Despite immense oil and gas wealth, the UAE has a high youth jobless rate. Irish exports and inward investment are envied, writes JOHN ARMSTRONG
THE HELICOPTERS drift above the suburbs of Abu Dhabi while fighter jets in formation fly low over the city centre, deafening the civilian population. But there are no troops on the streets and the activity in the air differs from that on other other side of the Persian Gulf in that the helicopters are carrying only flags and the trails of the jets are red, white, green and black, the national colours of the United Arab Emirates.
December 2nd was the 40th anniversary of the foundation of the UAE, the longest-lasting and most successful experiment in Arab unity in over a century. It also marked the culmination of 40 days of celebrations in each of the seven small kingdoms which make up the federation. The finale was a public spectacle in a sports arena in Abu Dhabi watched by a crowd of 100,000.
The president of the UAE, Sheikh Khalifa, marked the occasion more practically by ordering pay rises of up to 45 per cent for all Emirati federal government employees. He also announced new laws allowing the children of Emirati women married to non-nationals to be given UAE citizenship. This entitles them to free education, including in some cases free third-level education abroad, and free healthcare for life.
The sheikh also ordered the release of five political activists convicted of threatening state security. The five men, among 550 prisoners pardoned, had been convicted of undermining public order, opposing the government system and insulting the president of Abu Dhabi. One was sentenced to three years in prison and the others to two years.
This case aside, the Emirates seems to have remained relatively insulated by its glitzy prosperity and small population from the civil unrest which afflicts some of its near-neighbours, including Yemen to the south and Bahrain to the north. It has a difficult relationship with one of its closest neighbours, Iran, just 30 miles away across the Straits of Hormuz, including a territorial dispute dating back to 1971, and a diplomatically friendly but uneasy accord with Saudi Arabia, the dominant power in the region.
Perhaps feeling the need for more openness, several senior UAE ministers, together with the heads of several state companies and the central bank, held a series of media briefings for the many foreign journalists visiting the country to cover the anniversary celebrations.
Among the issues dealt with were the future of the oil and gas industry and a joint venture with South Korea to develop nuclear energy. With the fourth-largest oil reserves in the world producing about 2.5 million barrels a day, primarily from Abu Dhabi, and the fifth-largest gas reserves, revenues from these sources naturally make the largest single contribution to the national economy.
The foreign minister said the country was also pressing ahead with a nuclear energy programme “in accordance with the relevant international guidelines on controls and inspections”. The growing demand for fresh water and the heavy energy demands of desalinisation made energy diversification vital in the long term and, while the partial meltdown of Japan’s Fukushima nuclear plant following the tsunami in March had prompted reconsideration of safety aspects, “things are going to our satisfaction and on schedule”.
Oil and gas revenues now account for only about 30 per cent of gross national product in the Emirates, despite relatively high oil prices. Tourism accounts for over 10 per cent, with over 12 million visitors a year stimulating growth in the national airlines. Dozens of luxury cruise liners every year also contribute to the economy.
Another important sector, construction, which employs over half of the total labour force, most of them immigrant labourers, has begun a slow recovery from the sharp downturn in 2008 and 2009 that occurred as a result of the first phase of the current global economic crisis.
Unemployment among young Emiratis is at 12 per cent and new laws giving locals priority over immigrants, particularly in higher skilled jobs, came into effect earlier this year.
A recent editorial comment in the local English language newspaper, the National, urged planners in the Emirates to look to Ireland for lessons as it considers how to move to its next phase of development. “The first lesson, one vitally important for the Gulf region, is that it is never too early to undertake the reforms needed to create a more efficient, competitive and cost effective public service. This is a politically sensitive issue which Ireland failed to tackle during its boom years.”
The second lesson Ireland offers is there is no substitute for developing an educated workforce that can operate in a relatively low corporate tax environment, it said. “Last year in the midst of an international media frenzy that pronounced the Irish economy dead and buried, Ireland came in second after Singapore as the most popular destination for foreign direct investment on a per capita basis. In terms of attracting much prized RD projects, Ireland came in fifth. Even more impressive were the findings of IBM’s Global Location Trends 2011 report which ranked Ireland number one as a location for attracting high-level investment.”
It concluded, “The UAE would be well-advised to learn from the Irish attempt to rebuild its economy the importance of developing a vibrant export sector that can compensate for economic downturns at home.”