The journey of United Arab Emirate’s (UAE) transformation from an oil-dependent economy into a diversified one has been long and sustained, but also successful.
Indeed, academics and commentators are now of the opinion that UAE has succeeded in developing a self-sustaining, multi-component and diversified economy, with the capacity to generate massive capital gains independently of the old oil industry (Davidson, 2009).
The UAE urge to diversify its economic base arose from the fear that overreliance on oil exports would soon render its economy susceptible to the vagrancies of global economy and other uncontrollable events, and that it was important to maintain a balance of trade and attract foreign direct investment to shield the
Emirates from shaky oil prices (Karnik & Fernandes, 2009; Davidson, 2009). Some three decades down the line, research demonstrates that UAE’s services sector has matured to become a primary constituent of the country’s economic growth.
The brains behind the rapid evolution of UAE’s services industry lie in the equally rapid development of the Kingdom’s financial services sector, hotel and leisure sector, and the speedy integration of knowledge-based industries (Davidson, 2009).
In the proliferation of the financial services sector, academics and practitioners note that this domain has been critical in financing huge economic investments and projects undertaken in the country (Boleat, 2005).
While UAE’s Central Bank has contributed massively to the growing confidence of investors in the financial sector, the Emirates International Bank (EIB) has, since its commissioning in 1982, “…provided low-interest soft loans in excess of $350 million to various new business projects, especially those unrelated to the oil sector” (Davidson, 2009 p. 112).
Consequently, it can be argued that the provision of soft loans by these institutions coupled with the emergence of specialist finance companies continue to contribute to the preservation of economic value of real estate and housing projects undertaken in UAE (Boleat, 2005).
In equal breadth, foreign-owned financial institutions, such as HSBC, Barclays and Citibank, have been instrumental in spurring UAE’s export-import business by availing short-term capital to investors (Davidson, 2009). These dynamics have contributed to unprecedented economic growth and sustainability for UAE.
Moving to the unprecedented growth of the hotel and leisure sector, it is evident that the number of business and leisure tourists visiting UAE have considerably increased ever since the Kingdom became committed to developing a luxury international tourist industry since the 1990’s (Davidson, 2009).
Indeed, according to this author, Dubai has emerged as a realistic alternative to the Mediterranean and Florida due to its iconic hotels and entertainment hotspots, winter sun, long and breath-taking stretches of sandy beaches, and shallow seas.
Presently Dubai is not only a booming global economic hub, but also an outstanding resort destination, precisely because of top-notch luxurious hotel projects such as the high-end Jumeirah Beach Hotel and the world’s first seven star hotel Burj Al-Arab (Davidson, 2009).
Available figures from the Dubai Department of Tourism and Commerce Marketing (DTCM) demonstrate that Dubai emerged the top tourist destination in terms of hotel occupancy levels and average revenue per available room for January 2012, registering a massive 86.2 percent occupancy level for the month, up from 75.4 per cent registered in January 2011 (Kapur, 2012).
By 2007, Dubai was receiving an estimated 6.5 million tourists per year, up from 3.4 million recorded in 2000 (Davidson, 2009).
Such a surge in bed occupancy and tourist numbers is not only a sure testimony that the hotel and leisure sector is contributing immensely to UAE’s Gross Domestic Product, but also serves as a vivid indicator of the Emirate’s resolve to diversify its economy from oil dependency.
As postulated by Davidson (2009), UAE’s heavy investments in infrastructure and leisure, including the creation of Port Rashid, Port Jabel Ali, Dubai International Airport (DXB), Dubailand Theme Park, annual shopping festivals, and exhibition tourism, continue to attract millions of business and leisure tourists into the Kingdom.
This view is reinforced by Scott (2012), who suggests that UAE’s infrastructure, especially sea ports and world class airports, provides easy access in and out of the country to the advantage of tourists and investors.
Lastly, in the role of knowledge-based industries, it is worthwhile to note that the strategic initiatives undertaken to transform UAE into a knowledge-based economy has had positive outcomes not just for the country, but also for the region’s integration and cooperation efforts (Emirates Competitiveness Council, 2011).
The Dubai Internet City opened its doors in late 2000 to avail to over 100 corporations’ the information technology (IT) infrastructure that has proved essential to the Kingdom’s economic growth. The infrastructure includes a dedicated submarine internet cable (Davidson, 2009).
Interestingly, according to this particular author, “…by 2007 the City had expanded to house nearly 850 companies employing some 10,000 workers, and now boasts the Middle Eastern headquarters of leading technology firms including Microsoft, Hewlett-Packard, Dell, and Canon” (p. 117).
The UAE is also home to Dubai Media City, a conglomeration of regional and international media brands, including LBC, Al-Arabiya service, Al-Jezeera, CNN, BBC and Reuters, among others (Davidson, 2009).
Consequently, it is safe to argue that UAE’s financial services sector, hotel and leisure sector, and the emergence of knowledge-based industries, are vivid indicators of the dominance of the country’s services sector as a primary constituent of its economic growth and prosperity.
Reference List
Boleat, M 2005, ‘Housing finance in the United Arab Emirates’, Housing Finance International, vol. 19 no. 3, pp. 3-6.
Davidson, C.M 2009, Dubai: The vulnerability of success, Columbia University Press, New York City.
Emirates Competitiveness Council 2011, Policy in action: The UAE in the global knowledge economy, Issue 1. Web.
Kapur, V 2012, Six sure signs that show Dubai’s economy is booming again. Web.
Karnik, A.V & Fernandes, C 2009, ‘Natural resource dependence: A macroeconometric model for the UAE’, Applied Economics, vol. 41 no. 9, pp. 1157-1174.
Scott, K (2012). UAE world’s 16th most competitive economy, Gulf News. Web.