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Ecomonics of the UAESeven states in the southeastern Arabian Peninsula in southwest Asia make up the UAE | |||
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The UAE is rich in oil and gas resources, with most of the oil lying under Abu Dhabi and most of the gas fields located offshore. Oil trade accounts for about 25% of the Gross Domestic Product. The economy of the UAE has expanded healthily over the past decade, although the worldwide economic downturn of 2008 and early 2009 has had a dampening effect. Nonetheless, the UAE is ranked third in the world in terms of average income, after Luxembourg and Norway. Though oil has been a mainstay of the economy since the 1970s, the emirates are focusing on diversification as the first decade of the 21st century comes to an end. Dubai learned to diversify by the mid 1990s, motivated in part by the relatively small proportion of oil under that state, compared to neighboring Abu Dhabi. In 1997, Dubai legalized property sales to local citizens, and in 2002, certain areas were open to purchase by foreigners, too. These two steps gave wealthy Middle Easterners exciting investment opportunities close to home. By the dawn of the 21st century, money poured into Dubai, and posh shopping centers, hotels, and condominium towers sprouted rapidly. Before long, Dubai became a travel destination for Saudi Arabians, Britons, and Russians. But by the end of 2008, the worldwide slump in trading, lending, and traveling had affected even this glittering, dreamlike city. In February 2009, Abu Dhabi, the neighboring emirate and capital of the UAE, helped Dubai out financially by purchasing $10 billion in Dubai’s five-year bonds. While Dubai remains a prime tourist destination for the very wealthy, it will likely have to scale back expectations on becoming the Monaco of the Persian Gulf. Another concern that has grown in recent years is that the economy of the UAE relies heavily on expatriate workers. In the UAE, about 90% of the private sector labor force is foreign. The expat population has grown rapidly from 2005 to the end of 2008, from 4.3 million to an estimated 6 million. One indirect way that the UAE plans to change the face of its private sector workforce is by allowing students enrolled in universities in the UAE who are the children of foreigners to take part-time jobs. Because most of these students are children of families from other Arab countries, they have more cultural similarities to UAE citizens. The ultimate aim is for these young adults to move into semi-skilled jobs that are currently dominated by East Asians. The UAE is currently investing heavily in its manufacturing sector, particularly in Abu Dhabi, due to the fall in oil prices over the second half of 2008. Another reason is that the still-healthy economic growth in the UAE is increasing demand for finished products and materials. Abu Dhabi would like to be involved in satisfying those demands in order to diversify the economy. There are currently non-oil and gas industrial projects in the UAE worth over $20 billion US, and they account for 290,000 jobs. Specifically, the new economic investments are providing machinery and tools for the construction, shipbuilding, retail, power, and infrastructure sectors. While that may sound old-fashioned, the expansion of the manufacturing sector is expected to create innovative industry rather than new branches of old industries. While it may appear at first glance that Abu Dhabi is trying to do exactly what Dubai has done, that isn’t really so. In 2004, after the death of the UAE’s leader Zayed bin Sultan Al Nahyan, two of his sons took over. Sheikh Khalifa bin Zayed Al Nahyan became President, and Sheikh Mohammed bin Zayed Al Nahyan was named Crown Prince of Abu Dhabi. Sheikh Mohammed is considered the most “western” of the UAE leaders, with an education from Britain’s Sandhurst military academy. Since that time, Abu Dhabi has added an international airline and a palatial hotel, but the change having the biggest effect on the UAE economy has been abandoning the old property ownership regimes by permitting citizens to sell land, and in some places permitting the purchase of 99-year leaseholds by foreigners. The country has come a long way since oil was discovered in 1958. The first paved road in Abu Dhabi wasn’t built until 1961, and many families lived in houses made of palm fronds or mud. Now, 88% of the population of the UAE is urban, with Dubai and Abu Dhabi accounting for most of that figure. Though inhabitants do still live in some of the desert oilfield camps, the future of the UAE’s economy is expected to be based on urban industry, tourism, and the financial industry.
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Tags: united arab emirates economy, economucs, economy, uae economy, uae economics, emirates economy |