A good rule of life is that there is no free lunch. The examples offered as proof to the contrary are simply misunderstood as they are pure luck, which would be clear if the many comparative failures are also taken into account. In a country – indeed a region – that has had meteoric growth over the past half-century, far too many participants seem to have confused a long-term economic bull market with corporate success.

To use the vernacular of investors, there was no alpha, which is value creation by individual companies, and it was all beta, which is company growth due to growth of the economy.

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The Federal Open Market Committee (FOMC) of the United States Federal Reserve recently decided not to increase interest rates. This is significant because US interest rates affect not only the economy of the US but every single economy in the world in quite a material way.

Much of the analysis on how the actions of the FOMC will affect the UAE’s economy mirror the analysis for emerging markets as a whole. There is much one can learn by looking at other economies but emerging economies are not identical to each other and each has unique characteristics that simply do not fall within the norms of the emerging markets as a whole.

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The language used in discussing Greece’s economic dilemma is getting in the way of a solution. In business negotiations it is usually quite useful to look at the major issues and try to reframe them. This is no different when talking about economies.

Issue 1: The Greeks “rejected austerity.”

Reframe 1: The Greeks rejected the controlled austerity offered by the EU in favour of the chaos that the current Greek government has ensured for its citizens. This reframe is extremely important as the structure of the Greek government’s referendum was negligent and potentially fraudulent: they did not offer their citizens an explicit choice between two courses of action, instead they allowed one of the choices to be implicit. By doing so the Greek government betrayed their own people by hiding the risks from them.

What comes out of this reframe is that the gap in reality as understood by the Greek government and its citizens needs to be narrowed and even eradicated. This will take a lot of courage from the Greek government.

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The phrase “UAE dependence on foreign labour” is a mainstay of any discussion about the UAE’s economy. It sounds self-evident, doesn’t it? I, however, refuse to believe an opinion that is stated as fact, regardless of how authoritative the statement might sound.

The implication in the statement is that if foreign labour were to leave the UAE then the economy of the UAE would be negatively impacted. This misses the point that the factors affecting an economy are many, and are dynamic. For example, the statement does not address how easy to it is to replace labour. But that is for another article.

In this article I’ll look at what the relationship between foreign labour and the economy are, which of these leads and which of them follows and what this means to the UAE.

So how should we investigate this? I have heard it said that a picture is worth a thousand word. Let me present three.

Source: The World Bank

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From the point of view of a national economy, what does it mean to be a successful company? Is it contribution to GDP?

GDP is an attempt at measuring the production of an economy. It is not an efficiency measure, but a measure of overall economic strength.

GDP is of course difficult to measure. First, how does one collect the necessary information? In most countries the tax authority can provide this information since all commercial transactions must be reported to the authority. In the UAE there is no such authority and this creates a challenge.

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