IMPORTANCE OF FOREIGN-INVESTMENT FOR THE LONG-RUN ECONOMIC-DEVELOPMENT OF THE UNITED-ARAB-EMIRATES

For the United Arab Emirates (UAE) to sustain a reasonably high living standard after the oil runs out, it must make investments that yield sufficiently high rates of return. This paper argues that because prospects of returns on domestic investments are severely limited by several major structural bottlenecks, an active foreign investment strategy will be essential to economic development of the UAE, at least as long as the bottlenecks persist. It then shows that the UAE's foreign investment decisions have been governed by an extremely risk-averse attitude, leading to a disproportionately large portfolio share of highly liquid assets with negligible rates of return. Several investment measures and opportunities are identified to improve its foreign asset portfolio performance.