2015 Index of Economic Freedom

United Arab Emirates

overall score72.4
world rank25
Rule of Law

Property Rights55.0

Freedom From Corruption69.0

Limited Government

Government Spending85.8

Fiscal Freedom99.5

Regulatory Efficiency

Business Freedom74.7

Labor Freedom83.8

Monetary Freedom83.8

Open Markets

Trade Freedom82.4

Investment Freedom40.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 9.0 million
  • GDP (PPP):
    • $272.0 billion
    • 4.8% growth
    • 1.9% 5-year compound annual growth
    • $30,122 per capita
  • Unemployment:
    • 3.8%
  • Inflation (CPI):
    • 1.1%
  • FDI Inflow:
    • $10.5 billion
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The United Arab Emirates’ economic freedom score is 72.4, making its economy the 25th freest in the 2015 Index. Its score has increased by 1.0 point since last year, driven by improvements in investment freedom, the management of government spending, and freedom from corruption that outweigh a small combined decline in monetary freedom, trade freedom, and fiscal freedom. The UAE is ranked 2nd out of 15 countries in the Middle East/North Africa region, and its overall score is higher than the world and regional averages.

Over the past five years, economic freedom in the UAE has advanced by 4.6 points, the region’s largest increase. Score improvements in seven of the 10 economic freedoms have been led by sizeable gains in the regulatory environment and monetary freedom.

Improved economic freedom has corresponded with moderate levels of growth. Economic reforms have cemented the UAE’s position as a commercial, financial, and logistical Persian Gulf hub. However, institutional reforms have not been comprehensive. The perceived level of corruption has declined, but the relatively inefficient judicial system remains vulnerable to political influence.

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Background

The United Arab Emirates is a federation of seven monarchies: Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al-Khaimah, Sharjah, and Umm al-Qaiwain. The government responded to the Arab Spring protests with a $1.6 billion program to improve the infrastructure in the poorer northern emirates and by expanding the number of people allowed to vote in September 2011 elections for the Federal National Council. The UAE clamped down on Internet activism in 2012 and imprisoned 68 Islamists for allegedly attempting to seize power in 2013. Abu Dhabi accounts for about 90 percent of oil production; Dubai is the center of finance, commerce, transportation, and tourism. Free trade zones that permit 100 percent foreign ownership with zero taxation help to diversify the economy. Oil and gas exports account for roughly 80 percent of government revenues.

Rule of LawView Methodology

Property Rights 55.0 Create a Graph using this measurement

Freedom From Corruption 69.0 Create a Graph using this measurement

Although the UAE is considered one of the Middle East’s least corrupt countries, most decisions of any significance are made by the ruling families of the various emirates. The judiciary is not independent, and the political leadership reviews court rulings, but the rule of law is generally well maintained. All land in Abu Dhabi, largest of the seven emirates, is government-owned.

Limited GovernmentView Methodology

The UAE has no federal-level individual or corporate income taxes. Some emirates apply corporate taxes for different business entities. There are few other taxes. Overall tax revenues are equal to 7.2 percent of domestic income. Government spending, supported by significant oil and gas revenues, amounts to 21.8 percent of domestic output, and government debt equal to 12 percent of gross domestic product.

Regulatory EfficiencyView Methodology

Regulatory efficiency has improved. With no minimum capital required, establishing a business involves six procedures. Licensing has been streamlined and is less costly. The non-salary cost of employing a worker is moderate, and labor codes generally facilitate labor market efficiency. The government plans to reduce fuel and power subsidies to help limit energy consumption and imports of natural gas.

Open MarketsView Methodology

The UAE’s average tariff rate is 3.8 percent. Foreign firms are disadvantaged in government procurement. In general, foreign investment in UAE companies is capped at 49 percent. The competitive and modern financial sector provides a full range of services, although the state’s presence remains considerable. Capital markets are open and vibrant, with a number of foreign firms in operation.

Country's Score Over Time

Bar Graph of United Arab Emirates Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Bahrain73.4-1.7
2United Arab Emirates72.41.0
3Qatar70.8-0.4
4Israel70.52.1
5Jordan69.30.1
6Oman66.7-0.7
7Kuwait62.50.2
8Saudi Arabia62.1-0.1
9Morocco60.11.8
10Lebanon59.3-0.1
11Tunisia57.70.4
12Egypt55.22.3
13Yemen53.7-1.8
14Algeria48.9-1.9
15Iran41.81.5


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