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U.S. DEPARTMENT OF STATE
UAE: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                       UNITED ARAB EMIRATES

                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)


                                     1992      1993     1994

Income, Production and Employment:

Real GDP (1985 prices)              29,523    29,041    N/A
Real GDP Growth (pct.)                -0.9      -1.6    N/A
GDP (at current prices)             35,456    35,865    N/A
By Sector:
  Agriculture                          744       774    N/A
  Mining
    Crude Oil                       14,470    13,988    N/A
    Others                              95       101    N/A
  Manufacturing                      2,708     2,966    N/A
  Electricity/Water                    782       806    N/A
  Construction                       3,029     3,154    N/A
  Wholesale/Retail Trade/
    Restaurants/Hotels               3,547     3,645    N/A
  Transport/Storage/Communication    1,953     2,013    N/A
  Finance/Insurance                  1,752     1,814    N/A
  Real Estate                        2,228     2,310    N/A
  Other Services                       798       847    N/A
  Imputed Bank Service Charges        -730      -781    N/A
  Government Services                3,917     4,053    N/A
  Household Domestic Services          163       174    N/A
Net Exports of Goods & Services  1/   3,043      183    N/A
Real Per Capita GDP
  (1985 prices/USD 000s)              17.63    17.22    N/A
Labor Force (000s)                   769.30   794.40    N/A
Unemployment Rate (pct.)               N/A       N/A    N/A

Money and Prices:  (annual percentage growth)

Money Supply                           4.4     -1.6     1.6  2/
Base Interest Rate                     N/A      N/A     N/A
Personal Saving Rate                  22.8     17.1     N/A
Retail Inflation                       3.5      4.5     N/A
Wholesale Inflation                    N/A      N/A     N/A
Consumer Price Index (1985=100)      120.1    123.5     N/A
Exchange Rate (USD/dirham)           3.671    3.671     3.671

Balance of Payments and Trade:

Total Exports                       23,944    23,563    N/A
  Exports to U.S.                    871.9     774.5   231.1  3/
Total Imports                     17,434.0  19,613.0     N/A
  Imports from U.S.                1,552.4   1,811.4   748.6  3/
Aid from U.S.                            0         0    0
Aid from Other Countries                 0         0    0
External Public Debt                     0         0    0
Debt Service Payments (paid)             0         0    0
Gold and Foreign Exch. Reserves    5,893.8  6,286.2  6,824.6  4/
Trade Balance                      6,510.5  3,949.9       N/A
  Trade Balance with U.S.            680.5  1,036.9    517.5  3/




N/A--Not available.

1/ Net exports of goods and services is the current account
balance.
2/ 1992 and 1993 December to December; 1994 December to June
3/ 1994 figure is January-June.
4/ 1992 and 1993 figures are fourth quarter; 1994 figure is for
May.

Source:  All figures are from UAE Ministry of Planning and UAE
Central Bank sources, with the exceptions of those on trade
with the U.S., which are from U.S. Department of Commerce, and
gold and foreign exchange reserves, which are from the
International Monetary Fund (IMF) International Finance
Statistics (IFS).



1.  General Policy Framework

    The UAE is a federation of seven emirates.  The individual
emirates retain considerable power over legal and economic
matters, most significantly over ownership and disposition of
oil resources.  The federal budget is largely derived from
transfers from the individual emirates.  Abu Dhabi and Dubai,
the most prosperous emirates, contribute the largest shares.

    Oil production and revenues from the sale of oil constitute
the largest single component of GDP.  Consequently, rising or
declining oil prices have a direct effect on GDP statistics and
an indirect impact on government spending but may,
nevertheless, be less obvious in terms of overall economic
activity.  In 1993, real per capita GDP in Abu Dhabi, the
emirate with the most oil, was $20,664.  Ajman Emirate's real
per capita 1993 GDP of $4,257 was the smallest of the seven. 
Real per capita GDP fell in every emirate in 1993, for the
third consecutive year.

    Economic activity in the UAE depends on developments in the
oil sector, which accounted in 1993 for 39 percent of GDP, 51
percent of export revenue, and 79 percent of government
revenues, according to Ministry of Planning and Central Bank
sources.

    Government fiscal policies aim to distribute oil wealth to
UAE nationals by a variety of means.  Support from the
wealthier emirates of Abu Dhabi and Dubai to less wealthy
emirates is done through the federal budget, largely funded by
Abu Dhabi and Dubai, and by direct grants from the governments
of Abu Dhabi and Dubai.

    Federal commercial laws promote national ownership of
business throughout the country.  Foreign business, except
those seeking to sell to the UAE Armed Forces, must have a UAE
national sponsor.  Agency and distributorship laws require that
a business engaged in importing and distributing a foreign-made
product must be 100 percent UAE national-owned.  Other
businesses must be at least 51 percent owned by nationals.  A
1994 law extended these requirements to service businesses for
the first time.

    Within the Emirate of Dubai, companies locating in the
Jebel Ali Free Zone (JAFZ) are exempted from
agency/distributorship, sponsorship, and national ownership
requirements.  However, if they lack 51 percent national
ownership, they are treated as foreign firms and subjected to
these requirements if they market products in the UAE outside
the JAFZ.

    Certain sectors are closed to new private sector
investment, including oil and gas operations and related
industries, such as petrochemicals, and electricity
generation/water desalination.

    The Abu Dhabi and Dubai governments sustain the non-oil
sector in part by spending oil revenues on development
projects.  Foreigners are not permitted to own real estate in
Abu Dhabi or Dubai, and in Abu Dhabi 90 percent of residential
and commercial construction is carried out by a government
agency that builds and manages commercial and residential
rental property on behalf of nominal national landlords.

    There are no taxes on UAE nationals and no income taxes on
the large expatriate population, although fees for government
services, including health care, were increased substantially
for expatriates and slightly for nationals in 1994.  Most
services, including utilities, health care, education, and food
remain heavily subsidized by the government, although more so
for nationals than expatriates.  Most salaried nationals work
in the public sector, where salaries are higher than in the
private sector and work is less demanding.

    The authorities attempt to maintain wealth distribution
without generating inflation or drawing down reserves
accumulated in years of higher oil prices.  This is not always
possible.  The authorities' response to the oil price decline
of 1985-86 was to draw down foreign assets and decrease capital
spending.  The oil price decline of 1993-94 is comparable to
that of 1985-86.  This time, while we believe the authorities
are drawing down reserves, they are also adopting new and
previously untried measures to raise revenue and cut
expenditures.

    These include, as indicated, raising fees, primarily on
expatriates, who make up about 70 percent of the population. 
Services expatriates will pay more for include visas, residence
permits, water, electricity, and medical care.  Expatriates now
pay an annual tax of $1300 for each employed household
domestic.  The federal government budget has been frozen at its
1993 level through 1995.  Abu Dhabi emirate announced in
mid-1994 that its budget would be cut by 20 percent from
planned levels.  Emirate authorities announced later that an
additional 20 percent would be cut in 1995.

    Privatization had not been implemented by October 1994,
although there is scope for it and many observers believe that
it will be introduced in the near to medium term.  The federal
and individual emirate governments own many enterprises
outright and own shares in others.  A likely candidate for
early privatization is government-owned bank shares.  The
Central Bank in 1994 drafted a bill authorizing an official
stock exchange, but as of October the cabinet had taken no
action on it.

    The principal function of the UAE Central Bank is to
regulate commercial banks.  Within the past three years, the
Central Bank has increased the degree of its regulatory
activities, through issuing circulars and then following up on
them with enforcement measures.  The Bank's ability to regulate
is limited however by the fact that some of the banks are owned
by interests that are more powerful than the Bank and over whom
it has little or no authority.

    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 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, has been 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.  However, the dirham's relationship with the U.S.
dollar has been kept at a fixed rate.  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 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 weakness of the U.S. dollar in 1994 has given U.S.
exports an edge in the UAE market, as the dirham prices of
competing products from industrialized Europe and Japan have
risen.


3.  Structural Policies

    There have been several notable changes in the regulatory
framework in 1994.  New customs rules took effect on August 1,
1994.  A customs duty of four percent on the CIF value of
imports is to be collected in full on items that are not
exempt.  This duty does not apply to the higher tariffs on 
tobacco and alcohol.  The list of exempt items is lengthy and
includes items imported by the rulers or the government, items
imported from Gulf Cooperation Council (GCC) states, religious
materials, items imported by airlines, items imported by
charitable institutions, medicines and pharmaceuticals, many
different kinds of food, items to be re-exported, farm
machinery, construction materials, and newspapers and
periodicals.

    Other changes in 1994 include:  a ban on issuance of
licenses authorizing the establishment of 42 different kinds of
small business; increased fees, particularly for expatriates;
a reduction in the number of expatriates permitted to bring
family members with them to the UAE; and an increase in delay
penalties applicable to contracts with the UAE federal
government.

    The UAE Central Bank in 1994 issued an update of a circular
it had issued in 1993 on regulation of large exposures.  The
1993 circular had restricted exposure to one individual or
group to seven percent of a bank's capital.  The revised
circular defined exposure as funded exposure.  It also exempts
UAE governmental borrowers from the limits and permits larger
exposures in interbank lending.  Foreign banks, which had
objected to the 1993 circular, are somewhat more satisfied with
the changes, but will still have to reduce their funded
exposures to the principal customers or move their assets
offshore.

    The UAE began issuing ten-year, multiple entry visas to
U.S. passport holders in 1994.  In addition, the UAE now
permits certain nationalities of expatriate residents of other
Gulf Cooperation Council countries, among them U.S. citizens,
to enter the UAE without having first obtained visas.

    With the exceptions of those levied on foreign banks and
oil companies, there are no income taxes levied in the UAE.

    Prices for most items are determined by market forces. 
Exceptions include utilities, educational services, medical
care, and agricultural products, which are subsidized.


4.  Debt Management Policies

    The UAE federal government has no official foreign debt. 
Some individual emirates are believed to have foreign
commercial 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 and
Dubai governments and their official agencies are believed to
be significantly larger than the reserves of the Central Bank.

    External assistance is provided by the federal government,
individual emirate government agencies, individual rulers, and
private contributors.  No comprehensive figures are available. 
The largest aid donor within the UAE, the Abu Dhabi Fund for
Development (ADFD), currently is providing financing worth
almost DH 2.8 billion (USD 763 million) for 29 developmental
projects in 13 Arab countries.


5.  Significant Barriers to U.S. Exports

    The regulatory and legal framework 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 products
for distribution within the UAE must be 100 percent owned by a
UAE national.  Subsidies for manufacturing firms are only
available to those with at least a 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,
however, 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,
however, 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 future business activity in the UAE. 
Foreigners cannot 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.  Retendering 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 joined the GATT in
1994.


7.  Protection of U.S. Intellectual Property Rights

    In 1992, the UAE passed three laws pertaining to
intellectual property rights (IPR) protection:  a copyright
law, a trademark law and a patent law.  The UAE began enforcing
the copyright law on September 1, 1994.  The government began
registration of  trademarks and patents in 1993.  Most losses
to U.S. firms in the UAE have been to owners of copyrights, not
trademarks or patents, although there have been occasional
problems with trademark fraud and in obtaining IPR protection
for certain products, such as pharmaceuticals.  Since UAE 
patent law protects processes, not products, some U.S. firms
are concerned that there could be unauthorized manufacture and
distribution of their products.  In late 1994 UAE authorities
were considering revisions to the patent law to address
coverage of product patents.


8.  Worker Rights

    a.  The Right of Association

    UAE law does not grant workers the right to organize unions
or to strike.  Similarly, it is a criminal offense for public
sector workers to strike.  Foreign workers, who make up the
bulk of the workforce, would risk deportation if they attempted
to organize unions or to strike.

    b.  The Right to Organize and Bargain Collectively

    UAE law does not grant workers the right to engage in
collective bargaining, and it is not practiced.  Workers in the
industrial and service sectors are normally employed under
contracts that are subject to review by the Ministry of Labor
and Social Affairs.  The purpose of the review is to ensure
that the pay will satisfy the employee's basic needs and secure
a means of living.  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.

    c.  Prohibition of Forced or Compulsory Labor

    Forced or compulsory labor is illegal and not practiced. 
However, foreign workers may be recruited in their own
countries by unscrupulous agents who bring them into the UAE
under conditions approaching indenture.

    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.  Laws prohibiting the employment of children are enforced
by the Department of Labor.  Labor regulations allow contracts
only for adult foreign workers.

    e.  Acceptable Conditions of Work

    There is no legislated or administrative minimum wage. 
Supply and demand determine compensation.  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.  As noted in
Section 6.B., the Labor and Social Affairs Ministry reviews
labor contracts and does not approve any contract that
stipulates a clearly unacceptable wage.

    The standard workday and workweek are set at eight hours
per day, six days per week, but these standards are not
strictly enforced.  Certain types of workers, notably domestic
servants, may be obliged to work longer than the mandated
standard hours.  The law also provides for a minimum of 24 days
per year of annual leave plus 10 national and religious
holidays.  In addition, manual workers are not required to do
outdoor work when the temperature exceeds 45 degrees Celsius
(112 Fahrenheit).

    Most foreign workers receive either employer-provided
housing or a housing allowance, medical care, and homeward
passage from their employers.  The vast majority of such
workers, however, do not earn the minimum salary of DH 5000
(approximately USD 1370) per month currently required for them
to sponsor their families for a UAE residence visa (the UAE
increased the minimum requirement from USD 1000 to USD 1370 in
August, 1994).  Further, employers may petition for a one-year
ban from the workforce of any foreign employee who leaves his
job without fulfilling the terms of his contract.  Absent
careful oversight, such an option could be misused to inhibit
legitimate complaints on working conditions or reasonable
requests to change employers.

    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 units.  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 observed in the housing
camps provided by employers.  Workers' jobs are not protected
if they remove themselves from what they consider to be unsafe
working conditions.  However, the Ministry of Labor may require
employers to reinstate workers following an investigation of
the alleged unsafe working conditions.  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
underbudgeted so that complaints and compensation claims are
backlogged.

    Foreign nationals, especially 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 manual laborers and domestic servants to the UAE,
promising unrealistically high salaries, housing and other
benefits and may even bring them in illegally.  Such complaints
may be appealed to the Labor Ministry and, if this does not
resolve the issue, to the courts.  However, many laborers
choose not to protest or to engage in such a lengthy process
for fear of reprisals or of deportation.  Moreover, since
the UAE tends to view foreign workers through the prism of
their various nationalities, the employment policies, like
immigration and security policies, have, at times, been
conditioned upon national origin.

    A number of accounts, including some in the local press,
continue to call attention to abuses suffered by domestic
servants, particularly women, perpetrated by individual
employers.  These have included allegations of excessive work
hours, extremely low wages, verbal abuse, and, in some cases,
physical abuse.



  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
                                                                
              Category                          Amount          

Petroleum                                             291
Total Manufacturing                                    (2)
  Food & Kindred Products                     0
  Chemicals and Allied Products              (2)
  Metals, Primary & Fabricated               (2)
  Machinery, except Electrical                0
  Electric & Electronic Equipment             0
  Transportation Equipment                    0
  Other Manufacturing                         0
Wholesale Trade                                       142
Banking                                                (1)
Finance/Insurance/Real Estate                          (1)
Services                                               23
Other Industries                                       45
TOTAL ALL INDUSTRIES                                  537      

(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000

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

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