BTI 2020 Country Report United Arab Emirates This report is part of the Bertelsmann Stiftung’s Transformation Index (BTI) 2020. It covers the period from February 1, 2017 to January 31, 2019. The BTI assesses the transformation toward democracy and a market economy as well as the quality of governance in 137 countries. More on the BTI at https://www.bti-project.org. Please cite as follows: Bertelsmann Stiftung, BTI 2020 Country Report — United Arab Emirates. Gütersloh: Bertelsmann Stiftung, 2020. This work is licensed under a Creative Commons Attribution 4.0 International License. Contact Bertelsmann Stiftung Carl-Bertelsmann-Strasse 256 33111 Gütersloh Germany Sabine Donner Phone +49 5241 81 81501 [email protected] Hauke Hartmann Phone +49 5241 81 81389 [email protected] Robert Schwarz Phone +49 5241 81 81402 [email protected] Sabine Steinkamp Phone +49 5241 81 81507 [email protected] BTI 2020 | United Arab Emirates 3 Key Indicators Population M 9.6 HDI 0.866 GDP p.c., PPP $ 74943 Pop. growth1 % p.a. 1.5 HDI rank of 189 35 Gini Index - Life expectancy years 77.6 UN Education Index 0.744 Poverty3 % - Urban population % 86.5 Gender inequality2 0.113 Aid per capita $ - Sources (as of December 2019): The World Bank, World Development Indicators 2019 | UNDP, Human Development Report 2019. Footnotes: (1) Average annual growth rate. (2) Gender Inequality Index (GII). (3) Percentage of population living on less than $3.20 a day at 2011 international prices. Executive Summary On December 2, 2018, the United Arab Emirates celebrated its 47th National Day underscoring its growth and perseverance as a federal entity, and its position as a widely accepted member of the international community. During the review period (February 2017 to January 2019), the UAE continued to make progress toward comprehensive development in the economic and social sphere, although it regressed on the political front. Slightly higher oil revenues and the introduction of a value added tax allowed the government to continue with its pro-growth and investment strategy, which is the basis for the country’s economic stability. The reform steps that were introduced and implemented during the review period included a new industrial strategy, adjustments in the banking sector (e.g., a public debt law and audit regulations), a strengthening of anti-corruption legislation, a new law on domestic worker rights, the Young Innovative Companies Initiative and efforts to promote greater research collaboration in the higher education sector. The UAE also remains committed to overall social development, with more than 40% of the federal budget once again allocated to health care, education and other social services in 2019. With 2019 named the Year of Tolerance, the UAE underlined its policy of promoting inter- religious dialog and greater cooperation among different social groups. The government has also reiterated its strong stance against extremism and called for joint action against terrorist activities and causes. The movement toward increasing the participation of women continued with 50% of the seats for the 2019 Federal National Council election allocated to women. The UAE cabinet contained nine female ministers as of January 2019. Finally, the country established a Council for Climate Change and the Environment following its ratification of the Paris Climate Accord. A consistent factor guiding the UAE’s development has been the country’s competent and shrewd political management and leadership. Despite the continued volatility that has defined the Middle East strategic environment particularly since 2011, the UAE has been able to maintain a degree of widespread stability. The UAE continues to prioritize the creation of a competitive knowledge economy, the implementation of a first-rate education system, and balancing environmental BTI 2020 | United Arab Emirates 4 sustainability with infrastructure development, and economic and social development. Surveys in 2017 and 2018 in the Middle East, particularly among young people, highlight the UAE’s appeal as a destination country in which to work and live. The country’s recent economic and social progress has, however, been accompanied by declining political openness, with political power increasingly centralized and the government responding repressively to any challenge to its authority. While some of these measures can be placed within the context of the 2011 Arab uprisings, and the determination of the UAE’s leadership to prevent similar instances of instability and civil strife as witnessed throughout the rest of the Middle East, the emphasis on the consolidation of existing ruling arrangements at the expense of wider power devolution suggest a strengthening of authoritarian tendencies in the country. At the end of 2018, the UAE was still not a signatory to the International Covenant on Civil and Political Rights or to the Covenant on Economic, Social and Cultural Rights. At the regional level, the UAE has taken on a more visible role in foreign and security affairs, which is increasingly scrutinized and not always seen as favorable by the international community. This includes the UAE’s involvement throughout 2017 and 2018 in the civil wars in Yemen and Libya; its role in the boycott of Qatar, which has threatened the unity of the Gulf Cooperation Council; and its support for authoritarian regimes, such as that of President Abd al-Fattah al-Sisi in Egypt. This more militarized approach is contrasted by the fact that the UAE is the world’s leader in terms of humanitarian assistance in relative terms and has taken the lead when it comes to promoting inter-religious dialog and tolerance. At the same time, the UAE was instrumental in bringing about a peace agreement between Ethiopia and Eritrea in 2018. History and Characteristics of Transformation The United Arab Emirates is a federation of seven emirates established on December 2, 1971, with Ras al-Khaimah, as the last and seventh emirate joining in early 1972. Given the historical animosity that characterized the relationship between the tribal regions of southeastern Arabia, the UAE was initially given little chance of survival as a federation. Yet, due to the leadership of Shaikh Zayid Bin Sultan Al Nahyan, who ruled the largest emirate, Abu Dhabi, from 1966 until his death in 2005, and, from 1971 until 2005, was the UAE’s first president, the notion of a viable nation materialized over time. While the UAE may at one stage been seen as an experiment of unification, it today represents a solidified nation-state and the only successful attempt at federation in the Arab world. The success and resilience of the UAE is largely due to the manner in which the government has been structured. Apart from policy areas such as foreign policy and national security, the constitution – initially provisional and only made permanent in 1996 – left sovereignty on issues of local administration, economic and social policy, and even control over each emirate’s own mineral and oil wealth, with the individual seven emirates. This arrangement gave each constituent emirate the BTI 2020 | United Arab Emirates 5 assurance that the larger federal entity represented a distinct net benefit with respect to individual sustainability and prosperity. Over time, there has been an increased willingness to expand federal jurisdiction in areas that have proved to be functionally necessary. In 1997, the emirates dissolved their individual defense forces and joined them under one central command. Similar consolidation has occurred with respect to labor, economic and educational policies. In 2006, targeted campaigns were started that encouraged identification with the nation-state and UAE identity. This has included a greater emphasis on the celebration of the annual independence day as well as the introduction of a UAE National Service Law in 2014. The UAE’s political system continues to be defined by the traditional patriarchal style of leadership that is comprised of political loyalties structured around the country’s various tribal elements. On the federal level, the Supreme Council, comprised of the rulers of each of the seven emirates, is the highest executive and legislative authority. The country’s president is the ruler of Abu Dhabi, the largest emirate both in terms of size and wealth, and as a result assumes the “natural” leadership role within the UAE. Other emirates do retain a certain amount of input within the decision-making process, in particular the second-largest emirate Dubai. Economically, the UAE has made tremendous strides in its national development. Backed by the world’s seventh-largest oil reserves and a small national population of slightly more than 1.4 million, the UAE has witnessed its GDP rise from $46 billion in 1995 to $382.6 billion in 2017. Driven by high earnings from oil in the decade from 2004 to 2014, the UAE has invested smartly in infrastructure and services, not only creating a modern country with all the amenities found in Western industrialized societies but also allowing itself to diversify the economy to the point that the non-oil sectors account for 70% of the country’s GDP. The decline in oil prices starting at the end of 2014 have impacted overall economic growth but given its increased diversified nature this has affected the UAE economy relatively little. Both its economic growth and political consolidation is driven by a determined commitment of the UAE leadership to be an active part in the process of globalization and to use the country’s considerable oil wealth to sustain further development and assist in various economic diversification efforts. The indirect result has been the gradual implementation of and adjustment to fair economic practices, and an increased willingness to abide by legal standards governing business transactions. Given its high per capita income and the high degree of internal legitimacy, which the ruling families of the UAE have, there has been little movement to diversify the political system and expand participatory mechanisms for the Emirati population.