x Abu Dhabi, UAETuesday 25 July 2017

Since the last UAE presidential visit, a world of change

Sheikh Khalifa state visit:  The last time a UAE president visited the UK, both economies were on the verge of key changes that were to have profound effects on their development over the next two decades.

The last time a UAE president visited the United Kingdom, both economies were on the verge of key changes that were to have profound effects on their development over the next two decades.

In Britain, 1989 was a year of apprehension. The economic revolution put in place by the then prime minister, the late Margaret Thatcher, had brought profound change to the country's economy and society, but it was beginning to run out of steam.

The decrease in trade union power to affect wage levels, the privatisation of big chunks of Britain's state-owned industries and the opening up of London's financial sector during the "Big Bang" in 1986 combined to give the UK economy a stimulus in the middle of the decade. But by 1989 threats to the UK's well-being were looming in the shape of weak financial markets, higher inflation and more global uncertainty.

In the UAE, the main driver of the economy then was the price of oil, with both Abu Dhabi and Dubai important oil producers (though with the former sitting on much larger reserves).

In 1989, the cost of a barrel of crude oil on the world's markets was about US$18. After several decades of stability it had already gone through the oil price spikes of the 1970s, and was about to experience several decades of increased volatility with sharp rises followed by equally sharp declines.

But by the end of the 1980s, the days of cheap oil were truly over.

The still comparatively new UAE retained some of the characteristics of a "rentier" economy, where governments, corporation and businesses drew income from granting foreign partners access to commodities and other economic assets.

This decades-old trend was on the verge of change, however. In Dubai's case 1989 was the year a significant plank of its diversification strategy was launched, with the establishment of a department of tourism and commerce marketing, the first in the UAE.

The move was intended to kick-start economic and commercial diversification. It was the beginning of the emirate's repositioning as a commercial "hub" in the region.

Two vital factors in this progress - the Jebel Ali Free Zone and Emirates Airline - had been in operation only a few years, but the potential for making Dubai a commercial market place was already there.

In Abu Dhabi, the shape of things to come was also being set. The big government-owned investment companies, such as the Abu Dhabi Investment Authority and the International Petroleum Investment Company were already in place and channelling oil-revenue funds into long-term investments, at home and abroad. In economic terms, the years since the last UAE presidential visit have seen both countries increasingly affected by global forces and the shift of economic and financial power to the east.

The UK economy has gone through three bouts of sharp economic decline, mainly caused by the fallout from problems in the United States; the UAE has been affected by the economic effects of regional conflicts, and by oil-price volatility. It was also significantly impacted by the global financial crisis that began in 2008.

But the statistics tell the story of the comparative experience of the UK and UAE economies - and citizens - since 1989.

According to the IMF, the UAE economy has grown nearly eightfold since then, to stand at US$358 billion in 2011; in the same year, UK GDP was still much bigger, at $2.44 trillion, but had grown just less than threefold.

And last year, per capita income in the UAE stood at $64,000 per year, ranking 7th in the world, according to the IMF; UK citizens were at 24th in the global league, on $38,000 per year.

 

fkane@thenational.ae