Country Diagnostic Study – United Arab Emirates

The Country Diagnostic Study (CDS) for United Arab Emirates (U.A.E.) uses the Hausmann-Rodrik-Velasco growth diagnostics model to identify the binding constraints being faced in its quest for higher economic growth and make recommendations to relax these constraints. Hence, the findings of the CDS can help the Islamic Development Bank in identifying areas where it can have a greater impact and provide an evidence basis to support the development of the Member Country Partnership Strategy.

U.A.E.’s development journey has been painstakingly crafted over time, with the latest being Vision 2021. Launched in 2010 and in the aftermath of the global financial crisis (GFC), Vision 2021 was designed to place the U.A.E. among the best nations in the world. It has achieved several targets under the competitive knowledge pillar of the Vision, but some key targets related to economic growth, innovation, and knowledge workers are yet to be fully realized. This is because growth has been low and inadequate with relatively low private investment since the 2008–2009 GFC, leading to a lower than potential real GDP trend.

To bring in private investment and improve growth, both quantity and quality of human capital may need to be scaled up through improving the education system and spending on research and development to support industry-university collaboration on innovations. Efficient institutional governance in the areas of corruption control, regulatory quality and conducive bureaucracy is necessary for the vibrant functioning of the private sector.