Executive Summary
This report discusses demand and supply in United Arab Emirates (UAE). UAE is made up of seven emirates. UAE is popular for oil and natural gas reservoirs. It is recognized for tourism, urban trade centers and real estate developments which have led to a rapid economic growth. The demand for water, energy and labor is on the increase. There are to increase the supply.
Property demand and supply keep changing from time to time. The demand is instigated by an increase in population, agricultural activities, industrialization and need to desalinate water. The UAE federation has enacted policies that enable the balance between supply and demand be realized. Good infrastructure of roads, airport, seaports and communication facilitate economic growth.
Introduction
United Arab Emirates has experienced growth in the recent past. The region is a world trade center and is popular for exporting oil. Economic activities have led to disparity in supply and demand. Changes have occurred to aid in solving the disparity. This report will discuss demand and supply in UAE.
Supply and Demand in UAE
Background information of UAE
United Arab Emirates (UAE) consists of seven federations namely: Dubai, Umm al Quwain, Ajan, Abu Dhabi, Fujairah and Ras Al Khaimah. The region, which is in south west Asia, is arid. It is next to the coast, and part of the region is a desert. In the recent past, UAE has experienced a population increase and a rapid growth in its economy.
Policies emphasize agricultural self-sufficiency and a reliable supply of water. Since the discovery of oil in Abu Dhabi, the economy was transformed leading to industrialization in the region. Policies that foster liberation of the economy have caused the region to be the economic leader in the Middle East region. UAE has adopted economic diversity.
Besides oil and natural gas reserves, the region has a tourist attraction, real estate business and international trading centers located in diverse cities like in Dubai. Governmental policies boost economic diversity for a sustainable economy. Therefore, the main sources of income for UAE come from trade, tourism, construction and sell of real estate, financial services and transport.
UAE infrastructure makes the region a modern center. There is a good network of roads that link the different trade centers. Among the over 40 airports in the region, the airport in Dubai is considered an international airport which facilitates business.1
Water demand and supply
The government policies encourage growth of the agricultural sector. Since the UAE region is arid, there are a large number of wells that have been sunk. The water table has been depleted, and the water has become desalinated.
A large number of desalination plants have been established to meet non- agricultural and agricultural water demands. The demand for water has increased as the population has grown. The urban centers are continually growing, and the agricultural sector requires adequate water. Importing water from Turkey has been considered not viable owing to security issues.
Desalinated water, surface water, underground water and recycled water are the main sources of water in UAE. Desalinated water from the sea accounts for the water supply in the area. Increased population, industrial development and growth of the agricultural sector have increased demand for water in UAE.
Despite increased supply, demand for water has not been adequately met after increased farming and developments whose consumption is higher than the supply. To curb this problem, additional plants with a large capacity for desalination have been constructed. The water demand for construction, farming, landscaping and human consumption is high. 2
Energy demand and supply
Energy demand has been on the increase. The government has funded projects that increase the supply of energy. Energy and water sectors have been privatized in the region.
The challenge in the energy sector is inefficiency in power use, need for increased investments, poor regional connectivity and management in the private sector. With the growth in the real estate business, the demand for electricity is expected to increase in the future. The demand can be met, if investments to increase the supply are considered.
Thermal power, natural gas and oil, have been used as sources of energy in UAE. Natural gas as a source of fuel is less costly and is considered sustainable in the near future.
The demand for power supply is not expected to be very high as expected with the high developments in real estates. The demand will be slightly higher than the supply for power. Electricity demand will heighten owing to industrial developments and water plant projects.
UAE is likely to adopt nuclear power in the future to meet the increased demand for power. Although the region is rich in oil and gas reservoirs, it may turn to alternative power sources to meet the demand for energy. Abu Dhabi accounts for most of the oil; hence other regions have a lower oil reservoir than Abu Dhabi.
Energy is required to desalinate water, and there is a desire to expand electricity supply in the region. Moreover, the planners recognize the volatility of fossil fuel prices as well as the issues in the universal climate change. The hydrocarbons are more profitable and can generate huge revenues.
Property demand and supply
The patterns in the property market keep changing. In Dubai, the supply of property is low, and the rental costs have appreciated. The number of completed and ready for sale property is very low. The number of building on construction is high, and the supply is expected to rise. The number of people seeking accommodation is also high. Since the cost of purchasing property is very high, there are few buyers.
The growth of the international trading center is likely to increase the number of people seeking residence. Chances of supply exceeding demand are believed to be narrow. Dubai is a fast growing economy with numerous projects and businesses absorb a large number of people. Developing nuclear plants is considered a stepping stone to meet future demand for power and as a boost to the UAE economic development.
When the supply for new rentals increases, the cost of rentals is reduced. The upward momentums where prices keep increasing depreciate. Tenants have to put up with the decreased prices and continue to pay taxes that apply. Although the supply seems to meet the demand, the demand is constantly increasing, and the property begins to be reduced in supply as a large number of investors purchase the property. Unoccupied rentals affect the economic growth. There are plenty rentals available and construction of others is underway.
UAE policies discourage foreign investors from owning property. Investor visas last for a short period and investors have to renew their visa to continue with business. If one does not have a resident visa, owning bank accounts, driving license and a car is difficult. Harsh policies are viewed as a stumbling block to the development. 3
Tourism demand and supply
UAE significantly relies on tourism for foreign exchange. There is an increasing number of tourists visiting Dubai which is the busiest trade center in the region. Most tourists come to shop and view modern and ancient attractions of the city. The increasing number of tourist have led to a greater need for accommodation and led to increased investments. Dubai has to ensure that the demand for boutique, electronics and other goods is availed to meet the need of the tourists or buyers.
Labor demand and supply
UAE enjoys a supply of labor. This enables the economy to expand and to meet the demand. The demand for low skilled and semi-skilled laborers is dominant. The low skill and semi-skilled laborers enable organizations to pay minimum wages and maximize on profits. The high supply of low skilled employees may have effects on the organization on innovativeness and production.
There is a high number of immigrants in the trade centers employed to work in ongoing projects and conducting business. Labor laws and policies are very strict. Employees have for a long time been denied the freedom to change jobs. In the recent past, employees can change their jobs with the consent of their employer or former employer. Since a large number of employees are not citizens, the labor laws can be made favorable for employees to boost their motivation. Motivated employees will give increased output.
In the health sector, a number of nurses have immigrated to western nations despite an increase in their salaries. Experienced nurses have found better paying jobs in the west while UAE continue to train nurses and employ the untrained nurses. After training, the experienced nurses get employment elsewhere leaving a low supply of experienced healthcare nurses.4
Factors that affect demand and supply in UAE
UAE individual emirates are different regions headed by a ruler. Each emirate is autonomous in politics and economics. The federal government redistributes the revenue to the seven emirates. The emirates are diverse. A majority of the revenue is contributed by Dubai and Abu Dhabi.
The government policies favor the nationals from UAE region than foreigners. The government ensures that it enables the growth of other sectors in the region besides oil sector. Dubai and Abu Dhabi international operation in oil demonstrates equal interest. The government has no debt. In UAE, there is no income tax.
A well-developed network of roads and sea ports, as well as a modern airport, are the strongholds of UAE. Water and electricity supply are increased to enable trade. The marketing strategy commonly used in the Emirates is the use of commercial agents. Agents and distributors are treated as the same in UAE.
The demand for products with after sale services is increasing. More customer care and maintenance personnel are being trained causing an increase in the labor market. The communication sector has also experienced increased demand. Phone lines and mobile phones are common in the region.
There are well enhanced internet services in UAE, which have facilitated the growth of trade and communication. Reducing disparity in economic development expedites the region to have security; since the oil prices are highly volatile. Meeting the demand for the necessities required in development facilitates the economic growth the federation seeks to achieve.
Conclusion
UAE is a federation of Dubai, Umm al Quwain, Ajan, Abu Dhabi, Fujairah and Ras Al Khaimah emirates. The regions vary in their national resources and development. Dubai and Al Dhabi have large revenue than the other regions. UAE policies redistribute wealth across the region and encourage diversity of industries.
Water supply is on high demand due to the ever-growing need of water in the agricultural sector, industrial sector and human consumption. Sources of water are desalinated water, surface water, underground water and recycled water. Fresh water supply is increased if the desalinated water is augmented to meet demand.
Water wells are used in case of emergency. Enough energy is required to desalinate sea water and to enable industrial developments. Natural gas, oil and thermal power are the sources of energy. The demand for increased energy is increasing. Nuclear power energy adoption is expected to meet the power demand in the future.
The demand and supply of property in UAE keeps changing. Dubai has a renowned real estate. When the supply of property is low, cost of buying property and rental prices are high. The construction is increased to meet the demand. When there is an oversupply of property, the cost of buying property and rental cost is lowered.
Property demand increases as the number of tourists, laborers and the general population increase in the urban centers. Tourists come in large numbers to shop in the malls and to enjoy modern and ancient attractions in the place. There are a large number of non UAE nationals who are employed in UAE. Nurses in UAE look for employment in the western countries after gaining experience.
To balance between supply and demand, the UAE federation enacts policies that encourage distribution of wealth and economic development. It has increased production of power, supply of clean water, focused on building road and airport infrastructure, enhanced communication and encouraged diversity of industries.
Recommendations
The supply of sustainable water is necessary for agricultural, industrial and consumption. Water supply can be increased to meet demand if many plants with greater capacity to desalinate water are constructed. Energy demand that is increasing can be met with diversity in power generation.
Adoption of nuclear power will provide adequate energy for development needs in UAE. Real estate constant supply of property to meet demand will be necessary to maintain prices and meet the demand for the growing population. Laws and policies that allow non UAE nationals to invest will be relevant to encourage economic growth and meet the demand for property development. Employers should consider employing laborers with skills.
The labor laws can favor the laborers to increase their motivation by allowing mobility. As a result, the demand for improved production and innovativeness will be met.
The federation can consider providing better working conditions and adequate compensation for their nurses to prevent their immigration to the west. Since a majority of employees are not nationals in UAE, their motivation will contribute to the economic growth. Economic policies that enhance distribution of wealth together with economic development can be adopted to facilitate economic growth.
Bibliography
- The United Arab Emirates, Initial National Communication to the United Nations Framework, 2006. Web.
- Al-Hosani, H., Water demand forecast and management of United Arab Emirates, 2010. Web.
- Research and markets.com, Executive report on strategies in the United Arab Emirates, 2007. Web.
- Chilton, J. B., Supply and demand in the news: the emirates economist, 2007. Web.