Credit Management 2019

COUNTRY FOCUS
The UAE is one of
the richest regions in
the world and a land of
great opportunity.
AUTHOR – Adam Bernstein
PART ONE: United Arab Emirates
UNITED AMBITION
J. PAUL Getty once said that the
“formula for success is to rise
early, work hard, strike oil.” And
it appears that the United Arab
Emirates (UAE) agrees. Once a
sleepy backwater in the Arabian
Gulf wholly dependent on fishing and
a failing pearl industry, oil was first
discovered there in 1958.
The federation was formed in December
1971 following independence from Britain.
Originally nine emirates attempted
to form a much larger federation, but
political differences – despite efforts
by Saudi Arabia, Kuwait and Britain to
reinvigorate discussions – led to Bahrain
becoming independent in August 1971,
and Qatar following in September 1971.
The federation of the UAE now consists of
seven emirates: Abu Dhabi, Dubai, Ajman,
Fujairah, Ras al Khaimah, Sharjah and
Umm al Quwain; each maintains a large
degree of independence.
The land covered by the present-day
UAE has a history that extends back some
130,000 years and more ‘recently’ to six
distinct periods from 3200BE. The area
saw the spread of Islam from 630 AD and
the direct influence of the Ottomans from
the 16th Century together with a mix of
Portuguese, English and Dutch colonial
forces. During the 19th Century the British
gained influence and control of the area.
POLITICAL MAKEUP
With a population estimated to be between
8.1 million (BBC Monitoring) and 9.4
million (Baker McKenzie Habib Al Mulla)
spread over a landmass of 30,000sq miles.
86 percent of the UAE is made up of just
one emirate – Abu Dhabi – and is
strategically placed by the Strait of Hormuz,
a key transit point for oil in the region. Of
the rest, Dubai represents five percent of
the landmass, Sharjah 3.3 percent, Ras al-
Khaimah 2.2 percent, Fujairah 1.5 percent,
Umm al-Quwain one percent and Ajman
just 0.3 percent.
But population doesn’t equate to
landmass. Data from Dubai Online
reckons: Dubai has 45.4 percent (5.5
million) of the population; Abu Dhabi
30.4 percent (1.67m); Sharjah 12.3 percent
(678,000); Ajman 4.7 percent (258,000); Ras
al Khaimah 3.7 percent (205,000); Fujairah
2.3 percent (127,000); and Umm al-Quwain
just 1.2 percent (68,000).
As the UAE borders Oman, Saudi Arabia
and Qatar the region is not without its own
tensions, a key example being a UAE claim
on islands by Qatar.
Politically, the UAE consists of seven
absolutist monarchies each retaining
powers not granted to the national
government. The presidency and prime
ministership are effectively hereditary
roles with the Emir of Abu Dhabi holding
the former while the Emir of Dubai holds
the latter.
ECONOMIC GROWTH
Data from the UK Government indicates
that the UAE is the UK’s largest export
market in the Arab world and 13th overall
– the country took in £9.8 billion of exports
in 2016, a 37 percent rise on 2009. The UAE
is the UK’s fourth largest export market
outside of the EU.
With oil being a diminishing resource,
the UAE has taken great steps to diversify to
the point that non-oil sectors, according to
Coface, contribute some 70 percent of the
UAE’s GDP – that same figure stood at 43
percent in 2001. Regionally, IMF forecasts
the UAE to play second fiddle only to Saudi
Arabia in terms of GDP.
Coface also notes that the UAE has signed
various economic, trade, investment,
and technical agreements with many
countries. Its strategic location allows
it to play a central role in re-exporting
goods from different countries around the
world towards Arab nations. Re-exports
account for nearly 60 percent of total
exports.
At the same time, the UAE has been
prioritising trade ties with China. Coface
feels that China’s 2013 announcement of
the Belt and Road Initiative (BRI),
which aims to connect Asia, Africa, and
Europe, has significant benefits for the
UAE in terms of boosting commerce
and investments, as well as accessing
wider markets, especially regarding the
construction, metals, trade, logistics and
hydrocarbon sectors. China is aiming to
diversify its energy suppliers as much
as it can. This has brought the country
close to the Gulf States, which in turn
have benefitted from China’s trade and
investment flows.
As the UK Government has reported,
over 5,000 British companies operate in the
UAE, including BP, Shell, Rolls Royce, BAE
Systems, Mott McDonald, SERCO, Standard
Chartered, HSBC and John Lewis/Waitrose.
These names seem familiar for good
reason; the majority of the UAE population
is made up of expatriates, with 120,000
from the UK alone. Just as interesting are
14.9 million people who visited the UAE in
2016, of which 1.25 million were from the
UK.
PUBLIC SPENDING
The UAE is a hub of growth for a number of
reasons including its good infrastructure,
strong banking systems, stable
government, free trade zones that are both
tax free and which offer foreign ownership,
and a number of developments.
Unlike in the UK (and elsewhere for
that matter), public spending is rising in
the whole region – the Gulf Cooperation
Council (GCC) has a combined GDP of $1.4
trillion. The GCC is presently expanding
its network of trade agreements with
Australia, China and the EU.
The Recognised Standard / www.cicm.com / March 2019 / PAGE 24