Unfortunately for the UAE, its economic issues expand beyond oil dependence. A notable problem the country is struggling to overcome is its debt troubles. This was exemplified in 2014 when Dubai favorably refinanced $20 billion USD in maturing debt to Abu Dhabi and the UAE central bank. Despite this, Dubai still had public debt of $40 billion coming due between 2015 and 2017. This shows that public sector debt is an issue that will need to be addressed in the near future.

 

As mentioned when discussing the UAEs oil’s dependence, economic stability in the UAE is put at risk by low oil prices. This risk is compounded by high U.S. interest rates, stock market volatility, and low banking system liquidity if governments and government-related entities withdraw deposits. In response to these risks, the UAE plans on implementing a value-added tax (VAT) January 1st of 2018. This will consist of a 5% tax on items such as education, healthcare, and food. Discussions among other Gulf Cooperation Council (GCC) countries have occurred regarding implementing similar VATs in all GCC countries in January 2019. The desired result is to provide funds for social and economic programs that will drive the diversification necessary to overcome the risks mentioned above.

 

Another factor limiting the UAE’s ability to diversify is its restrictions on foreign investment, including requirements that joint ventures need to have majority ownership by UAE nationals. A potential way to increase FDI flows is through fully implementing Competition Policy Law. This would ease FDI restrictions, promote commercial diplomacy with other countries, and increase competition in foreign markets. It is certain that the UAE faces a wide array of threats to its economic stability. Despite this, the country has prioritized their efforts to diversify their economy through innovative policy and efficient allocation of investments.