The United (but not Equal) Arab Emirates

The following post — a backgrounder on the economic structure and inequalities of the UAE — was contributed by Jenifer Fenton.

When six emirates proclaimed themselves a unified country in 1971, Ras Al Khaimah was not among them.  For Sheikh Saqr bin Mohammed Al Qasimi, the ruler of the emirate at the time, there was one remaining stumbling block: an imbalance of power that tilted strongly toward the economically dominant emirates. Today, that imbalance remains.

While Abu Dhabi is awash with cranes working around the clock to raise a post modern city from the sand, and the skyline of Dubai is exploding with glass towers, in the northern emirates what one sees is a  developing-world landscape.  In Ras Al Khaimah, many of the residential streets are lined with single-story homes with unsightly exterior air conditioning units, peeling paint and tin-roofed garages.  From the highways of Sharjah, drab concrete apartment blocks appear the norm rather than the exception.

Here “there is no oil,” Yousef Al Antali, a resident of Fujairah said.  “We live a simple life.” But growing slower is better, his friend Abdullah Al Khadddeim said. Maybe in “two to three years we will be the same as Abu Dhabi.” 

Nearly four decades ago, the poorer emirates — Sharjah, Fujairah, Umm Al Quwain and Ajman — lost much of their autonomy in return for the financial and political stability that joining Abu Dhabi and to a lesser degree Dubai could give them. Ras Al Khaimah, given assurances that it would play a part at “the heart of the federation,”  followed suit a few months later.

In the emirates, where millions of unskilled expatriate laborers earn a meager salary, poor is a relative term. But compared to Abu Dhabi and Dubai, the north of the UAE is very poor.  The wealth gap has always been there but as Abu Dhabi and Dubai have grown significantly in the last 10 to 15 years, the gap has been magnified. 

The Arab spring that is sweeping through the region has called attention to this disparity once again.

“Some of the northern emirates have been left behind,” said Abdulkhaleq Abdullah, a professor of political science at UAE University. “I think the UAE has its weak points…some (emirates) are weaker socially, economically and developmentally,” Abdullah said. The emirates are not homogenous and the leadership of all of the emirates must address employment equality, he added.

According to figures from the UAE National Bureau of Statistics (NBS), the national unemployment rate for Emiratis in 2009, the most recent statistics available, was 14 percent. In Fujairah and Ras Al Khaimah the number jumps to 20.6 percent and 16.2 percent respectively.  But Ajman and Umm Al Quwain, with small economies, fare far better than the national average.

Employment statistics alone though do not give a full picture.  The available facilities in each of the emirates vary greatly, due in large part to differences in population, area and resources. The Emirati population and land mass of the five smaller emirates combined do not equal the number of citizens or size of Abu Dhabi. Ajman has just 42,000 citizens. Umm Al Quwain has 17,400 citizens, according to the UAE NBS. In these emirates, it would not be possible for nationals to have the same standard of living as Abu Dhabi or Dubai, so some people migrate south. (More than eight million people live in the emirates, but the majority of people in the UAE are migrant workers — only roughly one million are Emirati.)

Abu Dhabi has more than the lion’s share of the country’s oil — 92 billion barrels accounting for eight percent of OPEC’s production in 2009, according to government figures.  While the emirate’s gas reserves were estimated to be 212 trillion cubic feet.

The five “poorer” emirates depend on the federal government, financed primarily by Abu Dhabi, to bankroll them. These emirates have benefited greatly for the last 40 years from this relationship. Subsidies — food, electricity, petrol, etc. — are not federal, but local according to the constitution. But this is where it gets a bit complicated. Abu Dhabi supports about 90 percent of the funds provided to the federal government. The federal government provides for water and electricity in Ras al Khaimah, Fujairah, Ajman and Umm Al Quwain - but not the other emirates. The federal government takes care of education in all emirates, but Abu Dhabi. Residential land plots are the responsibility of individual emirates, but Abu Dhabi and Dubai help out here again with direct grants.

The UAE is a federation of seven different autonomous economies, that is a “constitutional fact of life,” Abdullah said. Recently Abu Dhabi, perhaps rightly so to catch up with Dubai and Qatar, has focused much of its own efforts on developing its own emirate, giving second consideration to the other emirates, he said. Abu Dhabi and Dubai are growing on a global scale, but some of this growth has trickled down and helped the other emirates.  

The UAE is also refocusing — or continuing to focus — its attention on the north. “Historically there has been discontent in the northern emirates toward the federal government,” according to Theodore Karasik, a security analyst with INEGMA. The northern emirates’ alliance is important for the stability of the UAE given the borders of the Emirates and past associations with so-called “foreign influences,” including Saudi, Iranian and even Omani. But, to suggest there is any serious overt Iranian political influence in the north today would be overblown, Karasik added.

Economic disparities can contribute to dangerous discontent, but the UAE has not experienced anything remotely close to feelings of injustice seen elsewhere in the region.  However, “we are seeing proactive activity by the UAE federal government and Dubai to address economic imbalances,” Karasik said.  While the investment in the north may be a continuation of previous policies, the UAE is announcing recent upgrades in “a very public way…to show signs of good will,” Karasik added. They are sending a signal that the UAE is united.

This year, UAE President Khalifa bin Zayed Al Nahyan ordered a US$1.55 billion investment to expand the water and electricity supply in the northern emirates. A 100 kilometer pipeline is planned to supply Fujairah and its environs. The UAE also plans to build an oil refinery there. Another 60 kilometer pipeline will deliver water to Umm Al Quwain. Sharjah, which has suffered from power cuts, will get a new main transmission station. Abu Dhabi National Oil Company is also expanding its services in Sharjah to ease petrol shortages after dozens of Dubai owned Emirates National Oil Company group’s stations halted operations.

The International Monetary Fund applauded these actions. “The authorities’ plan to upgrade the infrastructure in the northern emirates is a step towards more inclusive economic development and should be expanded.”

Housing loans now totaling in the billions have been approved for thousands of Emiratis. In a number of emirates, including Ras Al Khaimah and Sharjah, President Khalifa approved immediate restorations and replacement “of dilapidated houses owned by citizens …to ensure raising of their living standards,” according to the state run news agency WAM.

But all of this spending is a drop in the bucket compared to the hundreds of billions Abu Dhabi is spending to develop its own projects: Yas Island, which features a Formula 1 track and a Ferrari theme park; Saadiyat Island, the future home of the Louvre and Guggenheim; Masdar City, a carbon-neutral development; Reem Island, what will be the central business district; and many more projects.

Dubai recently upgraded its infrastructure with a $7.62 billion dollar metro. It too is focused on its own emirate and addressing what the IMF estimates to be $31 billion of debt due in 2011-2012.  

It is federal policy that all Emiratis requiring benefits, regardless of their emirate, should receive the same help. All Emiratis are equal (with the exception of families in which the father is a foreign national, something the UAE said is being addressed.) But what is law, what is reality and what is perception does vary to a degree across the UAE due to the size of the local governments, their autonomy, their complexities and relationships with each other and with the federal government.  

But this interlocking also lends to the government’s stability, Karasik said. “The (UAE) federation is an excellent model based on tribes and traditions of this country and the people that live here.” It is a model with many voices.

As Nasser Al Shaikh, a prominent Emirati, recently tweeted “As long as there are 7 emirates, 7 royal families, 7 local Govt, we’ll have 7+1 different ways of doing things.”