The United Arab Emirates is one of the more stable Gulf states and attracts a number of our clients. It has a small, wealthy population, no history of terrorism, and no sectarian tensions to speak of. The country is also supported by strong relations with the US. The UAE has a low level of democracy and transparency, but heavy oil-funded spending on security and social benefits help ensure there are few real challenges.

We ensure our clients make sound investment decisions in the UAE, using our risk-assessed total analysis model. Our teams keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. Our expert views are supported by our interactive data and forecasting. We also provide in-depth analysis on 21 of the UAE’s most important industries. Our analysts will ensure you find doing business in the UAE is made easy.

Country Risk

United Arab Emirates Country Risk

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Core Views

  • We expect relatively solid growth over the coming quarters, with real GDP forecast to expand 4.0% and 3.8% in 2015 and 2016 respectively.

  • We expect Dubai to outperform Abu Dhabi, with the former benefitting from increased activity in the trade and tourism sectors, in addition to our expectation that the all-important real estate industry is now set for sustained growth.

  • Credit growth to the private sector will remain relatively slow through 2015 as commercial banks continue to increase provisioning against potential loan losses due to the debt funding cliff.

Major Forecast Changes

  • On the back of weaker oil prices, we have lowered our forecast for the UAE's fiscal surplus from 3.5% to -4.9% in 2015.

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United Arab Emirates Operational Risk Coverage (9)

United Arab Emirates Operational Risk

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BMI View: The United Arab Emirates (UAE) is one of the most attractive destinations for trade and investment in the Middle East and North Africa (MENA) region. The country offers a welcoming environment for foreign direct investment (FDI), due to its open trade regime, numerous free trade zones, and liberal tax system. Businesses are generally able to obtain financing on market terms, and property and intellectual property rights (IPR) are well respected. There are some prevailing risks to foreign investors, notably the regulatory restrictions on FDI and the difficult process of dispute resolution. Nevertheless, the country's numerous attractions largely outweigh...

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United Arab Emirates Crime & Security

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The UAE receives a score of 58.8 in the BMI Security Risks ratings, placing it fourth in the region. This score is due to its very low crime rate and correspondingly good policing and rule of law. The costs to businesses from property crime and organised crime are negligible. Furthermore, there are few risks facing foreign workers from developed countries, but there have been increasing concerns regarding the living and working conditions of low-wage migrants from Asia. Partly on the back of this, the UAE lags Oman, Qatar and Kuwait - its Gulf peers- countries which normally compete with the UAE for investment.

The UAE faces a moderate risk of terrorism due more to the country's location rather than inherent challenges. Unlike much of the region however, there have been no major cases of bombings against civilian or military targets on UAE soil. Nevertheless, the UAE could be an attractive target to international...

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United Arab Emirates Labour Market

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BMI View: Businesses in the UAE must be aware that they will be required to import foreign workers for a wide variety of positions ranging from low-skilled construction labourers to highly-skilled oil and gas workers. This is due to the country's small population, which is poorly educated and remains predominantly employed in the public sector. This entails some significant risks to businesses, mainly stemming from the bureaucratic hurdles and costs associated with importing foreign staff, the lack of flexibility in recruiting from the vast migrant labour pool, and the growing risk of more stringent restrictions on the employment of expatriates. Nevertheless, the UAE's labour market also offers some advantages, particularly in terms of minimal labour regulations, very...

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United Arab Emirates Logistics

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BMI View: The UAE has developed a role as a key link in the global supply chain, with its ports and airports serving as major hubs on international trade routes between Europe and Asia. The government has worked hard to promote this position by minimising trade bureaucracy and investing heavily in transport infrastructure, ensuring that the country offers world class facilities at its air and maritime terminals. Congestion remains a key concern for internal supply chains, as there are no alternative options to the road network, however ongoing investment in railways will mitigate the risk of supply chain delays over the medium term. The hydrocarbons wealth enjoyed by the Emirates also ensures that utilities costs are...

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United Arab Emirates Trade & Investment

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The United Arab Emirates is one of the most attractive destinations for trade and investment in the Middle East and North Africa (MENA) region. The country possesses a well defined and implemented legislative environment, as well as strong intellectual property rights. We see little in the way of direct trade and investment risk, particularly given government support of pro-market policies.

We have given the UAE a score of 66.3 out of 100 in our Trade and Investment Risks Index, placing the country first out of the 18 countries covered in the MENA region. As one of the largest Arab economies, as well as being well-placed for trade elsewhere, the UAE offers a large market to foreign investors. Moreover, a low tax regime and relatively strong intellectual property rights help to bolster it score. Furthermore, compared with the rest of the Gulf Cooperation Council, the UAE has many incentives to foreign direct investment (FDI) and its tax and...

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United Arab Emirates Industry Coverage (22)

Autos

United Arab Emirates Autos

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BMI has become slightly more cautious on the near-term outlook for the UAE new vehicle sales market. We are now targeting 3% growth for 2015, down from 5% previously, as the combination of a slowing economy in Abu Dhabi and the rising likelihood of an increase in local interest rates weighs on the market's near-term prospects slightly. That said, BMI remains broadly favourable on the medium-term outlook for the local sales, with further growth of 21.8% forecast for the 2016-19 forecast period. This should take total new vehicle sales to above the 500,000 unit mark.

At an individual emirate level, BMI remains most upbeat towards auto sales prospects within Dubai, which will record the fastest rate of growth of the seven emirates in the UAE over the next few years, as well as outperforming all Gulf countries aside from Qatar. We forecast Dubai's real GDP...

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Commercial Banking

United Arab Emirates Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

United Arab Emirates Consumer Electronics

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BMI View: The consumer electronics market in the UAE is one of the most lucrative in per-capita terms in the region and also globally. Over our forecast period we expect spending to continue to be supported by strong private consumption and a high business confidence in the local economy. The UAE will remain one of the leading consumer markets in the MENA region, with the highest rate of household consumption expenditure per capita (we project this to rise from USD21,437 in 2013 to approximately USD30,000 by 2017). Meanwhile, Dubai's strength as a booming tourist and retail centre - the emirate has a reputation as a 'safe haven&#39...

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Defence & Security

United Arab Emirates Defence & Security

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BMI View: The UAE's local defence industry is still in the early stages of development, and as such, domestic companies rely heavily on assistance from foreign firms to manufacture sophisticated military equipment. The armed forces' requirements for high-tech naval, air power, missile and surveillance products are therefore predominantly met through imports. However, the government - as part of its economic diversification strategy - is working to expand the local defence industrial base, and is actively encouraging joint ventures (JVs) between international companies and UAE-based entities. The country ranks in the top 15 globally for the size of its defence budget, and we expect further spending growth over our forecast period to 2019 and beyond, driven by the rising threat from Islamist militancy in the region, growing levels of...

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Food & Drink

United Arab Emirates Food & Drink

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BMI View: We maintain our bullish outlook on the UAE's economy, even with weaker oil prices. Consumer and business sentiment remain positive, underlining our particularly upbeat views on household consumption and fixed investment over the coming quarters. Following estimated real GDP growth of 3.9% in 2014, we forecast the economy to expand by 4.0% in 2015. The non-oil sector will drive GDP growth and we therefore forecast real private consumption to accelerate from 6.5% in 2014 to 7.2% in 2015.

Headline Industry Data

  • 2015 food consumption growth (local currency terms): +5.7%; compound annual growth rate (CAGR) 2014 to 2019: +7.7%.

  • 2015 per capita food consumption growth (local currency terms): +4.6%; CAGR 2014 to 2019: +5.9%.

  • ...

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Freight Transport

United Arab Emirates Freight Transport

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BMI View: We expect continued robust growth across the UAE's freight modes in the near and over our medium-term forecast period to 2019. Although growth will not be spectacular in most instances, this is a reflection of base effects and the maturity of the market. Massive investment into freight transport infrastructure - not least the development of the UAE's nascent rail network - will ensure that growth in freight volumes continues far beyond our forecast period. This will be driven not only by domestic demand, but will also be massively informed by the UAE's becoming one of the world's foremost global transhipment hubs.

Trade across the UAE will benefit from a resilient growth outlook, and we forecast a 6.4% real expansion in total trade in 2015, followed by 5.1% in 2016. Although this is slower than growth of 7.3% recorded in 2014, it is nonetheless robust...

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Information Technology

United Arab Emirates Information Technology

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BMI View : High incomes and a consumption culture combine to make the UAE one of the most lucrative global IT markets in per capita terms, with retail spending a particular strength, Traditionally IT adoption by the enterprise sector has been for basic applications, but that is changing. Etisalat's adoption of Microsoft Lync, which can connect people across Windows and other operating systems, including mobile devices, and the Federal Authority for Human Resources' (FAHR) implementation of IBM MobileFirst support our view that heavy investments in next generation mobile broadband networks and the proliferation of smartphones has laid the foundations for growth in the region's enterprise mobility solutions market. However the rising number...

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Infrastructure

United Arab Emirates Infrastructure

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BMI View: We expect strong growth in the UAE's construction sector for 2015 and over the next five years. Dubai will be the outperforming market, although we expect growth will remain healthy across the UAE even in a lower oil price environment. Government investment will be robust in the infrastructure sectors, while we note the biggest risk stems from private investment in Abu Dhabi, which will be adversely affected by lower oil prices.

Factors Driving Construction Industry Growth

  • Lower oil prices pose little threat to the UAE's construction industry outlook. Abu Dhabi has the largest infrastructure investment programme in the UAE, with the water and power...

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Insurance

United Arab Emirates Insurance

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BMI View: The UAE's non-life segment is highly fragmented and divided between local and multinational players. We expect this situation to alter over the forecast period, with a number of factors, particularly regulatory ones, encouraging consolidation, particularly among Islamic takaful providers.

The market is not fully open to foreign multinationals. While they may operate with relative freedom in the Dubai International Financial Centre, a free trade zone, expansion into the UAE proper is dependent on licenses issued by the regulator, a distinction which in 2014 caused Standard Life to quit Dubai. Nevertheless, the subsidiaries of many foreign multinationals are active in the UAE, often focusing their business on expatriate communities among which their brand is well known.

The most important driver of growth in...

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Medical Devices

United Arab Emirates Medical Devices

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BMI Industry View: The United Arab Emirates (UAE) is among the top 40 largest medical device markets in the world, and ranks fourth in the Middle East & Africa (MEA) region. Manufacturing capability is limited, therefore the market will continue to rely on imported medical devices. Population growth, a changing epidemiological profile, a growing medical tourism industry, continuous healthcare infrastructure developments, an expanding health insurance and increasing health expenditure are...

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Metals

United Arab Emirates Metals

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BMI View: The UAE will see rapid growth in metals consumption over the coming years after a slew of construction projects. Production growth will also be high given expansion plans by the major players and thus the UAE will remain a major metals exporter in the region.

We expect the UAE to be a key driver of metals demand on a global level as the country embarks on an infrastructure spending binge. Given our expectation for rapid growth in the economy, as well as the hosting of the World Expo 2020, steel and aluminium consumption growth will be in double digits for the period to 2018. Production growth will also be significant given plans by Emirates Global Aluminium and Emirates Steel and ensure the country maintains its position as the Gulf's largest metals exporter in the coming decade.

Booming...

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Oil & Gas

United Arab Emirates Oil & Gas

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BMI View : Though global oil prices moderately rebounded from the precipitous deflation in 2014 - we expect the OPEC basket price to be at USD52.00 per barrel in 2015 - the long-term trajectory of stagnated pricing will continue to push petro-transitional countries like the UAE towards economic diversification. Under the right conditions, the pressure from decreased revenue can actually be a blessing in disguise. As the future success within the UAE's oil and gas industry will be inextricably linked to these economic diversification efforts, the greater revenue coming from non-hydrocarbon resources will invariably assist in production, transportation, and refining enhancements. The economic success that the...

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Petrochemicals

United Arab Emirates Petrochemicals

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The UAE petrochemicals industry is facing a squeeze on margins as product prices have declined amid over-supply on external markets. The situation will be exacerbated by increase capacity in the Arabian Gulf region with Emirati producers set to raise output at the same time as sanctions are lifted on Iran, which will lead to a flood of Iranian polymer on the Asian markets from 2016.

The dominant ethane feedstock in the UAE market has declined in competitiveness as a result of lower naphtha costs, which have been driven down by falling crude prices. This has benefited the UAE's more naphtha-reliant competitors, particularly in Asia, its main export market. At the same time, slackening demand in export markets has weakened product prices.

In these unfavourable market trends, the opening of the Borouge 3 petrochemicals...

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Pharmaceuticals & Healthcare

United Arab Emirates Pharmaceuticals & Healthcare

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BMI View: We uphold our outlook for continued strong growth in the UAE's pharmaceutical and healthcare markets, driven by expanding insurance coverage and medical tourism. Our growth outlook is supported by positive financial results for pharmaceutical distributor Al Ittihad Drug Store, and healthcare providers Al Noor Hospitals and NMC Health, with these results a good indicator of market growth. These key factors, boosted by strong economic performance and a relatively stable political environment make the UAE one of the most attractive markets for multinational drugmakers looking to set up operations in the Middle East.

Headline Expenditure Projections

  • Pharmaceuticals: AED9.46bn (USD2.58bn) in 2014 to AED10.29bn (USD2.80bn) in 2015; +8.7% in local currency terms and +8.8% US dollar terms....

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Power

United Arab Emirates Power

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BMI View: This quarter our forecasts remain virtually unchanged as our fundamentals remain unvaried. We continue to believe that the UAE's focus on expanding its nascent nuclear and solar industries will result in these two sectors making a much greater contribution to both the country's electricity capacity and generation mix over our forecast period. As such, the role of natural gas in the power mix will diminish, freeing up gas for export. Yet we remain sceptical about the ability of the country to meet its targets with the anticipated speed.

The UAE government - at both the federal and emirate levels - will continue to prioritise generating capacity expansion programmes, focusing on integrating a wider range of fuel sources into its electricity mix. Nuclear and...

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Real Estate

United Arab Emirates Real Estate

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BMI View : While the real estate sector in the UAE continues to outperform many other countries in the MENA region signs are beginning to show that the pace of growth in rents and value may stabilize going forward. This is both partially because of government initiatives which are being introduced to cool down property prices and a potential mismatch of supply and demand in the market.

With regard to the particular sub-sector it looks as though retail and industrial sub-sectors will continue to perform well while the office sub-sector will continue to suffer from a lingering supply overhang dating back...

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Renewables

United Arab Emirates Renewables

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BMI View: The UAE is emerging as a key renewables market in the GCC region, as the government reaffirms its commitment to expanding its nascent renewables sector, in particular solar power. High projected power demand, the government's desire to diversify its domestic power mix and beneficial climatic conditions, continue to underpin the solar expansion.

The government's commitment to its renewables expansion is strong, with the individual emirates implementing targets for renewable energy and carbon emissions reduction. Climatic conditions within the country and supply/demand patterns mean that solar power provides a feasible and mostly reliable form of energy, with fewer problems of intermittency, as seen in European or North American markets.

Key trends and developments within the UAE renewables market:

  • In March, a...

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Retail

United Arab Emirates Retail

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BMI View: Despite the fall in oil prices which damaged the oil dependent economy of the UAE, there are strong forecasts for growth in the region. With GDP expected to see growth of 4.0% in 2015, household spending is also expected to see strong growth during our forecast period. Most of this spending goes on housing and utilities, illustrating the high costs of living in the country; but there still exists a number of opportunities for retailers in the country.

The UAE is highly reliant on oil revenue; as a result, the fall in oil prices during the end of 2014 and beginning of 2015 resulted in a damage to the UAE economy. However the prices have stabilised to around USD60 a barrel which looks to be the new normal, and the UAE economy continues to grow overall. Real GDP increased by...

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Shipping

United Arab Emirates Shipping

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BMI View: The UAE's shipping sector, one of the best developed and most important in the world, will continue to expand rapidly in 2015 and over the medium term. The Dubai port of Jebel Ali is the ninth largest in the world in terms of container throughput, while the Abu Dhabi facility of Port Khalifa, only launched in late 2012, is expanding rapidly thanks to the KIZAD industrial zone being developed alongside it. We expect that an economic recovery in developed markets will ensure continued growth in transhipment demand at the UAE's ports, while domestic consumer demand will also remain a key driver of throughput. The gradual rapprochement of Iran with the West will also encourage growth given the considerable re-export trade the UAE has traditionally had with the...

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Telecommunications

United Arab Emirates Telecommunications

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BMI View: Telecoms operators du and Etisalat are expected to implement fixed network sharing by the end of 2015, which will eliminate their respective monopolies in Dubai's new developments and most of the rest of the country. With new subscriptions growth in the mobile market beginning to taper off in 2014, it is increasingly clear that growth opportunities lie in the mobile and wireline data markets, where there remain strong opportunities across the consumer and enterprise segments. BMI believes competition at a national level will be a crucial component in capturing these growth opportunities.

Key data

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Tourism

United Arab Emirates Tourism

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The tourism industry of the UAE is experiencing strong growth in all areas and we forecast this to continue through to 2019. Although the main bulk of the accommodation sector is aimed at high end and business travellers, there are a few medium range options beginning to emerge. Inbound and outbound tourism continues to increase, with the country's main airport in Dubai recently overtaking Heathrow as the busiest in the world.

Despite the strong growth of tourism in the UAE the one factor that continues to negatively affect the sector is the political instability of the wider region. In neighbouring countries this has seriously detracted from their ability to encourage growth in tourism, especially with inbound tourism. However, with its financial strength and willingness to encourage tourism, the UAE continues to be seen as a safe bet for investors.

...

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Water

United Arab Emirates Water

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We have substantially expanded our forecasts this quarter to include a number of new indicators. This data has, in turn, impacted our existing forecasts. Our extraction forecast has been upgraded following the addition of desalinated water production forecasts, a sector where we anticipate strong growth over the coming years. In addition, we have expanded our wastewater forecasts, and have good growth projections for treated wastewater, which will in turn augment the water resources available for consumption, as we anticipate treated wastewater can cater to much of the industrial and agricultural requirements, freeing up freshwater and desalinated water supplies for domestic consumers.

We expect that desalination will continue to provide the lion's share of the country's water supplies. There are concerns that ground water resources will disappear entirely...

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