spending amounts to 28.2 percent of total domestic output. Large oil revenues have kept the government budget in surplus and public debt below 15 percent of GDP. REGULATORY EFFICIENCY Business Freedom Labor Freedom Monetary Freedom 79.6 80.7 81.3 28th 14th 51st 0 20 40 60 80 +4.9 –3.1 –2.5 100 Business regulatory efficiency has improved. There is no minimum capital requirement for establishing a business, and licensing requirements have been streamlined. Labor regulations are relatively flexible, and the non-salary cost of employing a worker is moderate. The UAE cut energy subsidies in 2015, but commercial airlines in the U.S. and Europe have charged that there are “obvious and massive” state subsidies to Emirates and Etihad airlines. OPEN MARKETS Trade Freedom Investment Freedom Financial Freedom 82.8 45.0 60.0 66th 124th 38th 0 20 40 60 80 +0.4 +5.0 +10.0 100 The UAE’s average tariff rate is 3.6 percent. Foreign ownership levels are generally capped at 49 percent. State-owned enterprises include Emirates Airlines and Emirates National Oil Company. In many cases, at least 51 percent of a business must be owned by a UAE national. The modern financial sector provides a full range of services. Capital markets are open and vibrant and are becoming more competitive. Long-Term Score Change (since 1996) RULE OF LAW Property Rights Freedom from Corruption 438 –35.0 –20.0 GOVERNMENT SIZE Fiscal Freedom Government Spending –4.9 +29.0 REGULATORY EFFICIENCY Business Freedom Labor Freedom Monetary Freedom 2016 Index of Economic Freedom OPEN MARKETS –5.4 +6.4 +6.1 Trade Freedom +5.8 Investment Freedom +15.0 Financial Freedom +10.0