Sample Research Paper on The Economy of the United Arab Emirates

The Economy of the United Arab Emirates

  1. Country Introduction
  2. Geographic Location

            The United Arab Emirates is a conglomerate of seven emirates, and the country is in the Middle East locale. Beyond doubt, the UAE is on the Eastern shore of the Persian Gulf, and on the Musandam Peninsula (Kanna, 2011). The area range of the nation is about 83,600 sq. Km (32,278 sq. miles). The seven emirates include Abu Dhabi, Ajman, Al Fujairah, Dubai, Ras Al Khaimah, Ash Shariqah, and Umm Al Qaywayn. Initially, the Emirates were Sheikhdoms, and the United Arab Emirates became evident in 1971. The biggest emirate in the UAE consolidated land mass is Abu Dhabi, and it is on the Persian Gulf, and the rest of the Emirates are on the Musandam Peninsula. The Musandam Peninsula isolates the Persian Gulf from the Gulf of Oman (Linda, 2012). Overall, in terms of consolidated geographical attributes, the UAE is in the Middle East region, and it is a state found in the Persian Gulf locale.

  1. Type of Government

            The type of government in the UAE is a federation whereby the Federal Government has specified powers, and the remaining power lies with the member Emirates. The head of state in the sovereign UAE land is the President, and the head the country’s government structure is the Prime Minister and he acquires some help from the Vice President (Pinto, 2012). The Federal Supreme Council consolidates seven electors from the respective emirates, and they select the President and Vice President. Elections happen after durations of five years, and the President appoints the Prime Minister and the Deputy Prime Minister. The Supreme Council of Rulers is at the apex in terms of constitutional authority in the country, and it integrates the seven emirate elites. The institution sets up UAE’s broad strategies and assents federal legislative clauses. The President hires the cabinet staff, and the legislative arm of the UAE state inclines towards the unicameral framework. The Unicameral Federal National Council encompasses 40 seats whereby the rulers of the constituent states appoint 20 members and the remaining 20 members elected to serve for four years (Kanna, 2011). The country’s judicial entity integrates the Union Supreme Court, and the President names the bench of judges. The entirety of the Emirates with the exception of Dubai and Ras Al Khaimah comprise the Federal System, and the Emirates have Islamic and mainstream laws that identify with the civil, criminal, and high courts.

  1. Population

            As at 2014, The UAE had a population of about 8.2 million, and the population growth rate stood at approximately 3% (NBS, 2010). Definitely, the inundation of foreigners in the country transforms the societal image in the nation. The UAE populace integrates 21% of locals, and the rest are women and foreigners. Approximately 2.1% of the UAE populace survives on $1 in a day, and a bulk of the country’s inhabitants are Muslim.

  1. Demographic Make Up

            The Sunni Muslims are dominant in the UAE and the Shia Muslims comprise the minority. Most nonnatives are also Muslims, but Christians and Hindus form a considerable part of the foreign populace (Linda, 2012). The UAE’s official dielect is Arabic, and Persian, English, Urdu, and Hindi are present amongst distinct speakers residing in the UAE. The country’s infant mortality rate is more or less 16 deaths per 1000 evident births. Additionally, life expectancy at birth for the whole populace is about 74.75-72.28 years for the males, and 77.35 years for the females. The fertility rate in the UAE territory is about three youngsters per woman. The country’s labor force is highly dependent on male expatriates, and for every 100 females, there are 104 men (NBS, 2010). Figure 1 depicts the population distribution in terms of age as at 2009, and Figure 2 depicts the UAE population by the emirate, gender, and nationality as at mid-2010.

Figure 1: Distribution of the UAE population by age group as at 2008 And 2009 courtesy of the UAE National Bureau of Statistics (NBS)

Figure 2: The UAE Total Population by Emirate, Gender, and Nationality courtesy of the UAE National Bureau of Statistics

  1. Brief History of the UAE

            The tribally composed Arabian Peninsula Sheikhdoms formed the UAE along the southern shorelines of the Gulf of Persia and the Northwestern shores of the Omani Gulf. Additionally, Islam began to dominate the UAE locale in the 7th century (Pinto, 2012). For many years, the dynastic disputes were prevalent in the area, and the area’s name was the Pirate Coast because foreign ships underwent frequent harassments by raiders. In the year 1819, the British wanted to protect India from these raiders, and this led to the initiation of the campaign against the raiders in the UAE region at that time. In the subsequent year, the sheikhs signed a peace treaty to curb the raids but the raids were intermittent until 1835. Additionally, the sheikhs consented to discard the UAE territory to the British only and no other European sovereign states (Kanna, 2011). The UAE encountered some disputes attributed to land with Saudi Arabia in 1955, and the British favored the UAE. Moreover, in 1974, Oman, and Saudi Arabia obtained some of the disputed lands and the UAE remained with the remaining portion. In 1968, the British revoked the treaties it had with the sheikhs, and in 1971, the nation achieved its freedom. In 1976, the centralization of the UAE government occurred, and the Federal government gained control of defense frameworks, immigration, and foreign affairs (Linda, 2012). The constitution, which was temporary since 1971, became perpetual in June 1996.

  1. Summary

            Overall, The UAE‘s location is in the Middle East region, and the country’s population as at 2014 was approximately 8.2 million people. Additionally, the British colonized the country, and independence became evident in December 1971 (Pinto, 2012). The seven Emirate rulers choose the President and the Vice-President, and the President designates the Prime Minister and the Deputy Prime Minister. The principal legislative entity of the UAE is the Federal National Council and it joins 40 legislators. In terms of population, the majority of the UAE inhabitants are male because the country’s labor force depends heavily on expatriate males (Kanna, 2011). The predominant religion is Islam, and the Sunni Muslims have dominance while the Shia Muslims are the minority. A significant part of the expatriate populace consolidates Christians, Hindus, and other religions.

 

  1. Economic History and Current Status
  2. Economic Standing over Time

Before 1940, a majority of the UAE population lived at a subsistence level. Additionally, in the 19th and 20th century, pearling was a critical economic activity, and later on oil exploration came into play. After World War 2, the pearls industry experienced a depression and the resultant effects on the UAE economy were catastrophic especially in Abu Dhabi (Linda, 2012). However, the effect of the depression in Dubai was minimal because Dubai depended on the traffic in gold, and it had excellent harbor facilities close to India and Oman. In 1966, the channeling of massive amounts of gold originating from the UK occurred in Dubai. Dubai acted as a channeling point for gold reserves mined in the free world (Pinto, 2012). The British participated heavily in the economic development of the UAE from 1966 onwards, by investing in water resources, health and education, and infrastructure.

Over the past 50 years, the UAE highlighted a favorable financial position, a diverse economic framework, and it exhibited pro-business economic policies. Such factors made the UAE an attractive investment to many foreign investors (Kanna, 2011). Through the years, oil exploration that is prevalent in Abu Dhabi has offered an unshakable support for the UAE economy. To date, the UAE’s dependence on oil is gradually decreasing because Dubai highlights immense developments as a regional trading and financial hub. More intently, Dubai comes out as a favorable tourist destination (NBS, 2010). Due to the recent decrease in oil prices, the UAE economy took a blow but the non-oil activities came in handy in terms of supporting the country’s economy. The non-oil sector accounts for approximately 70% of the UAE economy, and to some point, the UAE economy is still vulnerable to the unpredictable oil market up to this date. Additionally, the inflationary pressures are lower because of the lower global merchandise costs. The UAE exchange rate to the US dollar is likely to be at about AED3.67: USD1.00, or slightly more or less than this.

  1. Important Events in the Political Standing that Influenced the UAE Economy

            The domestic political risk in the UAE is low, and this encourages immense amounts of investments in the country especially from foreign investors. The government in the UAE has an enhanced grip of power in the country, and this ensures that the levels of political instability in the nation are minimal (Linda, 2012). The Arab Spring culminated into the rise of Islamic opposition groups in the UAE, and these groups collectively criticize the UAE government on a regular basis. The UAE government advances on these groups to neutralize them and other countries that support the Muslim Brotherhood are not happy (Pinto, 2012). An example of such a country is Qatar, and if other countries are not satisfied with the actions taken by the UAE government, it causes tension in the Middle East region. Such tensions end up scaring the prospective investors, and this hurts the UAE economy.

The UAE government ensures that a significant percentage of all its citizens work in the oil wells, which are mostly present in Abu Dhabi (Linda, 2012). Thus, the levels of political activism in the country reduce and this improves the economy because it encourages more investments as opposed to a country with a myriad of political activism activities. Additionally, Abu Dhabi constantly reinforces its political and economic influence in the other Emirates, and Dubai, and this prompts enhanced economic stability in the UAE locale. Moreover, the UAE government coordinates with Saudi intelligence bodies to inhibit the activities of jihadists and this improves the economy immensely (Pinto, 2012). The UAE government highlights a strong support for the US-led international Anti-Islamic State Coalition operating in Iraq and Syria, and this improves the investments from America and all its allies. More intently, the UAE government continually advocates improvements in education, technological infrastructure, and it nurtures a business-friendly climate (Kanna, 2011). Additionally, the UAE also highlights a high level of freedom among the Gulf States, and this ensures that the economy of the UAE is always flourishing. Overall, the UAE highlights elevated levels of political solidity, and this improves its economy immensely.

  1. Major Economic Opportunities/Changes

Recently, the United Arab Emirates inclined its economy towards improving sustainable practices. More precisely, the UAE economy is becoming a green economy, and this is a significant change in the UAE economy (Linda, 2012). Foreign investors are avid on matters of sustainability, and this move will skyrocket foreign investments in the UAE. In terms of opportunity, the UAE can market itself an investment hub that values sustainability. Secondly, The UAE can cooperate closely with the respective Gulf Cooperation Council (GCC) states, and this will immensely improve the economic conditions in the country (Pinto, 2012). Thirdly, the UAE government has an excellent reputation in OPEC, and because of this, it also has a good reputation in the West. The government can utilize its good reputation with the Western States to obtain more foreign investment in the UAE. Furthermore, the UAE can further enhance its economic relationship with China. Finally, the UAE government can improve relations with Iran especially by agreeing on the matters that concern the islands in the Straits of Hormuz (NBS, 2010). Such a move will guarantee political stability and in the end, the UAE economy will thrive.

  1. Current Economic Challenges/Successes

            In terms of economic successes, The UAE exhibits favorable economic conditions (Kanna, 2011). More precisely, the economic stability, investment climate, the degree of nationalization of industries, rights of property, and the development of human capital play a critical role in attracting investors. Secondly, according to the Global Competitiveness Report of 2014 the UAE emerged 19 out of 148 countries because of its excellent institutional structures and macroeconomic stability (NBS, 2010). In terms of challenges, the breakdown of the Dubai property market in 2010 prompted a financial emergency, and Abu Dhabi had to bail it out. Such occurrences may damage the investors’ levels of confidence, and this limits economic growth. Secondly, there have been concerns about the lack of democracy in the country, and this threatens long-term economic stability.

  1. Analysis/Conclusion

            To sum up UAE’s economic history and status, the country has in the past 50 years grown from dependence on oil exploration (NBS, 2010). Currently, oil represents about 30% of the economy. The UAE highlights a stable political structure, and this enhances its economic framework in an immense manner. Additionally, the country is a favorable investment hub for the West and other foreign countries, and this boosts its economy, and guarantees its long-term economic sustainability.

III. Fiscal and Monetary Policy

  1. Definitions

            The Fiscal policy is a government practice that relates to adjusting the tax rates, the revenues, the spending levels, or expenditures. Fiscal policies aim to influence the economic frameworks of a nation (Linda, 2012). The Monetary Policy is a system utilized by a national or a central bank to fortify the money supply of a country.

 

  1. Description of Major Fiscal and Monetary Policies in UAE and Comparison with The USA

In the UAE, there is a dependence on oil exports for fiscal revenues, and this is not the case in the United States. In the US, the fiscal deficit significantly reduced in the recent past but the high public debt is a major concern, as for the UAE the public debt issue is significantly lower (Pinto, 2012). Both the USA and the UAE alter their monetary and fiscal policies after some specified periods. As at 2014, the financial shortfall in the USA was at -2.8% and the UAE had a fiscal surplus of about 5.9%. The US has a feedback control rule for fiscal policy altered quarterly. Both the US Federal Reserve and the UAE Central Bank tighten their monetary policy (Kanna, 2011). The USA has more control of its monetary policy but the UAE currency depends on the US dollar, and this makes it extremely difficult for the UAE to control its monetary policy.

  1. Analysis of the Effectiveness for the Country

            The UAE fiscal policy has not been effective in the latter past because of the diminished oil income. Additionally, there was a greater spending because of the 2009 crisis and the 2011 Arab spring, and this is likely to cause a larger deficit (Linda, 2012). The monetary policy is not effective as the UAE Dirham is heavily dependent on the US Dollar, and this limits the control exercised by the Central Bank of the UAE.

  1. International Trade
  1. ExportsUAE’s exports include crude oil, natural gas, re-exports, dates, and dried fish, natural gas, coal, and other agricultural produce.
  2. Imports- UAE imports machinery and transportation equipment, food and chemicals.
  3. Trading partners- the UAE export partners Japan, South Korea, India, Singapore, Thailand, Iran, and China. The UAE import partners include Germany, the United States, India, the United Kingdom, and China.
  4. Outlook for the Future- Abu Dhabi is very influential, and it accounts for approximately 70% of the UAE budget (Pinto, 2012). The country ought to attempt to diversify its activities to improve the contributions originating from other emirates. The UAE has a declining fiscal balance, and this may increase taxation rates later on.
  5. Conclusion- The UAE highlights a political steadiness, and this guarantees a long-term financial soundness in the country. Additionally, the UAE has to improve its economic ties at all times and resolve any issues that may inhibit its economic growth such as the issues with Iran (Linda, 2012). Such strategies will guarantee the long-term endowment of the UAE economy.

      

References

Kanna, A. (2011). Dubai, the City as Corporation. Minneapolis, MN, USA: University of Minnesota Press.

Linda, L. (2012). Abu Dhabi’s Vision 2030: An Ongoing Journey of Economic Development. Singapore, SGP: World Scientific Publishing.

NBS (2010). Analytical Report on Economic and Social Dimensions in The United Arab Emirates. Abu Dhabi, UAE: National Bureau of Statistics.

Pinto, V. C. (2012). Nation Building, State and the Gender framing of Women’s Rights in the United Arab Emirates. Reading, GBR: Garnet Publishing Ltd.