The UAE economy's transformation under Sheikh Khalifa's leadership

Sheikh Khalifa bin Zayed, who died on Friday at the age of 73, presided over the UAE’s transformation into a progressive economy.

Diversifying the UAE economy to boost non-oil revenue, developing it into a regional and global financial and tourism hub with best-in-class infrastructure and transportation networks and promoting the growth of a business-friendly environment were among the many milestones achieved by Sheikh Khalifa.

The Emirates opened up property sales to foreign investors and built an attractive ecosystem for small and medium-sized enterprises under his watch.

After succeeding the UAE Founding Father, the late Sheikh Zayed bin Sultan Al Nahyan, as President in November 2004, Sheikh Khalifa brought his long experience at senior levels of leadership to bear in charting the modernisation of the seven-emirate federation and ensuring its continued economic relevance both within the region and beyond.

“Sheikh Khalifa is recognised for bringing the UAE, a modest desert sheikhdom of seven emirates, to international fame and guiding the country through challenging times,” said Vijay Valecha, chief investment officer of Dubai-based Century Financial.

“Under his leadership, the UAE has seen rapid growth, offering a fair standard of living for the people calling this country home. Furthermore, he spearheaded the expansion of healthcare, education and technology sectors on regional and global scales as well as secondary sectors, which have effectively promoted the country’s economic diversity.”

He was responsible for steering the development of the oil and gas sector that has contributed to the country’s economic diversification. He also placed a heavy emphasis on renewable energies and redirected the UAE’s growth trajectory towards a future where hydrocarbons will no longer be the mainstay of the economy.

"Under his leadership, the UAE has become the most diversified economy in the GCC, transforming into a key logistical and tourist hub in the region," said M R Raghu, chief executive of research company Marmore Mena Intelligence.

"The UAE has the highest contribution of non-oil revenue as a percentage of total government revenue compared with other major oil-exporting countries in the region."

Opec’s third-largest producer, the UAE is turning to renewables as an alternative energy source and growing into a world leader in developing hydrogen.

Under Sheikh Khalifa’s leadership, the UAE also achieved success internationally, one highlight being the decision in 2009 to host the headquarters of the International Renewable Energy Agency in Abu Dhabi.

Sheikh Khalifa’s decree in December 2009 establishing the Emirates Nuclear Energy Corporation as the entity in charge of carrying out the UAE’s nuclear programme represents another milestone for the country. In 2021, commercial operations began at Barakah Nuclear Energy Plant.

The establishment of the renewable energy company, Masdar, in Abu Dhabi in 2006, paved the way for the building of solar power plants, further diversifying the energy mix. And last year, the UAE became the first Middle Eastern country to announce a net-zero by 2050 strategy as the country committed to supporting international efforts on global warming.

Under Sheikh Khalifa's leadership, a clear vision for the future helped to drive forward the Abu Dhabi Investment Authority, one of the nation's sovereign wealth funds.

Adaptable policy frameworks, regulatory changes and a flexible business and corporate environment have underpinned the country’s progress and propelled it to become the Arab world’s second-largest economy.

As part of Sheikh Khalifa's vision to attract business, the UAE introduced its first free zone in the 1980s, offering investors 100 per cent ownership of their organisations and favourable tax conditions. Today, there are more than 50 free zones across the Emirates.

The UAE is also home to world-leading financial and commodities hubs. Today, the Dubai International Financial Centre and Abu Dhabi Global Market are home to some of the world’s largest banks, investment houses, insurers, asset managers, cryptocurrency exchanges and a host of technology-focused start-ups, disrupting sectors from financial services to health and education. Dubai Multi Commodities Centre, one of the world’s fastest-growing commodities hubs, hosts companies that deal in everything from tea and coffee to rough diamonds and currency futures.

These free zones have put the UAE on the global map and helped boost foreign direct investment (FDI) flows to the country.

“The UAE is almost unrecognisable from 20 years ago and has developed into a vibrant and dynamic place where individuals and businesses can flourish,” said Scott Livermore, chief economist at Oxford Economics Middle East.

“An important legacy from an economic perspective is the optimism and positivity around growth prospects for the coming years and the opportunities available to investors and talent attracted to the UAE.”

The local aviation industry’s development over the decades has transformed the nation from a fishing and pearl-diving spot into a global centre for air transport. It has developed into a global powerhouse for air connectivity and created best-in-class airlines such as Emirates, Etihad, Flydubai and Air Arabia that connect far-flung parts of the globe.

Under Sheikh Khalifa's leadership, the UAE aviation industry grew into a key pillar of the economy and a driver of business activity, contributing about 13 per cent of national gross domestic product. It is now home to six national airlines ranging from low-cost to full-service operators.

Open skies policies, large investments in infrastructure and a foreign investor-friendly business environment have spurred the development of the aviation industry under his leadership.

The UAE has also become part of the aerospace supply chain, rather than only a customer of billion-dollar aircraft orders placed with the world’s biggest plane makers. Strata, Mubadala Investment Company’s aerospace manufacturing unit, became the Arabian Gulf’s first producer of composite aircraft parts and is a key part of the UAE’s economic diversification and local industrialisation plan.

Etihad Rail, which aims to connect the UAE with the rest of the GCC, is another key infrastructure project under development. Stage one is complete and operating along a 264-kilometre route from Shah and Habshan to Ruwais, transporting sulphur.

The Emirates is also a world-leading tourist destination, with many projects introduced to attract both business and leisure visitors, including Louvre Abu Dhabi, Dubai’s Museum of the Future and the world's tallest building, Burj Khalifa.

The industry is a leading contributor to the country’s gross domestic product and also acts as a catalyst for the growth of the retail sector.

The UAE’s entertainment and hotel offerings are second to none in the region and its Mice (meetings, incentives, conferences, and events) industry enables it to host international business conferences and exhibitions throughout the year. Most recently, the country successfully organised Expo 2020 Dubai. It is set to host the 28th UN global climate change talks in 2023.

In the UAE, the decision in 2005 to permit the sale of freehold properties and 99-year leases in certain areas was also a game-changer. The sector is now one of the leading contributors to the UAE's non-oil economy and attracts significant global investment.

The UAE's President, Sheikh Khalifa, meets former US president Jimmy Carter at the Carter Centre in Atlanta, Georgia, in 1986. Photo: Al Ittihad
President Sheikh Khalifa is welcomed to the Oval Office of the White House in Washington by then-US president Bill Clinton in May 1998. Reuters
President Sheikh Khalifa and then-US president George W Bush stand for their national anthems in the courtyard of Al Mushrif Palace in Abu Dhabi. Photo: National Archives
President Sheikh Khalifa and then-US president George W Bush at Al Mushrif Palace in Abu Dhabi. Photo: National Archives
President Sheikh Khalifa welcomes then-US president George W Bush to the UAE at Abu Dhabi International Airport. Photo: National Archives
President Sheikh Khalifa and then-US president George W Bush at Al Mushref Palace in Abu Dhabi. Photo: National Archives

“Sheikh Khalifa was a visionary and embraced sustainable development as a guiding methodology to build a modern nation. He oversaw much of the country’s economic growth,” said Rizwan Sajan, founder and chairman of Danube Group.

Despite the pandemic shock in 2020 that sent the world into its deepest recession since the 1930s, the UAE economy bounced back strongly and is forecast by the Central Bank of the UAE to grow 4.2 per cent in 2022.

After expanding the size of its economy to about Dh1.5 trillion from Dh11 billion ($3bn) in 1973, the country now plans to double its economic output over the coming decade to Dh3tn.

In March, the UAE announced plans to increase the manufacturing sector’s contribution to GDP to Dh300bn over the next decade as it embarks on a national programme to boost output.

The “Operation 300bn” strategy is focused on expanding the UAE’s advanced manufacturing base in sectors including energy, petrochemicals, plastics, metals and green fuels. Building partnerships with global industrial champions and boosting FDI is part of the broader industrial growth plan.

Rules allowing full foreign ownership of onshore companies came into effect in June last year. Changes to the commercial company ownership laws, which were first announced in November 2020, removed the requirement for onshore companies to have a major UAE shareholder.

In November, the Central Bank of the UAE, the Ministry of Economy and the Ministry of Justice also enacted amendments to the Commercial Transactions Law regarding the decriminalisation of bounced cheques.

The UAE also launched Golden Visas and a path to citizenship for talented individuals who have made outstanding contributions to the country, as well as those who have highly-prized skills or work in key industries that are crucial to economic growth. This is aimed at encouraging more people to put down long-term roots in the country and to attract global talent to the UAE.

"The period of phenomenal growth had a need for legal reforms in the country," said Devanand Mahadeva, director of Bestwins Law Corporation.

"The most important legal developments have revolved around making the UAE more tolerant, such as with the reforms on personal status laws, labour laws, foreign business ownership, tax laws and cyber laws to meet the demands of the modern world."

Earlier this week, an unemployment insurance programme for Emirati and foreign workers was announced for both the private and public sectors.

The UAE also launched the Virtual Assets Regulatory Authority in March that aims to create an advanced legal framework to protect investors and provide international standards for virtual asset industry governance to enable responsible business growth.

The country has created various business incubators to nurture start-ups, offering funding and mentorship, as it seeks to spur innovation and attract skilled talent. These include Abu Dhabi’s technology start-up incubator Hub71, Dubai Internet City’s tech-focused in5 business incubator and Intelak Hub, among others.

"The support extended by the UAE government to develop the SME ecosystem has enabled the country to become the most-preferred destination for foreign companies and start-ups in the Middle East. Notably, the UAE has the highest SME contribution to GDP among all GCC countries," Mr Raghu said.

The UAE made it mandatory for all listed companies to have at least one female director on their boards last year as it seeks to boost female participation in the workforce. The Emirates already has the highest level of women participating in the workforce — at 57.5 per cent in 2020 — of any country in the Mena region, the World Bank said last year.

Sheikh Khalifa also focused on developing a knowledge-based digital economy, driven by data analytics and artificial intelligence (AI). The UAE is developing a super computer and aims to train 100,000 coders as part of efforts to boost its knowledge-based economy.

The UAE’s road map for the next 50 years of development and economic growth focuses on new technologies, the Fourth Industrial Revolution and artificial intelligence. More importantly, the road map also looks to develop renewable and clean energy; oil, petrochemical and mining industries; and land and sea transport and storage sectors.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

Pharaoh's curse

British aristocrat Lord Carnarvon, who funded the expedition to find the Tutankhamun tomb, died in a Cairo hotel four months after the crypt was opened.
He had been in poor health for many years after a car crash, and a mosquito bite made worse by a shaving cut led to blood poisoning and pneumonia.
Reports at the time said Lord Carnarvon suffered from “pain as the inflammation affected the nasal passages and eyes”.
Decades later, scientists contended he had died of aspergillosis after inhaling spores of the fungus aspergillus in the tomb, which can lie dormant for months. The fact several others who entered were also found dead withiin a short time led to the myth of the curse.

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Ten tax points to be aware of in 2026

1. Domestic VAT refund amendments: request your refund within five years

If a business does not apply for the refund on time, they lose their credit.

2. E-invoicing in the UAE

Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.

3. More tax audits

Tax authorities are increasingly using data already available across multiple filings to identify audit risks.

4. More beneficial VAT and excise tax penalty regime

Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.

5. Greater emphasis on statutory audit

There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.

6. Further transfer pricing enforcement

Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.

7. Limited time periods for audits

Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.

8. Pillar 2 implementation

Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.

9. Reduced compliance obligations for imported goods and services

Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.

10. Substance and CbC reporting focus

Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.

Contributed by Thomas Vanhee and Hend Rashwan, Aurifer

MATCH INFO

Manchester United 1 (Fernandes pen 2') Tottenham Hotspur 6 (Ndombele 4', Son 7' & 37' Kane (30' & pen 79, Aurier 51')

Man of the match Son Heung-min (Tottenham)

Meatless Days
Sara Suleri, with an introduction by Kamila Shamsie
Penguin

Scoreline

Syria 1-1 Australia

Syria Al Somah 85'

Australia Kruse 40'

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How to get exposure to gold

Although you can buy gold easily on the Dubai markets, the problem with buying physical bars, coins or jewellery is that you then have storage, security and insurance issues.

A far easier option is to invest in a low-cost exchange traded fund (ETF) that invests in the precious metal instead, for example, ETFS Physical Gold (PHAU) and iShares Physical Gold (SGLN) both track physical gold. The VanEck Vectors Gold Miners ETF invests directly in mining companies.

Alternatively, BlackRock Gold & General seeks to achieve long-term capital growth primarily through an actively managed portfolio of gold mining, commodity and precious-metal related shares. Its largest portfolio holdings include gold miners Newcrest Mining, Barrick Gold Corp, Agnico Eagle Mines and the NewMont Goldcorp.

Brave investors could take on the added risk of buying individual gold mining stocks, many of which have performed wonderfully well lately.

London-listed Centamin is up more than 70 per cent in just three months, although in a sign of its volatility, it is down 5 per cent on two years ago. Trans-Siberian Gold, listed on London's alternative investment market (AIM) for small stocks, has seen its share price almost quadruple from 34p to 124p over the same period, but do not assume this kind of runaway growth can continue for long

However, buying individual equities like these is highly risky, as their share prices can crash just as quickly, which isn't what what you want from a supposedly safe haven.

The 15 players selected

Muzzamil Afridi, Rahman Gul, Rizwan Haider (Dezo Devils); Shahbaz Ahmed, Suneth Sampath (Glory Gladiators); Waqas Gohar, Jamshaid Butt, Shadab Ahamed (Ganga Fighters); Ali Abid, Ayaz Butt, Ghulam Farid, JD Mahesh Kumara (Hiranni Heros); Inam Faried, Mausif Khan, Ashok Kumar (Texas Titans

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