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WEEKLY NEWSLETTER
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United Arab Emirates
Index
The provisional constitution stipulates that each
amirate
contribute to the federal budget. In practice, however,
Abu Dhabi
was the only contributor in the 1970s; Dubayy began to
contribute
in the early 1980s. In 1991 Abu Dhabi provided 77.5
percent of
the federal budget and Dubayy, 8.5 percent. The government
levies
taxes on oil companies and banks in Abu Dhabi and Dubayy
but not
on other businesses and individuals.
The poorer amirates benefit from federal expenditures
on
defense, infrastructure, education, and social services,
but they
draw up their own budgets (which are seldom published) for
municipal expenditures and industrial projects. Some of
these
projects have been motivated more by prestige than
practicality.
For example, Dubayy, Sharjah, and Ras al Khaymah have
built large
international airports, even though they are a
one-half-hour
drive from each other and less than a two-hour drive from
Abu
Dhabi's large international airport.
Ras al Khaymah and Sharjah have borrowed heavily to
finance
facilities and industries, resulting occasionally in
economic and
political problems. Sharjah, for example, suffered a coup
attempt
in 1987 carried out by opponents critical of the amir's
alleged
financial mismanagement. The amirate's debt burden at the
time
was estimated at US$920 million.
The revenue and spending estimates for the UAE's first
and
only five-year plan (1981-85) were based on strong oil
revenues
in the late 1970s. Petroleum revenues fell in the early
1980s,
however, rendering many of the plan's goals unattainable.
The
federation's first budget deficit (Dh3.9 billion) occurred
in
1982. Since that time, government planners have opted for
a more
flexible approach, keeping in mind the vagaries of the
world oil
market and tending to be more conservative in revenue and
spending projections. Even so, sudden drops in oil
revenues have
repeatedly forced the government to put new projects on
hold and
to freeze current projects. Deficits generally are funded
by Abu
Dhabi and Dubayy and by borrowing from the Central Bank.
Although there is no attempt at long-term, coordinated
development planning, three main objectives have guided
federal
government spending. These include strengthening the
federation's
physical infrastructure and social services network,
diversifying
the economy, and expanding entrepĂ´t trade.
Despite slowdowns in world oil markets and amirs
jealous of
their local sovereignty, the UAE has been able to finance
massive
infrastructure projects (roads, utilities, communications,
ports,
and airports); modern education, health, and welfare
systems; and
improvements in agriculture and fishing. The lion's share
of the
federal budget, however, goes to defense (see
table 29,
Appendix). As a result of the continuing potential for
conflict
in the gulf in the 1990s, defense will probably continue
to
absorb between 40 and 50 percent of federal outlays and
will not
face the same cuts as do other sectors if the economy
contracts.
After battling budget deficits during most of the
1980s, the
UAE saw budget surpluses in 1990 and 1991. Deficits were
projected to return in 1992 and 1993, with an almost
US$710
million shortfall expected in 1993 (the figure includes
US$245
million rolled over from the previous year's deficit).
Abu Dhabi is one of the world's most generous donors of
foreign aid in terms of GDP and population. In 1981
foreign
grants and loans amounted to US$2.7 billion, or 8 percent
of GDP.
Even in leaner times, aid in 1983 was US$1 billion, or 4
percent
of GDP. The Abu Dhabi Fund for Arab Economic Development,
with
paid-up capital of US$500 million, extends loans and
grants
mainly to Arab and Muslim countries. Recipients have
included
Bangladesh, Egypt, Jordan, Mauritania, Morocco, Syria, and
Yemen.
The level of annual outlays depends on oil revenues. In
1989 the
fund's committed capital was US$2.2 billion. Loans in 1988
amounted to US$41.1 million, up from US$4.2 million in
1987.
Data as of January 1993
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