Over the last 50 years, industrially-developed countries have ranked higher in socio-economic indicators while developing countries have lagged behind because of the great disparity in development levels between the two groups. It seems that this trend – which began after World War II and lasted till the end of the last century – has begun to change. This has been due to major transformations in the global economy in recent decades and the progress made by emerging economies. The second group comprises BRICS countries, which have sustained high levels of growth, and the UAE and other Gulf Cooperation Council (GCC) countries, which have shown significant economic resilience. In fact, according to international development indicators, these countries have surpassed European, American and Asian economies.
If we take the UAE as an example of progress made by developing countries in the past decade, it gives a clear picture of the extent of changes that has taken place in the global economy and the relative weight of its individual constituents. According to the Global Competitiveness Report 2012 issued by the International Institute of Management Development in Switzerland, released earlier this month, the UAE ranks first globally in terms of efficiency in fiscal policy. The UAE has outperformed countries such as Britain, France, Japan and China in fiscal efficiency, the report said.
The UAE also features high in global ranking on trust in government procedures, posting an enviable 78 percent level, according to the noted Edelman’s Trust Barometer. The same report ranks the UAE second in terms of credibility of government officials. Meanwhile, the UAE has been ranked 27th out of 142 countries in the World Economic Forum’s Global Competitiveness Report 2011-12. These indicators suggest the UAE to be in an advanced stage of economic development, attained by an economy based on innovation (among the group of 35 advanced economies in the world).
These indicators are highly significant as they point to the extent of socio-economic development achieved by the UAE in various fields, in a relatively short time. These reports are highly credible as they have been released by highly specialized international organizations with distinguished academic and scientific credentials. Some of the major implications of the eminent rank achieved by the UAE in terms of efficiency of fiscal policy can be summarized in the following ways:
First, the effectiveness of the government policy in general and fiscal policy in particular shows that a balance has been struck between the needs of development and raising the standards of living of both citizens and residents. Second, it points to the efficiency of the social safety net and pensions and the non-imposition of taxes that would have constituted a heavy burden on individuals, companies and the business sector. The UAE enjoys a leading position in the World Bank’s Doing Business Report, 2012. It was ranked 33 out of 183 countries included in the report.
Third, the effectiveness of fiscal policy shows the efficiency of government budget and effective allocation of resources. Emphasis is placed on useful expenditure and on reduction of wasteful spending. Emphasis has also been laid on structural changes in government budgets over the past three years that has led to balanced budgets for the years 2011-13, with a focus on maintaining public funds. This has placed the UAE in the seventh position among countries with least wasteful spending globally.
Fourth, fiscal discipline has led to efficient management of financial surpluses and their use in the service of development. This has led to international recognition of effective financial management of the UAE and increased revenues from local and foreign investment with a commitment to international standards in the efficiency of spending in general. In fact, this impressive rise in the status of the UAE – wherein it topped other countries in terms of the efficiency of fiscal policy – has built on the strong foundations laid down by the Founder of the UAE, the Late Sheikh Zayed bin Sultan Al Nahyan, and the several years of strenuous efforts made by the UAE leadership since the establishment of the Federation. These foundations are the bedrock of high rate of growth and for attracting capital and investment to diversify sources of national income.
This has allowed the GDP to grow at a rapid pace over the past decades. It is expected to grow by approximately 5 percent in 2012 to reach AED 1,315 billion ($358 billion), making the UAE the second largest Arab economy after Saudi Arabia. The UAE also enjoys high global ranking in terms of per capita GDP, which amounts to $44,000. Inflation is also stable at acceptable levels of around 2.5 percent this year. The country has also taken major strides in areas of education, health, housing, foreign trade, transportation and communications. It has made progress in terms of development of legislation and laws that support growth and enhance investor confidence, develop non-oil sectors and provide a suitable environment for the private sector and market competitiveness at both regional and global levels.
Economic indicators suggest the UAE’s superiority in many areas highlight certain aspects of its leadership in terms of development vis-a-vis other countries. In addition to the rise of GDP and high per capita share, the expected growth in the value of commodity exports this year is estimated at 30 percent, which for the first time would exceed the one-trillion-dirham threshold, reaching AED 1,047 billion ($285 billion) mark compared to AED 808 billion ($220 billion) in 2011. At the same time, foreign exchange reserves are expected to increase by 41 percent this year to reach AED 203 billion ($55.3 billion) compared to AED 143.6 billion ($39.1 billion) in 2011. As further evidence of the proper environment for the business sector and the high capacity to compete, the Bureaucracy Index (BI) is expected to rise to 5.69 points in the current year, compared to the 4.21 points last year.
These developments and rapid growth have transformed the UAE into a modern and developed country that is capable of competing in various areas and in attracting qualified manpower. The UAE is currently considered one of the top destinations among talented people around the world, thanks to its competitiveness and the high standard of living it provides to its citizens and residents. This transformation corresponds to the progress happening in international economic and strategic relations at the levels of globalization, competition and open markets. This qualifies the UAE to occupy a leading position in international relations as a developed country that has the ability to compete and to further its growth besides improving the standard of living in the coming years.