United Arab Emirates Country Brief – January 2008

Bilateral Relations

Bilateral relations between Australia and the United Arab Emirates (UAE) are friendly and growing. They have traditionally been based on extensive trade relations as well as people-to-people contacts arising from the growth of direct air links. The UAE has been host to a number of high-level Australian visitors, with the Governor-General, former Prime Minister, former Ministers for Defence, Foreign Affairs and Trade and several state Premiers and Ministers having visited the UAE in recent years.

Sheikh Mohammed bin Zayed Al-Nahyan, the Crown Prince of Abu Dhabi, has been the most high-profile visitor to Australia in recent years.

The Council for Australian-Arab Relations (CAAR) is working to broaden and deepen relations with Arab countries, including the UAE.

Political Overview

The UAE is a federation of seven Emirates (Abu Dhabi, Dubai, Sharjah, Ras Al Khaimah, Ajman, Umm Al Quwain and Fujairah) that federated in December 1971. Since that time, the UAE has developed rapidly into a nation with modern infrastructure and a high standard of living.

The current President is HH Sheikh Khalifa bin Zayed Al Nahyan, who is also ruler of Abu Dhabi Emirate. The Ruler of Dubai, HH Sheikh Mohammed bin Rashid Al Maktoum, is the Vice-President, Prime Minister and Defence Minister.

The UAE federal structure includes a Supreme Council (comprising the rulers of each Emirate), a Council of Ministers, a semi-appointed Federal National Council (half the members are elected) with advisory powers and an independent judiciary. Each Emirate is nevertheless still governed by its own ruler and has its own local government.

The UAE is a member of the Gulf Cooperation Council (GCC), which also includes Saudi Arabia, Kuwait, Oman, Bahrain and Qatar. It is a member of the Arab League, the Organization of the Islamic Conference, the United Nations and the WTO.

Economic Overview

The UAE has the world's third largest conventional oil reserves and fifth largest natural gas reserves and is a major player in world energy markets. These reserves are overwhelmingly located in Abu Dhabi. The UAE is the Middle East's second largest economy after Saudi Arabia.

In the medium term, the UAE economy will continue to rely on its huge oil and gas reserves - which account for around a third of GDP, 40 per cent of exports, and the bulk of government revenue - to underpin its economic development. Investment income is also substantial and provides a further element to economic activity. Dubai Emirate has used its oil reserves to fund a range of diversification efforts to establish itself as a tourism, ICT, re-export and financial hub. Taking full advantage of its position near the head of the Gulf, it has become the key regional entrepot. Dubai has developed prestige hotels, massive port facilities and a range of free trade zones to attract both manufacturing and services industries. Increasingly, other emirates are looking to emulate the Dubai model, albeit on a smaller scale.

Bilateral Economic and Trade Relationship

The bilateral relationship has a strong commercial focus. The UAE is Australia’s second largest merchandise trade market in the Middle East and our largest services trade partner.

Australia's exports to the UAE have undergone a remarkable diversification away from their traditional primary product base. Elaborately transformed manufactures (ETMs) grew from barely 19 per cent of our total exports to the UAE in 1994 to over 37 per cent in 2004. This diversification gathered pace with the commencement of passenger motor vehicle (PMV) exports from Australia to the UAE in 1996: Australia’s largest export to the UAE are PMVs, worth $331 million in 2006-07. Other ETM exports include telecommunications equipment, tubes, pipes and fittings of steel, motor vehicles parts, civil engineering equipment and plastic tubes, pipes and hoses. Alumina, meat, dairy products, live animals and vegetables are among the main primary product exports.

Australian exports to the UAE have grown 45.1 per cent to A$2.4 billion. In 2006-07, two-way merchandise trade between Australia and the UAE was worth over A$4.1billion. In 2006-07, imports from the UAE rose by 162.3 per cent to A$1.7billion, with crude petroleum imports reaching A$1.5 billion.

The Australian Embassy in Abu Dhabi estimates there are around 12-15,000 Australian nationals and over 300 Australian companies in the UAE. Around a third of all Middle East tourists to Australia are from the UAE. The continuing expansion of air services between Australia and the UAE is likely to contribute to continued tourism growth. A revised Air Services Agreement was signed in March 2007 that provides a phased increase in capacity entitlements for UAE carriers to Australia. The number of UAE nationals studying in Australia continues to grow rapidly (showing a 30 percent annual increase), making the UAE the third-largest market in the Middle East for student recruitment. UAE students numbered 1120 by the end of 2006.

Bilateral free trade agreement negotiations between Australia and the UAE commenced in 2005 and made substantial progress, but were converted to broader GCC-wide negotiations in 2006 following a change in GCC policy.

Export Opportunities

The UAE is Australia's second-largest market in the Gulf, with excellent growth prospects. It has a sound economy, a fast-growing and youthful population, low barriers to entry, a well-managed banking system, excellent infrastructure, and a sophisticated business community familiar with Western practices. It is an intensely competitive market.

Australia's profile in the UAE is high. There is increasing recognition of Australian companies and capabilities. The rapid increase of UAE visitors to Australia and of students studying in Australia are also prime drivers in this new business engagement.

The activities of Australian companies in the UAE include steel trading, building, construction and financial services, banking services, materials and equipment, agricultural supplies and services, industrial minerals, dairy products, marine manufacturing, education and training services, sports and recreation, health services, livestock, oil field supplies, courier and freight services. Many use Dubai as a regional base in view of its world-class transport, financial and communications infrastructure.

Highly complementary economies produce a good fit. Australia's advanced engineering capability is ideal for the UAE's huge infrastructure programs. Australian small and medium sized enterprises (SMEs) offer world class services that can be readily adopted in the UAE government and private sector.

Further information

Trade Watch Contacts

If you would like more information on the trade and economic conditions in UAE please email the Department of Foreign Affairs and Trade.