Federal benefits

The goal of economic diversification away from oil revenue dependence is not new, but there is an urgency to find new policy responses since late 2014 when oil prices declined sharply. The United Arab Emirates (UAE) has been successful in part because of the federal structure of the government, which has encouraged policy differentiation, learning, and even competition between the seven emirates. Because resource endowment is not equal across the federation, nor are the proceeds of oil wealth evenly distributed, policy experimentation and change has flourished, furthering the pace of economic diversification. This policy learning and differentiation between emirates predates the 2014 oil price collapse, but it has set the stage for a pattern of policy flexibility now embraced and accelerated by the central government between 2015 and 2019. This chapter focuses on a series of policy choices and reforms, from labour market regulation to fiscal reform, to policies affecting the investor and business climate. In the UAE, while we have seen centralisation of state authority, especially in foreign policy, there remains a benefit to new economic policy formulation, experimentation, and competition between emirates. Breaking down the policy agenda post-2014 in the UAE, we can identify three core economic response policy areas: fiscal policy, social development policy, and diversification policies.