Reduced red tape and easier access to electricity for companies helped to propel the UAE up seven places to 26th in the World Bank's latest report on the ease of doing business.
Enabling businesses to file and pay fees online also contributed to improving the country's rating compared to last year. The UAE improved in more than half of the areas assessed by the Doing Business Report 2013.
"Real competitive economies drive economic prosperity to its people," said Abdulla Lootah, the secretary general of Emirates Competitive Council, a federal Government agency.
"Federal and local government entities in the UAE have been exerting a great amount of effort to enhance processes and boost productivity and efficacy for the purpose of offering better service to the public."
The UAE's better performance was in contrast to the slower pace of reform in most other parts of the Middle East and North Africa. Saudi Arabia and Egypt were the only other countries in the region to improve their scores.
Egypt rose one spot to 109th in the index. Tunisia fell three places to 50th, with Jordan dropping one place to 106th.
Reforms to the business environment have been put on the back burner in many parts of the region since the end of 2010 as key economies grapple with unrest or the transition to democracy. More than half of the countries failed to push through any reforms, the report found.
Weak investor and property-rights protections were a continuing theme across the region, the report found.
The UAE ranked 128th in protecting investors. Enforcing contracts and getting credit were other areas in which it scored poorly. Resolving insolvency was another topic in which the UAE rated badly, with the report estimating it took an average of 3.2 years and cost 20 per cent of a business's estate to resolve a dispute. Research has linked simpler business regulation to an accelerated creation of businesses and jobs.
Jennifer Bibbings, a partner with the law firm Trowers & Hamlins in Dubai, who contributed to a survey used to rate the UAE, said the country's score was based on how easy it was for a 100 per cent locally owned to set up a business. As a result, the report might not be directly relevant to potential foreign investors, she said.
"It is a useful report at a high level and is useful for marketing the UAE but whether an executive for a foreign company sitting overseas actually looks at these reports, I'm not sure," she said.