Abstract
This paper broadly discussed the sustainability of the natural resources in the Gulf states. The paper has presented the numerous challenges in the Gulf in relation to the diversification of economic activities. The Arabic nations mainly depend on oil as the principal source of wealth. Nonetheless, this paper presents a rationale that nothing can last forever. Anticipating future depletion of the oil reserves, the paper argues that it is in the best interest of the Gulf States to explore alternative economic activities. There is a risk of solely depending on one economic resource in an entire region. In case of a decline in the demand for the product, the entire region will be at risk. The Gulf States depend solely on oil and the development of sources of energy that are friendly to the environment may threaten its demand.
Introduction
While the Gulf Cooperation Council petrochemical industry is proving a world-leading economic pillar, there is a looming challenge of managing the environmental implications. It is projected that as the industry is set to influence exiting opportunities, there is a downside where some challenges will arise. A number of gulf petrochemical manufactures are more concerned with trading their products hence overlooking the issue of sustainability. It is evident that 5% of the amounts of greenhouse gas emissions are emitted by the chemical manufacturing industry [1]. This is even made worse by the fact that some of these resources are actually non-renewable. Sustainability in the petrochemical industry is a detrimental challenge that is making the industry rate very low in labor attractiveness. Employees are not willing to work in an industry that does not show the capabilities to sustain its employees long enough. Employees seek to secure jobs that can sustain them for a period and offer them a sense of security. These economic times require secure and certain economic plans which can only be provided by employers who have a future and sustainable infrastructure.
The petrochemical industry as of now seems to have hit rock bottom in its pursuit of solutions to the global problems caused by their activities. The global warming that has drastically changed the weather patterns of the entire globe is a major challenge. Far from the environmental challenges, the resources found in the UAE have turned to be tragic inventories. Some people refer to these resources as a curse. The rationale is based on the circumstances that these resources are being exploited. The Middle East is a region known for its reputation in war and conflicts over natural resources. This has led to the rise of incapacitated governments and countries hence paralyzing normalcy in the region. The reason why this is the case is because of the oil deposits found in this region. Sometimes the oil deposits in the region are considered a curse rather than a blessing due to the conflicts that have arisen from the fight to control the oil reserves. Battles ensue within the region due to competition for supremacy and oil control.
The Gulf States are greatly dependent on remittances from their oil reserves and foreign investments. The oil refineries are the main economic activities in the Arab countries although some of the states within the gulf have greatly diversified their economy into the manufacture of other products. Bahrain for instance set up an aluminum smelting plant to mitigate the looming fluctuation in the prices and demand for oil. Dubai on the other hand diversified in the hotel and tourism industry as well as export and sea transport. The creation of the ports in Dubai increased the number of tourists flowing into the country as well as boosted trade in the country. Such developments in the economic ventures give the Gulf States a level of sustainable business outlook that is disrupted by the changes and fluctuations in the oil prices. As the prices keep on escalating and changing, the economy remains stable due to the diversified investment in other economic factors that hold the country in times of crisis. This is the reason why Dubai has turned to be the world’s most popular business hub due to diversification into other industries.
General economic outlook
The UAE’s GDP, which relies on oil prices, has followed a roller coaster model, towering throughout the 1970s and deteriorating steeply all the way through the 1980s. These swings in revenue have caused the system to give the impression of being for traditions to expand the financial system, predominantly in Dubai, where oil production is dwindling. The exploration for diversification has been barely to some extent victorious. Oil revenues linger to be the machine that drives the economy. Oil revenues present 80 percent of financial proceeds and about 60 percent of sell overseas retribution in the period 1990-1994 [1].
The UAE is in an enhanced monetary situation than its instantaneous neighbors. The administration is not hindering spending to service providers or borrowing from foreign commercial banks to reimburse its amount outstanding. It is, nevertheless, drawing leading from its own overseas assets and has loaned from domestic commercial banks in which it has a right in shares. This reduces to greatly extends the public debt and enhances the government’s autonomy in financial matters. Government borrowing can destroy or impede the growth of an economy. Therefore, by establishing an independent financial system, the government increases its chances of making progress in sustainable economic diversification.
The majority of the workers are working for the government [2]. The administration provides several financial support services, which also are comprehensive to foreigners who make up to 80 percent of the entire population [2]. In 1994, the government embarked on a mission to decrease this financial backing by escalating charges to foreigners for various services, like health, water and electricity [3]. The insurance does not completely cover up expenses, and citizens still access a lot of services at cheap or free of charge. In an attempt to restrain the predicament of unlawful laborers, the administration approved a law banishing all foreign laborers in infringement of their visas [3]. The law, which affects practically 10 percent of the UAE’s inhabitants, is in no doubt going to have pessimistic consequences. By now, some food distributors and vendors have accounted for a 30 to 35 percent plummet in trade [3]. In addition, the building segment, which is an inducement for the overseas workforce, anticipates spiky diminutions. Supporters of the law maintain that the removal will relieve joblessness nuisance, lessen misdemeanor and condense government spending.
All the six associates of GCC presently have a privatization policy of some shape as a way to trim down government spending and to rotate unbeneficial nationalized businesses [4]. The UAE particularly has been testing strategies for privatization on diminutive farming endeavors and now hopes to unbolt calculated sectors of its financial systems, such as the petrochemical industries, private investors [4]. In the Gulf States, the major economic asset is the oil reserves which are estimated at 100 billion brains of verified oil reserves. This amounts to almost 10 percent of the entire world’s oil reserves representing an enormous resource in oil deposits. Nonetheless, in order to maintain sustainable economic relevance, there is a need for the Gulf States to diversify their economies. Depending on a single resource as the main economic wealth producer leaves the economy in a volatile situation especially with the global fluctuations of demand and prices. Diversification helps an economy to maintain financial stability in the event of an economic crisis.
Recommendations
Like the UAE has done, the Gulf States must come up with diversification policies to enable their economies to withstand the pressure of economic instability in the global market. All of the greatest economies in the world today have been elevated to their current economic status by the introduction and setting up of manufacturing sectors in their economies. Taking into account countries like Japan, China, South Korea, the United States of America among others, manufacturing industries have been the main economic driving force in these economies. The Gulf States in a bid to diversify their economies should consider setting up manufacturing sectors. Investing in alternative economic factors is a good way for an economy to prevent and protect itself from the looming economic inconsistencies in terms of financial stability. World trade keeps on changing and demand and preferences can not last long hence the need for a diversified economy to take advantage of the changing economic tides.
The Gulf States need diversified economic activities since recent developments in the energy sector may render their main source of wealth useless. The recent developments in solar and wind energy are threatening the demand for petroleum products. Still, the main concern about the use of petroleum products is the environmental effects of greenhouse gas emissions. With the increasing campaigns to avert the greenhouse effects of carbon emissions, the oil market has a challenge. Other environmentally friendly sources of energy are coming up and their presence might affect the viability of the oil products. In the event there is a discovery of an environmentally friendly source of energy that is dependable then the Gulf States will have to deal with a major drop in petroleum demand.
References
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