Open Skies Agreement
The Open Skies Agreement between the European Union and the United States implies that the air transportation of cargo and passengers from Europe to the U.S. and vice versa should be allowed at any point and at any time (Bureau of Economic and Business Affairs).
However, the recent tension between the U.S. carriers and the Gulf ones may disrupt the cooperation that has been in place for decades. After the rapid development of the UAE economy and airlines (Gray 36), as well as the emphasis on the role of Gulf carriers, particularly, “Emirates, Etihad Airlines and Qatar Airways” (Mouawad), the U.S. government has been trying to oust the specified companies out of the market (Cameron).
The concerns of the “franchise agreements” (Cameron) and the associated issues regarding foreign ownership of the U.S. airlines were mentioned by the U.S. government as the main argument. The UAE authorities, in their turn, claim that the expansion is a part of the state’s economic growth and the related objectives (Cline 546).
The Open Skies Agreement allows for receiving more efficient air travel services and faster delivery of the cargo. However, for the American consumer, the agreement also implies that the UAE airlines will dominate the global market. Thus, a possible decline in the U.S. economy may be expected (“Other Carriers Can’t Compete With Gulf Airlines Under The Current System — Here’s Why”). Foreign passengers, in their turn, will also since the aggressive behavior of the Gulf airlines will most likely contribute to a significant economic shock. Therefore, the current approach toward the subject matter needs to be reconsidered, and a compromise must be found. As soon as the business approach used by the Gulf airlines becomes less aggressive, significant improvements in the relationships between the UAE and the U.S. can be expected (Mouawad; Cameron).
Rentier Economy
The concept of the Reinter Economy can be defined as the economy in which the operations related to any form of property are monopolized (LaSalle 2). As a rule, to illustrate the concept, MENA states are mentioned. The reason for the specified assumption is that the MENA state economies rely heavily on rent as a continuous income stream (Nair).
The development of the real estate industry (REI) is dependent heavily on the progress of the oil market (Al-Khatteeb, “Saudi Arabia’s Economic Time Bomb”). Seeing that the latter provides a significant number of UAE residents with job opportunities and contributes to the overall economic growth, the drop in oil prices will immediately trigger a slowdown in the development of REI. Therefore, lower oil prices make real estate prices fall to a “fresh low” (Martin and Alloway).
The flow of private investments can be viewed as a source of financial resources. The money flow occurs between GCC and MENA and hinges on the oil prices significantly (Devarajan).
Six characteristics are used to determine a rentier state. Among them, three can be distinguished as especially important. These are responsiveness without actual democracy, promotion of globalization with some elements of protectionism, and reinforcement of development policies (Gray 23-36). Indeed, the UAE accepts and supports the concept of globalization, yet the state authorities are reluctant about the ideas of democracy, particularly, equality among all members of the population. As a result, while the globalization process, in general, is encouraged, protectionism is used to safeguard some of the specifics of the UAE culture and traditions. Nevertheless, the emphasis on the development of the state infrastructure, industries, and the economy is evident and consistent. Thus, the UAE manages to maintain a balance between accepting the principles of globalization and retaining most of its cultural and national specifics, which may hinder the multicultural relationships (Gray 23-38).
Dubai Real Estate Market
The development of the Real Estate Market (REM) has been rather uneven in Dubai. The Commercial REM (CREM) has been doing comparatively well, yet it is expected that, along with the luxury one, the identified market is going to face significant impediments in its development in the next few years (Al-Khatteeb, “Gulf Oil Economies”). The specified phenomenon can be attributed to the drop in oil prices in the UAE market.
Due to the problems in the residential Real Estate Market (RREM), the cash inflow into the state economy has been rather measly (Fattah). The drop in the oil industry performance can be viewed as the primary reason for the setback (Barnard; BMI Research). In order to succeed in the RREM area, the UAE authorities will have to consider enhancing the oil industry performance by providing more opportunities as far as the cooperation with the target customers is concerned (Nair).
Therefore, the improvements in the oil industry and the enhancement of international relationships can be considered the primary factors that define the UAE’s success in CREM and RREM. Particularly, it is crucial to create the environment in which investors will feel confident and, therefore, be ready to consider the UAE RREM and CREM as the possible targets for their operations (Dubai Property Review: 2016 and Beyond 4). As soon as investment flow increases, the foundation for a gradual improvement of the UAE RREM and CREM will be created. Furthermore, opportunities for further development as far as the RREM- and CREM-related opportunities are concerned can be considered.
OPEC
OPEC, also known as the Organization of Petroleum Exporting Countries, is the product of collaboration between twelve oil-producing states. OPEC carries out the processes associated with coordinating oil trade and the related processes between its members and the customers. As a result, the crucial issues are identified and managed in an efficient manner, while important decisions are made with the help of collaboration.
However, the OPEC states are not the only successful producers of oil. Cabot Oil & Gas Corp. and Seneca Resources Corp., which represent the modern U.S. fracking industry, have been delivering an outstanding performance (Doorn). The organizations were delivering rather good performance in 2012-2014, while the stock prices have been on the decline recently for Cabot Oil & Gas Corp. (“Cabot Oil & Gas Corporation (COG)”). Seneca Resources Corp., however, has recently seen a slight increase in stock prices (“National Fuel Gas Co.”).
It should be noted, though, that OPEC countries have a significant advantage compared to the U.S. Particularly, the oil deposits in the OPEC area are incredibly rich. Furthermore, the fact that the OPEC states have an impressive influence on oil prices needs to be brought up. Therefore, OPEC has a major competitive advantage, even though its announcements are sensitive to the benchmark index (Loutia et al. 262). The fact that the U.S. frackers increased oil production, the subsequent drop in oil prices, and the use of innovative technology allowing for quality improvement can be viewed as the three primary reasons or the U.S. frackers to beat OPEC (Vara).As a result, OPEC cut oil production and, therefore, oil prices, in 2016 to adjust to the new economic environment (Brinded and Martin). Therefore, there is a threat that OPEC may lose its influence on the oil and gas industry, whereas the U.S. companies, in their turn, will take over the identified sector.
Three Sectors Presenting Excellent Economic and Employment Opportunities for MENA
Given the challenges that the OPEC states have been suffering from, the MENA region may also be affected by the related economic issues. Therefore, it is important to reconsider the current strategy toward the use of the key assets and the approaches toward the management of the available resources. According to a recent analysis, the public sector remains a major source of employment for the residents of the MENA states. Since the oil and gas industry remains one of the sources of economic stability, it can also be viewed as an important area in which the residents of the MENA states may pursue their careers. However, as stressed above, there has recently been significant concern over the issues associated with the drop in the oil and gas industry productivity due to the aggressive politics of the U.S. therefore; the identified sector should be considered with due caution as a possible area in which one may explore employment and career opportunities. In fact, the construction industry sector is currently ousting one of oil and gas from the employment market as the superior area in which the residents of the MENA region are willing to enter (). The reasons for the construction sector to gain so much attention include the recent need to improve the state infrastructure, i.e., build new roads and bridges so that the cities could be connected and that the Supply Chain Management processes could be improved (Kukreti). Finally, banking and finances need to be listed among the primary areas of employment that the residents of the MENA region should consider. Indeed, while the private sector has not been thriving in the MENA environment, there has been significant progress in the banking and finance sector, which can be explained by the recent liberalization trends (Jurdi et al. 327).
Works Cited
Al-Khatteeb, Luayt. “Gulf Oil Economies Must Wake up or Face Decades of Decline.” Broolkings.edu, Web.
—. “Saudi Arabia’s Economic Time Bomb.” Brookings.edu, 2015, Web.
Barnard, Lucy. “Dubai Property Prices Have Further to Fall, Phidar Report Says.” The National, 2017, Web.
BMI Research. United Arab Emirates Real Estate Report 2016. A Fitch Group Company, 2016.
Brinded, Lianna, and Will Martin. “OPEC Has Finally Agreed to a Production Cut, and Oil Is up almost 9%.” Business Insider, 2016, Web.
Bureau of Economic and Business Affairs. “Open Skies Partnerships: Expanding the Benefits of Freer Commercial Aviation.” U.S. Department of State, 2017, Web.
Cameron, Doug. “‘Open Skies’ Faces Bipartisan US Opposition.” Financial Times. 2007, Web.
“Cabot Oil & Gas Corporation (COG).” YahooFinance.com, 2017, Web.
Cline, Hannah E. “Hijacking Open Skies: The Line Between Tough Competition and Unfair Advantage in the International Aviation Market.” Journal of Air Law and Commerce, vol. 81, 2011, pp. 529-559.
Devarajan, Shanta. “How the Middle East and North Africa Can Benefit from Low Oil Prices.” Brookings.edu., 2016, Web.
Doorn, Philip Van. “Opinion: These U.S. Shale-Oil Companies Are Poised to Profit When Prices Rise.” Market Watch, 2016, Web.
Dubai Property Review: 2016 and Beyond. Savills, 2016.
Fattah, Zainab. “Falling, Falling: Dubai House Prices Seen Dropping a Second Year.” Bloomberg.com, 2016, Web.
Gray, Matthew. A Theory of “Late Rentierism” in the Arab States of the Gulf. Center for International and Regional Studies, 2011.
Jurdi, Doureige, et al. “Financial Liberalization and Stock Market Development in the MENA Region.” 19th International Scientific Conference on Economic and Social Development, SCESD, pp. 325-337.
Kukreti, Anshuman. “Employment in the Middle East: the scenario in 2014.” NaukriGulf, 2015, Web.
LaSalle, Jones Lang. Dubai Real Estate Market: Overview. Q3 2016. JLL, 2016.
Loutia, Amine, et al. “Do OPEC Announcements Influence Oil Prices?” Energy Policy, vol. 90, no. , 2016, pp. 262-272.
Martin, Matthew, and Tracey Alloway. “Dubai Real Estate Prices Seen Falling 5% in 2017 Before Recovery.” Bloomberg, 2016, Web.
Mouawad, Jad. “Open-Skies Agreements Challenged.” The New York Times, 2015, Web.
“National Fuel Gas Co.” MarketWatch.com, 2017, Web.
“Other Carriers Can’t Compete With Gulf Airlines Under The Current System — Here’s Why.” One Mile at a Time, 2015, Web.
Nair, Depthy. “Which Way for Dubai Property in 2017?” Khaleej Times, 2016, Web.
Vara, Vauighini. “How Frackers Beat OPEC: The Surprising Ingenuity of the U.S. Shale-Oil Industry and Its Global Consequences.” The Atlantic, 2017, Web.