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TITLE:  UNITED ARAB EMIRATES ECONOMIC POLICY AND 
        TRADE PRACTICES
DATE:  FEBRUARY 1994
AUTHOR:  U.S. DEPARTMENT OF STATE

                       UNITED ARAB EMIRATES

                     Key Economic Indicators
           (Millions of dirhams unless otherwise noted)

                                  1991      1992      1993 /1

Income, Production,
 and Employment

Real GDP (1985 prices)            119,059   123,821     n/a
Real GDP Growth (pct.)              5.2       4.0       n/a
GDP (at current prices) /2        126,264   130,163   131,660
By Sector:
  Agriculture, Livestock,
   and Fishing                      2,563     2,730     2,838
  Mining and Quarrying
    Crude Oil                      54,260    53,116    51,350
    Other                             332       355       369
  Manufacturing                     9,770     9,942    10,991
  Electricity/Water                 2,700     2,869     2,961
  Construction                     10,365    11,125    11,582
  Wholesale, Retail trade,
   Restaurants and Hotels          11,943    13,020    13,682
  Transport, Storage,
   and Communications               6,711     7,167     7,490
  Finance and Insurance             5,488     6,431     6,656
  Real Estate                       7,440     8,180     8,583
  Other Services                    2,689     2,931     3,107
  Less Imputed Bank
   Services Charge                 -2,182    -2,684    -2,768
  Government Services              13,634    14,376    14,981
  Domestic Services (Households)      551       605       638
  Trade Surplus                    30,702    21,888    17,546
Real Per Capita GDP /3             62,341    61,559     n/a
Labor Force (000's)                   717.9     733.5   n/a
Unemployment Rate (pct.             n/a       n/a       n/a


Money and Prices
(annual percentage growth)

Money Supply (M2) /4               14.5       4.6       0.6
Base Interest Rate (pct.) /5        5.00      3.88      2.75
Personal Saving Rate                n/a       n/a       n/a
Retail Inflation                    3.0       3.5       3.0
Wholesale Inflation                 n/a       n/a       n/a
Consumer Price Index (1985 100)   115.4     118.4       n/a
Exchange Rate
(dirhams per dollar)
  Official                          3.671     3.671     3.671
  Parallel                          n/a       n/a       n/a

Trade and Balance of Payments
 (in millions of U.S. dollars)

Total Merchandise Exports          22,122.5  22,860.8  22,872.5
  of which to U.S. /7                 713.4     871.9     568.7
Total Merchandise Imports          13,904.8  16,893.7  18,533.0
  of which from U.S. /6             1,455.0   1,552.4   1,156.0
Aid from U.S.                           0         0         0
Aid from Other Countries                0         0         0
External Public Debt                    0         0         0
Debt Service Payments                   0         0         0
Gold and FOREX Reserves /7          5,236.2   5,856.2   n/a
Merchandise Trade Balance           8,217.7   5,967.1   4,339.5
  Balance with U.S. /6               -741.6    -680.5    -587.3


Notes:

1/  Estimates.
2/  At factor cost.
3/  Dirhams
4/  For 1993, December 1992 to June 1993; for 1991 and 1992,
December to December.
5/  Dirham 3-month interbank offer rate from November 1991, 
November 1992, and November 1993.
6/  For 1993, January to August.
7/  Central Bank only.


1.  General Policy Framework

    The United Arab Emirates (UAE) is a federation of seven
emirates that retain a high degree of control over their
respective political and economic activities, including
ownership and management of their oil resources and oil
revenues.  The federal government, responsible for defense,
internal security, justice, health, education, and foreign aid,
relies mostly on transfers from individual emirates for its
revenue.  In 1991, Abu Dhabi's share of UAE GDP came to 63.5
percent.  The smallest share, at 0.6 Percent, went to Umm al
Quwain.  In the same year, Abu Dhabi had the highest per capita
GDP, at $31,508, while Ajman's, at $6,093, was lowest.  In
1992, Abu Dhabi's per capita GDP rose to $32,067, and Ajman's
had climbed to $6,312.  Umm al Quwain was the only emirate to
see per capita gdp fall from 1991 to 1992, from $9,080 to
$8,756.

    Economic activity in the UAE depends largely on
developments in the oil sector, which accounted in 1992 for 76
percent of government revenue and 68 percent of the country's
export receipts.  Lower oil prices in 1993 and UAE adherence to
an OPEC quota will mean that total UAE earnings from oil will
fall in 1993 to $12.5 billion from $14.5 billion in 1992. 
Government fiscal policies aim to maintain non-oil sector
growth through spending oil revenues on development projects,
without creating inflation or drawing down official reserves. 
There are no taxes on UAE nationals and few on the large
expatriate population.  Most services, including utilities,
health care, education, and food are heavily subsidized by the
government.  Fluctuations in oil prices are met with changes in
the level of government expenditure or by drawing down
reserves.  When oil prices declined considerably in the
mid-1980's, the UAE federal government and the larger emirate
governments responded by drawing down foreign assets and
cutting capital expenditures more than current spending.

    It is unclear in December 1993 whether lower oil revenues
will necessitate an adjustment in the governments' fiscal
policies.  The federal government announced in December that
its budget for calendar year 1994 will be as large of that for
1993, which was the largest since the early 1980's.  The option
followed in the mid-80's is still available.  The respective
governments, through their official agencies, including the
central bank for the federal government, and the Abu Dhabi
investment authority for the emirate of Abu Dhabi, have ample
reserves and no debts.

    The principal function of the UAE Central Bank is to
regulate commercial banks, which it has done very actively in
1993.  The bank seeks to maintain the dirham/dollar exchange
rate, which has not changed since 1980, and to keep interest
rates close to those in the U.S.  Given these goals, the
Central Bank does not have the scope to engage in independent
monetary policy.  Trends in domestic liquidity continue to be
primarily influenced by residents' demand for UAE dirhams
relative to foreign exchange.  Banks convert dirham deposits to
foreign assets and back again in search of higher rates of
return and in response to fluctuations in lending opportunities
in the domestic market.  To a limited extent, domestic
liquidity can be influenced by the Central Bank through its
sale and purchase of foreign exchange, use of its swap
facility, and transactions in its certificates of deposit.

    The provision of government statistics in the UAE is
limited.  Little information is available on oil and gas output
or pricing, inflation, service and capital transactions in the
balance of payments, or the UAE's foreign assets.


2.  Exchange Rate Policy

    Since November 1980, the UAE dirham, though formally pegged
to the IMF's special drawing rights (SDR) at the rate of one
SDR equals 4.76190 dirhams, with a margin of fluctuation set
initially at 2.25 percent and widened in August 1987 to 7.25
percent, has been kept in a fixed relationship to the U.S.
dollar.  Since November 1980 the buying and selling rates for
the U.S. dollar have been 3.6690 dirhams and 3.6730 dirhams,
respectively.  Commercial banks are free to enter into foreign
exchange transactions, including forward contracts, at rates of
their own choosing.  In practice, these rates have followed
closely the rate quoted by the UAE Central Bank.  The UAE
maintains a liberal exchange system which is free of
restrictions on both payments and transfers for current and
capital transactions.  The trade system is also free of
restrictions and only a small proportion of total imports is
subject to tariffs at an effective rate of one percent.


3.  Structural Policies

    There have not been any significant changes in the UAE
regulatory framework in 1993.  Government interference in the
economy remains minimal.  The central bank announced a
regulation in October that would limit the size of loans
outstanding to one client, defined as an individual, a company,
or a group of related companies, to seven percent of capital. 
For foreign banks, the regulation defines capital as local
capital, not international capital.  The bank's stated
objective in issuing the regulation is to strengthen local
banks.  The effect will be to encourage foreign banks to book
loans offshore, unless the regulation can be modified.  As of
December, talks were underway between the bank and foreign
banks over how to resolve the objections of the latter.

    A new shelf-life regulation that considerably shortens
shelf-life for various categories of imported food
threatens U.S. egg exports to the UAE.

4.  Debt Management Policies

    The UAE central government has no official foreign debt. 
Some smaller, individual emirates are believed to have foreign
debts, and there is private external debt.  While there are no
reliable statistics on either, the amounts involved are not
large.  The foreign assets of Abu Dhabi, Dubai, and their
official agencies are believed to be significantly larger than
the reserves of the UAE Central Bank.

    External assistance is provided by the federal government,
emirate government agencies, individual rulers, and private
contributors.  No comprehensive figures are available.  In
1991, the UAE government spent $4.74 billion on aid in
connection with the gulf crisis.  This amounted to 14 percent
of GDP for that year.  In 1992, the aid level had dropped to
$735 million, or two percent of GDP.  The largest aid donor
within the UAE, the Abu Dhabi Fund for Arab Economic
Development (ADFAED), distributed $1.6 billion in loans and
$116.6 million in grants between 1974 and 1992.


5.  Significant Barriers to U.S. Exports

    The regulatory and legal framework heavily favors local
over foreign business.  There is no national treatment for
investors in the UAE.  Except for companies located in
duty-free zones, at least 51 percent of a business
establishment must be owned by a UAE national.  A business
engaged in importing anything into the UAE must be 100-percent
owned by a UAE national.  Subsidies for manufacturing firms are
only available with at least 51-percent local ownership.  By
law, foreign companies wishing to do business in the UAE must
have a UAE national sponsor, agent or distributor.

    There is some disagreement between the federal and local
authorities over the meaning of "national".  The Federal
Ministry of Economy and Commerce stipulates that a national
sponsor is a sponsor for the entire country.  Local chambers of
commerce see "national" as meaning UAE citizen, and often will
not allow a business to operate within their emirate if the 
sponsor is from another emirate.  Once chosen, these sponsors,
agents, or distributors have exclusive rights.  Sponsors can be
replaced, if the sponsor agrees.  This happens, but not often. 
Foreign companies do not press claims, knowing that to do so
would jeopardize any future business activity in the UAE. 
Foreigners can not own land or buy stocks.  Foreign companies
do not pay taxes, except for banks, whose profits are taxed at
a rate of 20 percent, and oil producers, which pay taxes and
royalties on their equity barrels.

    The tendering process is not conducted according to
generally accepted international standards.  Re-tendering is
the norm, often as many as three or four times.  To bid on
federal projects, a supplier or contractor must either be a UAE
national or a company in which at least 51 percent of the share
capital is owned by UAE nationals.  Therefore, foreign
companies wishing to bid for a federal project must enter into
a joint venture or agency arrangement with a UAE national or
company.  Federal tenders are required to be accompanied by a
bid bond in the form of an unconditional bank guarantee for
five percent of the value of the bid.


6.  Export Subsidies Policies

    The UAE government does not use subsidies to provide direct
or indirect support for exports.  The UAE is not a member of
the GATT.


7.  Protection of U.S. Intellectual Property Rights

    In 1992, the UAE passed three laws pertaining to
intellectual property:  a copyright law, a trademark law, and a
patent law.  All three were to have gone into effect in 1993. 
While the government has begun registering trademarks and
patents, little has been done to implement the copyright law,
which, in the view of U.S. Government experts, does not, as
written, protect U.S. works.  Nothing apparent has been done
about the manufacture, sale, and export to surrounding
countries of pirated video and sound recordings.  U.S. industry
estimates that UAE sound and video piracy costs it $116 million
per year.  Most software sold in the UAE is also unauthorized.


8.  Worker Rights

    a.   Right of Association

    UAE law is silent on the right of workers to organize
unions and to strike, except that it is a criminal offense for
public sector workers to strike.  In practice, there are no
unions and few strikes.  Foreign workers who might attempt to
organize a union risk deportation.

    b.   Right to Organize and Bargain Collectively

    There is no legal provision for the right of workers to
engage in collective bargaining.  Most of the work force is
foreign.  Workers in the industrial and service sectors are 
normally employed under work contracts that are subject to
review by the Ministry of Labor and Social Affairs.  For the
resolution of work-related disputes, workers must rely on
conciliation committees organized by the Ministry of Labor and
Social Affairs, or on special labor courts.  Domestic servants
and agricultural workers are not covered by UAE labor laws and
thus have great difficulty in obtaining any assistance in
resolving labor disputes.  The same laws and regulations apply
as in the rest of the country in the free ports, where
manufacturing takes place.

    c.   Prohibition of Forced or Compulsory Labor

    Forced or compulsory labor is illegal and not practiced.

    d.   Minimum Age for Employment of Children

    Labor regulations prohibit employment of persons under age
15 and have special provisions for employing those aged 15 to
18.  Labor regulations allow contracts only for adult foreign
workers.  In January 1993, the government announced new
regulations prohibiting the employment of young children as
camel jockeys and decreed that camel jockeys should weigh no
less than 45 kilograms.  It also created a camel race
association to enforce the new rules.  Small children who were
employed as jockeys were returned to their parents.

    e.   Acceptable conditions of work

    There is no legislated or administrative minimum wage. 
Supply and demand determine salaries.  However, according to
the Ministry of Labor and Social Affairs, there is an
unofficial, unwritten minimum wage rate which would afford a
worker and family a minimal standard of living.  The labor and
social affairs ministry reviews labor contracts and does not
approve any contract that stipulates a clearly unacceptable
wage.

    Work hours are restricted to eight hours per day, six days
per week, but these standards are not strictly enforced.  The
law provides for a minimum of 24 days per year of annual leave
plus ten national and religious holidays.

    Most foreign workers receive either employer-provided
housing or a housing allowance, medical care, and homeward
passage through their employers.  The vast majority of such
workers, however, do not earn the minimum salary ($1,000 per
month) required for them to sponsor their families for a UAE
residence visa.  Employers have the option to petition for a
ban from the work force of one year for any foreign employee
who leaves his job without fulfilling the terms of his contract.

    The government sets health and safety standards, which are
enforced by the ministry of Health, the Ministry of Labor and
Social Affairs, municipalities, and civil defense.  Every large
industrial concern is required to employ an occupational safety
officer certified by the Ministry of Labor.  If an accident
occurs, a worker is entitled to fair compensation.  Health
standards are not uniformly applied in the housing camps
provided by employers.  All workers have the right to complain
to the Labor Ministry, whose officials are accessible to any 
grievant, and an effort is made to investigate all complaints. 
The ministry, which oversees worker compensation, is, however,
chronically understaffed and under-budgeted, so that complaints
and compensation claims are backlogged.

    Foreign nationals from India, Pakistan, the Philippines,
Bangladesh, and Sri Lanka continue to seek work in the UAE in
large numbers.  There are many complaints that recruiters in
the country of origin use unscrupulous tactics to entice
foreign manual laborers and domestics to the UAE, promising
false salaries and benefits, and at times bringing them in
illegally.  Such cases may be appealed to the Labor Ministry
and, if this does not resolve the issue, to the courts. 
However, many laborers are reluctant to protest or to engage in
such a lengthy process because of fear of reprisals by their
employers.  Moreover, since the UAE tends to view foreign
workers through the prism of their various nationalities,
employment policies, like immigration and security policies,
have at times been conditioned upon national origin.

    The bottom line is, that regardless of nationality, job, or
education, virtually all foreigners working in the UAE, which
means the vast majority of the work force, are in the UAE by
choice for one simple reason: the pay is better than at home. 
Although they are free to leave whenever they want, few do.

    f.   Rights in Sectors with U.S. Investment

    Worker rights in sectors where U.S. investment exists
follow prevailing practices under UAE labor law, and conditions
do not vary from sector to sector.


         Extent of U.S. Investment in Selected Industries

              U.S. Direct Investment Position Abroad
                on an Historical Cost Basis - 1992
                    (Millions of U.S. dollars)

Category                                    Amount

Petroleum                                               306
Total Manufacturing                                       0
    Food & Kindred Products                     0
    Chemicals and Allied Products               0
    Metals, Primary & Fabricated                0
    Machinery, except Electrical                0
    Electric & Electronic Equipment             0
    Transportation Equipment                    0
    Other Manufacturing                         0
Wholesale Trade                                         116
Banking                                                   D
Finance and Insurance                                     D
Services                                                 17
Other Industries                                          D

TOTAL ALL INDUSTRIES                                    480


(D)-Suppressed to avoid disclosing data of individual companies

Source:  U.S. Department of Commerce, Bureau of Economic
Analysis.
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