UAE leads the GCC in economic diversification efforts – report

The UAE has led the regional pack in terms of economic diversification efforts, and stood 16th in global rankings for ease of doing business. 

The UAE’s ease of doing business improved 12 spots within a period of five years, the report published by the UBS Global Wealth Management’s Chief Investment Office, suggested. 

Geographical and cultural proximity, less barriers to trade, a business-friendly environment, a diversified economic structure in manufacturing, and a skilled workforce are key to economies responding effectively to shifting supply chains.

Niels Zilkens, head, Arabian Gulf at UBS Global Wealth Management, said:” Emerging markets will encounter opportunities and challenges informed and shaped by the new dynamics created after the Covid-19 pandemic. Building human capital, developing a specialised yet flexible economic structure, and creating a business-friendly regulatory environment do not happen overnight – and neither does the relocation of supply chains. Not all countries will be winners in this gradual shift from global to local, but the UAE has laid strong foundations to leverage on the new opportunities arising. We believe that those governments, entrepreneurs, and investors who incorporate this long-term thinking into their current decision-making will be better prepared for the future.”

While the UAE is already home to a diversified range of industries, it has its sights set on promoting robotics and advanced manufacturing techniques to better position the local economy for the future.

The UAE government has also effectively addressed the functioning of supply chains, pivotal to food security, underscoring the leadership’s focus on the localisation of food production, which aims to diversify the supply mix and offer a wide range of investment opportunities.

Read more: Sheikh Mohammed reiterates UAE’s drive to enhance food and water security

More so, recent surveys conducted by the UBS Evidence Lab illustrate that businesses are keen to relocate their foreign operations as a result of coronavirus-related shutdowns.

Of the US, North Asian, and Chinese firms surveyed, 85 per cent, 76 per cent and 60 per cent respectively, have moved or are planning to move production out of China.

Chinese manufacturers also reported they would move 30 per cent of their export capacity outside of the country.

UBS expects the trend toward more localised economies to advance in the years ahead as it relies on a range of crucial factors such as the complexity of supply chains, access to a competitive workforce, energy or commodities, appropriate infrastructure or business environment, and geographical proximity to final sales markets, among others.

Michael Bolliger, chief investment officer, emerging markets at UBS Global Wealth Management said: “The Covid-19 crisis has made the world structurally less global, accelerating further the de-globalisation and near-shoring trends which will be affecting significantly emerging markets in the years to come. Although the shift will take place gradually, investors should be exploring the increased importance of sustainable investing, the opportunities and challenges arising from the fourth industrial
revolution-digitalisation, automation, and the use of robotics are all on the rise-and, finally, climate change and its effects on food security.”