The emirates have made efforts to diversify their economy in order to reduce their reliance on oil. Manufacturing has played a significant role in this endeavor. In Al-Ruways, located 140 miles (225 km) southwest of Abu Dhabi city, a petrochemical industrial complex has been established, consisting of a petroleum refinery, a gas fractionation plant, and an ammonia and urea plant. Dubai has invested its revenues in various projects, including a dry dock, a trade center, and the expansion of its first airport in the 2000s. Additionally, a second airport was constructed near the port of Jebel Ali, and notable hotels, such as the Burj al-ʿArab (“Tower of the Arabs”), were built in the late 1990s. The Burj Khalifa (“Khalifa Tower”) skyscraper in Dubai city, which opened in 2010, became the tallest building and freestanding structure in the world.
In addition to its thriving commerce and service sectors, Sharjah has also made significant strides in the field of manufacturing. The Emirate boasts a state-of-the-art cement plant, a cutting-edge plastic-pipe factory, and several top-notch paint factories that are renowned for their quality products. These manufacturing facilities have not only bolstered Sharjah’s economy but have also created numerous job opportunities for its residents. Despite the impressive advancements in the manufacturing sector, it currently accounts for less than one-tenth of the country’s GDP. However, with ongoing investments and government support, it is poised for further growth and contribution to the Emirate’s overall economic development. The commitment to diversifying the economy and promoting various industries, including manufacturing, showcases Sharjah’s dedication to achieving sustainable growth and prosperity for its citizens. As the manufacturing sector continues to expand, it is expected to play an even more significant role in shaping the future economic landscape of the Emirate.
The Central Bank of the United Arab Emirates was established in 1980, with Dubai and Abu Dhabi each contributing half of their revenues to the institution. The bank is responsible for issuing the UAE dirham, the national currency of the emirates. In addition to the central bank, there are various types of banks operating in the country, including commercial, investment, development, foreign, and domestic banks. There is also a bankers’ association.
In 1991, the worldwide operations of Abu Dhabi’s Bank of Credit and Commerce International (BCCI), which was partly owned by the ruling family, were shut down due to corrupt practices. As a result, the Abu Dhabi Free Zone Authority was established to develop a new financial center. The Dubai Financial Market (DFM), the emirates’ first official stock exchange, was opened in 2000, followed by the Dubai International Financial Exchange in 2005.
The United Arab Emirates is at the forefront of the development of modern Islamic finance, which adheres to the principles of Sharīʿah laws. The Dubai Islamic Bank (DIB), established in 1975, was the world’s first commercial Islamic bank. As the popularity of Islamic finance grew, the government introduced legislation to regulate it in 1985. In 2007, the DFM became the first stock exchange to comply with Islamic finance standards. The country’s status as an international financial and commercial hub has made its Islamic financial institutions an attractive market for organizations worldwide.
However, the United Arab Emirates’ strategic location, extensive international business activities, and lenient business and finance regulations have made its financial institutions vulnerable to money laundering, terrorist financing, and other illicit financial activities. This issue is further compounded by the presence of informal financial networks and practices, known as ḥawālah, which originated from the region’s Silk Road trade networks prior to formal finance regulation. Consequently, the country has taken significant measures in the 21st century to strengthen regulations, combat illegal financial activities, and bring ḥawālah networks into the formal market.
Trade has played a significant role in the growth and prosperity of Dubai and Sharjah for a long time. Even before the discovery of oil, Dubai’s position as the leading entrepôt in the Persian Gulf ensured its economic success. It was particularly renowned for its involvement in smuggling gold into India. In 1995, the United Arab Emirates became a member of the World Trade Organization, leading to the establishment of various free-trade zones, technology parks, and modern ports aimed at attracting trade. The development of the extensive free-trade zone of Port Jebel Ali during the 1980s has been instrumental in attracting foreign manufacturing industries interested in exporting goods.
In addition to petroleum and natural gas, Dubai and Sharjah also export a variety of other products including electronics, textiles, and chemicals. These two emirates are known for their bustling ports and thriving trade industry, making them important hubs for international commerce. Imports to Dubai and Sharjah are diverse, ranging from machinery and transport equipment to luxury items like gold and precious stones. The emirates also import a large quantity of food products to meet the demands of their growing population and tourist industry. China, India, Japan, and countries in western Europe are key trading partners for Dubai and Sharjah, with strong economic ties that support the thriving trade industry in the region. These partnerships help to ensure a steady flow of goods and services in and out of the emirates, contributing to their economic growth and development. A significant portion of the trade in Dubai and Sharjah involves reexports to neighboring Gulf countries. These reexports play a crucial role in the regional economy, facilitating the movement of goods between different markets and supporting the overall stability and prosperity of the Gulf region. The strategic location of Dubai and Sharjah, combined with their efficient ports and infrastructure, make them ideal hubs for reexport trade in the Gulf.
The service sector, which includes public administration, defense, tourism, and construction, has experienced remarkable growth in its impact on the economy since the late 1990s. This expansion can be attributed to various factors, but the country’s emphasis on attracting tourists and foreign businesses has played a crucial role in driving this growth. The tourism industry, in particular, has seen substantial development as the country has invested in infrastructure and marketing strategies to attract visitors from around the world. The presence of world-class resorts, cultural attractions, and natural landscapes has made the country a popular destination for travelers seeking diverse experiences. Additionally, the government’s efforts to streamline visa processes and improve transportation networks have made it easier for tourists to visit and explore the country’s offerings. Moreover, the construction sector has also experienced significant growth, fueled by the increasing demand for residential and commercial properties. The government’s investments in infrastructure projects, such as roads, airports, and utilities, have created opportunities for local and foreign construction companies to contribute to the country’s development. This has not only created jobs and stimulated economic activity but has also improved the overall quality of life for residents. The growth of the service sector has had a positive impact on the country’s economy, contributing to job creation, increased foreign investment, and improved living standards for the population. By continuing to focus on attracting tourists and foreign businesses, the country can further capitalize on the potential of the service sector and drive sustainable economic growth in the years to come.
These infrastructure projects have been strategically planned and executed in order to attract more tourists and businesses to the country. By investing in the development of accommodation and transportation systems, the government aims to enhance the overall tourism experience for visitors and create a more conducive environment for businesses to thrive. The construction of new hotels and resorts not only provides more options for tourists to stay in, but also helps to create jobs and stimulate the local economy. Similarly, expanding airports and improving transportation networks make it easier for both tourists and business travelers to access different regions of the country, further boosting the growth of the tourism and business sectors. In addition to physical infrastructure, the government has also focused on improving communication networks and promoting the country’s unique cultural and natural attractions to attract more visitors. By showcasing the country’s rich history, diverse culture, and stunning landscapes, the government hopes to generate more interest in visiting and investing in the country. Overall, these infrastructure projects play a crucial role in driving the growth of the tourism and business sectors, ultimately contributing to the overall economic development of the country. Through strategic investments and promotion efforts, the government seeks to create a more vibrant and attractive destination for visitors and businesses alike.
The majority of the labor force in the United Arab Emirates consists of expatriate workers, comprising approximately 90% of the total workforce, with even higher numbers in certain sectors of the private industry. These workers often face challenging working conditions, and until the beginning of the 21st century, they were not allowed to form labor unions. Similar to other Gulf states heavily reliant on foreign workers, the UAE has implemented the Emiratization program to encourage businesses to hire more Emirati nationals and reduce the reliance on foreign employees.
Despite significant developments, the issue of expatriate labor persisted in the early 21st century. New laws were introduced to prohibit work during the hottest hours of the day in summer and to ban the use of children, who were mostly expatriates, as jockeys in camel races. In 2005, a major construction and development company faced strikes and protests by unpaid expatriate laborers, which were eventually resolved in favor of the workers. In early 2006, the government announced plans to allow the formation of unions and wage bargaining through a new law. However, later that year, a different law was passed allowing the deportation of striking workers, and worker organization remained illegal. Over the years, the government gradually provided additional protections and rights to workers, but it was not until 2017 that the UAE’s labor laws met the minimum standards set by the International Labour Organization.
The United Arab Emirates does not impose income tax, and corporate taxes are only applicable to oil companies and foreign banks. The majority of government revenue is generated from non-tax sources, primarily from the sale of petroleum products. However, the government has started to diversify its revenue streams by implementing consumption taxes. In 2017, an excise tax was introduced on carbonated beverages, energy drinks, and tobacco products. Furthermore, in 2018, the UAE, along with other Gulf countries, implemented a value-added tax on most goods and services.
The country has an excellent road system that was developed in the late 1960s and ’70s, allowing for the smooth movement of motor vehicles throughout the country and its neighboring countries. A tunnel has been added to the bridges connecting Dubai city and the nearby commercial center of Dayrah, making it easier for traffic to cross the small saltwater inlet that separates them. International airports serve the cities of Abu Dhabi, Dubai, Sharjah, Ras al-Khaimah, Fujairah, and Al-Ain, with a second airport opening in Dubai in 2010. The older airport in Dubai is one of the busiest in the Middle East. The federation also boasts several large and modern seaports, including Dubai’s Port Rāshid, which has a vast shipyard, and Port Jebel Ali, one of the largest man-made harbors in the world and a bustling port in the Gulf. Sharjah has a modest port north of the city on the Gulf of Oman. Dubai introduced the Gulf region’s first metro system in September 2009, with plans for additional public transit projects such as monorail service in Abu Dhabi and connections to the Saudi rail networks. Construction of a railway connecting all seven emirates began in 2012, with the Abu Dhabi to Dubai section completed in 2022. There are also plans for a Hyperloop system to connect Abu Dhabi and Dubai.
Etisalat, a major telecommunications provider in the country, offers radio, television, telephone, and cellular telephone services. Internet service was introduced by Etisalat in 2000, leading to one of the highest subscriber bases per capita in the Middle East. In 2005, a second licensed operator called Emirates Integrated Telecommunications Company (du) started providing telephone and high-speed Internet services, and they reached an agreement with Etisalat in 2006 to connect their networks.
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