UAE's Development Strategy

---

Introduction

The hosting of the World Economic Forum Summit on the Global Agenda in the United Arab Emirates (UAE) in late 2010 is indicative of the winds of change that have blown across the country, transforming if from a primitive to modern entity in just about four decades. The choice of the UAE as the venue for the third consecutive year also underscores the emerging role of the country in driving leadership ideas of global concern, especially encouraging global dialogue for socio-economic change.

This is relevant because innovation and free enterprise have been two pillars on which the leadership has sought to build its economic and social progress. Even during the time of global financial uncertainty, the UAE, as a country, remained on the growth track. While focusing on economic growth, the leadership has placed the citizen at the core of its development strategy and is increasingly investing in its human capital to prepare new generations to be globally competitive.

This research paper attempts to trace the country's transformation, the tools that the leadership has used to achieve results, and plans envisioned to take the country to the next developmental plane.

Four-decade Story

From the 19th to early 20th century, the bedrock of the Trucial States's (which became UAE in 1971) economy was the pearling industry. It was both a major source of income and employment. The semi-nomadic inhabitants were pearling in the summer and tending date gardens and indulging in other agricultural activities during the winter. The Great Depression in the late 1920s and early 1930s, and most importantly the cultured pearl invention by Japan, dealt a severe blow to the local industry.

As a result, the Trucial States vied for avenues to generate revenue and secure income. Following geological surveys conducted in 1930s to explore oil reserves, Abu Dhabi exported the first cargo of crude in 1962. Backed by growing oil revenues in subsequent years, Sheikh Zayed bin Sultan Al Nahyan became the ruler of Abu Dhabi in 1966 and undertook a massive programme of construction of infrastructure like schools, housing, hospital, and roads. Simultaneously, one of Sheikh Zayed's early efforts was increasing contributions to the Trucial States Development Fund to facilitate the establishment of the UAE federation.

Supporting these steps, Sheikh Rashid bin Saeed Al Maktoum, the de facto ruler of Dubai since 1939, also undertook development programmes. Dubai started exporting oil in 1969 and the ruler used oil revenues to foster economic growth, by emphasising on infrastructure. Being a visionary, Sheikh Rashid was conscious of the limited resource base and focused on developing the shipping industry to diversify the economy and revenue stream.

In 1971, the UAE's population was merely 180,000. There were substantial differences among the individual emirates in terms of size, population, economic resources and degree of development. While economic development gathered momentum in the larger emirates of Abu Dhabi and Dubai with the start of oil exports, the smaller emirates remained underdeveloped. Though they adopted different models of economic growth, Sheikh Zayed and Sheikh Rashid thus drew the contours of what modern-day UAE has evolved into.

Within a span of four decades, the UAE has undergone an impressive transformation from a ‘small desert economy’ to an ‘oasis of opportunity’ with booming economic sectors such as real estate and construction, tourism and hospitality, mass communications, shipping and logistics, retail and finance. This economic miracle epitomizes the success of an innovative state-led capitalist growth model.

With the 1973 boom, oil became a dominant factor in UAE's economic growth and provided substantial investible surplus for accelerating economic development. Its growth is unique and peculiar because it did not go through the theoretical development stages that most developed countries experience. The massive oil revenues helped bypass the conventional stages of development to reach the current high mass consumption stage. Instead of saving and capital accumulation being the conventional drivers of growth, the leaders adopted a resource-based development strategy. The deployment of the 1973-1982 oil windfall, aimed at rapidly and comprehensively boosting the social and economic infrastructure, enabled the UAE to achieve spectacular development.

Today, the UAE has achieved an income level comparable to many industrialised nations. It is an open market economy with a high per capita income and a huge trade surplus. The process of economic diversification continues unabated. The primary goal of the diversification process is to create high value-added jobs in a wide array of sectors in order to make the growth momentum more sustainable. Success in these efforts has resulted in declining dependence on oil. As a result, the main engine of growth is shifting from the public to private sector, facilitated by channeling huge investments to key non-oil sectors.

Table 1
Real GDP since independence, UAE

Highly liberal and market-oriented policies such as free trade zones - offering 100 per cent foreign ownership and zero taxes - have attracted huge foreign investments. Apart from investment in sophisticated physical infrastructure, the government is stepping up investments in social infrastructure - healthcare, education, training and innovation - in its attempt to incubate knowledge-based economic structure and integrate better with the rapidly globalising world economy. During the period 2004-2008, higher oil revenues, burgeoning liquidity, cheap credit and housing shortages resulted in higher asset prices (shares and real estate) and jacked up consumer inflation. However, with the global financial crisis spreading contagion into the real economic sectors, asset prices deflated and economic growth receded.

Source: Department of Agency Development, UAE Ministry of Economy, June 2008.

Development model

Being a loose federation, each emirate retains considerable autonomy over economic and financial affairs and has adopted different development strategies contingent upon their resource endowments and core competencies. As a result, the economic development model of the UAE is not uniform. Whilst oil resources allowed Abu Dhabi to focus on oil-based industrialisation, dwindling oil reserves made Dubai focus on transport, logistics, tourism, hospitality, financial services, as well as real estate and construction.

The developments in Abu Dhabi and Dubai have had an impact on other small emirates. In an attempt to replicate Dubai's success, there is ample evidence of some of these emirates accelerating non-oil sector growth, especially trading and tourism, as well as real estate until the advent of the global economic crisis. Thus, from a macro perspective, the UAE model of economic development is solely based on innovative business strategy of the Dubai Inc.-style development paradigm that has successfully transformed a barren desert sheikhdom into an ultra-modern city state. [1]

Dubai's transition from a ‘de-industrialised oil economy’ to the ‘expression economy’ speaks volumes about the development strategy. The Dubai model is unique in the sense that its foundations and strategies not only capture the dynamics of various existing development models (such as Anglo-Saxon, Continental European and East Asian), but also demonstrates the success and efficacy of harnessing locational and comparative advantage to excel in the modern era of incipient globalisation.

Since a development model does not emerge overnight, but evolves over time as the outcome of a broad range of contextual features that involve historical, external, locational/size, cultural, institutional and political factors, the Dubai model - notwithstanding its recent setbacks - is truly a ‘process in progression’ and its achievements speaks volumes about visionary leadership.

Sustainable development - economic diversification

Realising that a sustainable economy enhances a country's standard of living by creating wealth and jobs, encouraging the development of new knowledge and technology, and ensuring stability, the UAE is focussing on a coordinated plan of economic diversification and knowledge-based economy.

While oil will anchor the economy, with plans to increase its oil output capacity to 3.5 million barrels per day (bpd) by 2018 from the 2.7 million bpd it currently produces, successful efforts have been made to diversify the economy beyond oil. [2] A solid industrial base is being created to complement a very strong services sector. As a result, the non-oil sector's contribution to the UAE's GDP in 2008 was 62 per cent, just lower than 64 per cent in 2007. [3] The investment in the industrial sector is estimated to be $27 billion in 2010, increasing to 33 billion by 2012. [4]

In the manufacturing sector, the industry's direct contribution to the GDP in 2009 was about 12 per cent, and its indirect contribution was 20 per cent. By 2015, the government aims to attract increased foreign direct investment in this sector. [5] Further, as part of the diversification process, nearly half of $2.4 trillion worth of infrastructure projects in the region are either planned or under construction in the UAE.

GCC Infrastructure projects ($ billion)

Source: Ventures Middle East/Emirates Business 24X7, 10 May 2009

Dubai is still a good example of the post-oil age in the Gulf with oil contributing only three percent of the emirate's GDP, down from about 35 percent in 1975. [6] During a period of real estate gloom and financial turmoil, Dubai Duty Free, for example, announced annual sales of $1.1 billion in 2009. [7]

Abu Dhabi's ambitious diversification programme from its reliance on hydrocarbons reserves is also well under way and will take place in the form of public-private partnerships, with developments, encompassing tourism, energy, real estate and social programmes. The emirate and capital of the UAE, which produces more than 85 percent of all oil from the country, had a non-oil sector that contributed 37 percent of the GDP in 2006, which is predicted to increase to 60 percent by 2030. [8] Despite being flush with oil-derived funds and possessing one of the biggest sovereign wealth funds in the world, the Abu Dhabi government is now aiming to boost foreign investment into the emirate by nine per cent annually to promote private sector growth.

One of its flagship projects is the Saadiyat (Happiness) Island. The $27 billion project is expected to be completed in 2018 and become the city's cultural centre. Most prominently, it will host five major museums, including the Guggenheim and Louvre.

As part of its foray into the hi-tech industry the $50-million DubaiSat-1, the country's first remote-sensing satellite, began sending images from space in 2009. Built by local scientists with South Korean help, the aim of the strategic programme is to develop a team of Emirati scientists and experts to support knowledge-based development. Similarly, Abu Dhabi's direct investment vehicle Mubadala Development has invested about $1.4 billion in the development of the Yahsat-1A communications satellite. Further, Aabar Investments, an Abu Dhabi state-linked company, has bought a stake in Virgin Galactic, the commercial space venture of Richard Branson. [9]

It is likely that diversification efforts will pick up pace in the wake of the recent collapse of real estate and equity markets, which generated large losses for investment abroad for the country's sovereign wealth funds. The fact that UAE sovereign wealth funds actively supported the bailouts and stimulus activities of some of the Western companies has put them in positive light. [10] For example, Daimler, Manchester City, Chrysler Building, and Barclays are some of the global assets that have been targeted by Abu Dhabi's investment arms.

Thus, it is obvious that the UAE has learnt a lesson after the region squandered oil wealth during the 1970s. For the first time, high oil price has been accompanied by economic diversification, including sports. [11] The UAE is hosting a number of world-class sporting events and many more are in the pipeline. Investment in sports is not only seen as benefiting the construction, hospitality, travel and tourism sectors, but also as a tool to reposition the country on the world map.

The $1 billion Abu Dhabi Yas motor racing circuit, which opened in 2009, is part of the developing $40 billion Yas Island resort complex. Such has been the enthusiasm for sports and the economic spin-offs it promises that Dubai launched a $4-billion Sports City featuring state-of-the-art facilities. Among the other high-profile events it hosts are Dubai Desert Classic golf championship, Dubai Tennis Championship, International Rugby Board Sevens and the Dubai World Cup, featuring the world's richest horse race. [12]

Knowledge-based economy

However, while the diversification plan appears to be chugging along well, the road towards creating a knowledge economy is very bumpy. While the UAE has the required financial resources and leadership, it lacks a proactive national workforce to ensure continuity in the core management of every enterprise it puts up. Recognising the importance of education as a foundation for economic growth, policy makers are raising their sights. By studying the successes and failures of education reforms elsewhere and by partnering with some of the world�fs leading educational institutions to apply the lessons, the UAE is attempting to create a unique laboratory for educational innovation. This emphasis on knowledge software rather than military hardware highlights a quiet revolution in an area once described as a ‘scientific desert.’

While events like the Arab Strategy Forum in Dubai and Festival of Thinkers in Abu Dhabi are providing an informal impetus towards creating a knowledge economy, the real changes are taking place in the state school system. Admitting that there are serious problems, the UAE - where 40 percent of Emirati students study in private schools - has initiated a reform package including new curriculum, better teacher training and international standards of learning over the next few years. For a start, the education budget outlays have been increased. The ministries of education and higher education received $2.7 billion or 22.7 per cent of the budget outlay for 2010. [13] Several parallel initiatives are in place to improve standards in state schools, including the Public-Private Partnership for Public School Management, in which education consultancies from overseas have been hired.

In the higher education sector, The UAE has set up an independent National Authority for Scientific Research to stimulate research activity in vital areas, finance research activities on an annual basis, and cooperate with higher educational institutions and research centres in the country. [14] Simultaneously, institutions like the Khalifa University of Science, Technology and Research are focusing on innovation, transfer of technology and connecting emerging technologies to business advantage, which would help strengthen various industries. [15] In November 2007, the New York University-Abu Dhabi, which is the first comprehensive liberal arts campus that any major American research university established abroad, was announced. Classes began in 2010.

At another level, as part of its commitment to develop institutional capacity, the Dubai School of Government (DSG) offers executive education programmes to equip public and private sector leaders with the understanding and skills to address the changing realities of the 21st century. DSG is working closely with the Lee Kuan Yew School of Public Policy, National University of Singapore, since September 2005. DSG also cooperates with the John F. Kennedy School of Government, Harvard University. [16] Several foreign colleges and universities have opened in Knowledge Village and expanding into Academic City during the last six years. And, in American University of Sharjah, which started 10 years ago, the UAE has the best American university among the Gulf countries.

Vision 2021

In order to translate the leadership's vision into reality, the Cabinet approved in early 2010 a National Charter to transform the UAE into “one of the best countries in the world by 2021,” the golden jubilee anniversary of the formation of the federation. It contains four components.

1. 1. Ensure that UAE nationals have ambition and high sense of responsibility, are capable of drawing the future with confidence and participate effectively in a sustainable socio-economic environment based on stability, solidarity, moderate Islamic values and original national heritage.
2. 2. Ensure a strong union with a common destiny that protects Emiratis and advocates balanced development to make the UAE an effective power.
3. 3. Develop a knowledge-based economy that will be diverse and flexible, as well as led by skilled professional Emiratis.
4. 4. Ensure prosperity for UAE nationals, who should enjoy a long life, good health, quality education and other distinguished services provided by the government. [17]
   

Two other plans that are relevant here are Plan Abu Dhabi 2030 and Dubai Strategic Plan 2015.

Plan Abu Dhabi 2030

This plan is designed to transform the UAE's capital into a vibrant global metropolis in less than 25 years (2007-2030). Regardless of whether the city's population grows to three million or five million, it presents a practical, flexible and sustainable view of the future. In parallel to the internal assessment, three benchmark countries were selected for key economic characteristics relevant to Abu Dhabi - Norway, Ireland and New Zealand. The plan will eventually be split into five-year programmes. [18]

The government has identified several pillars that will form the architecture of the emirate's social, political and economic future:

• Large empowered private sector
• Sustainable knowledge-based economy
• Optimal, transparent regulatory environment
• Continuation of strong and diverse international relationships
• Optimisation of the emirate's resources
• Premium education, healthcare and infrastructure assets
• Complete international and domestic security
• Maintaining Abu Dhabi's values, culture and heritage

The following strategic sectors will be targeted for economic growth:

• Energy - oil and gas
• Petrochemicals
• Metals
• Aviation, aerospace, and defence
• Pharmaceuticals, biotechnology and life sciences
• Tourism
• Healthcare equipment and services
• Transportation, trade and logistics
• Education
• Media
• Financial services
• Telecommunication services

A combination of these is expected to boost Abu Dhabi's economy to $400 billion in 2030. As part of the non-oil sector growth, the manufacturing sector could grow ten fold to $100 billion. Abu Dhabi also unveiled the world's biggest industrial zone project in Taweelah, where some ‘deserving’ industrial units would be granted 100 per cent foreign ownership rights. The Khalifa Industrial Zone, or Kizad, is investing $7.2 billion that includes the cost of the first phase of the Khalifa Port. By 2030, Kizad is expected to contribute around 15 per cent of Abu Dhabi�fs non-oil GDP. [19]

Dubai Strategic Plan 2015

This was unveiled in 2007 with the aim of maintaining double-digit economic growth, achieve a GDP of $108 billion and increase real per capita GDP to $44,000 by 2015. It set out a strategic approach to develop the emirate's most dynamic economic sectors that were key contributors to Dubai's annual real GDP growth rate of 13 per cent since 2000. This was necessitated because the targets for 2010 that were set in 2000 were realised in 2005 itself, with the non-oil sector contributing 95 per cent to GDP - five per cent more than in 2000. The services sector was the driving force behind Dubai�fs economic growth.

The plan was meant to ensure a common framework for the integrated operations of all government entities, focusing on five key areas that showed the highest level of development potential - economic development; social development; infrastructure, land and environment; security, justice and safety and, public sector excellence. The future strategic growth was based on six key ‘building blocks’ which included, tourism, trade, transportation and finance. The development of these blocks were meant to be supported by seven horizontal growth enablers - human capital, productivity, innovation, cost of living and doing business, quality of life, economic policy and institutional framework, and laws and regulations. [20]

Post-financial crisis review

Dubai is a classic case of globalisation being both beneficial and detrimental. While the economy peaked during the global boom, it also suffered from the subsequent credit crisis. The emirate accumulated a debt of nearly $100 billion, mostly due to exaggerated investment in the real estate sector, which was estimated to be contributing more than one-third of the emirate's GDP during the high growth period of 2005-2008. Immediately thereafter, the GDP went into negative mode for the first time in 15 years and the local stock market value declined by 70 per cent.

Whilst some of Dubai's mega projects were either delayed or aborted, its economy started growing in 2009, albeit only by about 2.5 per cent. Much of this growth was fuelled by government investment in infrastructure projects and other public spending. However, all economic aspects of Dubai's Strategic Plan 2015 are currently under review to help stabilise the economy and safeguard jobs.

Dubai announced in November 2010 that:

• Debt is no longer a big concern for the emirate's economy as some of the leading government-owned entities have made significant progress in restructuring their obligations
• Restructuring was finalised in 10 months and is well into the implementation phase
• It is not worried about the debt maturities in 2011
• It can manage to meet its financial obligations without further help from the UAE Central Bank
• No plans to sell strategic assets to finance its debt obligations
• More Dubai entities could be raising funds on the bond market as the economy revives (it raised $1.25 billion through a bond issue in September 2010 and various Dubai entities raised $2.5 billion through bonds after the Dubai World restructuring)
• Property developer Nakheel, which is trying to reach an agreement on a proposed restructuring plan, said it is planning a sukuk issue in early 2011.

The emirate also announced that:

1. “Dubai World is now on a sound financial footing, and is fully focused on its core business. Dubai Holding, which is facing some challenges in some of its assets, is being seriously addressed…The current sovereign debt of Dubai is about $30 billion. Various government-owned entities have varying levels of operational debts and these are required for ongoing investment programmes and are backed by solid assets…We continue to diversify our sources of funding and to share the wealth in our economy we are working on opening the capital of some of our leading companies to our public…” [21]
   

It is believed that Dubai would take a leaf out of the fallout of the financial crisis and return to concentrating on its core business of serving as a hub for trade, transport and tourism related activities. With the best infrastructure, business-friendly environment and intellectual base in the entire Middle East, Dubai - which has been a time-tested example of being innovative to achieve rapid development despite limited oil resources - could reinvent itself and reemerge as a force to reckon with, even as Abu Dhabi and Qatar aim to catch up.

Political modernisation

Given the rapid economic and social development in the UAE, the political modernisation process - though long overdue - was envisaged in 2005 in three stages. In the build-up to the elections, the UAE government emphasised that the process was less about democracy and more about broadening political participation. In its view, the modernisation of the political system was a two-stage process - the first would be ‘limited elections,’ and the second would be to increase the powers of the Federal National Council (FNC) and make it a ‘representative institution.’

The limited scope of participation is due to three reasons - first, the country does not have an ‘electoral legacy’ and elections were not a necessity in a stable environment; two, the prevailing political tension and instability in the Gulf region and Middle East means that there is no scope for mistakes; third, elections in the Arab world have proved to be divisive, based on sects and regions, which the UAE does not want. [22]

The second stage of the evolving system is likely to see an expansion in the number of members serving in the FNC, as well as increasing its scope of authority and responsibility. And, the final stage of the process is expected to encompass comprehensive and direct elections of half the members of the parliament. This includes possible amendments to the Constitution to increase the number of seats in the FNC to match demographic changes and increase legislative terms of the councils to prepare for direct elections.

The first step towards political change came through the process of the establishment of electoral colleges. These were created through a process by which each emirate nominated a Council that had 100 times the number of FNC seats it is entitled to fill. The final approved Electoral College had 6595 members representing 825,000 Emiratis, from which 452 candidates contested in the 2006 elections.

This process effectively established the mechanism for indirect elections to a public office. It brought new faces into the political process and also established an election-based culture for the first time in the history of the country. The elections were a part of a general effort to keep pace with fundamental ground realities that include a younger population, challenges of resources, role of women and issues polarising society in other parliamentary experiments in the region. Furthermore, a unique context faced by the UAE includes an unusually high expatriate population - over 80 per cent. The elections were a gradualist step towards absorbing these changes, while maintaining stability and economic viability.

Social development

Investment in its people as ‘the wealth of the nation’ has always been the government's focus. The population has a high standard of living and is now reaping the benefits of investment in the education, health and social services. For example, more than 648,000 students were enrolled in 1259 public and private schools in 2007/2008 and the government's policy of guaranteeing free education up to the university level for all citizens has resulted in a 93 percent literacy rate. There are over 60 public and private universities in the country.

In other fields, rapid advancement in healthcare facilities drastically reduced infant mortality to about eight per thousand births in 2008 and raised the average life expectancy age to 77 years for men and 80 for women. In addition, efforts are being made to facilitate the empowerment of women, and provide social welfare to the more vulnerable in society, with the elderly, physically challenged, orphans, widows, and divorced women topping the list of beneficiaries.

Women in the UAE account for nearly half the native population and are today at the forefront in the government and private sectors. Women's literacy rates now match those of men. Nearly half the students registered in the 1250 schools across the country are girls; about 75 percent of all students in the UAE University are women; and, three out of every five students in the public higher education system are women. The large number of educated national women has had repercussions in the employment market. Despite traditional and cultural barriers, UAE women account for about 30 percent of the national workforce. Women currently occupy posts ranging from civil servants to engineers and bankers to law enforcement agencies and armed forces, as well as traditional jobs in teaching and healthcare..

In the 2006 elections, 17.7 percent of the Electoral College was made up of women; and 63 of the 452 candidates who contested in the polls were women. While one woman was directly elected in this election, the government nominated eight others to the 40-member FNC, which translates into 22.5 percent share of the seats, compared to the world average of 17 percent. Further, the number of women ministers in the Cabinet was doubled to four in 2008, which reflects the government's serious commitment to positively impact women's leadership role in society.

Foreign policy

Reflective of the region's proactive diplomacy, the UAE - after operating for decades within the broad and conservative foreign policy framework established by its founding president Sheikh Zayed by emphasising on ‘diplomacy, negotiation and compassion’ - is now showing signs of shifting to a more dynamic approach. While the stress continues to be on pursuing a policy that ensures ‘peace, security and stability’ in the Arab region and the world at large, as well as using development and humanitarian aid as a foreign policy instrument, the country has been open to new ways of accommodating the evolving changes in the global community.

As the second largest Arab economy, the UAE's foreign policy is naturally geared towards creating greater commercial opportunities with various partners. While contributing $45 billion to fight hunger and poverty across the world during the last three decades and continuing to be a prominent donor for humanitarian causes, it also places great emphasis on nurturing an expansion and growth of commercial and investment links with other countries and institutions worldwide.

In line with this approach, the UAE's diversification of intense diplomatic contacts includes Africa and its regional groupings, in accordance with the Millennium Development Goals, and Latin America. Further, as Asia weathered the economic crisis more successfully than other parts of the world, which is bound to have repercussion in world politics, the UAE leadership has begun engaging with a host of Asian countries to absorb this shift.

Some examples of this experiment include the UAE diplomatic mission becoming one of the first few functioning Arab embassies, with a resident ambassador, in post-Saddam Baghdad in 2008; becoming the only Arab country which has sent troops to perform humanitarian activities on the ground in Afghanistan; hosting a meeting of special envoys on Afghanistan and Pakistan from 43 countries in January 2010; as well as hosting at least three formal meetings of the Friends of Democratic Pakistan Public Private Partnership Conference between November 2008 and January 2010.

However, one of its biggest diplomatic victories, which reflected the UAE's growing desire and international clout, came in 2009 with Abu Dhabi being chosen to host the headquarters of the International Renewable Energy Agency (IRENA) - the first time that a developing country has had the opportunity to host the nerve centre of a major international organisation. While it was, ostensibly, an international vote of confidence in the UAE's commitment to adopt and promote renewable energy, the UAE's diplomatic rationale and means to achieve its end was noteworthy.

From a broader perspective, the region's ‘Look East’ policy applies to the UAE too, though Abu Dhabi has not been as explicit as many other capitals in the Gulf region. The new approach, nevertheless, is to explore the possibilities of going beyond preferential trading arrangements and newfound political warmth with Asia. This is particularly relevant because the region is not completely in sync with the many aspects of recent US foreign policy, especially the Iraq and Iran events spinning out of control. This regional introspection in the political arena is likely to influence the long-term political economy of the region and shape international relations in the coming decades. [23] This means addressing emerging security dynamics that look beyond the US-centric security paradigm prevailing in the Gulf. In short, the emphasis is on more internationalisation of the region.

For example, France formally opened a French military base - Peace Camp - in Abu Dhabi in 2009, the first French military base in the Gulf, which will assist in training operations. The UAE is constantly interacting with NATO to chart a way forward within the framework of the Istanbul Cooperative Initiative. Further, the UAE hosted the third Indian Ocean Naval Symposium in March 2010. And, given the colonial role it has played in the past and the advisory role that several Britons continue to play at the top echelons, Britain remains a key partner in the developmental agenda.

However, while the relationship with the United States is no longer exclusive, the truth is that there is no immediate alternative security guarantor either. Security is seen as the key to stability and growth. This is particularly true in the case of the UAE, which is perennially worried about Iran, its nuclear programme and its hegemonic intentions, especially in connection with the row over the Abu Musa, and Greater and Lesser Tunbs islands issue.

Environment

According to a 2005 World Bank Study, the UAE figures among the world's top 50 carbon dioxide emitters. And in 2008, the World Wide Fund for Nature concluded that the UAE has the largest ecological footprint per capita on the planet, primarily due to its carbon levels from intensive energy needs. [24] These could be attributed to rapid economic growth driven by fossil fuels, extreme climatic conditions that necessitate widespread use of air-conditioning, need for desalination plants, as well as high standard of living with very little environmental consciousness.

In order to address these realities, the UAE created a new Ministry for Environment and Water in 2006. The Abu Dhabi Tourism Authority has committed to a 10 per cent energy saving, as well as 20 per cent water usage cut and 20 per cent waste-to-landfill reduction as part of its ambitious environmental targets for 2010. And, in 2009, Dubai announced a plan to cut carbon emissions by 20 percent over two years, after being heavily criticised for its environmental record. [25]

Like the rationale behind pursuing economic diversification, the UAE is taking to renewables in order to conserve and prolong the longevity and value of its hydrocarbon resources, especially since the global demand for fossil fuels is bound to increase and prices are likely to remain relatively higher. Further, given its enormous liquidity, the UAE is confident that it can be just as successful in developing renewables as it was in developing the oil industry, hence its commitment to IRENA.

Another sign of the changing attitude is the UAE - which has the world's sixth largest proven oil reserves - signing a $20.4 billion deal with a South Korean-led consortium to build four nuclear reactors in the country, the first of which is expected to begin providing electricity to the grid in 2017 and the remaining in 2020. [26]

The UAE's quest for nuclear energy witnessed intense diplomatic efforts to develop cooperation mechanisms to guarantee a credible and comprehensive civilian programme. This push resulted in the signing of the UAE-US civilian nuclear cooperation agreement, the first such US arrangement in the Middle East. After Britain and France, the UAE also signed a memorandum of cooperation with Japan to explore possibilities of developing peaceful nuclear energy

The UAE has also commenced a major national carbon dioxide emission reduction programme by announcing an initiative to deliver a national carbon dioxide capture and storage (CCS) network. It is estimated that the CCS network could reduce the UAE's carbon dioxide emissions by almost 40 per cent, increase oil production by up to 10 per cent and liberate large quantities of natural gas. [27]

The most ambitious project, of course, is Masdar Initiative, which envisages a cars-free, renewable energy-powered, wind and photovoltaic-surrounded, as well as pedestrian-friendly city. The ‘Green City’ plan is a part of Abu Dhabi's decision in 2006 to embrace renewable and sustainable energy technologies. When complete, this multi-billion plan is expected to be the closest thing yet to a zero-carbon, zero-waste city. The Abu Dhabi government-owned organization announced plans to enter the business of thin-film photovoltaic solar products.

With ‘future energy’ as its motto, the company has initiated a pilot geothermal energy scheme - power extracted from heat stored in the earth. The first such project in the region is being experimented along with Iceland's Reykjavik Geothermal. The $2.3 million contract could provide up to five megawatt of power. [28]

Conclusion

As things stand, unlike many other oil-rich countries, the UAE has a well-diversified economy, with 70 per cent of its GDP coming from the non-oil sector. It is on course to becoming a trillion dirham ($272 billion) economy in 2010, with real GDP expected to grow by 2.25 per cent, led by strong traditional sectors such as trade, logistics, transportation and tourism. This has translated into the average Emirati adult's wealth tripling between 2000 and 2010 - from $56,777 in 2000 to $150,121 in 2010.

Moving ahead, while each of the emirates has its own plans, the Cabinet has approved a collective federal budget of $33 billion for 2011 to 2013. In a new trend, the zero-based budgeting has been introduced wherein all expenditure by departments - not only new items or increases from the previous year - require explanation and approval. It is also projected that the non-hydrocarbon sector would be the star performer in the UAE's economy in the next two years and this will ally with a recovery in the oil sector to expand the overall GDP.

Thus, the UAE, which was founded after decades of deprivation, division, and isolation of its separate entities, has not only been transformed through visionary leadership into a country of prosperity, progress and security for its people, but also set sights on achieving greater heights in the years ahead. Most interestingly, in attempting to achieve its modern goals, it is striving to maintain a balance that allows for the preservation of the country's rich tradition and culture.