Lack of investment in human capital risks holding back growth in the UAE, a new report by the ICAEW has warned.
Spending on skills would help to complement diversification efforts involving investment in financial services, infrastructure and tourism, said Peter Beynon, the regional director of the accountancy and finance group.
"More investment is needed across the region in 'human capital'; ensuring the growing population has the skills needed to grow the economy and to attract people to do business here," he said.
"The private sector must be allowed to flourish in order to make sure that growth is sustainable in the longer term."
Both Abu Dhabi and Dubai have spent heavily in recent years to widen their sources of growth into sectors such as manufacturing, services and tourism. Abu Dhabi's planned financial free zone, Global Marketplace Abu Dhabi, and the new airport taking shape in Dubai are examples of the push.
Efforts to develop human capital range from spending more than a fifth of the national budget on education to setting quotas requiring companies to hire Emiratis.
Financial services was a growth sector in the capital, said Charles Davis, the head of macro-economics at the Centre for Economics and Business Research, which produced the report.
"Creating a financial zone, which will attract multinational businesses, should boost this further," he said.
"However, petroleum products still accounted for over half of Abu Dhabi's GDP. We expect that Abu Dhabi will continue to grow faster than the UAE as a whole, but it will need to continue to push policies favouring diversification."
In the wider GCC, the report forecast growth to fall back to about 4 per cent this year from close to 6 per cent last year as oil output dipped.
Oil output in Saudi Arabia, the region's leading producer, had fallen back by 0.2 per cent in the year to March.
The weakening in the oil economy posed "fundamental questions" over the current economic model in the region, it said in its latest Middle East economic insight report.
"As the population grows and energy demands rise, the region needs to ask itself whether or not oil supplies can provide for domestic energy needs and continue to drive economic growth through export earnings," warned the report.
Rising populations consuming cheap fuel and a push to develop energy-hungry industries meant energy consumption would swell by 36 per cent between 2010 and 2020, it said.
