THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

United Arab Emirates

Ranked 41st of 149

At a glance

Ranks

41 st on the Legatum
Prosperity Index™

21st
23rd
53rd
66th
28th
32nd
109th
25th
43rd

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, United Arab Emirates performs best on Economic Quality and Business Environment and scores lowest on the Personal Freedom sub-index.

Visit our Rankings table to see how the United Arab Emirates compares to other countries.

Prosperity Gap

The ‘Prosperity Gap’ takes a country's GDP and uses it as the yardstick to measure a nation's expected Prosperity Index ranking.

The UAE, alongside its Gulf peers, has one of the 30 biggest prosperity deficits in the world. While it remains significant, policy change over the past ten years has reduced the size of the prosperity gap by 28%.

Note:
In the chart above, each dot represents a country. The curve shows the general tendency with which prosperity increases as GDP per capita increases. If a country falls below the curve, then we can say that compared to all other countries, it is under-delivering prosperity for its citizens. Likewise, if a country rises above the curve, then we can say that it is over-delivering prosperity for its citizens. Learn more about the Prosperity Gap here.

Alternatively, have a look at the Prosperity Gap view on our Rankings table for a full list of countries and to see how each of them are performing on the various sub-indices.

Commentary

The Prosperity Index captures the UAE as a country in ongoing transition. In some sub-indices it shows many typical attributes of a Gulf oil state. In others, it illuminates an innovative forward looking nation more akin to those in Western Europe, North America, or the Oceanic region.

Like its peers in the region, the UAE exhibits many of the characteristics of oil-rich states worldwide. The lack of democratic institutions limits its performance in the Governance sub-index, and there is a deep-rooted under-delivery in Personal Freedom consistently observed by the Index across the last decade. The failure to address civil liberties violations and restrictions on minority rights limits the potential for prosperity within the UAE. This, however, is not uncommon. The average level of Personal Freedom in the Gulf states sits far behind the OECD average.

Personal Freedom score (level of Personal Freedom) in the UAE, Gulf, and OECD
The average level of Personal Freedom in the Gulf states sits far behind the OECD average.

However, in many ways the UAE breaks with its peers in presenting a much more positive picture of prosperity delivery. An internal focus on international best practice, and a desire to be viewed as a peer of the OECD, not simply the Gulf, can be seen in the characteristics of national prosperity.

Despite its oil dependency, a concerted effort to secure the governance and legal structures to attract international business (for example business in the Dubai International Finance Centre is subject to UK law) is reflected in the UAE’s Governance and Business Environment performance.

Over the last decade, the UAE has risen from 59th to 54rd in Governance, putting it well ahead of closest peer Qatar at 60th. On key measures like government effectiveness, it leads EU members such as Spain, Italy, and Portugal. Democracy may be a limiting factor in the UAE’s performance, but in pursuing a ‘Singapore’ model of effective governance (ranked 19th in global prosperity), continued improvement is possible in this sub-index.

The Index has also recorded notable improvement in the UAE’s business environment. Greater labour market flexibility, better access to credit, and improved IP protection have all helped to make the UAE more internationally competitive for business, and more attractive than many OECD nations. Over the last decade, the UAE has risen from 42nd to 23rd in the Business Environment sub-index, putting it ahead of much of Eastern and Southern Europe.

There is further evidence that the UAE is forging for itself a new path to prosperity. As well as the focus on improving its business environment, the UAE has made significant gains over the last decade in the Economic Quality sub-index. Much of this change has been structural liberalisation, for example the 2012 Competition Law that sought to restrict monopolistic behaviour and open new markets to competition. It is subsequently unsurprising that anti-monopoly policy is the area that has really driven improvement in this sub-index. The UAE has risen from a rank of 43rd in 2007 to 21st in 2016, the best performance of any sub-index. Alongside market liberalisation has also come improvement in people’s perceptions of living standards and financial security, including among non-nationals, though there undoubtedly remain issues for the low-skilled migrant population. However, as the UAE’s economy now sits just outside the global top 20, it should be noted for its efforts to liberalise and deliver more for its citizens with its wealth.

Yet, for a country with a GDP per capita similar to Norway, it still under-delivers prosperity based on this wealth. However, reform has reduced this prosperity deficit by 29% over the last decade. While Personal Freedom and the non-democratic constraint on Governance are clearly limiting the UAE’s prosperity potential, the Index does reflect ongoing efforts to deliver greater prosperity with the country’s wealth.


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Data

How to read this graph:
When comparing multiple countries on a spider chart, data points that appear
further away from the center represent a better performance to the points that are closer to the center.

Special Analysis

Special Analysis

OVERALL

The UAE has grown more prosperous since 2007, rising two ranks to just outside the global top 40. It has taken positive steps to improve the business environment and economy in order to secure future prosperity. This is reflected in the UAE reducing its prosperity deficit by a third over the last ten years.

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Areas of Success
Areas of Success

The UAE has posted a 19 and 22 rank improvement in the Business Environment and Economic Quality sub-indices respectively over the last ten years. This has been the result of a concerted policy effort to liberalise a number of markets, increase flexibility in the labour market, and improve free competition. These efforts have done much to help narrow the UAE’s prosperity deficit, enabling it to deliver greater prosperity with its wealth, and is reflected in rising satisfaction with living standards. Steps to improve legal and governance structures, both for government and business, should also be noted. The UAE has the highest Governance score of any Gulf country, and has risen by 6 ranks since 2007.

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Areas of Little Change
Areas of Little Change

Little movement has been recorded by the Index in the Health sub-index. This is one area where the UAE performs consistently well, sitting within or just outside the global top 30 across the last ten years. Within the top 30, the UAE has the highest level of satisfaction with individual health, and is among the highest when it comes to satisfaction with the health system. Recent vaccination programmes are reflected in improved vaccination rates. Of concern are life expectancy and mortality which, despite improvement, remain among the worst in this group. So too do risk factors such as obesity and diabetes remain a problem for the UAE.

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Areas of Improvement
Areas of Improvement

The main area for concern in the UAE is Education, where the Index records a 14 rank decline over the last ten years. In real terms, the level of education in the UAE has stood still, whilst others have overtaken, including Sri Lanka, Vietnam, and Georgia. The UAE’s key areas of weakness are tertiary education - both in terms of the levels of tertiary education within the population, and world class institutions – and vocational education. Whilst the tertiary figures are undoubtedly distorted by a large migrant population, the skills of the workforce, be it national or non-national, are important for future prosperity.