The EXPO 2020 Effects on the Economy of the UAE Research Paper

Executive Summary

Global EXPOS is known to attract many participants who directly or indirectly benefit through trade exchanges and employment opportunities. For instance, the EXPO held in Shanghai in the year 2010 was a game-changer for China since it attracted about 73 million participants and more than 300 global companies. The 2020 Dubai EXPO is expected to catalyze economic transformation and facilitate sustainable improvement in performance in the UAE’s GDP in the foreseeable future. Specifically, the findings of the research suggest that the 2020 EXPO would be a game-changer in the UAE sectarian economy since its impact would be felt in the major sectors of the economy such as tourism, retail, manufacturing, and service industries. Besides, it is predicted that the EXPO would create more than 300,000 new jobs to help further lower the single-digit unemployment rate at present. The regression analysis suggests that there is a positive correlation between the GDP of the UAE and different sectors of the economy after the 2020 Dubai EXPO. This positive correlation is associated with increased revenue in these sectors as a result of investments and returns from the influx of opportunities and visitors during the seven months event.

Introduction

As the host of the first global EXPO held within the region of the Middle East, North Africa, and South Asia (MENASA), the Dubai 2020 EXPO is expected to have a massive impact on the economy of the city of Dubai and the entire UAE. Modeled around the theme, Connecting Minds, Creating the Future, the Dubai 2020 EXPO is likely to surpass showcasing commerce, infrastructure, and technology since it will guarantee opportunity, mobility, and sustainability in economic growth and development. It is vital to review the direct and indirect impacts of the 2020 EXPO on the economy of Dubai and the entire UAE.

Research Background

According to Rahman (2014), the city of Dubai is expected to transform into an agency of economic progress as the current infrastructural developments such as creating sustainable energy sources, creation of transport network, and proactive facilitation of the intrinsic entrepreneurship culture within a single location (Rahman 2014, p. 6). Economists have used words such as ‘economic catalyst’ and ‘transformative’ to describe the potential effect of the 2020 Dubai EXPO. At present, about US$7 billion has been set aside by the UAE for infrastructural developments in Dubai as part of the preparation for the EXPO (International Monetary Fund 2017, p. 7). Besides, the strategic location of the city of Dubai as a hub for global trade reachable by almost a third of the world population within 4 hours makes the city an attractive center for business. Besides, the location of Dubai is a bridge connecting developing and developed nations to guarantees the exponential economic impacts before and after the EXPO.

The current infrastructural activities in the leisure, hospitality, tourism, and transport sectors have direct benefits such as the creation of job opportunities and stimulation of the economy from development spending. Besides commerce, EXPO is expected to have a direct impact on the dimension of human development. In a press statement after the successful bid to host the 2020 Dubai EXPO, H.H Shiekh Mohammad bin Rashid stated that “our goal is to build a better future for the region’s youth. The UAE will achieve it through collaboration and inspiration at the event” (Modul Dubai University 2017, p.4). Therefore, there is a need to carry out research on the actual impacts of the EXPO 2020 on the economy of the city of Dubai and the UAE. Specifically, the research will attempt to identify the direct and indirect effects of the EXPO in different economic sectors.

Research Problem Statement

Trade EXPOS are known to attract different positive economic impacts from the time of planning, during the event, and after the event. Specifically, these benefits cover different economic sectors since such events are known to stimulate expenditure and attract investment in millions of dollars (Monks & Minow 2012, p. 34). The global trade EXPO is an important economic event that is organized by more than 200 hundred economies across the globe. The EXPOS attract private investors from local and international markets. The planning of such events involves massive financial expenditure in the infrastructure and other functions that would support the actual event. For instance, prior to the 2010 Shanghai EXPO, the Chinese government spent more than US$4 billion in preparation of the event and generated more than US$22 billion from direct trade deals between different governments and organizations (GRI 2016, p. 12). In line with the upcoming 2020 Dubai EXPO, the need to establish the actual and quantifiable impacts of the event on the UAE economy necessitated this research study. Specifically, the study will attempt to quantify the specific impacts of the EXPO on different sectors of the UAE economy. At the end of the research study, direct and indirect benefits or costs of the EXPO will be comprehensively revealed to quantify the significance of hosting such a global event.

Research Aims and Objectives

Considering the global nature of the Dubai 2020 EXPO, this research study aims at reviewing the potential impacts of the event on different sectors of the UAE economy. The following sub-objectives were created to address the above aim.

1. To review the direct impacts of the 2020 Dubai EXPO on the economy of the city of Dubai and the entire UAE
2. To review the indirect impacts of the 2020 Dubai EXPO on the economy of the city of Dubai and the entire UAE.
3. To explore the potential short-term benefits that the UAE economy will derive from the EXPO.
4. To explore the potential long-term benefits that the UAE economy will derive from the EXPO.
5. To investigate potential gains within the UAE economy in the planning stage, the actual event, and after the EXPO.

Research Questions

From the above objectives, the following research questions were generated to address the topic of the study.

1. What are the direct impacts of the 2020 Dubai EXPO on the economy of the city of Dubai and the entire UAE?
2. What are the indirect impacts of the 2020 Dubai EXPO on the economy of the city of Dubai and the entire UAE?
3. What are the potential short-term benefits that the UAE economy will derive from the EXPO?
4. What are the potential long-term benefits that the UAE economy will derive from the EXPO?
5. What are the potential gains within the UAE economy in the planning stage, actual event, and after the EXPO?

Significance of the Study

Global trade events such as the 2020 Dubai EXPO are critical in promoting economic growth in the host country and the region. This research will be instrumental to the UAE government, business organizations, citizens of the UAE, and private participants who may want to carry out a cost-benefit analysis of the upcoming EXPO. The study will provide suggestions to the UAE government to ensure that it maximizes the potential economic gains as the hosting country for the 2020 trade EXPO.

Literature Review

More than 200 multinational organizations from about 120 countries are expected to be part of the upcoming Dubai EXPO 2020. By the end of the year 2016, the government of the UAE had released AED 5.3 billion for infrastructural expansion and site development (Dajani 2017, p. 7). It is expected that more than AED 11.5 billion will be released in the next twelve months to finance the planning for the event. The UAE government has projected that the 2020 EXPO will attract about twenty-five million visitors from more than 120 countries. The planning and hosting of the event are expected to create about three hundred thousand new jobs within the UAE (First Group 2015, p. 13). Besides, it is projected that the event will attract many short-term and long-term investments to the city of Dubai and the UAE. Specifically, “the impact of EXPO 2020 on Dubai’s economy will be significant as it will have a long-term effect on the economic growth of Dubai and UAE” (Dajani 2017, p. 9). Since the EXPO is the third major global experience after the Olympics and FIFA cup, the city of Dubai is expected to host more than twenty-five million participants between the month of October 2020 and April 2021.

Several economic benefits have been identified as accompanying the 2020 EXPO in the city of Dubai. The benefits include investments, economic diversification, economic growth, tourism, job creation, and major attractions among others (Gordon 2013, p. 27). Reflectively, the 2020 EXPO is expected to “attract foreign investments between $100 to $150 billion in Dubai and UAE across various sectors of the economy such as real estate, hospitality, retail and education” (Rahman 2014, p. 11). Specifically, major investments are expected within the healthcare, commerce, and IT sectors. In terms of economic growth, the GDP of Dubai is expected to grow at a constant 4% annually between the years 2017 and 2020. Since Dubai is among the Most Diversified Economies (MDE) in the global business arena, the 2020 EXPO is projected to catalyze economic diversification into new sectors such as sustainable energy, innovation, media, and medical tourism among others.

In terms of jobs, it is projected that more than 300,000 new jobs will be created up to the time of the event and even after. At present, “Dubai enjoys high occupancy rates (approx. 80%) and tourist growth (approx. 10-15% y-o-y basis) across in the MENA region” (Ashford 2017, p. 9). More opportunities will be created for incentives, meetings, and leisure to improve on the earnings from the tourism sector and the hospitality industry in the UAE. In terms of major attractions, the opening of Dubai Opera, IMG Adventure World, City Walk, and the Dubai Water Canal among others are expected to net maximum returns during the EXPO 2020 alongside the Palm Jumeirah and Burj Khalifa (Dajani 2014, p. 19). In addition, the current projects for upcoming attractions such as the Dubai Creek and Dubai Safari Park are expected to reap benefits from the high population of visitors during the period of the EXPO. Finally, the current goodwill from the UAE government to implement a series of economic reforms is expected to catalyze an influx of foreign investors looking to gain from new markets (Corporate Register 2016, p. 23).

Research Methodology

Since the research is focused, the researcher opted to use a quantitative approach in data collection and analysis. Specifically, secondary data was collected from the IMF site on the GDP trends in the UAE between the years 2015 and the year 2022. The period of research falls within the upcoming 2020 Dubai EXPO. The researcher applied regression and correlation tools to analyze the collected data (Paul 2013, p. 22). In order to interpret the data, graphs were drawn for different variables to establish a clear relationship between the 2020 EXPO and the economy of the UAE. Specifically, GDP was used as the dependent variable while the unemployment rate, revenues from the tourism sector, current account balance, and revenues from retail sectors as the independent variables. In order to guarantee unbiased data interpretation, the researcher was keen to apply different dependability tools and ethical principles of professional study (Miller, Mauthner, Birch, & Jessop 2012, p. 32). For instance, data was collected from an authentic source (Kothari 2013, p. 26). Besides, the use of regression and correlation tools allowed for comparative analysis to draw findings that can be tested and verified (Mason 2015, p. 19). The findings are discussed in the next chapter.

Research Findings and Analysis

Summary of the Findings

The findings from secondary data analysis revealed a positive relationship between the dependent and independent variables with exception of unemployment as captured in the correlation results. Specifically, the positive relationship was linear in nature suggesting that the 2020 EXPO would catalyze exponential growth in different sectors of the UAE economy.

Trend Analysis

The trend of GDP as related to other variables was analyzed from the year 2015 to 2022 and the finding is summarized in graph 1 below.

Graph 1 above shows that the country had a decline in GDP, gross national savings, current account balance, total investments, and general government revenues in 2016. However, the values are expected to increase in 2020 and beyond. This signifies that the EXPO is likely to spark growth in the economy.

In terms of the percentage change in the GDP, the finding from trend analysis is summarized in graph 2 below.

The trend of percentage growth in GDP as captured in graph 2 above shows a decline between 2015 and 2017. However, the EXPO and other variables in the economy will cause an increase in 2018. Thereafter, the country is likely to experience steady growth in GDP after the EXPO and beyond.

In relation to the tourism and retail sectors, the trend analysis result is summarized in graph 3 below.

The graph above shows that the country has experienced an increase in revenues generated from the tourism and retail sectors. This has been sparked by growth in tourist attraction centers. However, the EXPO is expected to create a surge in the number of visitors. Therefore, these two sectors are expected to perform even much better during and other the event. This explains the continuous growth in revenues.

Regression

The regression line will take the form Y = b₀ + b₁X₁ + b₂X₂ + b₃X₃ + b₄X₄

• Y = GDP in USD, billions
• X₁ = unemployment, percentage
• X₂ = current account balance
• X₃ = tourism sector revenues
• X₄ = retail sector revenues

The theoretical expectations are b₀ can take any value and b_3, b₂, and b₄> 0, while b₁ < 0.

Correlation results

Regression result

The regression equation will take the form Y = 231.49 – 33.34X₁ + 0.82X₂ + 1.52X₃ + 1.05X₄. The coefficient of unemployment is negative. It shows that there is a negative relationship between unemployment and GDP (Kothari 2013, p. 22). The other variables have a positive coefficient which implies that an increase in the value of the each variable causes the GDP to increase by the value of the coefficient. A two tailed t-test is used to test the significance of the explanatory variable (Blaxter, Hughes, & Malcolm 2014, p. 27). The t-statistics for revenues from tourism sector is 4.0272, while the p-value is 0.0275. Since the p-value is less than α=0.05, then the null hypothesis is rejected and conclude that the variable is a significant determinant of GDP.

The p-values for the other variables are greater than Alpha. This implies that they are not statistically significant at the 95% confidence level (Cooper 2014, p. 45). The results of the t-test might have been distorted by the high correlation between the variables as indicated in the correlation matrix above (Bryman 2012, p. 39). The value of f-calculated is 234.5802. The value of significance f (0.0004) is less than α (0.05). This shows that the overall regression line is statistically significant at the 95% confidence level. Further, the value of R-square is 0.9968 while adjusted R-square is 0.9926. R-square is a measure of goodness of fit. The value is close to 1 and it indicates that the independent variables have a strong explanatory power because they explain about 99.68% of the variations in GDP. The regression results show that revenues from tourism sector will have a significant effect on the GDP of UAE. Further, unemployment, revenues from retail sector, and current account balance, will not have a statistically significant impact on the GDP.

Conclusion

The trade EXPO is a global trade event with series of benefits to the economy of the hosting country. The 2020 Dubai EXPO is expected to be a game changer in economy performance for the city of Dubai and the UAE. The findings reveal that there is a positive relationship between the EXPO and economic growth in the UAE. Specifically, the findings suggest that the EXPO would have a multiplier effect in the UAE’s GDP and general growth in revenue in the major business sectors such as service, retail, and tourism industries among others. Besides, the EXPO would reduce the unemployment rate by a large margin since it likely to lead to creation of more than 250,000 new jobs.

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