The UAE maintained its position as the most prosperous country in the Arab world and its residents have had the greatest improvement in living standards anywhere in the world over the past decade, according to the latest prosperity index by the Legatum Institute.
“The Middle East and North Africa has seen significant growth in the living standards of its citizens,” the report said. “The United Arab Emirates has seen the greatest increase in standard of living in the world in the last ten years; and there has also been an increase in people’s satisfaction with their standard of living right across into North Africa.”
The UAE came in at number 39 out of 149 countries in an index that measures economic quality, business environment, governance, personal freedom, social capital, safety and security, education, health and natural environment. The second best performer in the measure was Qatar, which came in at number 47 in the rankings, followed by Bahrain at 62 and Oman at 73.
It is the UAE’s decades old policy of diversifying away from an oil-based economy that has paid dividends. Those nations that rely most heavily on oil revenue, for example Kuwait – where oil represents over 38% of GDP -have recorded sharp falls in overall prosperity
The UAE had managed to hold its ground in the prosperity index in the wake of the oil crash of 2014 because its economy has been able to diversify away from relying too heavily on oil revenues to fuel GDP growth, according to Legatum.
The country’s economic diversification strategy is decades old, with moves into various industries including aviation, financial services, tourism and heavy industry. The UAE government has also reduced subsidies on water, electricity and petrol prices, introduced taxes on cigarettes and fizzy drinks, and is preparing to introduce a 5 per cent value added tax in January.
Kuwait by contrast fell to number 80 on the prosperity index ranking from 71 last year, due to the centrality of hydrocarbon revenues to its economy.
“As has been illustrated in our previous reports, countries that rely on single commodities for income are generally not successful generators of overall prosperity,” the study said.
“Some nations in the Middle East and North Africa, such as Kuwait and Iraq, generate an enormous share of their wealth through oil rent whereas others such as the UAE have reduced this through economic diversification.” For the UAE, revenues from oil as a percentage of gross domestic product stands at 11.2 per cent whereas for Iraq that figure is 28.6 per cent and 38.5 per cent for Kuwait.