The UAE's ranking in a survey of economic freedom slipped in 2005 after its labour market regulations score declined, but it still ranked 15th in the world based on a favourable investment climate.

The 2007 report by Canada's Fraser Institute ranks 141 countries based on 42 criteria of how well they encourage freedom in economic polices such as tax rates, property laws, labour laws and government interference.

The UAE scored 7.7 points out of 10 in the survey compared with 7.8 points in the previous year as its labour regulations' score declined to 6.6 points from 8.9 points.

The UAE federation of seven emirates including trade and tourism hub Dubai, outranked three fellow Gulf Arab states in the survey which did not include Saudi Arabia, the largest Arab economy.

Oman, Kuwait and Bahrain ranked 18th, 32nd and 44th place, respectively.

Gulf Arab economies have surged on a tripling in oil prices in the last five years, encouraging regional and global companies, especially in financial services, to expand their presence.

Hong Kong, Singapore and New Zealand were first, second and third on the index, with scores of 8.9, 8.8 and 8.5 out of 10, respectively.

Dubai has attracted investment by setting up tax-free zones, including a financial services business park. It also opened up it real estate sector to foreign investment in 2002.

The UAE came in fifth place globally in the 'freedom to trade internationally' category, compared with rankings of 18 and 25 in Germany and the US, respectively.

But it ranked in 40th place in terms of how well it protects property rights. - Reuters