Introduction
Today we can observe drastic changes in the global economy. The appearance of specific trends in the way countries interact, the high speed of globalization, and the emergence of new dominant agents impact the way economies evolve. Moreover, the rapid development of certain areas that previously were not considered significant stipulates the reconsideration of diverse patterns peculiar to business relations between states and even their policies. There are several areas that today affect the world significantly and shape the existing global intercourse and economy. Nevertheless, the Middle Eastern region is one of these regions.
Its extensive rise is associated with the increased importance of oil which is now considered the fundamental strategic resource. Being rich in its deposits, the Gulf States entered the period of its rapid rise and creation of new modern economies. The UAE belongs to these states and nowadays is considered one of the most fast-growing countries with stable and continuously evolving industry and business sectors (“Economy,” n.d.). With this in mind, the given paper is devoted to the comprehensive investigation of the UAE and its macroeconomics. To understand the essential features of the UAEs economy, it is compared with the Netherlands, its macro fields, and other meaningful showings.
Economies Overview
The UAE
In general, the UAE has the second-largest economy in the Arab world after Saudi Arabia (“Economy,” n.d.). Its gross domestic product comprises $403,2 billion (“Economy,” n.d.). However, about 80% of the UAE s comes from the oil export (“Economy,” n.d.). That is why there are numerous tendencies towards the diversification of its economy. Using the oil industry as the basis for its power and wealth, the country correctly realizes the necessity to develop other spheres to minimize the dependence on this source and oscillations in its price. For this reason, the UAE has the most diverse economy in the Gulf region (“Economy,” n.d.). At the moment, it develops the high-class tourism sector attracting people from all countries. Moreover, international finance becomes a more significant part of the UAEs current business environment.
The state attracts investors and international financial agencies by suggesting beneficial conditions for their development and growth. For instance, the Dubai International Financial Centre offers 55,5% of foreign ownership to guarantee the broad participation of other countries and the continuous evolution of this field (“Economy,” n.d.). At the same time, no withholding tax is suggested for international agents participating in the development of the economy (“Economy,” n.d.). There are also numerous attempts to facilitate the evolution of high technologies. Government-led investments result in the development of the aerospace and automotive industries (“Economy,” n.d.). Finally, regarding foreign trade, the UAE has one of the most dynamic markets globally. It is included in 16 largest exporters and 20 biggest importers of commodities (“The UAE vision 2021,” n.d.). In this regard, the country becomes a significant player at the international level.
The Netherlands
As for the Netherlands, the country holds a traditionally powerful position in the international economy and trade. By statistics, it has the 18th largest economy in the world. Regarding the fact that the population comprises 17million inhabitants, the GDP per capita is about $48,860, and it is one of the highest showings among all nations (“Netherlands economic outlook,” 2018). The given effect is achieved due to the diversification of the economy and focus on the innovative technologies and spheres that could guarantee a high income. For instance, the state has a powerful energy sector that is based on the rich natural gas resources and nuclear power plants. Nuclear energy contributes to the development of industry in the state and its further enrichment.
The country also has a developed tourism sector that attracts millions of tourists every year (“Netherlands economic outlook,” 2018). Additionally, the Netherlands has an open economy with a focus on foreign trade with other countries worldwide. The given vector of the countrys development contributes to its financial stability and a further rise in terms of modern international cooperation and the latest trends. There are numerous developed industries such as food processing, chemicals, petroleum refining, high tech technologies, financial services, and electrical machinery (“Netherlands economic outlook,” 2018). All these factors indicate that the country has a highly-developed economy with numerous opportunities for further evolution.
Economic Goals
Comparing these two states, their fundamental economic goals should be analyzed. Thus, regarding the above-mentioned peculiarities of their economies, the UAE and the Netherlands have diverse goals. By the UAE vision 2021, a document that regulates the states further evolution, the primary goal is to “shift to a diversified and knowledge-based economy” (“The UAE vision 2021,” n.d., p. 3). It means a significant reconsideration of the industrial sector with the central aim to decrease dependence on oil and increase the countrys competitiveness and the international level by simulating innovative technologies, diversification, and education to prepare local high-skilled workers who can support this incentive. As for the Netherlands, its current economic goals is the preservation of its leading positions in the world trade and continuous growths of all industries that are central for the state and contribute to its wealth and sable position (“Netherlands economic outlook,” 2018).
Role in Global Economies
The selected countries also play different roles in the global economy. It is stipulated by the historical peculiarities of their development. Nevertheless, as it has already been stated, the Netherlands remains one of the key actors in international relations suggesting numerous products, services, and opportunities for cooperation and foreign investors (“Netherlands economic outlook,” 2018). As for the UAE, being a newcomer, it rapidly gains momentum and starts playing a more significant role. As the second-largest economy in the Middle Eastern region, the state impacts the vector of international relations with oil-producing nations (“Economy,” n.d.). It affects prices for this strategic resource which also evidences the UAEs critical role in current global economies. The state is now engaged in numerous relations with diverse partners and demonstrates multiple perspectives for the further growth of its importance because of the focus on other industries and the financial sector.
Valuation of Currency
The UAE has its currency known as AED (Arab Emirates Dirham). In 2015, it experienced an inflation rate of 3.7% (“Economy,” n.d.). However, despite this threatening tendency, the leading financial agencies and investors still consider AED one of the most stable currencies globally (“Economy,” n.d.). It comes from the continuous growth of the economy of the state and its leading positions in producing oil. Additionally, there are numerous tendencies towards the diversification of the economy mentioned above. For this reason, forecasts related to AED and its rate at the international level are positive. At the moment, 1 AED is equal to 0,27 U.S. dollars (“X-rates,” n.d.). The Netherlands, like other states of the EU, uses the Euro which is now one of the most stable and powerful currencies excelling the U.S. dollar (1 Euro = 1,23 U.S dollars) (“X-rates,” n.d.). In such a way, both compared states have powerful currencies that are supported by their economic wealth.
Economic Growth
By the latest reports, the UAE expects significant economic growth in 2018 (“The UAE vision 2021,” n.d.). It will almost double its expansion rate in 2018 from 1,7% in 2017 to 3,6% in the upcoming year (“Economy,” n.d.). Additionally, the focus on the diversification of the economy and stimulation of other spheres will help to achieve even more significant development in spheres that were traditionally considered weak or unimportant in the UAE. In such a way, the country enters a period of stable and continuous evolution preconditioned by significant revenues from oil-producing and selling and emergence of new branches of industry that will help the country to preserve the high speed of its transformation into one of the world-leading nations with positive dynamics related to GDP and other important financial showings. As for the Netherlands, it also demonstrates stable showings. In 2017 it experienced economic recovery with a growth rate of 1,5% (“Netherlands economic outlook,” 2018). For this reason, the predicted extension in 2018 is around 3,3% (“Netherlands economic outlook,” 2018).
Interest Rates
Both the UAE and the Netherlands remain attractive for investors and foreign companies. Being one of the fast-growing economies, the UAE also stimulates financial relations in the state by suggesting specific interest rates. For instance, the benchmark interest rate in the country comprises 2,25 percent (“Economy,” n.d.). It indicates that the company continues its evolution and empowerment. As for the Netherlands, this rate averaged 3,53 percent from 2003 until 2018 (“Netherlands economic outlook,” 2018). These showings prove the beneficial characters of these economies for investors and for individuals who want to engage in a particular financial activity. Moreover, the positive dynamics of interest rates might support the countries functioning at the international level and increase their attractiveness for potential partners. In such a way, it is critical to monitor its levels and attain their appropriate meanings.
Skills of Labor Force
Finally, as for the skills of the labor force, the Netherlands has a more powerful position. The fact is that the country is focused on the development of high technologies and implementation of innovations to different branches of the industry with the primary aim to increase their efficiency and attain better outcomes (“Netherlands economic outlook,” 2018). It is impossible without the use of educated specialists who possess all skills needed to perform a complex activity that demands specific knowledge and competence. As for the UAE, it lacks a skilled labor force because of the comparatively young economy. At the moment, the country invites foreign specialists to work in spheres that demand experiences and professional education as local workers do not have the needed education and are not able to engage in these activities (“The UAE vision 2021,” n.d.). However, the country tries to eliminate this drawback by facilitating education and emphasizing the necessity of the creation of its human resources characterized by outstanding skills and expertise.
Conclusion
Altogether, having compared these two states, we can conclude that differences in the macroeconomic aspects are preconditioned by the unique features of their economies. Being the developed state with the traditionally powerful industrial sector focused on innovations, the Netherlands plays an important role in global trade. As for the UAE, it continues its evolution and demonstrates problems peculiar to states that experience this stage of their growth. However, it has outstanding opportunities for further development and becoming one of the leaders of the world’s global trade.
References
Economy. (n.d.). Web.
Netherlands economic outlook. (2018). Focus Economics. Web.
The UAE vision 2021. (n.d.). Web.
X-rates. (n.d.). Web.