Background
UAE Economy and Demographics
The UAE has an approximate area of 83,600 square kilometers characterized by a hot, humid and low rainfall arid wasteland. After the discovery of oil and natural gas reserves, an influx of foreign workforce led to gradual population increase in the UAE. Several people immigrated into the region in search of more rewarding jobs than in their home countries.
Currently, the population in the UAE stands at approximately 8.26 million (2009); however, only 11.5% of these are home-country nationals while 88.5% are expatriates (Rosenberg 1). As such, the UAE national population is a minority of the region’s population. At the current growth and immigration rates, the future population projections of the regions stand at 10 million by the year 2050.
At the moment, the UAE enjoys an open economy with a high per capita income as a result of stable oil business and real estate in states such as Dubai and Abu Dhabi. However, Until the 1960s, the region was poor and its economy was dependent on fishing when oil exploration started.
Oil exploration in the UAE resulted in a rapid conversion of the impoverished arid land into a contemporary state characterized by high living standards. In particular, the UAE government achieved success in economic development through the expansion of infrastructure, real estate, privatization, as well as, job creation (Rosenberg 2).
This resulted in the influx of foreign workers and expatriates to fill the created job opportunities. On the contrary, dependence on oil and expatriate workforce (mainly from neighboring Asian countries) creates a key concern and other states such as Dubai are taking the necessary corrective measures. An example strategy is the diversification into other areas of the economy such as tourism, steel, and aluminum firms to curb future oil depletion.
Comparison of the UAE Today and 30 Years Ago
As mentioned earlier, the UAE was among the least developed nations in the world during the past few decades. In particular, the arid country mainly depended on fishing, subsistence farming, animal husbandry, and a diminishing pearling industry before the mining of oil and gas during the 1960s (Abed and Peter 249).
As such, the country’s limited resources resulted in dependence on a subsistence economy; hence, the existing population had extremely low living standards. In connection to that, the existing population was low but mainly comprised of country nationals because there existed few opportunities that could attract foreign workforce.
However, the discovery of oil reserves led to gradual developmental changes in the country that necessitated growth in all aspects. Huge revenues obtained from oil exports resulted in the creation of high salaried jobs, quality education, health facilities and high standards of living of the population (Denicola 34).
Furthermore, the region’s infrastructure metamorphosed into world-class rating with iconic buildings and infrastructure that creates a perfect tourist destination.
Executive Summary
Importance of Analyzing Factors That Contributed to Change in the UAE
In order to have an excellent view of the socio-economic development path taken by UAE, the influential factors have to be analyzed. The analysis will enable other developing economies to realize their hidden potential and enlighten them in ways to creating an economic success.
As a result, different countries may use the findings as a case study for future development, as well as, create awareness in the establishment of innovative socio-economic solutions.
The Project Sections
This paper has four sections namely; the introduction, UAE economic and social development, the factors behind UAE’s economic development, and a summary section. Initially, the author gives an introduction of UAE and its demographics.
Secondly, the author gives an analysis of the socio-economic development in the UAE, after which, a discussion of the contributing factors follows. Lastly, the author gives a summary of the whole paper and future outlook of the UAE.
Introduction
The United Arabs Emirates (UAE) consists of seven states established in 1971 and namely; “Abu Dhabi, Dubai, Ajman, Fujairah, Ras al Khaimah, Sharjah and Umm al Qaiwain” (Mundi 2). All the states are under the rule of an Emir; however, Sheikh Khalifa is president the UAE and ruler of Abu Dhabi while Sheikh Mohammed serves as the second in command and ruler of Dubai.
Over the last few decades, the UAE’s has grown from an economy dependent on fishing to among the largest oil exporters in the world. Hence, this has substantially impacted on the country’s social and economic development as discussed in the following paragraphs.
UAE Economic and Social Development
The UAE economic and social development has undergone a series of phases that enabled the realization of the current state of affairs. As such, these phases have positively contributed in the creation of a world-class economy as discussed in the following paragraphs.
Stages of Development
As mentioned above, the UAE underwent a three-phase process to attain the current milestone in social and economic development. In particular, the country passed through a three-phase developmental stage namely; the Pre-20th Century phase, 20th Century phase, and Modernity (current) phase.
The Pre-20th century phase, also known as the first generation phase, lasted between the 1900s and 1960s. During this time, the UAE was still a sparsely populated region covered in vast sand dunes and mountain ranges to the east and inhabited by resourceful nomadic Bedouin ethnic groups. At the time, the largest state (Abu Dhabi) comprised of several palm huts, few coral buildings and the Rulers Fort.
On the other hand, Dubai served as a trading center offering an effective trading zone within the region and beyond. The current lifestyle in the UAE has limited similarities with the lifestyle during this phase of development.
Besides that, the second stage (20th century phase) known as the second generation phase lasted between the 1970s and 1990s. This phase of development comprised of ground breaking activities for oil reserves and natural gas among other resources.
However, during the 1960s most of the states such as Abu Dhabi comprised mainly of unstable economies with few low-rise structures and showing up. For a greater part of the 20th century, UAE’s economy remained dependent on fishing, pearling, camel herding and agriculture as the prime mover of the economy.
However, the main turning point of the economy occurred during this phase and resulted in the economic boom of the UAE. For instance, Abu Dhabi made the first export of oil in 1962 while Dubai made her first export seven years later meeting their first successful attempts in oil exploration (Abed and Peter 251).
Lastly, the last phase of development may be referred to as the third generation and covers periods starting from 2000s onwards. Over the years, the UAE exported oil and gas reserves and established a strong economy for future development and investments.
Realizing that oil reserves would be exhausted sometime in the future, some of the states such as Dubai started taking measures to counter the effect of oil depletion. Hence, this led to the third development phase referred to as a key international business and tourist destination.
Despite having an estimated 10% of the global known oil reserves, UAE still participates in massive real estate and creation of tourist destinations such as the Palm Islands. As a result, the UAE falls among the richest countries on the globe with a high per capita income of about $18,000 USD (Mundi 44).
Fortunately, the UAE practices economic biodiversity rather than solely depending on the oil and gas revenues; hence, future success remains a guarantee.
Historical Events That Accompanied the Stages
During the 20th century phase, key events had little implications on immediate social and economic development of the UAE founding sheikhdoms. The phase involved UAE’s “founding fathers” who led difficult lives in search of better lives for future generations.
Over several years, however, such events resulted in significant advantages for the oil-rich country. The events mainly involved the creation of peace treaties, colonial rule, and struggle for independence. As such, key historical events involved associations with the British colonial rule in the region.
In the 1820’s, for instance, the colonial power imposed a Peace Treaty aimed at ending Piracy in the region. From that period onwards, the seven states assumed the title ‘Trucial Coast’ until 1971 when the sheikhdoms united to form a government free from colonial influence.
This led to the formation of the United Arabs Emirates governed by the main powers of the region, Abu Dhabi and Dubai respectively.
According to relevant sources, key developments in the UAE started taking shape during the 20th century phase. This happened due to the withdrawal of the British colonial power from the Gulf in 1971.
Hence, the formation of the UAE allowed for the creation of a peaceful environment for oil exploration and subsequent economic transformation. Since efforts into mining oil and natural gas commenced, Abu Dhabi made her first oil export in 1962 while Dubai made her first export seven years later.
Expatriates and laborers, from surrounding Asian countries, emigrated to work in the mining areas and assume other job opportunities created by the developments. Consequently, increased production resulted in high revenues enabling UAE to invest in infrastructure, health facilities and education; hence, substantially improving the living standards of the people (Holdsworth 2).
Additionally, this phase experienced an increase in the construction of high-rise structures and hotels designed to transform the desert into a world-class economy. Unlike several developed countries, UAE effectively metamorphosed from an impoverished country to fall among the worlds richest economies within 30 years of oil exploration.
Lastly, the current phase mainly involved economic diversity plans that resulted from the need to develop future economic sustainability of the UAE. An estimated 22 billion barrels are the figures for already exported oil from the initiation of the first mining attempt. As such, the oil reserves are constantly decreasing; hence, creating a sustainable future means a lot to a world-class economy.
Relevant sources show that UAE owns about 10% of the global known oil and natural gas reserves with nearly 95% existing in Abu Dhabi. However, this only means a sustainable oil production for a period of 5 and 105 years of oil production for Dubai and Abu Dhabi respectively.
Since current findings show that Dubai oil reserves will be depleted by 2015, there has to be better ways of creating a sustainable future for Dubai and UAE as a whole. Fortunately, Dubai realized this effect early enough; thus, the state started investing in real estate, massive tourist destinations and luxury hotels.
Some of the modern iconic structures developed from that need include the Al Burj Arab, Burj Khalifa and the Palm Islands. Apart from that, the UAE continues to invest in ultra-modern facilities and other tourist facilities. As a result, the country is already a leading tourist destination and boasts of a high per capita income of nearly $18,000 USD (Mundi 44).
Impact of the Historical Events in Comparison with Other Gulf Regions
The key historical events shaped the UAE into a world-class economy due to several reasons unlike in several other Gulf Countries. All the Gulf Countries have oil, authoritarian leadership, and share the Islamic culture; however, several factors contributed to the extreme deviation in economic status when compared with the UAE. Some of these factors include economic diversity, social and political stability, and the state of social services.
Since the creation of the UAE, the region has enjoyed social and political stability that allowed for smooth economic development in the region (Abed and Peter 250). Furthermore, people from other Asian countries flocked the UAE to fill job opportunities as a result of the safe country. Therefore, the country received sufficient human capital to work in its vast oil reserves and other sectors of the economy.
On the contrary, other Gulf countries such as Saudi Arabia have continually experienced political instability and civil wars; hence, hindering the ultimate growth potential of affected countries (Denicola 32).
Additionally, the UAE successful administration of economic diversity created an atmosphere for rapid growth and development. The UAE, unlike several Gulf countries, reduces overdependence on oil as the key contributor of the GDP (Denicola 32).
At the moment, the state is an international tourist destination due to massive investments in real estate and the tourism sector. As mentioned earlier, some of the key iconic structure that holds the country’s future includes the Palm Islands, the Burj Al Arab, and Burj Khalifa among several others (Denicola 41).
Factors Behind the UAE’s Economic Development
In order to achieve the current economic status, various factors played valuable roles during the growth and development of the UAE’s economy. Some of the key contributing factors include the presence of oil and gas, political and social stability, economic diversity, and globalization. The following paragraphs contain the detailed descriptions of the mentioned factors.
Firstly, the discovery of oil created a radical turning point in the economic status of the UAE since oil significantly contributed to the more than 30% of the economy. Since the first oil exportation in 1962, the UAE leaped from being one of the world’s poorest economies to among the world economic leaders in only 30 years of exploration.
In connection to that, relevant sources confirm that it is nearly impossible for a nation to realize significant benefits from exportation of a single resource other than oil. The UAE has approximately 10% of the world’s known oil and gas reserves and new reserves could possibly double the estimate.
Secondly, political and social stability is another valuable factor that creates a perfect environment for economic development. Regions with political instability such as North African countries and Middle East countries limit their economic growth potential because insecurity hinders smooth development. Furthermore, political unrest scares away investors who would help in establishing favorable business atmosphere.
Since the creation of the UAE (1971), the region has benefited from the fruits of political stability. Several people flocked the UAE in search for job opportunities due to high safety standards in the country (Abed and Peter 250). Hence, the country has always had sufficient labor force to work in industrial areas and tourism sectors.
Thirdly, economic diversity enables a country to create a sustainable future economy by reducing overdependence on key resources that are subject to exhaustion. Unlike other countries, the UAE continually reduces its overdependence on oil as the principal economic booster. For example, Dubai took drastic measures to improve the tourism sectors before the predicted depletion of its oil reserves in 2015.
Besides tourism, Dubai continually develops other economic sectors such as fisheries, business and agriculture to supplement the future economy. Today, the total contribution of oil in the UAE’s GDP reduced to 30 percent while the tourism industry contributes a giant percentage of GDP. This indicates a healthy economic diversity that would enhance future prosperity and economic success.
Lastly, globalization is the most crucial factor in the transformation of a young economy into a leading economy. Globalization allows an economy to interrelate fully with the outside world in terms of trade, tourism and social integration.
Several countries in the Gulf region have undermined globalization due to the conservative and authoritarian nature of the Islamic governments. Consequently, this has led to limited economic growth and development of such countries.
However, UAE has endorsed globalization and social integration at higher levels than several Islamic countries; hence, the significant growth in the economic worth. The creation of free trade zones such as the Media City and Internet City depicts some of the benefits of globalization (Denicola 37).
Importance of Each Factor
As mentioned earlier, the discovery of oil in the UAE played a critical role in changing the country from an impoverished country into a world-class economy. During the 1960s onwards, the UAE received substantial revenue from the exportation of oil and natural gas.
Increased revenue led to the development of infrastructure, industries and social amenities such as schools and hospitals (Abed and Peter 255). As a result, the literacy levels increased while health and well being of the population significantly improved.
For example, between 1985 and 1993, 99 percent of the population had access to medical facilities while 95 percent had access to safe drinking water (Abed and Peter 256). Consequently, income substantially improved resulting in high living standards and purchasing power of the population.
On the other hand, social and political stability allowed for the immigration of more job seekers into the UAE than in any other Gulf country. As a result, the country had sufficient labor force to work in its oil reserves and other sectors of the economy (Abed and Peter 251). This trend continued over the years since the UAE allows for higher levels of social integration and cultural practices as compared to other conservative Gulf countries.
Additionally, economic diversity formed a platform for success and future sustainability of the UAE. This achievement is attributed to ventures in tourism, business and agricultural sectors of the economy that aims at eliminating overreliance on oil and natural gas revenues.
Economic diversity materialized in the UAE because tourism generates substantial revenue for the country’s GDP. Without massive investments in the tourism industry, the UAE would not rate among the world’s leading tourist destinations; hence, the future sustainability of its economy would be in jeopardy.
Lastly, globalization helped to open the UAE into the world market and vast business opportunities. Unlike several Islamic countries, the UAE lifted several trade barriers and lowered trade tariffs to allow for effective global operations. Consequently, an increasing number of corporations and investors flocked the region to utilize the chance.
This influenced the creation of free trade zones such as the Media City, Internet City and other business areas. As a result, the UAE continually receives more revenue from its globalization tactics unlike other Gulf countries such as Saudi Arabia.
Effect of Western Relationships on the Development Factors
To some extent, western relationships played significant roles in influencing some factors that led to the economic development of the UAE. According to relevant sources, the key factors influenced by western culture include political stability and globalization.
Political stability was positively influenced by the British colonial powers since the establishment of the Trucial Cost in the 1820s. Initially, the region was politically instable characterized by frequent piracy. However, under the British colonial rule a Peace treaty to end the piracy was signed.
As a result, piracy came to an end while the region’s political status stabilized since that period. Additionally, the western rule in the region created a soft spot for future globalization; in particular, the leaders were more open to external integration than any other Islamic country in the region. Therefore, it became easier to establish rules and atmosphere that would encourage globalization to take effect in the country.
In conclusion, the western influence served a critical purpose in the economic development of the UAE, and especially Dubai. Other factors influenced by the western association include adoption of the education system, health facilities and industrialization that create a valid platform for global competition.
Conclusions
Report Summary
As mentioned in the paper, the UAE has undergone a faster transformation from among the weakest economies in the world to one of the richest with a per capita income of nearly $18,000 USD (Mundi 44). The change occurred between the 1970s and 1990s since the discovery of oil and gas reserves.
Using the enormous funds received from oil and gas exports, the UAE effectively planned for development by heavily investing in infrastructure, education and health facilities. This further improved the UAE’s economy as improved living standards are directly beneficial to the social and economic development of a country.
The UAE, unlike other Gulf countries, embraced globalization which allows for further development in business, trading, banking and tourism. Currently, the UAE has transformed into the world’s leading tourist destination due to massive investments in the tourism sector.
Future Outlook of UAE’s Economic and Social Levels
With the current trend in investment and social development, the UAE has a bright future despite few challenges that may come up from cultural degradation and undermining of the Islamic practices. Since oil in the UAE is subject to depletion, new economic sustainability approaches must be employed.
In that case, economic diversification especially in tourism and manufacturing is inevitable for the UAE. As such, the future economy of the UAE will most likely rely on the tourism sector, business and manufacturing. Fortunately, the UAE has already laid fundamental strategies to cater for future economic sustainability by improving education, health facilities, real estate and upgrading existing infrastructure.
In fact, the UAE is in the most advanced stage of economic development referred to as innovation-driven economies ranking 25th place globally (Holdsworth 2). In the recent future, the UAE will also be categorized among the world’s leading countries in terms of innovativeness as there is vast immigration of super brains into the UAE. Additionally, the intensive investment in education is a key to the creation of human capital that would participate in the realization of the countries dream (Holdsworth 2).
Final Conclusion
As described in the report, the UAE has successfully created better platform for economic development than any other Gulf country. UAE’s success can be attributed to the endorsement of global relations into its business and investment sectors of the economy.
Additionally, political and social stability has constantly encouraged the influx of job seekers; hence, securing and maintaining the necessary level of workforce. As a result, the economy stabilized leading to the historic high living standards of its citizens. In conclusion, the UAE’s global relations with other nations created the most conducive atmosphere for social and economic development.
Works Cited
Abed, Ibrahim Al, and Peter Hellyer. United Arab Emirates: A New Perspective. London: Bookcraft, 2001. Print.
Denicola, Christopher. “Dubai’s Political and Economic Development: An Oasis in the Desert?” Diss. Williamson College, 2005. Print.
Holdsworth, Paul. “UAE at Most Advanced Stage of Economic Development in the Region.” Gulfjobsmarket.com. Gulfjobsmarket, 26 Oct. 2010. Web.
Mundi, Lex. “A Guide to Doing Business in the United Arab Emirates.” 2010. Microsoft Word file.
Rosenberg, David. “UAE’s Expat Population Surges to Reach Almost 90 Percent.” Arabnews.com. Arabnews, 3 Apr. 2011. Web.