* Electricity, water networks to cost 5.7 bln dirhams
* Move comes after UAE president tours emirates - WAM
(Adds quotes, funding details)
ABU DHABI, March 2 (Reuters) - The United Arab Emirates, watching as Arab unrest spreads to nearby Gulf countries, will invest ${esc.dollar}1.6 billion to improve infrastructure in less developed regions of the country, state media said on Wednesday.
The decision to expand water and electricity networks at a cost of 5.7 billion dirhams came after President Sheikh Khalifa bin Zayed al-Nahayan last month ordered a tour to the less prosperous areas of the world's third largest oil exporter to assess their living conditions.
"Electricity supply is to be provided to buildings and shops belonging to citizens in the northern emirates, the president ordered," the state news agency WAM said.
Revolts against oppressive leaders and economic hardships have been sweeping through the Arab world over the past two months, ousting the presidents of Egypt and Tunisia. They now challenge regimes in Libya as well as nearby Bahrain and Oman.
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The UAE, the second largest Arab economy, has escaped the unrest so far. Its relatively small local population enjoys one of the world's highest economic outputs per capita, at over ${esc.dollar}47,000.
"There is unrest in so many Arab countries. The issue is causing discomfort and has been addressed in the UAE 25-30 years ago," said Khaled Abdulla al-Qubaisi, a senior adviser at the Abu Dhabi government investment fund Mubadala.
"Basic necessities are provided for jobs, health, good quality of life in Abu Dhabi and the UAE. We don't see that as an issue," he said on the sidelines of an event in Abu Dhabi.
"Whether they finance it directly or with local and international funding sources, funding is not going to be a major challenge," said Simon Williams, chief economist at HSBC Bank in Dubai.
It was not clears how the plan would be financed.
The UAE plans to spend 41 billion dirhams (${esc.dollar}11.16 billion) in its 2011 deficit budget. [ID:nLDE6A60CE]
Abu Dhabi, which accounts for most of the UAE's oil output and fiscal spending, has not released a budget for this year.
Potential for disturbances would most likely come from the five northern emirates, whose citizens have benefited less from the capital Abu Dhabi's vast oil wealth or trade and property-fuelled development in business hub Dubai.
Ras al-Khaimah, one of the northern emirates, has seen small protests in past years but they were quickly crushed by Abu Dhabi security forces. The emirate sits on the Strait of Hormuz, through which 40 percent of the world's seaborne oil passes.
The president ordered the Abu Dhabi Water and Electricity Authority to supply the Federal Electricity and Water Authority with around 1,300 megawatts of power to meet projected demand.
He also called for construction of a 100-km (62-mile) water pipeline costing 900 million dirhams from the northern town of Kalba to Dibba on the eastern coast, as well as a 60-km pipeline worth 300 million dirhams in Umm al-Quwain emirate, WAM said.
Supermarkets in the UAE have agreed with the economy ministry to cut prices for food and other essential goods by up to 40 percent for one month. [ID:nLDE72023I] (${esc.dollar}1=3.672 dirhams) (Reporting by Martina Fuchs and Stanley Carvalho; editing by Mark Heinrich)
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