Page 49 - Azerbaijan State University of Economics

Bahruz Babayev: Studying the Case of the UAE in Economic Diversification and Non-Oil
Export Growth: Public Policy Lessons for Azerbaijan

As shown in the official website of the government of the UAE “(By the year 2021),
the UAE will benefit from a sustainable and diversified economy, flexible in adopting
new economic models, and capitalizing on global economic partnerships to guarantee
long-term prosperity for current and future generations of Emiratis” (Government of
UAE, no date). The government intends to build knowledge and innovation-based
economy in 2021 and onwards with the special focus on the development of a touristic
sector and human capital. As it is seen, only 12% of export revenues of the UAE come
from oil revenues, and 88% of revenues come from non-oil exports. As mentioned
earlier, oil and gas extraction simply enables the government of the UAE to
accumulate financial capital to finance the development of other sectors of the
economy, but of course, development path chosen by the government also plays a
vital role in the diversification of the revenues in the country.

Considering the above-mentioned argument, it is important to present the successful
policies of the UAE in economic diversification and deduct public policy
recommendations for Azerbaijan which is also recognized as a resource-based
economy. It is important to note that “diversification is important to promote
economic development, to create job opportunities for a rapidly growing local
workforce, but also to reduce or spread the risk of a high economic concentration,
which makes an economy vulnerable to external events, such as changes in the price
of the dominant commodity” (Schilirò, 2013: 3). Economic diversification also
requires the structural transformation of the economy as well as the correctly chosen
development model. The following policies are being implemented by the
government of the UAE to achieve economic diversification.

“The importance of the UAE in the global arena is a product of its strategic location
connecting the east and the west, its liberal and competitive business environment,
and the government focus on diversifying from its dependence on oil sources”
(Grant, Golawala, McKechnie, 2007:507). It is extremely important to note that the
following factors which contribute to the economic success of the state of the UAE
is its model of economic development with which most authors in the economic
literature agree. Of them, the first factor is the discovery of oil and revenues from
energy resources, including oil and gas. Certainly, the revenues contribute to the
policy of the government to invest in improving the socio-economic conditions of
the population and perform robust infrastructure projects. The second highlighting
factor is the adoption of the free market system.

Since gaining its independence, different to most developing economies the UAE
has accepted a free market based on “freedom of investment and trade in all fields,
and where the private sector plays a leading role in the national economy since the
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