UAE: down from a mall, straight to the ball

One of the youngest states, still one of the richest. The Islamic approach to financial system functioning and absence of taxes. In the life of Emirates there are plenty paradoxes. We will try to briefly describe some interesting facts about economy and stock market of the United Arab Emirates (UAE).

Economy and Investments

Since 1973 UAE as a country has begun its fight for a place under the sun, by actively developing from a poor region into the vast modern state with high living standards and open economy.

Abu-Dhabi is the largest emirate. 

UAE's economy is mainly focused on oil. At the same time, diversification exists as well - data analysis shows that unrelated to oil sectors' contribution doubled from 1980 to 1998. But regardless of this, the share of "oil" remains high. UAE's main trading partners are the US, Japan, Germany, China, France, Great Britain and South Korea.

Abu Dhabi is the largest emirate, that produces 90% of all oil and gas, and also contributes 60% of the total GDP of UAE. Northern Emirates are considered poorer than others, accounting altogether only 6.6% of GDP.

One of the main distinguishing features of UAE economy is that oil revenues are not only used to diversify national production, but also to transform the country into a major international financial and tourist center.

Another feature of the country is absence of taxes (capital gains tax, tax on personal and corporate income). Lacking a unified tax system, UAE has agreements with more than twenty countries on avoidance of double taxation.

Major investments are being made in new buildings and modern desalination plants construction - it is necessary to meet the demand for fresh water not only for residents but also for hundreds of millions trees planted over the last 25 years.

Structure of the stock market

Local stock market  has been operating since 2000.

Local stock market  started operating only in 2000 with establishment of stock exchanges. For example, there are two exchanges in the UAE: Dubai Financial Market and Securities Market of Abu Dhabi. Procceses are supervised by the United Arab Emirates Administration of valuable goods and securities, which fully controls operation of the stock market, as well as monitors activities of companies whose securities are traded, investors and brokers.

Despite the fact that the number of registered companies is very small, Dubai financial market is considered to be the flagship of UAE stock market - it is trading about 80% of securities.

Securities Market Abu Dhabi was founded by the decree of the Government of the Emirate on November 15, 2000. The government granted it financial management independence and autonomous status. Fujairah, Sharjah and Ras Khaimah are now under the direction of this stock exchange.

The pace of  UAE stock market development is incredibly fast

Banks are also in

Banking structures of the country are actively involved in operations carried out by the exchange as well as insurance transactions. Thus, the conjugate investment banking sphere creates conditions for development of manufacturing industries - such as oil refining, gas liquefaction and production of copper, aluminum semi-finished products for equipment and machinery.

Shares and income

Nowadays, only a few companies of the Gulf and about 40 regional companies have listing of shares on the local stock exchanges.

At the same time, pace of development of the young (against the rest) UAE's stock market is incredibly fast. Exchanges increase the level of market capitalization and trading volumes for equities with speed of light. For comparison, at the end of 2005, capitalization of UAE stock market increased up to $ 245 billion. This is almost three times more than the figures with which 2004 was closed.