The United Arab Emirates (UAE), once completely reliant on oil revenues, is rapidly diversifying its economy. UAE's recent economic growth was based on a business-friendly environment, in which the burden of government regulation is low and services are provided efficiently, attracting substantial inflows of foreign investment. The result was an increasing service sector and a construction boom. The financial crisis has popped the construction bubble, and corruption cases have come to light. Several high-profile scandals have demonstrated a need for stricter controls on the higher echelons of both public and private sectors. These scandals confirm observations made about the UAE having an opaque business climate, prompting the government to accelerate its on-going efforts to enhance transparency. On the other hand, episodes of petty corruption are reportedly uncommon.
Positive developments in relation to corruption and investment:
- The government has made some efforts to improve UAE's reputation of lacking transparency, and in a September 2009 interview, the Sheik of Dubai reiterated that his government will fight corruption and close loopholes that allow for corrupt practices to occur.
- The procedures to get an operating licence are straightforward and publicly available in all emirates.
- Anti-corruption and anti-fraud legislation is evenly enforced, thus providing a strong deterrent to future illegal acts.
- The State Audit Institution has drawn up an anti-corruption law. The law will be discussed in the cabinet as well as in the Federal National Council and then submitted to the Federal Supreme Council for ratification.
Risks of corruption:
- Information on business-related corruption in the United Arab Emirates is scarce, making an accurate estimation of the extent of corruption very difficult.
- In the wake of the financial crisis, several high-profile cases of corruption have been detected.
- A number of real estate and financial companies are under investigation, government owned Nakheel being the most prominent. AED several billion have reportedly been defrauded, embezzled or used as bribe money.
- Market competition in the UAE needs to be improved, as foreign companies still have to rely on local sponsorship if they want to succeed in their business. Moreover ruling families' involvement in the economy provides for an uneven playing field.
- There is no civil society organisation working with anti-corruption in the UAE and there is a great scarcity of reports on the issue.
- The absence of financial disclosure laws makes the effective implementation of anti-corruption policy difficult.