From fishing and pearling to finance and petrochemicals, policymakers have worked hard to transform the economy from its rural roots since the discovery of oil more than half a century ago.
Revenue from oil has been ploughed into building new industries to help diversify the economy and attract foreign investment.
As a result, the share of GDP of the oil and gas sector has gradually declined. More than 71 per cent of the country's economy was based on the non-oil sector in 2009, the latest year for which data is available.
Although the diversification drive has propelled growth and helped to cushion the economy from dips in oil prices it has also brought risks. As the economy has become more open, its vulnerability to external shocks has also increased.
The most high-profile example of the pitfalls of diversification was the US$24.9 billion (Dh91.4bn) restructuring of debt by Dubai World, the investment vehicle owned by the Government of Dubai. Dubai World's difficulties sprang from investments in property and other assets which soured during the global financial crisis of 2009.
Fresh risks are now emerging from the sovereign debt troubles in the eurozone and a slowdown in global growth.
GDP this year is expected to register growth of 3.3 per cent, the International Monetary Fund (IMF) forecasts. The growth is higher than many other global economies, but only about half as much as expansion in the years before the financial crisis.
"A weak external environment hurts the domestic economy here," said Simon Williams, the chief Mena economist at HSBC. "The domestic economy is still weighed down by the after-effects of the excesses that came up during the boom."
With less oil wealth, Dubai has been at the forefront of the drive into new sectors.
The emirate's government pioneered the creation of free zones, business areas where international firms can hold 100 per cent ownership of their operations. Offering no withholding tax and a tailor-made regulatory system, the Dubai International Financial Centre (DIFC) attracted global banks and helped turn the emirate into a regional centre for finance.
Abu Dhabi's economy is also diversifying. Under Abu Dhabi's Economic Vision 2030, officials plan to cut the emirate's reliance on oil to 36 per cent of GDP by 2030. As a result, it is investing billions of dirhams in stimulating new growth sectors such as tourism, finance, industry and property.
In a sign that its efforts are bearing fruit, non-oil activity was the biggest driver of the emirate's GDP last year, despite rising oil output.
Non-oil activity accounted for more than half of growth last year, contributing 50.3 per cent to GDP.
Abu Dhabi is building its own financial centre as part of the Sowwah Island project by Mubadala.
It is also gaining a foothold within high-tech manufacturing. Mubadala Aerospace, a business unit of Mubadala, has signed agreements with Boeing and Airbus for its manufacturing subsidiary Strata to build and supply aircraft components.