The FINAL Mirage of the Middle East

The Mirage of the Middle East:
The United Arab Emirates
“Since its independence in 1971, the United Arab Emirates
has surpassed the economic success of the neighboring
GCC partners such as Qatar and Saudi Arabia due to its
economic diversification.”
Authors: Aya Sadder & Mikaela Stamas
5/10/2013

The Mirage of the Middle East Sadder & Stamas 1
Table of Contents
Introduction ..................................................................................................................................................2
Histories of UAE, Saudi Arabia and Qatar.....................................................................................................3
Formation..................................................................................................................................................3
Religion .....................................................................................................................................................6
Influence of the British..............................................................................................................................8
Government development ...........................................................................................................................9
Arab League and FNC................................................................................................................................9
GCC..........................................................................................................................................................10
Citizenship...............................................................................................................................................11
Political and Economic Stability ..................................................................................................................13
Infrastructure...........................................................................................................................................13
Politics ....................................................................................................................................................14
Government Regulations and Trade...........................................................................................................16
Courts......................................................................................................................................................18
Policies ........................................................................................................................................................20
Monetary Policy......................................................................................................................................20
Fiscal Policy .............................................................................................................................................21
Foreign Trade & Policies .............................................................................................................................23
Trade Policies..........................................................................................................................................23
Language.....................................................................................................................................................29
US Relations ................................................................................................................................................29
Business Policies .........................................................................................................................................35
Business Regulations...............................................................................................................................35
Visas ........................................................................................................................................................36
Employment Rates......................................................................................................................................38
Labor Rates .............................................................................................................................................38
Economic Diversification.............................................................................................................................40
Conclusion...................................................................................................................................................80
Exhibits........................................................................................................................................................82
Work Cited ..................................................................................................................................................89

Introduction
The economies of the United Arab Emirates, Qatar and Saudi Arabia each project a
sustainable and financially stable outlook. The three countries focus on concentrating the wealth
turnaround from their natural gas and oil production back into the countries‟ finances. Each
country has a specific policy system that enables them to turn around the wealth from the
hydrocarbon industry to fuel the non-hydrocarbon industries in their respective countries.
Similarly, each of these economies focused on the expansionary fiscal policies as a way to
improve the outlook of their countries socially, economically, technologically and politically. By
implementing an expansionary fiscal policy for all of these countries, they can concentrate on
developing the infrastructure, education prospects and overall country performances in each of
their countries. The most important facet that has been used to measure the success of the three
countries is the function of economic diversification. When measuring each country‟s successes
from 1971 until present, the United Arab Emirates was able to differentiate itself from the other
two countries because of its ability to progress beyond an Islamic state and has embraced the
element of foreign investor partners much more than the other two countries. The United Arab
Emirates has been able to concentrate the wealth derived from foreign expats by creating
legislative restrictions that ensure that the profits from investments are returned back into the
UAE. Qatar has been able to follow in the footsteps of the UAE but with a constitution recently
written in 2005, the country still has a lot of catching up to do to the UAE. Presently, the UAE
has surpassed the economic success of Qatar even with the same policies in use and the same
direction as the UAE government to spend an incredible amount to turn the country into a mirage
of wealth. In the situation of Saudi Arabia, the country is almost thirty times the size of UAE in

land mass and four times the population size of the UAE as well as Qatar. The strict legislation
of Saudi Arabia for foreigners has made it a bit difficult for a lot of expatriates to live in the
country but they are given many advantages in the FTZ‟s of the country. Therefore, as Saudi
Arabia becomes a more modernized country that is able to work with foreign companies, with
their size they will overtake the UAE and Qatar very shortly.
Histories of UAE, Saudi Arabia and Qatar
Formation
Formation of the Trucial States: The United Arab Emirates was officially formed in 1971
when it gained its independence from the United Kingdom. The seven emirates: Ras al
Khaymah, Ajman, Abu Dhabi, Dubai, Umm Al Qaiwain, Sharjah and Fujairah all joined together
under the leadership/ruling of Sheikh Zayed Bin Sultan Al Nahyan (Sheikh Mohammed). Before
the United Arab Emirates was formed in 1971, the country was named a Pirate Zone
(Encyclopedia). During the Ottoman Empire, the British and Dutch tried to compete for world
domination and they attempted to defeat the Qawasim. The Qawasim were the ruling clans of
Sharjah and Ras Al Khaymah. The pirates referred to the attack of the British on the area who
had defeated the Qawasim and assumed power in 1820, labeling the area as the Trucial Coast. In
1892, the British had gained control of the then Trucial Emirates‟ Foreign Affairs. In 1952, the
United Arab Emirates formed the Trucial States and soon after they became a member of the
OPEC council in 1967 and continue to be a member today (OPEC). The trucial states agreed to
share policies on foreign affairs, defense, security, and social services and adopt a common
immigration policy which was more formally known as the Union Accord (UAE history).

The country acclaimed as Saudi Arabia today established its independence and its
unification in 1932. It changed its name from the state of Najd and Hajez to the Kingdom of
Saudi Arabia (Imam Reza). During this time, their external affairs were being controlled by the
United Kingdom. Saudi Arabia was proclaimed King Abdul Aziz Ibn Saud upon its
nomenclature. Prior to the country discovering its oil rich resources, it relied on non-hydrocarbon
resources such as pearling, trading and fishing. The country was in a collective position of
weakness, dependent on the people to create the wealth of the country. After the country
discovered its oil wells, it became independent and self-fulfilled and not too concerned with the
citizens. The country began to re-distribute the wealth back to the main local citizens but not fast
or efficiently enough. The formation of „Saudi Arabia‟ was under the rule of King Faisal bin
Abdulaziz, he was the visionary innovator with who had a great respect for tradition. He initiated
the first of a series of economic and social development plans that would transform Saudi
Arabia‟s infrastructure, especially industry, and set the Kingdom on a path of rapid growth. He
also established the first public schools for girls. The topography of Saudi Arabia includes a land
mass of 830,000 square miles (CDIS).
The country today is governed as an absolutely monarchy and an Islamic and unitary
state. The capital of the country is Riyadh, rich with the highest-level of investment as well as
the highest touristic area. The current king is Crown Prince Salman bin Abdulaziz who was
appointed the position after his brother, Prince Nayef bin Abdul Aziz Al Saud. The Saudi Arabia
Oil Company), which was fully nationalized in 1988, controls this vitally important resource
(Saudi Aramco). Even as the demands for oil, and consequently the price per barrel, remain at
historic highs, Saudi Arabia faces the challenge of diversifying its economy (Icweb2).

The peninsula of Qatar gained its independence from the British colonization took place
on the 3rd
of September, 1971. Concurrently Qatar and the United Arab Emirates were both
under the British colonization. In 1971, they were each allotted their independence. The
peninsula is located geographically to the North West of the United Arab Emirates and East of
Saudi Arabia. Qatar‟s peninsula was under the leadership of the Al Thani family and has been
passed down as a monarchy to the existing Al Thani family today. The first ruler of Qatar was
Sheikh Thani bin Mohammed, the father of the current ruler Sheikh Mohammed bin Al Thani. In
relation to its geography, the country occupies approximately 11,521 square kilometers on a
peninsula that extends 160 kilometers north into the Persian Gulf from the Arabian Peninsula.
The coastline is 550 kilometers long. Its territory comprises a number of islands. (Qatar
Embassy) The topography in Qatar consists of mountains with a very high aridity country there
are no lakes or rivers (Morison Menon). It is characterized by a variety of geographical
phenomena including many coves, inlets, depressions and surface rainwater-draining basins.
These areas have the most fertile soil and are rich in vegetation.
The country itself being bordered by the United Arab Emirates and Bahrain, the three
countries considered a formation of Trucial states. Sheikh Rashid Bin Said Al Maktoum had
close ties with Qatar, which was ruled by his son-in-law who had been generous towards
development projects in Dubai. Teachers and civil servants had come to work in Abu Dhabi from
Bahrain and the sheikhdom used the Bahraini dinar as its currency between 1966 and 1972. By
the end of the month, they had also invited the other Trucial states and Qatar and Bahrain to
become part of a larger federation. The idea of Oman joining was also mooted when Sultan
Qaboos became ruler in 1970. As history would have it, as the situation unfolded, Oman

remained a Sultanate and both Qatar and Bahrain become independent states, in their own right
(Al Shindagah).
Ranking first place, Qatar was ranked by Forbes officially in 2012 as the richest country
in the world (Forbes). Within the capital of Qatar, Doha, the most populated and growing
projects of Qatar can be witnessed. With the last calculation of GDP per capita at $102,800 in
2012, the country can be described as very wealthy and doing much better than the world
average (Index Mundi). Although, if we look at the figures on the gini distribution, with a
staggering 41% we can see that the main distribution of solid GDP per capita is in the capital of
the country (Trading Economics). The peninsula has a population of almost 1.9 Million people
as of July 2012.
Religion
According to article seven in the UAE constitution, „Islam is the official religion of the
Union. The Islamic Tiara's shall be a main source of legislation in the Union. The official
language of the Union is Arabic‟ (UAE Constitution). The doctrine of which the constitution in
the UAE falls back on is Islam. There is about one mosque within less than 100 meters from one
another. The sound of the prayer is heard five times a day and is usually accompanied with the
sound of more than one prayer which can be heard from every corner in the UAE.
The main religion in the Kingdom of Saudi Arabia is Islam and their legal system is
based on Sharia‟ law. The constitution of the country was written and based on the Qur‟an and is
influenced by the Wahhabism sect of Islam. According to the World fact book, the population
percentage recorded for Muslims is at 100%. Although, it cannot be definite that an entire
population of more than 28 million is all Muslim especially if there are foreign expats living and
working in Saudi Arabia. As well as, according to world fact book there is an 82% urban

population with a 2.2% annual increase annually (CIA). To further explain that these statistics
can hold a discrepancy, Bureau of human rights say that: “comprehensive statistics for the
religious denominations of foreigners are not available; however, they include Muslims from the
various branches and schools of Islam, Christians, and Hindus.” Therefore, a lot of the
population is not accounted for even if there is a vast amount of people of other cultures and who
practice different religions other than Islam.
According the Bureau of human rights, “the Government does not provide legal
protection for freedom of religion, and such protection does not exist in practice. The public
practice of non-Muslim religions is prohibited. The Government recognizes the right of non-
Muslims to worship in private. However, it does not always respect this right in practice and
does not define this right in law” (Travel State). The problem is that for those who are not
Muslim, the state allows them to live in the country but they are not allowed the same rights and
are not protected under the law.
The main religion in Qatar just like Saudi Arabia and the United Arab Emirates is Islam.
The courts are influenced by Sharia law which is built on the foundations of Islam and the
citizens are subject to the rules written within the Qur‟an. The country‟s constitution became
ratified on June 9, 2005 officially (Hziegler). According to the new Judiciary Law, the previous
two court system has merged into one. A Higher Court called the Court of Cassation has been
established (Supreme Court). Appeals from the Court of Appeal can be raised to the Court of
Cassation, which will be considered the highest court of appeal in the country.
Like Qatar‟s tolerance of other religions, the United Arab Emirates is also very open to
many different religions since it harbors many different groups of people from different parts of

the world. In Qatar, it is evident from its generous leasing of land in 2004 to the Christian
community that they are very accepting of Christianity and embrace the practice of religion and
all religions for that matter in their community. The Church complex houses more than ten
different churches. "It's showing the world they are open to new ideas, and I guess it's part of
growing up as a nation," said Reverand Tomasito Veneracion, at the opening of Our Lady of the
Rosary Church in Doha (Cop, 18).
Influence of the British
Although the influence of the British in the UAE seemed short-lived and not very
effective, they had actually been the ones to take the first steps to modernize the country. In
1953, the British had set up the first Westernized curriculum in Sharjah (Encyclopedia). Up until
1971, the British had offered the United Arab Emirates security and stability until they gave the
United Arab Emirates its control in 1971 (Encyclopedia). Sheikh Zayed Bin Sultan Al Nahyan
recognized the potential of the oil industry as a main attraction for foreign investors and decided
to capitalize on this as the biggest asset to grow the country. The authorities of the UAE did not
blur their vision with this opportunity; instead they focused on expanding their economy by
growing and diversifying their businesses into tourism, construction and business (BBC).
Currently, the United Arab Emirates‟ security and defense budget is contributed by Abu Dhabi.
The Red Line Agreement of July 1928 had the effect of formally conceding American oil
companies a role in the Gulf region after years in which the Colonial Office and particularly the
India Office had actively sought their exclusion. Nevertheless, the agreement imposed stringent
conditions for any American oil company desirous of obtaining a concession in any territory
under British protection except Kuwait. As a result, in order for SOCAL to maintain its option in
Bahrain, the company had first to create a British subsidiary, the Bahrain Petroleum Company

(BAPCO), register it in Canada, ensure that one of its five directors would at all times be a
British subject and ensure that as many as possible of its employees were British or Bahrainis.
Naturally the whole of the share capital was subscribed to SOCAL(Archived Editions). Though
Saudi Arabia was intended to be covered by the Red Line Agreement, Britain was hardly in a
position to hold American oil companies operating there to the same conditions as she held no
exclusive treaty relations with Ibn Saud. As a result, there was nothing to prevent Saudi Arabia
granting the 1933 concession to SOCAL. By this time SOCAL had obtained two important
concessions in Bahrain and the Hasa province of Saudi Arabia. It is worth noting that in the mid-
1920s Major Holmes had offered the Bahrain concession on more than one occasion to the
Anglo-Persian Oil Company, the Iraq Petroleum Company and other British oil groups while the
Eastern and General Syndicate held the option for the island. The Anglo-Persian Oil Company
had held an exploration concession in Muscat and Oman during the mid-1920s but abandoned
the area as unfavorable after only two years (Archived Editions).
Government development
Arab League and FNC
In 1971, the UAE joined the Arab League. The Arab League was founded in 1945 to
protect the twenty members and to help them coordinate amongst one another the signatory
nations on education, finance, law, trade, and foreign policy, and it forbids the use of force to
settle disputes among members (Arab League).
Alongside with managing external relationship, the Federal National Council was
created. The Federal National Council is a part of the five authorities that make up the Provincial
Constitution (UAE History). The Federal National Council constitutes 40 members who are

appointed by the board (the rulers of each of the seven emirates). The federal national council is
similar to the Federal Court in the United States. They are the third party who overlooks all the
states and they try to ensure equality and to act as an overall mediator for more serious situations
which need to be overseen by a bigger authority (FNC). All of the members have consented to be
a part of this council and have agreed to their terms and conditions to also remain on it
(Almajles).
GCC
The Gulf Cooperation Council was founded on the creed of Islam on May 25th 1981,
thus binding the following six countries together: The United Arab Emirates, The State of
Bahrain, The Kingdom of Saudi Arabia, The State of Qatar, The State of Kuwait and The
Sultanate of Oman (GCC-SG). With their main headquarters in Riyadh, Saudi Arabia the GCC
aims to regulate economic, financial affairs, commerce, customers, communications, education
and culture throughout the council. They keep the interests of all parties congruent and they
share research and technological advances that strengthens them and allows them comparative
advantage against competitors. They also share a budget which each member contributes
annually in equal amounts to guarantee equal stake. The GCC offered all of the oil-rich countries
a protective agreement that allowed them a powerful defense through the help of their neighbors.
Aside from the councils‟ promise of shared tangible resources, they also share a promise
of protection. “Due to the country‟s vulnerability at that point, the Peninsula Shield Force, part
of the mutual agreement signed 10 October 1982 among Gulf Cooperation Countries, were
activated to insure the integrity of Bahrain‟s territorial borders (GCC) . Their operations were
limited to preparing to assist the Bahrain Defense Force (BDF) against any confrontation by any
foreign armed intervention and in protecting and securing vital locations in the country.

Peninsula Shield Forces did not participate in any operations involving confrontations with
Bahraini civilians or engage in any form of riot control. Furthermore, The Commission did not
find any evidence of human rights violations committed by these units deployed in Bahrain
starting on 14 March 2011” (GCC).
Citizenship
In order to acquire UAE citizenship the person has to have their origins traced back to
the early centuries (United Arab Emirates) expatriates who live in the United Arab Emirates are
not entitled to citizenship. It is the decision of the UAE authorities to grant expatriates with
citizenship. There is a difference between holding the UAE passport and being granted
citizenship. A foreign national can marry an Emirati citizen but will not be entitled to
citizenship until there has been proof of marriage for more than ten years. Even if a child is
born in the UAE he is not entitled to a UAE passport if his parents are expats (Expat Focus).
Although there are many advantages to having the UAE passport there are also many
disadvantages. One of the disadvantages is the inability to hold two passports at once. In order
to renounce the original passport, the person trying to do so will have to contact the authorities
of his country and make sure that they are aware to ensure that the applicant is not holding a
dual citizenship. Another disadvantage would be that the person who is applying for citizenship
must be married to an Emirati citizen and would not get the passport immediately, they would
have to wait for ten years until they can fully become a UAE citizen and would not be permitted
travel access until their passport was given to them (Expat focus).
Women considering relocation to Saudi Arabia should be keenly aware that women and
children who are considered members of a Saudi household (including adult US-citizen women

married to Saudi men, adult US-citizen women who are the unmarried daughters of Saudi
fathers, children born to Saudi fathers, and US-citizen boys under the age of 21 who are the sons
of Saudi fathers) require the permission of the Saudi male head of their household to leave the
Kingdom. Married women require their husband's permission to depart the country, while
unmarried women and children require the permission of their father or male guardian. The US
Embassy can intercede with the Saudi government to request exit permission for an adult US
woman (wife or daughter of a Saudi citizen), but there is no guarantee of success, or even of a
timely response. Mothers are not able to obtain permission for the departure of minor children
without their father's permission” (Travel State).
Qatar‟s government is keen to protect the status quo and doesn‟t want to compromise its
cultural values or standard of living by allowing foreigners to become a permanent part of
society. The only route to becoming a naturalized citizen is by marriage to a national. In
exceptional circumstances only, citizenship can be granted to a foreigner who has provided
outstanding service to the state over a number of years (Qatar Embassy).
Children of foreigners born in Qatar don‟t have rights of local citizenship and
automatically assume the nationality of the parents. If one of the parents is a national of Qatar,
the child will usually be granted local nationality and may later become a national of Qatar and
obtain a local passport (Just Landed). There are two ways in which a person can lose their
citizenship: voluntarily or involuntarily. The involuntary ways are similar to both the UAE and
Saudi Arabia, the citizen has either joined the military service of a foreign country against the
wishes of the Qatari government, acquired a foreign nationality (there is no tolerance for dual
citizenship) or become a worker for the interests of a foreign government that is in a state of war
with Qatar (Multiple Citizenship).

Political and Economic Stability
Infrastructure
The infrastructure that has been set up in the UAE is very advanced for a country that
came into existence in such a short period of time. The electricity & water establishment,
telecommunication support, airport channels, free zone ports and available public transportation
is the most advanced and efficiently set up within the Middle East, predominantly in Dubai
(UAE Interact). The electricity and water usage in the UAE has been inclining over the couple
of years with the increased amount of investment in real estate, the increase in population and to
meet the demand of the new businesses. The government who has become more conscious of
this is now including renewables, tradition hydrocarbons and nuclear energy as part of the mix
to try and be more sustainable. “The UAE‟s investment in renewable energy offers the region a
pragmatic path to reducing per capita carbon emissions, which are currently among the highest
in the world,” said IRENA‟s Director-General, Adnan Z. Amin (IRENA). The UAE is trying to
keep up with demand and maintain a low carbon footprint by increasing consciousness in the
country (Emirates 24/7). Local newspapers are trying to keep the citizens as aware as possible;
by regularly releasing articles such as “How to reduce the Carbon footprint in the UAE” The
government who controls the media in the country is trying to keep the people aware (Emirates
24/7).
There has been major spending on infrastructure since 2011 on Saudi Arabia. The
government in 2011 has said to have spent “$600 billion on its road, railways and airports”
(World Folio). It is a great asset for a developing country as large as Saudi Arabia to be prepared
for future development with the help of international companies. In order to accommodate future
growth and in order to become a super power as strong as the United States, adjustments need to

be made in order to keep up with the future changes. In 2013, “Investment in infrastructure
projects could provide a significant opportunity for investors in Saudi Arabia, as Government
spending is set to touch SR1 trillion ($266.6bn) in 2013, according to Emirates NBD Wealth
Management, a part of the Middle East's leading bank” (Ameinfo).
The peninsula is very rich in oil and natural gas since they share the gulf oil with their
neighbors such as Kuwait, United Arab Emirates, Saudi Arabia and Oman. Qatar, similar to the
UAE, are very focused on making sure to turn around the oil money into actual investments for
the country in order to grow and establish a stable infrastructure for the country. According to
Arabian Oil and Gas in 2010, oil reserves in Qatar were projected to last them another 40 years
(Arabian Oil and Gas). Thirty-seven more years for Qatar to develop enough stable
infrastructures in the Qatar to be profitable running off non-hydrocarbon solutions is the current
focus and drive of the country. With Qatar being the new hub of investment and upcoming place
to be, it has been trying to move the focus away from the UAE by working endlessly on
incredible projects that are soon going to put them in the lead for technology, education and
infrastructure.
Politics
The United Arab Emirates is a constitution federation of seven emirates which is
comprised of the federal system of which includes the Supreme Council, the Council of
Ministers (Cabinet), a parliamentary body in the form of the Federal National Council (FNC)
and the Federal Supreme Court, which is representative of an independent judiciary. The
government is an absolute monarchy, elective monarchy, non-partisan democracy. The capital

of the UAE is Abu Dhabi and the ruler of the whole UAE is H.H. Sheikh Mohammed bin
Rashid Al Maktoum (UAE interact).
In terms of political alignment, the UAE has maintained its position in the Arab League
and the GCC countries. Therefore, its alliance to Palestine and Lebanon with their conflict with
Israel has remained on the side of its fellow Arabs. They are not politically affiliated with the
situation but they try to maintain bonds with their Arab partners by offering support when
conflict arises with Israel by offering aid and some help to restore peace. With a tightly
legislative system governed by conservative rules and practices that rely on a radical sect of
Islam (Wahhabism) in today‟s modern world, there is a great deal of oppression from the
masses of Saudi Arabia. According to the New York Review of Saudi Arabia, an editor asked:
“Will Saudi Arabia ever changes” (NY Times)? With areas as developed as Riyadh and as
open-minded and educated as Jeddah, Saudi Arabia‟s rules have oppressed the people long
enough.
The politics of Qatar are such that they only take place in an undemocratic framework of
an absolute monarchy whereby the Emir of Qatar is not only head of state, but also the head of
government. Politically, Qatar has also become a significant world power, taking the decision to
work as a mediator in a number of global conflicts and emerging as an important nation in terms
of international affairs. While many of these achievements have come about in recent years, the
country has been building towards its current success since 1971, benefiting from the foresight
and vision of the leadership which has seen the country advance significantly since the Emir took
over the direction of the country in 1995 (Info Qatar).

The relationship between Qatar and the United States has been strengthened over time.
With Obama as president, more talks have been established between the United States and Qatar.
In recent talks with Obama, Emir Sheikh Hamad bin Khalifa al-Thani met to discuss the situation
in Syria. During the talk, Obama was congratulating the Emir. As we all as mentioning that
"[they had] obviously been cooperating closely with Qatar and other countries in seeking to
bring about an end to the slaughter that's taking place there (and) the removal of president
(Bashar al-Assad)," Obama told reporters (Your Middle East). Therefore, close securities and
ties are made between the US and Qatar which ensures them protection worldwide from as super
power their size and control.
Government Regulations and Trade
The Federal Law of UAE restricts the ownership to an expatriate in a trading company
to 49% whereas in free trade zones expatriate can set up 100% owned (Howrath Mak). In the
case of doing business in the United Arab Emirates, the UAE is ranked number twenty-six in
2013 (Doing Business). The UAE Commercial Companies Law (CCL) requires that each
company established in the UAE has one or more UAE national partners who hold at least 51
per cent of the company's capital (UAE Interact). In relation to Free trade zones, companies
established in free zones are also exempt from the 51% requirement, if the relevant free zone
has special provisions regulating the company. Foreign banks are exempt from having to
appoint a sponsor. Therefore, free trade zones are a good alternative to setting up a normal
business, they come with many advantages such as reduced trade barriers, tariffs or quotas
(UAE Interact).

Saudi Arabia, being a more conservative country, is not as popular a market for foreign
investment as the UAE and Qatar. Therefore, their legislation is less strict on allowing foreign
investment into the country. “The foreign direct investment law, revised in 2000, claims foreign
investors are no longer required to take local partners in many sectors and may own real estate
for company activities. They are allowed to transfer money from their enterprises outside of the
country and can sponsor foreign employees” (Travel State). The government allows for
foreigners to own their enterprises without a local partner which is a very attractive opportunity
for people who are looking to invest.
The regulation so foreign investment in Qatar allow for the small population to circulate
the profits within the hands of the government and their nationals. This strategic policy was
implemented in Qatar closely after the UAE. The UAE itself did not adopt this policy by
mistake; it actually enacted similar policies to Singapore who are a wealth-driven economy with
very strategic goals and plans in mind to keep their country operating at their level of
optimization. Therefore, the Foreign Capital Investment Regulation states that: “The Foreign
Capital Investment in Economic Activities Law (No. 13 of 2000 as amended) regulates the
inflows of foreign capital into Qatar. Generally, a foreign entity may participate in any part of
the economy so long as the equity shareholding does not exceed 49% or, in other words, a
Qatari partner owns at least 51% of the equity shareholding” (McNamer). This policy allows for
Qatar to control their money flow and guarantees them a profitable disposable income for the
government which is helpful for them since they focus on expansionary policies to further
develop their country.

Courts
The UAE‟s judicial system applies two types of law, Sharia and civil Law. The way that
the courts decide which one to use is split up between family matters versus all other types of
matters (Global Security). Families who are not Muslim do not have to go through the regular
Shia council and are not subject to Islamic law penalties. Non-Muslims are put through a
different court of law. Higher courts may overturn or modify Islamic law penalties imposed on
Non-Muslims (Global Security). This allows for fairness and less harsh penalties on expats who
populate more than three quarters of the country.
In Saudi Arabia, under legislation, “the import or possession of alcoholic beverages and
pork products is not allowed. This is religious law. Offenders are open to acute penalties”
(Startupoverseas). The reason for this restriction is re-enforcing the fact that Saudi Arabia is an
Islamic republic that does not encourage the habits or practices that are written outside of the
Qur‟an. At the top of the legal system is the King, who acts as the final court of appeal and as a
source of pardon. The largest is the Shari‟a Courts, which hear most cases in the Saudi legal
system. The Shari‟a courts are organized into several categories: Courts of the First Instance
(Summary and General Courts), Courts of Cassation and the Supreme Judicial Council. Shari‟a
presumes that a defendant is innocent until proven guilty, and only in serious crimes or in cases
of repeat offenders is one likely to witness severe punishments (Saudi Embassy).
The Judiciary in Qatar is expressly established as an independent body by the provisional
constitution and is currently divided into two court systems; the civil, commercial and criminal
system and the Sharia Court system. Sharia Court system administers Islamic laws. In October
2004, the judicial system underwent a radical change with the establishment of the new Judiciary

Law issued in 2003, which became effective in 2004. According to the new Judiciary Law, the
previous two court system has merged into one. A Higher Court called the Court of Cassation
(Supreme Court) has been established. Appeals from the Court of Appeal can be raised to the
Court of Cassation, which will be considered the highest court of appeal in the country.
In Qatar, there are three types and levels of courts, the civil, the Criminal and the Islamic
“Shari‟a” courts. The civil courts have exclusive jurisdiction over civil, commercial, banking,
insurance and maritime matters. The Criminal Courts rule over all crimes under its jurisdictions.
The “Shari‟a” courts have exclusive jurisdiction in connection with all family law matters
(Tamimi). In addition, the QFC Regulatory Authority (QFCRA) regulates financial issues
including, banking, insurance, derivatives and securities. The QFC Regulatory Tribunal
(QFCRT) has jurisdiction to hear appeals raised by individuals and corporate bodies against
decisions of QFCRA and other QFC institutions.
The Advisory Council can draft and approve laws, but final say is in the hands of the
Emir. The Council has 45 members, 30 of whom are elected by direct, general secret ballot, and
15 of whom are appointed by the Emir. The next election is scheduled for 2013.In 2007, an
Administrative Court, a Constitutional Court, and Courts of First Instance, Appeal, and Cassation
were established. All judges are appointed by Amiri degree, on the recommendation of the
Supreme Judiciary Council (established in 1999). Terms are for three years Similar to the United
States, male and female Qataris aged 18 and older are able to vote, and run as candidates for
election (Hziegler).

Policies
Monetary Policy
Amidst the global economic crisis in 2008 and still uncertain economic environment, the
UAE economy has shown a sign of resilience as an estimated growth of 4% was announced by
the International Monetary Fund (IMF) for 2012 (UAE Economic Report). As of 2012, the
Emirates entered a phase of fiscal adjustment, aiming to unwind the stimulus of recent years and
lower the high breakeven oil prices without harming the UAE in its economic recovery.
In turn, fiscal spending set to slow, while the fiscal surplus of 2012 increased 14%
following a growth rate of 200% in 2011. Overall, fiscal revenues accounted for 36% of GDP in
2012 and are still seeing projected growth, but are subjected to future downward pressures as the
UAE‟s oil output nears capacity and momentum begins to slow. However, revenues generated
by non-hydrocarbon activities set to increase at 9.4%, and account for 20% of total fiscal
revenues. Such accelerated levels have supported the economy due to the diversified industries
like tourism, logistics, manufacturing, and trade. More so, the UAE general government fiscal
accounts have sustained a positive balance for three consecutive years, with fiscal expenditures
accounting for almost 24% of UAE GDP, and a 12% spending surplus for 2012 (UAE Economic
Report). Accordingly, the gross debt of the general government has been steadily declining,
moving from 17.8% of GDP in 2011 to 16.5% in 2012, the lowest level since the global financial
crisis.
The three countries, Saudi Arabia, United Arab Emirates and Qatar all made the decision
to be pegged to the dollar and so their efforts and plans to adjust the monetary policy will remain
loose. According to BMI in Saudi Arabia, “over the next few years, supporting money supply
growth and bank lending, the M3 money supply and private sector credit grew by 12.3% y-o-y

and 15.4% in March, respectively.” Analysts are projecting a continuous positive return for the
Saudi economy over the next few years, but are still volatile to international markets.
Qatar‟s monetary policy is formulated by the QCB to, among other things, regulate
interest rates, maintain the stability of the Qatar Riyal and control inflation. The Qatari dinar is
pegged to the dollar, which they say has enabled Qatar a “solid platform” for them to work with
today. The central bank governor was explaining in a report made on World folio in November
2012 that being pegged to the dollar has been advantageous to Qatar because of the relative
stability of the US dollar as well as the exchange which they use when they invoice both their
imports and exports (Worldfolio).
In relation to the non-hydrocarbon areas of Qatar, there has been an increase in economic
activity after the recent recession and they had to adjust their key policy rate by 50 basis points to
signal a soft interest rate regime and encourage the flow of credit to the private sector. According
to reports from World Folio, Qatar “Stability is the watchword for the Qatar Central Bank and
the proof is in the results of its policies” (Worldfolio). The effectiveness of this two sided policy
that was implemented enables the market to be aware of the risk early on as well as be able to
correct it at an early stage. Even though no economy can be entirely recession proof, this is a
good preventative that supports Qatar‟s long-term vision of being a financially stable country.
Fiscal Policy
The fiscal policy projected for the United Arab Emirates remains fundamentally
unchanged. Even though the projected fiscal breakeven oil price according to “BMI is currently
forecasting Brent crude oil to average US$102/bbl in 2013, down only slightly on the
US$110/bbl estimated for 2012. Their core projections see government expenditure increasing

4.0%, compared to an estimated 3.0% in 2012” (BMI). This shows an expected increase in the
exports of oil and the government adapting an expansionary policy to keep the levels of
projection up to match their actuals.
The fiscal policy implemented by Saudi Arabia is similar to the United Arab Emirates
and Qatar, the country is constantly focusing on expansionary policies to improve the outlook of
their countries and the only way they can do this is through the development of infrastructure.
Although, Saudi Arabia is worried that according to their BMI: “with continuing political
tensions across the region encouraging the regime to finally address long-neglected social and
development needs. However, the main challenge for Saudi Arabia remains its ability to ensure
fiscal sustainability over the longer term. (BMI)” The country will continue to improve their
infrastructure through the funding of their expenses through their sources of wealth from their
hydrocarbon reserves.
Qatar expected to increase their government spending by 27% in order to improve
infrastructure, social services and wages and was hoping to receive a return on their investment
in April 2012. The country has been working very hard to benefit the outlook of Qatar and to
drive their country in the direction the UAE has been going in for years. Along with the spending
increase, the government is trying to prepare the country for the upcoming commitment to host
the world cup in 2022 and “they have penciled in revenue of 206 billion riyals, a 26 percent rise
from the previous year's budget plan and a surplus of 28 billion riyals, or 4.4 percent of 2011
gross domestic product, according to Reuters calculations” (Al Arabiya).
In relation to the car market in Qatar, the country reported in a BMI report: “In 2012,
there were a reported 85,358 new vehicles sold in Qatar, representing a 30% increase year-on-
year (y-o-y). This reflected the positive impact of an expansionary fiscal policy, low

unemployment and booming credit levels within the country” (BMI). This growth shows a
positive outlook for the country and the decision to implement an expansionary vs.
contractionary fiscal policy. The decision to spend more money in the public vs. taxing the
citizens allowed for more investment and more turn around for this growing market (See Figure
1). With this increase over the past year from 2012 to 2013, they are expecting another 17%
increase in the auto industry.
Figure 1: Fiscal Policy on car revenue
Qatar New Car Sales
(BMI)
Foreign Trade & Policies
Trade Policies
Analyzing the United Arab Emirates (UAE) in comparison to the Kingdom of Saudi
Arabia (KSA) and Qatar, the countries‟ trade policies have played an important role in their
pursuit of economic success. While trade policies between nations appear to be similar due to

paralleled memberships in several organizations, each country has fared differently due to their
pursuit of economic diversity in the modern world. In order to achieve unity and strengthen
relations through similar objectives in the political and cultural world, an alliance was formed
between these three countries, amongst others, to form the Gulf Cooperation Committee (GCC)
(Gulf Cooperation Council). Over the years, the GCC has become a member of the World Trade
Organization (WTO), introducing a commitment to holding an open international trade
environment. The UAE, KSA, and Qatar are all members of the Pan Arab Free Trade
Agreement, (PAFTA) facilitating the development of free trade among Arab states, and have
further established free trade agreements with the European Free Trade Association (EFTA)
(Industrial and Trade Agreements). Though affiliated with the GCC, varying economic
objectives have lead these countries to join the World Trade Organization (WTO) at different
times. In 1994, the United Arab Emirates became a contracting party to the General Agreement
on Tariffs (GATT) which then assimilated into the World Trade Organization in 1996. The
WTO was founded in order to promote international trade and development through the
reduction of tariffs and other restrictions. Qatar and Saudi Arabia were not members of the
World Trade Organization until 2005 due to trade practices that required the need for
liberalization in several sectors before being admitted, including opening trade to Israel. Though
these three countries have similar histories and affiliations, liberal economic policies, practices
and involvements have allowed the United Arab Emirates to surpass the economic successes of
both Saudi Arabia and Qatar.
Since the United Arab Emirates entered into the World Trade Organization in 1996, they
promptly established themselves as an influential player in the international trading system.
Since inception in 1971, the UAE has focused its efforts on achieving a diversified economy

through enhanced trade relations worldwide, particularly in the realm of non-oil products. In
parallel, they have made it their goal to create an attractive business environment showing
promise in economic growth through the adaptation of an open economy. In doing so, the UAE
has become a major trading partner amongst thirty two countries in the World Trade
Organization alone (Trade and Investment). Below are two exhibits which display the UAE‟s
top 5 import and export partners and their products (See Figure 2 & 3).
Figure 2: The UAE's Top Five Import Partners
1 China 12.8%
Primary products: textile products, clothes, light industrial products,
handicrafts, machinery and products made from gold, silver, copper,
iron, tin.
2
India
10%
Primary products: cotton, accessories, gems and jewelry, manmade
yarn, fabrics, manufacturers of metals, cotton yarn, marine products,
machinery and instruments, plastic and linoleum products, tea.
3 United States 8.7%
Primary products: transport equipment, machinery, computer &
electronic products, primary metal manufacturing, chemicals.
4 Japan 6.1%
Primary products: transport equipment, electrical machinery, general
machinery, foodstuff, raw materials, and mineral fuels.
5 Germany 5.9%
Primary products: machineries, electronics, chemical products,
measurement and control technology, iron, steel.
(Trade/Investment)
Figure 3: The UAE's Top Five Export Partners
1 Japan 23.6% Primary products: crude oil, aluminum.
2 South Korea 9.2%
Primary products: crude oil, petroleum products such as naphtha and
liquefied petroleum gas, aluminum, copper.
3 Thailand 5.0% Primary products: crude oil, scrap metal, gold and silver bar, chemicals.
4 India 4.8%
Primary products: pearls, precious and semi-precious stones, gold, pulp
and waste paper, sulfur and unroasted iron pyrites, metalifer ore and
metal scrap, organic and inorganic chemicals.
5 Iran 3.8%
Primary products: gas, cigarettes, spare parts for machinery,
telecommunications and radio apparatuses, auto teller machines, mobile
phones, heavy machinery, banana.
(Trade/Investment)

As the country builds on its achievements, one of the most prominent drivers that can be
attributed to the continuous growth of the UAE is its free and competitive open trade policies.
As members of the GCC and WTO, Saudi Arabia, Qatar, and the United Arab Emirates have
varying trade tariff policies which prove to differentiate their levels of economic diversification,
thus attributing to their levels of economic success. The UAE has low level tariff protection,
with a steady 4% customs duties rate on general imported items, with an exception to both
alcohol and tobacco with a 50% and 100% duty rate respectively. A zero rate applies to
approximately 70 goods exempted from tariffs, including agricultural and industrial machinery,
educational materials, pharmaceuticals, and green energy products such as solar, wind and
thermal generating sets, solar cells and panels (Tariff Structure for Imports). In Qatar, the
general import rate is also 4% on almost all commodities. However, a protective tariff rate of
20% is imposed on several items such as cement and steel that compete with goods produced in
Qatar. There is also a record and musical instruments tariff of 15%, tobacco with 100% tariff,
and alcohol is virtually banned from importation with the exception of the Qatar Distribution
Center (Importing Goods). Lastly, Saudi Arabia has had the most stringent guidelines on its
imports, imposing hundreds of tariffs and risking the future full operation of the GCC customs
union in 2015. In an effort to protect fledgling national industries, Saudi Arabia has imposed
customs duties of up to 20% on selected imported commodities such as matches and plastic bags,
charging higher rates than the UAE, Qatar, and most other GCC members and compromising the
GCC‟s efforts to bolster stagnant levels of trade. Saudi Arabia applies the common GCC tariff of
5% for general goods, but other imports such as tents, aluminum bars and rods, and furniture are
subject to a 15% tariff, with a 12% tariff on 294 further items including some textiles, and
alcohol is banned from importation, but would otherwise have a 200% tax alongside tobacco

(Arnold). Lastly, the United Arab Emirates is the only nation that is plays an active role in the
Doha Development Agenda, continuously making efforts to propose to eliminate tariffs and non-
tariff barriers on raw materials altogether.
In attempts to establish a unified customs union, the GCC is pushing for all of its member
countries to have international Free Trade Zones by 2015. A Free trade Zone (FTZ) is a
specialized area within a country which allows for the free trade of goods without any barriers,
such as quotas and tariffs, being imposed. Such trade barriers are removed in order to narrow the
bureaucratic necessities and attract new business and foreign investment with 100% exemption
from import and export duties levied (Economy Watch). These international Free Trade Zones
“facilitates cross-border trade by removing the obstacles imposed by customs regulations, and
ensures faster turnaround for planes and ships by lowering custom related formalities” (Economy
Watch). Currently, the United Arab Emirates has the most substantial amount of Free trade
Zones with over thirty-eight in operation, and approximately nine under establishment. These
Free Trade Zones play an important role in the diversification of the industry based UAE
economy, accounting for a maximum of real growth rate GDP of the UAE which was 3.3% in
2011 (Entities-Free Trade Zone) . In comparison, no Free Trade Zones have been established in
Qatar or Saudi Arabia. Qatar does have plans to establish three FTZs to house clean and light
commercial establishments involved in legal, trade, engineering, financial services and
consultancies; transport companies and manufacturing industries; and petrochemical and other
major downstream industries (Qatar Will House Three New Free Trade Zones). As of now, one
of the three proposed Free Trade Zones is under development at the New Doha Port. Saudi
Arabia, on the other hand, has no FTZs under development, though the prospective
implementation of Free Trade Zones is under consideration by the government.

Another important aspect which not only facilitates trade, but further stimulates the
economy is the implementation of the Open Skies Policy between nations. Similar to Free Trade
Zones, the Open Skies Policy promotes increased trade, enhances productivity, and creates
employment opportunities and economic growth (Open Skies Agreements). Most importantly
Open Skies Policy increases international travel through the liberalization of international rules
and regulations on the aviation industry; eliminating government interference on air
transportation and is particularly important for countries where national ownership requirements
would prevent airlines from merging across borders. So far, the United Arab Emirates has
established 146 air transport agreements, 104 of which are Open Sky Agreements. Qatar has
Open Skies Agreements with only thirty-five airlines, consisting of only a handful of countries
such as Chad, Costa Rica, Canada, Gulf Countries, and has recently entered the process of
implementation with the United States of America. Saudi Arabia, however, has been moving at a
glacial place in its development of airline policies. As of 2011, the Kingdom announced that it
would open its airlines to travel sectors across the GCC, and joined Open Skies policy with the
United States. The reason both the UAE and Qatar have managed to make significant strides in
the freedoms of the aviation industry is due to their efforts to develop tourism, entertainment and
transport infrastructure (Al Asoomi). However, it is the United Arab Emirates pursuit to
diversify their economy at an early stage that has driven them to conduct open trade policy with
a fairly liberal regime through FTZs, low tariff rates and a multitude of international agreements;
aiming to promote increased trade relations, increase contribution of foreign trade to GDP, and
foster foreign investment flows.

Language
The official language in the United Arab Emirates is Arabic followed by Persian,
English, Hindi and then Urdu. The population of Emiratis is 19%; South Asians are about 50%
of the population, other Arab and Iranians at 23% and expatriates at 8%. The official religion is
Muslim which account for 96% and other religions account for only 4% (CIA).
In Saudi Arabia, the official language like Qatar and the UAE is Arabic. In Qatar, English
is the official second Language (CIA). Aisha, The new leading parliamentary figure holds a BA
in Islamic Religion and Philosophy from Qatar University, and an MA and a PhD from the
Cairo-based Al Azhar University. She is the first Gulf woman elected Arab Parliament Deputy
Speaker.
US Relations
After the UAE was established in 1971, the United States was the first to formalize their
international relationship. Since this time, the United Arab Emirates has become the single
largest export market for US goods and services in the Arab World (Trade and Investments) and
is the United States‟ 19th
largest goods export market worldwide (United Arab Emirates). Such
a relationship has served as an ample opportunity for growth and progressive development
within the UAE, and will continue to be a major factor for its growth and development plans for
the future. In recent years, the UAE and US have nurtured strong economic ties, allowing for
tremendous growth in trade and investments. The relationship between the two nations is
extremely dynamic, characterized by high value trade and investment activities that have little to
do with oil, but rather is based on an extremely diverse array of products ranging from computer
chips to city centers.

Bypassing Saudi Arabia and Qatar, the United Arab Emirates has sought out more US
goods than any other country in the Arab world, holding the single largest import market for US
goods in the Middle East for 2011. During this time, US exports increased from $11.6 billion in
2010 to over $15.8 billion in 2011. Between 2006 and 2011 passenger jets and helicopters
manufactured by Boeing were the largest export to the UAE, accounting for one third of overall
US exports to the UAE. In lieu of their growing relationship, the US ran a substantial trade
surplus of $13.5 billion between 2009 and 2011, and exports from the UAE increased 158%
from 2002 to 2010 ($937 million to $2.4 billion). The top five export categories to the United
States in 2011 were: aluminum at $665 million, special other (returns) at $638 million, mineral
fuel and oil (crude) at $394 million, iron and steel products at $198 million, and precious stones
(diamonds) at $157 million (United Arab Emirates). Overall, the UAE is the United States‟ 34th
largest goods trading partner, and has trade relations with every state in the US alongside Puerto
Rico, The District of Columbia and the Virgin Islands.
Foreign direct investment (FDI) and business ventures are another important aspect that
tends to the multi-dimensional growth of the relationship between the United States and the
United Arab Emirates. In current day, more than “30,000 Americans call the UAE home, and
750 American-owned businesses enjoy the opportunities of growth and expansion the UAE
provides on a domestic and regional level” (Trade and Investments). In 2010, US FDI stood at
$4.3 billion, which showed a 1.8% investment increase from 2009, and a monumental increase
from investment levels of $540 million in 1999 (Moore, 5). Lastly, US foreign direct investment
into the UAE increased nearly 605% in the past eight years from 2003 to 2011, with a presence
of over 1000 US firms in the United Arab Emirates ranging from Exxon Mobil to Starbucks and

Cold stone Creamery. Below is an exhibit containing examples of directly quoted UAE
investment in the United States (See Figure 4).
Figure 4: UAE Foreign Direct Investment in the United States
United Arab Emirates FDI in United States of America
 AMD completed a deal with Advanced Technology Investment Company of Abu Dhabi to
create GLOBALFOUNDRIES, a US-headquartered semiconductor manufacturing company
that will combine advanced process technology, industry-leading manufacturing facilities
and expanded global capacity, including a new, $4.6 billion semiconductor fabrication plant
in upstate New York. (2009)
 Jafza International of Dubai announced its intention to establish a new warehouse and
transportation hub in Orangeburg, South Carolina. The “greenfield” facility reportedly
would involve a $600 million investment and create as many as 5,000 new jobs. (2008)
 Mubadala also took a 50 percent stake in Los Angeles-based Kor Hotel Group. (2008)
 Emirates Investment and Development spent more than $150 million for an 80 percent stake
in Sino Swearingen Aircraft Corporation, based in Texas. (2008)
 Abu Dhabi Investment Council purchased a 75 percent stake in New York City‟s Chrysler
Building. (2008)
 Emirates Airlines detailed plans to buy 12 Boeing 777s worth approximately $3.2 billion.
This order, along with previous sales, means that Boeing will, on average, deliver one
airplane a month to Emirates Airlines for at least the next four years. (2007)
 Abu Dhabi Investment Authority announced a critical $7.5 billion dollar capital infusion
into Citigroup. This will result in a 4.9 percent share in Citigroup, which had recently faced
financial difficulties associated with subprime mortgage crisis. (2007)
 Borse Dubai, the government-controlled exchange, took a 19.9 percent stake in the
NASDAQ and bought NASDAQ‟s 28 percent stake in the London Stock Exchange. (2007)
(Trade and Investments)
Overall, the relationship between the UAE and the United States has been characterized
by rapidly expanding trade and investment flows that have little to do with oil. Ultimately, “the
economic, political, and strategic interconnections [between both countries] will continue to
provide strong incentives for long-term investment, with important benefits for both countries”
(Moore, 11). The bilateral trade relationship between the United Arab Emirates and the United
States of America shows an improvement in their trend (See figure 5 below).

Figure 5: Bilateral Trade Relationship in Billions
(Trade and Investments)
In contrast to the UAE, the relationship between the United States and Saudi Arabia has
strongly been established since the 1940s. However, their relationship has been based on the
premise of the United States‟ dependency on oil. As a result, when World War II approached,
military and economic aid was provided to Saudi Arabia in order to ensure the country‟s ability
to provide oil to the United States would remain intact. At this time, President Theodore
Roosevelt and his administration realized that oil was going to be very important to the future of
the United States, and told the nation that “the defense of Saudi Arabia is vital to the defense of
the United States” (Ottaway). Since this time, a strong yet controversial relationship has been
established between the two nations, while issues of political, economic and social reform
regarding the Kingdom of Saudi Arabia continue to be addressed by the United States.
Further analyzing the relations between Saudi Arabia and the United States, trade is
considerably dictated by US imports of hydrocarbons from Saudi Arabia and US exports of
weapons, machinery, and vehicles to Saudi Arabia. In 2011, Saudi Arabia benchmarked the 12th
largest goods trading partner with the US totaling $61 billion; $47.5 billion of which was
attributed to exports to the US e and $13.5 billion totaled for KSA imports. Of this data, there is
a 51.1% increase in exports from 2010, and a 234% increase from the year 2000. The five largest
export categories of 2011 to the United States were mineral fuel (oil) at $46.2 billion, organic

chemicals at $509 billion, fertilizers at $265 million, special other (returns) at $127 million, and
iron and steel products at $155 million (Saudi Arabia). Over the years the US has had a trade
deficit with Saudi Arabia that has rapidly been increasing, with a current deficit of $33.7 billion,
a 69.5% increase since 2010. Most recently, the Obama administration publicly announced that
Saudi Arabia agreed to proceed with a $29 billion sale of advanced fighter aircrafts to the
kingdom, alongside further anticipated sales totaling $8 billion in military helicopters
(Blanchard, 6).
Similar to Saudi Arabia, Qatar and the United States have a very strong business
relationship revolving around military and security, most prominently the large reserves of
natural gas Qatar holds alongside their importance in the thriving petroleum industry. Qatar is a
major source of imports for the United States, particularly in energy and petrochemicals. As the
number one producer in the world for liquefied natural gas, the relationship between Qatar and
the US has been growing stronger due to anticipated depletion of the natural oil supply around
the world, leading countries like the US to begin looking towards other outlets to provide new
energy sources (The Importance of Qatar). Since relations were established in 1972, Qatar has
become the 64th
largest goods trading partner for the United States with Qatari imports valued at
$2.8 billion and exports to the US valued at $1.2 billion. The top US export categories into
Qatar in 2011 were: aircraft at $1.2 billion, machinery at $341 million, vehicles at $324 million,
electrical machinery at $163 million, and optical and medical instruments at $93 million. Qatari
exports to the US have seen an increase of 164.5% since 2010, where the top five exports were:
mineral fuel (liquefied natural gas) at $830 million, aluminum at $173 million, fertilizers at $161
million, special other (returns) at $29 million, and sulfur at $15 million (Qatar).

Ultimately, while the United States shows strongly integrated relationships with all three
countries, it is clear that the United Arab Emirates have been able to differentiate themselves
from the rest. Not only have they been a supplier of oil to the United States, but they have
fostered an even stronger relationship through diversified business ventures and foreign direct
investment that have nothing to do with the oil industry at all. Saud Arabia and Qatar, on the
other hand, have relationships based on the United States‟ dependency on oil and their need to
protect these nations in order to protect themselves. Analyzing top international import and
exports alone show the levels of diversification in the UAE and lack thereof in the KSA and
Qatar. Looking into the long term, the UAE has the most sustainable relationship with the
United States given that the oil industry is not a long term solution, and other levels of
investment will keep them financially stable when the oil industry faces a decline. Furthermore,
the US does have FDI in Saudi Arabia ($8 billion) and Qatar ($10 billion) that are much higher
than those of the UAE at $4 billion, but these investment are majorly monopolized by the oil
industry, proving the US relations with the UAE to be far more valuable in the long term than
current relations with the KSA and Qatar. Though this section only analyzes the relations with
the United States, it presents the bigger picture showing that “the UAE is recognized in the
region as a business-friendly country with a government focused on economic reform and
diversification” (Moore, 7), providing it with the ability to both preserve and enhance its
economic welfare for the future.

Business Policies
Business Regulations
In the United Arab Emirates unlike Saudi Arabia, the ease of starting a business places
the country at #22 which is very low for the Middle East. The country struggles like Saudi
Arabia in enforcing contracts based on the fact that the country has recently started to adopt
computerization for their courts. In relation to protecting the investors as well as getting credit
the UAE has a much higher rank which is better for the country. The country investment is
insured (See Exhibit 1).
In relation to Saudi Arabia in “ease of starting a business” the rates it received from
doingbusiness.org in 2013 show that it is ranked number 78 ahead of Qatar but behind the UAE.
Because of its foreign policy which enables foreign companies to set up in free trade zone areas
without the need for a local partner, more investment is flowing into the country. The country
ranks very high in enforcing contracts which is connected to the legislative aspect of working in
Saudi Arabia. According to data collected by Doing Business, “enforcing a contract takes 635
days, costs 27.5% of the value of the claim and requires 40 procedure” (Doing Business). This
protocol is based on the fact that the improvement this year for Saudi Arabia has been moving
towards computerization which allowed for an electronic computerization system (See Exhibit
2).
In the case of Qatar, they are higher than Saudi Arabia and Qatar on getting credit. The
reasons for this area because they only have a ranking of 4th
out of 10 for the strength of legal
rights index as well as the private bureau coverage in percentage is zero ; this indicates serious
areas for improvement. The ranking on the ease of getting credit is based on the percentile

rankings on the sum of its component indicators: the depth of credit information index and the
strength of legal rights index (See Exhibit 3).
Visas
Depending on the passport held by the citizen entering or passing through the UAE is in
possession of, they can issue a temporary visa for up to thirty days without an issue. In the case
that a person wanted to extend their visit visa for longer than thirty days, they can request till up
to 90 days. If the passport holder is not a US citizen, but are one of the citizens on the list in
Figure 4 then the passport holder is eligible to receive a visa to the UAE if they meet the
following criteria: (1) Original Passport (Not a travel Document), should not expire within six
months from the expected date of arrival in the UAE and (2) Confirm round-trip airline ticket or
airline ticket to other destination. For most of the Gulf it is an issue with Israeli passports to
enter the UAE, but if the person is in possession of another passport then they can enter the
UAE. Also, it is no longer an issue for people coming in to the UAE with the Israeli stamp on
their passport.
Passports and visas are required to gain entry into Qatar. US citizens can purchase a visa
upon arrival at Doha International Airport valid for thirty days. To facilitate entry with Qatari
Immigration, former resident permit holders should carry a “no objection letter” issued by their
former sponsor. Some HIV/AIDS entry restrictions exist for incoming visitors and foreign
residents of Qatar; a nation that does not allow individuals with HIV/AIDS to live in the country.
Medical exams are required for all long-term visitors and residents. Individuals who have
HIV/AIDS may be subject to deportation.

Travelers who are planning to arrive at another port of entry in Qatar or travelers who
previously held residency in Qatar but whose visa had been cancelled early or for whom a
sponsor may have filed a complaint, should obtain a tourist or business visa in advance of their
arrival from a Qatari embassy or consulate abroad or online at Qatar‟s E-Government English
language web site. Travelers should also note that the Qatari Government charges $55 for each
day that an individual overstays a visa, up to a maximum amount of $3,300 (Travel State). A
residency visa lasts for two years but sometimes it may only be granted for six months.
Renewing a residency visa is fairly straight forward so long as it is done before the old one
expires. It is safest for visitors to keep track of their expiration date and submit a passport before
renewal at least one month before it is required. It is possible to fill out a renewal form at the
post office; however, paperwork is only accepted in Arabic so long as it includes the necessary
documentation and payment with the completed form (Gulf Jobs Market).
In Saudi Arabia, visa requirements are similar to the UAE and Qatar. Depending on the
purpose of visit, the restrictions of entering country differ. Tourist visas are very easy to acquire
to visit Saudi Arabia but in the case of working, sponsorship is required. Also, in the case of
residency the requirement is that the male is the one who establishes the working visa only then
can the women come into the country as well as the children (Saudi Embassy). Women
considering relocation to Saudi Arabia should be keenly aware that women and children who are
considered members of a Saudi household (including adult US-citizen women married to Saudi
men, adult US-citizen women who are the unmarried daughters of Saudi fathers, children born to
Saudi fathers, and US-citizen boys under the age of 21 who are the sons of Saudi fathers) require
the permission of the Saudi male head of their household to leave the Kingdom (Travel State).

Employment Rates
Labor Rates
In relation to the unemployment rate in the United Arab Emirates, the outlooks in the
exhibit below show that the unemployment rates for nationals is very high in the UAE This has
been a reported problem by credible companies such as Booz & Co.: “during the next decade the
Arab world needs to create up to 75 million jobs, a 40% increase over the current level, just to
keep pace with the rapid population growth of Arab youth who will be entering the workforce”
(Al Shorfa). The guarantee of the UAE‟s employment rate increase is there and it is a prominent
problem for the UAE which will force more entrepreneurship in the country if the country is
willing to lower interest rates to create more job flow in the country (See Figure 6).
Figure 6: Unemployment Rates in the UAE
(National Bureau of Statistics)

The labor rates in Saudi Arabia are projected from looking at both women and men above
the ages of fifteen and above. In Figure 6, the diagram below shows the rate of unemployment
total is at 5.5%. This number has been stagnating over the past couple of years. Although, the
number of women in total‟s unemployment rate is at 21.3% which is a bit high considering that
the country has been giving reports that it is more forthcoming and is trying to become more
modernized (See Figure 7).
Figure 7: Unemployment Rates in Saudi Arabia
(CDSI)
In recent reports, just focusing on the beauty industry, there has been a “Saudisation
policy” that is trying to replace the foreign salesmen with Saudi women to try and reverse the
problem of women‟s unemployment rate as presented above as being four times that of men
(FT). The unemployment rate in Qatar is very low (as shown below) and is expected to become

even lower in the next few years. They have a very low unemployment rate, one of the lowest in
the Middle East and are very focused on maintaining these standards (See Figure 8).
Figure 8: Qatar’s Unemployment rate 2012
(Trading Economics)
In a report by Qatar National Bank, The National Development Strategy is stating that they are
expecting to increase the public sector and have more available trading options and scholarships.
They are pushing for “strong investment and reform of education and the labor market will
contribute to reducing future unemployment in Qatar” (Qatar National Bank).
Economic Diversification
United Arab Emirates
Through the diversification of their economy, the United Arab Emirates have enabled
themselves to become the most economically sustainable country in the Middle East, and have
heavily reduced exposure to economic volatility. In 2009, the petroleum sector accounted for
29% of GDP, 69% of government income, and 85% of export revenues. Today, the contribution
of the non-oil sector has increased to 71% of GDP in the UAE (Kader). Such strong influx in

diversification of GDP can be attributed to the rapid growth in sectors such as real estate and
construction, airline transport and maritime, tourism, telecommunications, and financial services;
particularly in the emirates Abu Dhabi, Dubai and Sharjah. In the UAE, Abu Dhabi is the largest
emirate and one of the world‟s richest locations. However, the wealth that has derived from oil
and gas resources is majorly reinvested in creating and maintaining development and growth in
this emirate; thus reflective on the welfare of the remainder of the UAE. Due to the large
number of economic activities in the region, Abu Dhabi has seen a reduced dependency on
wealth from the oil and gas industry. Comparatively, Dubai is the second largest emirate in the
UAE and is “globally recognized as the international hub of the Middle East” (Kumar, 6).
Dubai is a cosmopolitan city home to over one million people and comprised of approximately
two hundred nationalities, whose real estate and construction boom can be attributed to the large
influx of expatriates into the city. Over the past two decades, Dubai has seen tremendous
structural changes, creating an environment characterized by a modern infrastructure, efficient
financial markets, complete transportation and telecommunication networks, and free trade-
oriented public policy. Furthermore, Dubai was the first emirate in the UAE to implement
freehold real estate projects, creating an important international hub for business and property
investments worldwide (Kumar, 6). Analyzing 2008 GDP by sector in Dubai, only 2% of overall
GDP was attributed to the oil sector (mining and quarrying), whereas the remaining 98% was in
non-oil (Kumar, 7) The exhibit below shows 2011 GDP breakdown for the United Arab Emirates
(See Figure 9).

Figure 9: UAE Contribution to GDP by activity breakdown
(Contribution of the Petrochemicals Sector to Regional and National GDP)
In the GCC, construct projects amount to over $1 trillion a year, two thirds of which take
place in the UAE. On a yearly basis alone, the real estate and construction sector have seen year-
on-year double digit growth, and contributed 15% to GDP (Kumar, 3). Due to liberalization of
real estate and property laws, Abu Dhabi, Dubai, and Sharjah, have been the main beneficiaries
of the exceptional growth the construction and real estate sectors have experienced. More so,
“the creation of free zones has acted as a major catalyst for local and foreign investment by
offering incentives such as 100% foreign ownership, one-stop locations for paperwork and other
procedures, exemption for import duties and taxes, full repatriation of capital and profits, and, in

some cases, subsidized water and energy prices” (Kumar, 3). Some major projects which reflect
the rapid development phase the UAE‟s construction sector is experiencing consist of: Dubai
World Central and Dubailand; Al Maktoum International Airport; the Jumeirah Beach
Residences, one of the world‟s largest synchronized real estate developments; the Jumeirah
Palm, one of the largest manmade islands in the world; and the tallest building in the world, the
Burj Khalifa (Kumar, 3). A detailed list of projects in progress are displayed in Exhibit 4.
Looking at the telecommunications industry, the United Arab Emirates has one of the
most developed markets and has an infrastructure that is the most technologically advanced in
the Gulf. According to the Global Information Technology Report produced by the World
Economic Forum, the UAE is ranked first in the Arab World for telecommunications, and 29th
worldwide. Initially, the telecommunications sector was provided under monopolized conditions
by Etisalat, the Emirates Telecommunications Corporation 60% owned by the government.
However, in 2007 the Emirates Integrated Telecommunication Company now known as “du”
bought into the industry, and has now launched internet, pay TV, and mobile services across the
Emirates. Since accession into the WTO, the UAE has planned to become a fully liberalized
market by 2015. The UAE took its first steps towards liberalization in 2004 when the
government entity, Telecommunications Regulatory Authority (TRA), was created to oversee the
telecommunications industry and remain responsible for the development of required policies to
maintain fair competition, govern entrants‟ ability to compete, and manage regulations of
licensing regimes. As a result, Etisalat‟s monopolization of the industry was terminated. Once
du was introduced into the market, internet subscription grew by 38%, reaching 7.6 million
subscribers in 2007, and quarterly net mobile subscribers in the market nearly doubled (UAE
Telecom Industry).

Since the implementation of the telecommunications industry in the Middle East, the
UAE has always been a leader in infrastructure service rollouts and latest industry developments.
The UAE was the first country in the Middle East to introduce mobile phones and launch GSM
services in 1994, and was also the first region to install 3G technology alongside a variety of
multimedia and mobile services in 2003, leading to a present day market penetration of 167%
(UAE Telecom Industry). While the UAE has the highest internet penetration in the Middle East
at 50%, the internet is still heavily censored from content that is considered objectionable for
religious and cultural reasons. More so, Voice Over Internet Protocol (VOIP) is allowed, but
only for domestic use. Lastly, with the developments of 3G and DSL, fixed and mobile
broadband services are increasingly becoming accessible, and subscribers are increasing by 4-5%
annually (UAE Telecom Industry). In recent years, the UAE reached over 1.8 million fixed line
subscribers with a 31% penetration rate for 2011, but remains third in broadband penetration at
5.17%, behind Qatar and Bahrain respectively. More so, the TRA Annual Sector review also
showed that the number of active mobile subscriptions reached over 11.7 million by the end of
2011, representing one of the highest mobile penetration rates in the world. Overall, this thriving
telecommunications industry created an important contribution to the UAE economy. In 2011,
the telecommunications industry contributed nearly 4.9% to GDP and provided employment to
10,798 people (UAE Telecommunications Sector Booms). With reduced regulations and
increased competition, the telecommunications industry in the UAE continues to grow as mobile
and internet services become more accessible and affordable (See Figure 10).

Figure 10: Mobile Market Liberalization
(UAE Telecom Industry)
In order for the UAE to create a diversified economy, one of its main objectives has been
to achieve this through tourism-related business. Facing strong development, the tourism and
travel industry in the UAE has been attracting large numbers of people worldwide. In 2011, the
World Economic Forum‟s Travel and Tourism Competitiveness Report ranked the UAE highest
in the Middle East and 30th
among 139 countries (Tourism Outlook, 2). As visitor demand
increases and hotel supply continues to grow, UAE tourism is forecasted to rise 67% by 2016,
reaching an influx of $7.5 billion, $3 billion more than 2011 numbers (67% Revenue Growth
Forecast for UAE). More so, between 2012 and 2022, tourist arrivals in the UAE are forecasted
to grow at a Compound Annual Growth Rate (CAGR) of 5.3%, with hotel supply expected to
increase by 28,391, with a total of 125,383 by 2016 in both Abu Dhabi and Dubai (67% revenue
Growth Forecast for UAE). In 2012, tourism revenue surpassed the global average of 9%,
accounting for 14% of the UAE‟s GDP at $52.71 billion, and is expected to increase by 3.2% by

the end of 2013 (WTTC 2013). By 2013, international tourist arrivals are forecasted to hit 25.8
million, and generate a projected $56.39 billion in visitor expenditure (WTTC 2013).
As the top tourist destinations in the United Arab Emirates, Abu Dhabi and Dubai have
development plans under way to attribute towards further economic success from the tourism
sector. By 2030, Abu Dhabi is intended to be the Gulf‟s dominant tourism region. The 2030
plan includes 45 marinas with the ability to accommodate 10,000 luxury yachts, an extension of
the Saadiyat Island Project which will create a Marina that can accommodate 145,000 permanent
residents and potentially 8 million tourists, and attractions including the Guggenheim Museum,
the Louvre Abu Dhabi, the Zayed National Museum, the Abu Dhabi Performing Arts Center, and
a New York University campus serving approximately 2,500 students (Casale). Dubai, on the
other hand, intends to build an island development off the coast where Jumeirah Beach
Residence stands, called The Bluewaters Island projects. There, the world‟s tallest Ferris wheel
will be featured, known as the Dubai Eye, with an anticipated attraction of more than 3 million
visitors a year (Dubai Unveils New Mega Project). A Forecasted image is shown in below (See
Figure 11).

Figure 11: The Dubai Eye
(Dubai Unveils New Mega Project)
In recent years, the UAE tourism industry has largely benefitted from the country‟s
economic and political stability amidst the Arab Spring, and has emerged as a safe haven that has
further benefitted from redirected tourism. Enhancing the tourism industry and further
attributing to the UAE‟s economic diversity is the aviation industry, which currently accounts for
about 28% of GDP (Derhally). In 2012, Dubai‟s international airport was ranked 4th
busiest in
the world in terms of international passengers, with a recorded 52.3 million travelers for the first
eleven months of 2012 (67% Revenue Growth Forecast for UAE). However, by 2015 the Dubai
International Airport is set to surpass London‟s Heathrow Airport as the busiest in the world
(Derhally), and by 2020 international passenger numbers are anticipated to reach 98 million. As
of yet, the UAE is home to eight airports and five national airline carriers including Emirates,
Etihad, Flydubai, Air Arabia, and RAK Airways, with Etihad and Emirates being two of the
fastest growing carriers on a global level. In 2012, airlines in the UAE have joined forces with

other global carriers, embracing foreign partnerships at an aggressive rate. Etihad Airways
acquired equity stakes in four airlines including Airblerin, Air Seychelles, Aer Lingus, and
Virgin Australia; and signed a number of codeshare deals, while Emirates also signed a ten year
codeshare agreement with Australian carrier Qantas, adding a hub for European flights to Dubai
(Jain). More so, Flydubai has seen 53% growth across their network and has added eight new
destinations in the past year, while Air Arabia has added over ten new routes totaling 81
destinations, increased its total operational fleet to 31 aircrafts, and seen a 15% jump in
passenger traffic (Jain).
Overall, increased levels of aviation in the United Arab Emirates have enhanced
economic performance due to the vast range of connectivity to other nations. This has been
enabled through the tax-free system the UAE holds in place, facilitating the aviation boom by
enabling revenues to be reinvested into the aviation industry. In turn, travel transparency has
enhanced productivity of the nation through increased access to foreign markets and increased
foreign competition in the domestic market. This has resulted in more liberal movement of
investment capital and workers between countries, as well as buoyancy in the trade and tourism
industries (Economic Benefits from Air Transport, 10). As a result, the greater connectivity a
country has, the more attractive foreign direct investment becomes due to increased passenger
traffic and trade, leading to a more favorable environment for foreign firms to operate. Figure 12
below shows the connectivity of the UAE compared to other nations.

Figure 11: UAE Connectivity Compared to Other Nations
(Economic Benefits from Air Transport in UAE)
Similar to the aviation industry, the maritime industry in the United Arab Emirates is
rapidly growing. While both industries heavily impact the transport and logistics sector which
account for 14% of GDP in the UAE, alone they have made great strides which heavily attribute
to the success of their diversified economy. Overall, the maritime industry is very important for
over 90% of international trade is carried out by the international shipping industry (Dubai
Chamber Workshop ).The UAE has five major ports in the three main Emirates, Dubai, Abu
Dhabi, and Sharjah. Dubai accounts for 61.3% of all import activity and is home to 103 berths.
The two ports of Dubai are Rashid and Jebel Ali, the largest man-made port in the world which
handles bulk cargo and industrial material. The Dubai Ports have been ranked as one of the Top
Container Ports Worldwide, operating over 60 terminals across six continents, and eleven new
developments and expansions underway in nine countries. Furthermore, in order to meet rising
demand, Jebel Ali will implement a multi-phased expansion to result in a port with 82 berths,
125 port side cranes, and a capacity to handle more than 21 million containers per year
(Transportation and Logistics in the UAE). Abu Dhabi has Port Zayed which accounts for

12.1% of all import activity, has approximately 21 berths, and handles crude oil exports. In
2012, Khalifa Port opened in Abu Dhabi alongside the Khalifa Industrial Zone Abu Dhabi
(Kizad). This port and industrial zone are anticipated to account for 15% of Abu Dhabi‟s non-oil
GDP, and act as a container terminal handling approximately one million tons of cargo per
month. The port and trade zone was designed in order to accommodate the needs of key sectors
targeted for future growth such as steel, petrochemicals, food, paper, print and packaging,
aluminum, glass, logistics and warehousing. More so, “Khalifa Port and Kizad provide access to
two billion people within four time zones, three international airports within a 90-minute drive,
purpose built express highways, and a direct Etihad Rail link planned for 2016” (New Era in
UAE‟s Trading and Maritime History). Lastly, the Khor Fakkan Container Terminal (KCT) in
Sharjah account for 8.9% of all import activity in the UAE, has over 15 berths, and is the only
Emirate that has a port on both coastlines. The KCT is a dedicated container port and has
dynamic commercial and industrial markets on the UAE‟s Gulf coast (Dubai Market
Information). There are also ports in Ajman, which serves the Ajman Free zone with eight
berths and two dry-docks for ship repair and maintenance; Fujairah Port which recently
expanded fuel storage facilities to 12 million tons of fuel oil per year and is now the second
largest fuel storage facility world; Umm Al Qaiwain which has a four-berth deep-water port
adjacent to its free trade zone; and the four Ports of Ras Al Khaimah including the Saqr Port
located next to the RAK Free Trade Zone Industrial Park and handles 90% of the UAE‟s cement
exports, Al Jazeera Port mainly used for bulk cargo and has 12 dry berths, the Ras Al Khaimah
Port which allows transportation of general cargo and livestock, and the newly constructed port
at Al Jeer (Transportation and Logistics in the UAE).

Of all the Emirates, Dubai is the leading maritime hub for international business
worldwide. Overall, the UAE has seen its feeder vessels alone increase from approximately
1,500 Twenty-foot Equivalent Unit (TEU), to 5,000 TEU vessels, and has seen a positive growth
of 10% annually in the last five years (Jafar). In comparison to Europe and the US who have a
domestic containerization figure of 168 TEU and 132 TEU per 1,000 people respectively, the
UAE has figures at 890 TEU per person due to its focus on maritime trade (Jafar). Lastly, in the
past ten years (between January 2003 and January 2013), Dubai achieved the 100 million TEU
record for container boxes in both the Rashid and Jebel Ali Port, and an overall annual container
throughput increase by more than 150% from 5 million TEU to 13.3 million TEU (DP World
Marks Milestone). In addition, the Free Trade Zones provided by the Ports of the UAE allow for
100% foreign ownership with no recruitment or sponsorship requirements, exemption from
corporate taxes and custom duties on imported raw materials and equipment, and no levy on
exports and imports (Dubai Ports). In turn, the free zones, strategic geographic location, and
business-friendly environment make UAE the now preferred shipping center for East-West
commerce. Looking towards the future, the UAE is taking an active role in the growth of the
logistics sector across the seven Emirates through the implementation of a metro called the UAE
National Rail, and further plan to link transportation to other Gulf States.
As a dynamic and forward thinking country, the United Arab Emirates has established
itself as a global logistics hub with state of the art ports and supply chains, but further has a
reputation for fostering financial growth. Such financial growth has been achieved through the
banking, financial services and insurance industries, as well as the growing popularity of foreign
direct investment. Currently, the banking sector of the UAE is served by 23 domestic banks and
28 foreign banks, with those incorporated in Abu Dhabi or Dubai holding the majority of total

domestic assets. As of 2012, the banking industry has seen satisfactory performance in
aggregated assets, where banking activity grew by 6.1% over the first ten months of 2012, from
$452.6 billion in December 2011 to $480 billion at end-October 2012, surpassing 2011‟s 4%
activity growth (UAE Economic Report, 12). Accounting for two thirds of the balance sheet,
deposits are heavily relied upon to ensure the funding needs of the UAE. In the first ten months
of 2012, there was an 8.7% increase in deposits, compared to a slow 1.3% increase in 2011
where high outflow occurred due to the Eurozone crisis. In order to alleviate risk in the external
funding market conditions, the UAE banks have been lengthening their deposit maturity profiles
over the past few years. Overall, deposits are a stable source of funding for banks, with the
wealthy government and public sector accounting for only a quarter of bank deposits. The
evolution of banking aggregates is displayed in Figure 12 below.
Figure 12: Evolution of Banking Aggregates in the United Arab Emirates
(UAE Economic Report 2012)
Lending activity from banks in the UAE has slowed since the global crisis, but has still
managed to post a 3% increase in the first ten months of 2012 reaching $300.4 billion. The
majority breakdown of loans goes to residents, offsetting the sluggishness of new borrowings on
behalf of the corporate and financial private sector, particularly with excess debt capacity in the

real estate sector hindering lending opportunities. Overall, there has been a significant increasing
in lending volumes in the construction sector, moderate growth in personal loans, subdued
growth in the corporate sector, and strong lending activity in the retail sector playing a
supportive role in the public sector. Since the financial crisis, UAE banks have pulled up their
liquid assets to 35.4% of total deposits at end-August 2012, and a series of liquidity oriented
regulations were also put in place to ensure banking security and hedge financial risk and asset
deterioration. The average loan/deposit ratio for some of these major banks lie above 100% and
in some cases above 120%, and there is heavy liquidity in the sector as the four major banks
have Tier 1 capital funding amounting to approximately $4.36 billion. Given their Tier 1 status,
banks in the UAE have maintained total capital ratios significantly above the regulatory
requirements, in some instances exceeding 20% and strengthening the future ability of the banks
to absorb higher non-performing loans. Bank loan activity can be seen in Figure 13 below.
Figure 13: United Arab Emirates Bank Loan Economic Activity
(UAE Economic Report 2014)

The FINAL Mirage of the Middle East

The FINAL Mirage of the Middle East

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