The UAE ranked 22nd among 64 economies thanks to an increase in scores for quality of life, management remuneration, health infrastructure, quality of education and labour force growth, according to the index by the World Competitiveness Centre.
Among other Arab countries included in the ranking is Bahrain, which jumped eight places to rank 27th globally. Qatar rose four positions to 30th and Saudi Arabia was ranked 36th.
Kuwait was included for the first time and positioned 28th worldwide.
The 2023 global rankings "show that as economies become more service-orientated – a transformation process that has also reached China (41st) and India (56th) – the physical presence of employees in the country of their employers is no longer needed", said Arturo Bris, director of IMD's WCC.
"All in all, we observe the emergence of a new type of employee that has been educated in one country, lives in another, and works for a company located in a third country."
In recent years, the UAE has undertaken several economic, legal and social reforms to attract skilled workers.
The government’s overhaul of visa programmes has boosted opportunities for foreign workers to live and work in the country. That includes a revamp of the 10-year golden visa to simplify eligibility criteria and expand the categories of beneficiaries.
The green visa was also introduced to provide five-year residency to skilled workers without needing a sponsor or employer.
The UAE also implemented a new unemployment insurance programme for federal government and private sector employees, to which all workers must subscribe.
Globally, the WTR found that Switzerland maintained its lead for attracting and retaining talent, continuing its dominance since the ranking was established in 2014.
It was followed by Luxembourg and Iceland in the top three. Sweden registered a big downfall – from second to 10th position – while Belgium (fourth) and Singapore (eighth) have both moved back into the top 10.
The rankings are calculated by quantifying 31 criteria that involve both hard data and survey responses from executives.
The annual report considered factors such as remuneration, taxes, cost of living, the education system, as well as the economy’s position on environmental issues and a fair judicial system.
Globally, many countries have not been able to return to pre-pandemic levels of talent competitiveness, which has led to greater parity between certain regions, the report said.
It also found that the pandemic-induced shift towards remote or hybrid models is affecting career progression, according to respondents.
Up to 27 per cent of the 4,000 executives questioned in a survey that fed into the results said they felt that remote work was detrimental to career development in their company.
WTTC researchers believe the reason could stem from a “proximity bias among managers”, seeing them favour those individuals who follow the traditional in-office work model.
The economies in which remote work is considered less harmful for career development are, on average, also those that excel in the attraction and retention of highly skilled professionals as well as in the levels of female participation in the job market, it found.
“If new work models lead to the curtailment of the opportunities that organisations offer to their staff, organisations’ capacity to attract and retain talent may be limited," the report said.
"Such a trend can restrict talent development, and ultimately talent competitiveness, by negatively affecting some of the core elements of competitiveness."