The United Arab Emirates has an active economy that makes it attract a lot of foreign investors. It is strategically located in the Middle East making it attractive to investors that want to set up operations in the region. The country main business hub, Dubai, is famous for its hospitality, financial and tourism sectors which have registered significant growth in the last two decades. The city is a famous transport hub linking visitors travelling to Asia, Europe, Africa and other parts of the world. This paper will analyze a variety of published sources to uncover economic conditions that affect demand and supply in the UAE. This will help establish how these factors impact on food production in the country.
UAE citizens have a high purchasing power and this makes the country attractive for investment. Emiratis have refined consumer tastes and this makes them demand high quality products in the market. The country is arid which makes it difficult for various food production and other agricultural activities to be done locally. It imports cereals, beef, fruits, milk and poultry products from other countries. The scarcity of these products makes them valuable in the country which drives up their demand. Many Emiratis have higher disposable incomes which has led to an increase in demand of various food items. However, UAE lacks a unified food regulation system, which slows down firms in the food industry from achieving specification and quality requirements. It is also difficult for firms to get credit for their operations and this restricts the amount of capital investments they are able to make.
The food sector is estimated to grow which opens up opportunities for firms interested in food production in the country. There are many supermarket chains in the country which make it easy for consumers to access food products sold. The market is has many expatriate workers from different countries who consume imported food products that are not easily available in the country. The region has modern transport infrastructure that makes it easy to deliver food products to their respective markets. It is estimated that more than 35% of imported food items are repackaged and sold to other markets. The food industry in the country is thriving because its main airports and sea ports are connected to other regions in the Middle East which makes it possible for finished products to be transported. This has also made distribution channels to be more effective which ensures products are delivered to various markets on time.
Some products are bulky when they are still raw and they need to be processed in areas they are sourced from. It is more economical to produce such products in areas that have low labor costs to make them more competitive in the market. Goods processed abroad can be repackaged in the country and later sold in neighboring countries in the region. Saudi Arabia, Kuwait and Qatar do not have well developed agricultural industries and can serve as ready markets for food products packaged in the UAE. The UAE has a higher comparative advantage compared to other countries in the region because of its thriving food industry. Therefore, the country is suitable as a packaging zone for raw and processed food items imported from other countries. It has positive trade ties with many South Asian countries which have low cost manufacturing zones. Therefore, these mutually beneficial trade relations make it possible for producers in the country to source food products at lower cost which can then be sold to consumers at higher returns.
Figure 1 showing the production possibility frontier showing manufacturing in UAE and South Asia. The figure demonstrates that it is more competitive to manufacture products in South Asia before they are shipped to UAE.
Technology can be used to improve the way different economic processes are performed in the country. The country needs to make it easy for investors to access different types of information through the internet to enable them understand crucial economic policies they need to satisfy. Investors need to be given information on taxes, stock prices, government policies and existing forms of finance to make it easy for them to transact. This makes the economy more competitive because different sectors are able to share crucial information to help them move forward. Business firms in the country need to be encouraged to institute automated payment systems to make them more efficient in their operations. This will help these firms reduce their labor costs to make their operations leaner and more efficient. Business firms in the country need to be encouraged to be more flexible to help them take advantage of opportunities that exist in local and regional markets.
In conclusion, the UAE has many economic opportunities which business firms need to exploit. The country has favorable investment policies that make it attractive for foreign direct investment from other parts of the world. The country acts as a gateway to the Middle East because it is strategically located and has adequate transport and communication connections with other regional economies.