The United Arab Emirates Case of Economic Success

Figure 7. UAE Population (in millions of people) - 1980 to 2015 
Source: IMF, 2016 

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consequent increase of the domestic market. Nonetheless, the UAE economy still 
relies on foreign trade to increase its local demand and promote further economic 
growth. 
Due to the shortage of national labor force, the UAE economy has been 
characterized by its high dependence on foreign labor force. Incoming labor 
allowed the Emirates to carry out development projects, both in the oil and non-
oil sectors as well as in the public and private sectors, that otherwise would not 
be possible to achieve. In fact, this has always been an issue to the UAE dating 
back to the 1950’s with the initial discoveries of oil that where only possible by 
bringing British expertise to lead the hydrocarbon exploration (Butt, 2001). Most 
recently Free Zones and Foreign Direct Investment (FDI) have brought the 
technology and know-how the Emirates did not possess. In this sense, foreign 
labor «…contributed effectively to the rapid economic, social and cultural 
development of the country and to the creation of a market to activate the various 
sectors of the national economy.» (Omaira, 2001).
Lastly, the UAE’s geostrategic location has enabled the country to transform itself 
into a regional business-hub and a transshipment platform (National Media 
Council, 2001). This has allowed the Emirates to establish several trade 
agreements with Arab, Gulf, Asian and Western countries (mainly Europe). Due 
to its geographical position, the UAE is close to suppliers of raw materials and 
less costly productive industries, such as India and China. But it is equally close 
to markets such as Europe, to where it can supply finished goods. As Omaira 
(2001) points out, this enables the UAE to cater for these markets much more 
rapidly and at a much lower cost, which in turn enhances the growth of export 
activities.

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2.2.3. Economic Performance Overview 
To understand why the UAE has been remarked as a case of success «… an 
analysis should be made of the development of the Gross Domestic Product 
(GDP)...», which will provide us an overall picture of the UAE’s economic 
performance during the period of 1972 to 2015 (Omaira, 2001). According to 
Bondarenko (2016) the GDP is an economic indicator that represents the «…total 
market value of the goods and services produced by a country’s economy during 
a specific period of time. It includes all final goods and services […] that are 
produced by economic agents located in that country.».
GDP has the ability to reflect the value added by the economic sectors that make 
up its economy. As such, development of the value added «…is a response to 
domestic and foreign demand on locally-produced goods and services.» 
(Omaira, 2001). In this sense, «…the more productive a nation is, the easier it is 
to develop sustainable growth.» (Anderson et al., 2015). For this purpose, two 
GDP measures could be taken into account: Nominal Gross Domestic Product 
(NGDP; Nominal GDP) and Real Gross Domestic Product (Real GDP).
While NGDP values are not adjusted for inflation, Real GDP values are. This 
means that NGDP values can change over time due to changes in the quantities 
of goods and services produced by a country’s economy and/or changes in price 
levels. Although NGDP is measured in current prices (or market prices) Real 
GDP is measured in constant prices, meaning that it is adjusted for differences in 
price levels. As a result, Real GDP will allow us to establish comparisons between 
different time periods and assess the UAE’s economic growth. In this sense, only 
Real GDP measure will be taken into consideration.

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2.2.3.1. Real GDP Evolution: 1972 – 2014 
As previously mentioned, Real GDP is measured in constant prices, as such, it is 
not affected by variations in price levels. It only takes into account changes in the 
quantities of goods and services produced by the economy. This will provide a 
clearer picture of the UAE’s economic growth evolution.