Middle East Regional Powers and UAE Indices Analysis

Subject: Economics
Pages: 5
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Study level: PhD

An Overview of the Index

GDP or the gross domestic product is the combined value of the final products and services generated in a country within a particular duration, usually annually, and production levies less any subsidies or grants.1 GDP per capita is expressed in purchasing power parity (PPP) based on the “2011 international dollar rates”.2 An international dollar contains an equivalent GDP value in a given country as that of the American dollar ($) in the U.S. GDP per capita is an important indicator of economic development in a country. However, the index does not indicate asset/resource depreciation, reduction, or depletion.

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The Ranking of the Middle East Countries

In the Middle East region, Saudi Arabia has the highest GDP value of $1,683 billion, which places it at position 14 globally. The World Bank (2016) ranks Turkey at position 17 with a total GDP of $1,589 billion, which makes it the region’s second largest economy.3 The Islamic Republic of Iran with a GDP value of $1,371 billion follows Turkey closely in the third place. Globally, Iran is ranked the 18th largest economy in terms of GDP. Egypt with an estimated GDP of $1,048 billion takes the fourth slot. Globally, Egypt is ranked the 23rd largest economy in terms of GDP worldwide. The United Arab Emirates comes in fifth in the region. Its GDP is worth $648 billion, placing it at number 32 globally.4 In contrast, Israel has a GDP of $282 billion and is ranked at position 58 in the world. Therefore, Israel’s GDP is the lowest in the region.

Why the Countries are Doing Good or Bad

GDP growth in the countries of the Middle East is slowing mainly due to declining oil prices. According to the International Monetary Fund, the GDP growth is expected to drop to 3.25% in 2016 from 3.5% in 2015 due to the declining global oil prices.5 Another factor accounting for the low GDP growth is unemployment. Saudi’s unemployment rate is the highest (43%) while the UAE has the least (14%).6 Besides, unemployment among women, poor governance structures, social tensions, reduced competitiveness, public sector inefficiency, and lack of transparency contribute to the lower productivity growth in this region.

How the UAE can Improve

For the UAE to become the country with the highest GDP among the six countries, it should implement reforms that support the private sector to create employment and raise productivity. In addition, fiscal consolidation is needed to reduce external debts and strengthen key growth areas. Increased public spending in key non-oil sectors, such as tourism, can have a positive impact on UAE’s productivity growth.7 Public investment is also required in education and health to boost the productivity of the labour force. In addition, progressive tax systems and appropriate reallocation of the energy subsidies can enhance the UAE’s competitiveness in the region. Financial and labour market (emiritisation) reforms are required to support growth and reduce unemployment.

United Nation Human Development Index 2015

An Overview of the Index

The United Nation Human Development Index (HDI) measures three dimensions of a nation’s human development achievement, namely, the people’s health, standards of living (per capita income), and education.8 The indicators of population health and education include “life expectancy at birth” and the average years of “schooling for adults aged 25 years or more”, respectively.9 On the other hand, a country’s standard of living is evaluated by its GNI per capita. Besides measuring human development, the HDI can indicate the efficiency of national policy choices. In this case, a scenario with two countries with comparable GNI per capita, but differing HDI would indicate poor national policy choices. The HDI is limited to measuring specific elements of human development. It does not indicate a country’s level of poverty, economic inequality, or gender disparity.

The Ranking of the Middle East Countries

According to the 2015 United Nation Human Development report, countries with the highest HDI in the Middle East include Israel, Saudi Arabia, and the UAE. Israel is the leading country in the Middle East with an estimated HDI of 0.894. Saudi Arabia comes in fourth in this ranking with an HDI of 0.837 followed closely by the UAE whose HDI is 0.835. Iran is placed at position 10 in the region with a moderate HDI of 0.766. Turkey also has a moderately high HDI of 0.761 compared to Egypt’s 0.690. Thus, based on this report, the Middle East countries can be ranked in descending order of HDI as follows: Israel, Saudi Arabia, the UAE, Iran, Turkey, and Egypt.

Why the Countries are Doing Good or Bad

In general, countries with an HDI value of >0.8 are considered to have very high human development. The other categories include 0.7-0.79 (high), 0.55-0.69 (medium), and <0.54 (low human development).10 Based on this criterion, Israel, Saudi Arabia, and the UAE are doing good in terms of human development. Thus, these countries have public spending policies that aim to improve literacy, increase life expectancy, and promote the standards of living. In contrast, Iran and Turkey put moderate investments in the three human development areas. Egypt, which falls in the low HDI category, only spends a small proportion of its GNI in the health and educational wellbeing of its citizens.

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How the UAE can Improve

The UAE can improve its human development standing in the region by adopting policies that promote the physical and educational wellbeing of its citizens. In health care, the UAE government should expand its infrastructure (hospitals) and enhance the efficiency in care delivery to increase life expectancy. The country can improve the education levels by providing incentives and sponsorships to poor kids to join schools. The UAE should also strengthen the Emiritisation program to reduce unemployment, social inequality, and poverty among its nationals. Social protection programs can also shield vulnerable groups, such as the disabled and the elderly, from social risks that affect human development.

The Global Competitiveness Index

An Overview of the Index

The Global Competitiveness Index (GCI) ranks the competitiveness of countries based on 110 variables organised into twelve domains with different weights.11 Each domain contains the key determinants of competitiveness as indicated by the results of an Executive Opinion Survey conducted in each of the 144 economies compared. The principal domains include institutions, infrastructural development, quality health and basic education, and strong macroeconomic structures, among others. The GCI report indicates that economic growth should necessitate a rise in the minimum wage. As a result, productivity has to improve to support higher wages, leading to a rise in the overall competitiveness of an economy.12 The GCI does not indicate economic growth of a country. However, the index is an important indicator of a country’s ability to support economic prosperity of its people through policies and institutions.

The Ranking of the Middle East Countries

The UAE has the highest GCI ranking among the countries in the Middle East. It is ranked at position 12 with a GCI value of 5.3.13 Saudi Arabia, with a GCI of 5.1 and a global ranking of 24 is the second most competitive economy in the Middle East. In the third place is Israel, which is ranked number 27 globally and has a GCI value of 4.9. Turkey, Iran, and Egypt have GCI values of 4.5, 4.0, and 3.6, and occupy positions 45, 80, and 119, respectively.

Why the Countries are Doing Good or Bad

The UAE and Saudi Arabia are among the top 30 most competitive countries worldwide. Thus, their institutions, infrastructure, economic structures, innovation, health systems, and basic education are well developed.14 On the other hand, Israel, Turkey, and Iran have moderate levels of competitiveness, which indicates that they are efficiency-driven (production processes) economies. In contrast, Egypt, which has the lowest GCI value in the region, is a factor-driven economy, i.e., it competes at the level of the natural resources.

How the UAE can Improve

The UAE tops the six countries as the economy with the highest GCI value. To maintain the high competitiveness, the UAE firms must be able to develop unique and innovative products that raise the standards of living and per capita income of the citizens. Furthermore, the production processes must be efficient and anchored on innovation.

Bibliography

International Monetary Fund. “World Economic and Financial Surveys: Regional Economic Outlook.” Web.

Sala-i-Martin, Xavier, and Elsa V. Artadi. The Global Competitiveness Index, Global Competitiveness Report. Cologny: Global Economic Forum, 2004.

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United Nations Development Program. “Human Development Report 2015: Work for Human Development.” web.

United Nations Development Program. “What does the Human Development Index Tell Us?.” Web.

World Bank. “GDP, PPP (Constant 2011 International $).” Web.

World Economic Forum. “Competitiveness Rankings.”  Web.

Footnotes

  1. World Bank, “GDP, PPP (Constant 2011 International $),” Web.
  2. Ibid., 4.
  3. Ibid.
  4. International Monetary Fund, “World Economic and Financial Surveys: Regional Economic Outlook,” Web.
  5. Ibid.
  6. Ibid.
  7. Ibid.
  8. United Nations Development Program, “Human Development Report 2015: Work for Human Development,” Web.
  9. Ibid., 6.
  10. United Nations Development Program, “What does the Human Development Index Tell Us?,” lWeb.
  11. Xavier Sala-i-Martin and Elsa V. Artadi, The Global Competitiveness Index, Global Competitiveness Report (Cologny: Global Economic Forum, 2004), 9.
  12. Ibid., 11.
  13. World Economic Forum, “Competitiveness Rankings,” Web.
  14. Ibid.