The UAE has risen to seventh position in the IMD World Competitiveness rankings.

The high ranking was achieved with cumulative policies that diversified the UAE's economy over the past decade and an increase in real GDP per capita driven by higher oil prices.

“The important factors for the UAE related to its strong domestic economy, and [in] general with international trade and investment,” says Christos Cabolis, chief economist and head of operations at the IMD World Competitiveness Center.

While the UAE scored highly on metrics such as its strong domestic economy and access to international trade, its weakest scores were in the areas of science, technology, health and education.  These scores are expected to improve in the long term with the introduction of 10-year visas for highly qualified expatriates.

“[The 10-year visas are] definitely a good idea," says Cabolis. "They will appeal to the international talent pool while at the same time help the UAE retain the talent that is already there. The results are not immediate, it takes a little time, and depends on how they are implemented.”

Another area where the UAE did not score so well was cost competitiveness.

“The low position is the price an economy pays for being successful,” says Cabolis. “That is the other side of the coin, you cannot have both.”

While the UAE’s ranking improved to seventh position, Saudi Arabia’s dropped, leaving it in 39th position.

"The economy is in transformation mode," says Cabolis. "The fact that it has dropped three positions is not important; what is important is looking at the long-term trends and the overall strategy. It still an economy with local costs of production and it is very dynamic, with tremendous potential."

The top five most competitive economies in the world remain the same as the previous year, but their order changes. The US returns to the number one spot, followed by Hong Kong, Singapore, the Netherlands and Switzerland.

The IMD World Competitiveness Center is a research group at IMD business school in Switzerland. It has published the rankings every year since 1989 using 258 economic indicators.