United Arab Emirates is one of the most prosperous countries in the Middle East. The country credits its economic prosperity to its stable political environment. The UAE is the only country in the Middle East that does not have a history of political turmoil. The UAE is an Islamic country. Therefore, the ideals of Islam are the basis of its constitution. Dubai, one of the emirates of the UAE, is the most prosperous emirate of the UAE. The UAE is one of has one of the largest oil reserves in the world. Availability of funds from funds from oil provides the government with vast amounts of money for financing various infrastructural projects. These infrastructural projects help in developing various sectors of the economy. The availability of huge oil reserves guarantees the availability of funds for investments in various infrastructural projects in the future (Shemirani, 2011).
The constitution of the UAE permits private, public, and state ownership of property. Everybody should have access to public property. However, the constitution does permit private ownership of certain vital properties. This is because privatization of these properties would make a few people own a majority of vital resources. In addition, privatization of these properties may not lead to fair use of the property. The constitution of the UAE permits privatization of other types of public property. Upon privatization of public property, the new owners of the property should pay tax (Zakat) on the property. The constitution of the UAE ensures that natural resources and other vital properties whose privatization would be difficult remain as property of the state.
However, the state may allow private entities to use the properties temporarily. Users of these properties should pay tax to the government. The constitution of the UAE allows private ownership of property. Various laws help in the protection of private property. In the UAE, companies and wealthy individuals should give 2.5% of their income to the Zakat fund. The government uses the Zakat funds to help the poor in the society. There are many similarities between the economic system of the UAE and the Islamic economy. However, the emphasis of the economic system of the UAE is on wealth creation. On the other hand, the emphasis of the Islamic economy is on wealth distribution (Tétreault & Denemark, 2004). This is one of the major differences between the Islamic economy and the economy of modern Islamic countries.
The current economic model of the UAE ensures that there are no unfair business practices. Hoarding is one of the unfair business practices that the government prohibits. This is because hoarding creates a temporary shortage of goods leading to an increase in prices. Hoarding enables traders to make huge profits while exploiting consumers. Therefore, the government ensures that there is no interference in the market. In addition, the government ensures that there is freedom of information. Freedom of information ensures that there are good business practices. In some instances, the government may intervene to prevent exploitation of consumers. The government may fix the prices of various vital products (Shoult & Terterov, 2006). On the other hand, the Islamic economy prohibits governments from interfering with the market. It relies on the ability of the market to regulate itself. However, it is a fact that there are unscrupulous traders who may influence the market to their benefit. Restriction of government interference is one of the major limitations of the Islamic economy.
The monetary policy of the UAE strives to keep the theoretical rate of inflation at zero. It maintains the value of the currency according to a basket of foreign currencies and various products. This method is similar to the fiscal policy of the Islamic economy. The current economic system of the UAE allows banks to charge interest on money loans. Banks are at liberty to provide sharia compliant loans or conventional loans, which usually attract an interest. Sharia compliant loans do not usually have any interest. In the current economic system of the UAE, banks have formulated various sharia compliant loans that enable them to make profit. Banks may provide customers with loans at zero interest rate but inform customers to pay any amount of money that they wish to pay over the borrowed amount. If the customers decide to repay the exact amount of money borrowed, the bank would not make any profit. However, most customers usually pay a little more than their loan amount as a sign of appreciation (Warde, 2010). This enables banks to make profit from lending money to customers. This enables financial institutions to remain profitable.
The economic system of the UAE facilitates economic growth. It ensures that there is mutual benefit between the trader and the customer. The economic system is a hybrid of the capitalistic and socialist economic system. Since the UAE, is an Islamic country most economic policies are sharia compliant. The UAE government should not change its current economic system. Changing the economic system would reduce the attractiveness of the economy to foreign investors.
References
Shemirani, M. (2011). Sovereign wealth funds and international political economy. Surrey: Ashgate Publishing.
Shoult, A. & Terterov, M. (2006). Doing business with the United Arab Emirates. London: GMB Publishing.
Tétreault, M.A. & Denemark, R.A. (2004). Gods, guns, and globalization: Religious radicalism and international political economy. Boulder, CO: Lynne Rienner Publishers.
Warde, I. (2010). Islamic finance in the global economy. Edinburgh: Edinburgh University Press.