UAE businesses enjoy the highest economic freedom in the Arab world. This opens a wealth of opportunities to grow for UAE Inc. It also helps reduce poverty in the country, generate more employment opportunities and makes workforce and credit easily available.
According to the Fraser Institute’s Economic Freedom of the Arab World’s annual report 2018, the UAE tied with Bahrain for first place with a score of 8.0.
Among the sub-indices, the UAE’s score for legal structure and security of property rights remained 8.0 and retained its first place. The Emirates’ score for sound money rose to 9.5 from 9.4, leaving the UAE ninth place in the ranking, the same as last year.
The UAE came in first place in freedom to trade, up from second, with an improved score of 8.3 compared to 8.1 last year. For regulation of business, labour and credit, the UAE scored 7.6, but rose from fifth to third place in the rankings.
Regionally, Jordan has been ranked third, followed by Qatar, Kuwait, Lebanon, Oman, Palestinian Territories, Saudi Arabia and Tunisia. The bottom-ranked countries were Libya, Syria, Algeria, Sudan, Egypt, Iraq, Yemen and Djibouti.
Increased economic freedom is the solution that will unleash the drive and ingenuity of the whole population and power Arab nations into a new era of prosperity and opportunity. This is a necessity for even resource-rich states as they move to diversify, said Fred McMahon, a Fraser Institute resident fellow.
“Economic freedom supports these goals directly and by boosting prosperity. Prosperity, in turn, supports both democracy, stability and the further growth of freedom. True economic freedom also combats corruption. When people are economically free, they may do what they like economically,” McMahon said.
According to the report, economic freedom dramatically reduces poverty. In the least free nations, over 30 per cent of the population suffers extreme poverty – defined as $1.90 a day – and over 50 per cent suffers moderate poverty – $3.20 a day. In the freest nations, 1.48 per cent of the population suffers $1.90-a-day poverty and only 4.31 per cent suffer $3.20-a-day poverty.
Mahmood Bangara, chairman, Institute of Chartered Accountants of India (Dubai chapter), said the UAE has an open economy with relatively simpler employment regulations and an open and vibrant capital markets.
“Reforms adopted in previous years have created a relatively efficient and well-functioning regulatory system, free of corruption. E-governance and automation too have been superb, avoiding wastage of time, which will make business efficient, with phenomenal infrastructural developments,” he said.
Bangara pointed out that the cost of manpower is relatively higher and called for affordable housing for SME employees.
“The businesses deserve protection from the rental increase as the cost of business must be at the level or below par with peer international cities. Partial privatisation of state-owned enterprises and opening to foreign investors with independent regulators could be a boost. Foreign ownership may be widened in various sectors,” he suggested.
Jitendra Gianchandani, chairman, Jitendra Chartered Accountants, said the UAE ranked top regionally mainly due to higher government spending, government integrity and judicial effectiveness, business freedom, trade freedom, investment freedom, labour freedom, monetary freedom, fiscal health, etc.
Also, the UAE has outpaced other Arab countries in the region when it comes to lifestyle, infrastructure and balanced investment in human resources, education, health and welfare of the society, he said.
“To realise the ambitious goal to be a tourism hub and global trade destination, the UAE should equally invest in soft and hard infrastructure, increase the private sector contribution and liberalise financial, real estate and cyber sectors to attract more foreign investments. Making the legal system more independent and effective is the need of the hour,” Gianchandani said.
According to the Fraser Institute’s study, the per capita income of least free economies is around $5,649 while residents of most free economies enjoy on average $40,376 per capita income.
Nimish Makvana, senior partner, Crowe UAE, said the UAE is one of the Gulf’s most liberal countries with a constitution that allows freedom of religion.
“When competition is global rather than local, the UAE is staying ahead of rivals by constantly improving its business laws, developing innovative concepts and employing the latest technology,” he said.
Makvana noted that for any economy, the key driving factors are finance and real estate sectors to attract foreign investors and tourists. And it is important to enhance the legal and regulatory framework to further strengthen investor confidence.
Author: Waheed Abbas (Khaleej Times)