Factor behind the economic and social development of the UAE

Factor behind the economic and social development of the UAE Introduction Economy and Demographics of the UAE MOIA (1) explored that the UAE has demonstrated skyscraping growth connecting its GDP per capita income almost similar to the European leading economy while the oil sector is the prime contributor of economy; however, this country has a population of 4.4 million with a growth rate of 1.52 percent and 0.66% migration rate per annum accounted in 2006. The key features of the demography of the UAE include–Advertising We will write a custom essay sample on Factor behind the economic and social development of the UAE specifically for you for only $16.05 $11/page Learn More Here, 75% people are 15-64 years of age group, about 20% people are 14 years and less age group, and about 1% people are older than 65 years; The life expectancy range is 75.7 years in average; The country has an alarming mail female ratio, such as, for 3 million male there are 1.4 million females; The major feature of the demography is t hat there are 20% people local inhabitants, 60% people are migrated from South Asia, and rest 20% people have settled from different Arab states; According to the constitution, UAE is an Islamic country, and 86% people are Muslim, and 14% citizens are other ethic group; among the Muslims, 85% people are Sunni, and 15% inhabitants are Shia (Library of Congress 5-6). However, the following figures show the GDP per capita income and population of the UAE for the last five years Figure 1: GDP per capita income of the UAE Source: Indexmundi (1) Figure 2: Population of the UAEAdvertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Source: Indexmundi (1) Comparison between the Concurrent and Past of UAE The World Economic Forum argued that the concurrent UAE has been going through an extremely higher economic growth due to rising oil prices along with vigorous expansion of the housing and r eal estate markets and the country evidenced a standard growth of GDP over 7% per annum during 2000-2007; however, it has recorded 65% GDP growth in 2008 (WEF 4). At the seventy years back, the modern Emirates were different several states under Britain general treaty of peace while the nations were under control of two tribal groups, such as, Qawasim and Bani Yas; however, the people of that time lived on agricultural and pastoral along with robbing on the foreign ships. The overall economy of this region was very distressed until the oil resources were discovered and the traditional form of Arab monarchy continued until independence. Importance of the Factors of the Socioeconomic Development in UAE The Economist reported that the Arab world is under serious threats for Labialization and democracy, the wave of Arab Spring has been spreading out from one county to another, some of the Emirates are afraid with the growing violence and peoples movement, which may abolish the tradition al Arab monarchy in UAE replacing by democracy at any moment (The Economist 1). To mitigate such risk, the government of UAE necessitates introducing appropriate economic development policy, which would be capable to avoid social unrest and political violence. To formulate such a policy, it is essential for policymakers to take into account of the factors those contributed the country to be a most resourceful county in the world and to bring social development, analysis of that factors would assist the policymakers to generate new policy which would be acceptable to the mass people.Advertising We will write a custom essay sample on Factor behind the economic and social development of the UAE specifically for you for only $16.05 $11/page Learn More Thus, it is essential to analyze the factors of social and economic development of UAE. Snapshots for Rest of the Essay The first cheaper of the paper has presented the background of the study while the second cha pter would present stages of economic development in UAE from the historical perspectives with a comparison with other Arab counties in this region. The third chapter would identify and analyze the four factors that generated economic and social development and the fourth chapter would draw conclusion for the study. Economic and Social Development of UAE Stages of development in the UAE From now to the seventy years back, UAE has evidenced different development stages, this paper would classify the stage into three phases, such as, colonial stage, independence and post independence stage and the third phase is global financial crisis and concurrent stage. Although, the country has historical perspectives of archaeological background from 5000 BC to 676 AD, era of Islamic Interference, Tribal society, and Trucial states development, but these historical stages are out of the area of present study and limited up to seventy years back. The development stages of last seventy years are a s- Colonial Stage: At seventy years back, during the British colonial rule, UAE evidenced the World War-II. Hellyer and Garey (2) pointed out that UAE and the Trucal states have great impact of World War-II, there were US and British military presence in this region while the region faced highly raise of food price, presence of foreign migrants, wartime trade barrier distressed the economy of the country (1). At the same time, due to presence of British political official and flights there were tremendous infrastructural development all over the region, flying base, radio communication were introduced, following the end of the war the country get the opportunity rethink about confederation and development of constitution. During this stage, most of the people lived on agriculture and pearl trade, although the first instance of oil discovery, British proclaimed to leave this territory in 1962 (Library of Congress 2). Independence and Post Independence Stage: Sadik (7) and Butt (2) m entioned that independence in 1971, contributed UAE to organize a federation of seven Emirates under a constitution different from the other Arab; moreover, exploration of oil performance started to encourage socioeconomic development of UAE by amplifying petroleum exports that boosted government revenues. As a result, the economy diversified by optimizing its capacities, export revenues overflowed it budget deficits and turned to promoting other manufacturing and service sector that generated huge demand for importing low cost labor from the south Asian counties for capital incentive industries. At the same time, the country has gained remarkable progress for human resource development and education expansion safeguarding the religion believes of society with Islamic morals. Global Financial Crisis and Concurrent Stage: Ellaboudy (1) pointed out that due to global financial crisis the liquidity and tight credit conditions, UAE started to more intensifying due to huge current accoun t surpluses had invested in foreign countries, a number of local banks was very much covetous due to overseas borrowing for large projects Dubai. In consideration of banking liabilities, the loan and deposit ratio of local banks amplified at 120% while the necessity of credit has boosted far above than local deposits rate and the situation turned vulnerable with negative real interest rates while wealth fund hold up with the strapping macroeconomic principles. Due to due to fall of oil price, the export revenue tremendously reduced and the economy faced serious downturn while most of the European and US countries have failed to overcome the crisis, UAE evidenced far better position due to its strong macroeconomic base and petroleum resources. On the other hand, the wave of Arab Spring has been threatening the monarchy of UAE that may lead the nation to introduce new policy that would be acceptable to the local incumbents with non-oil sector expansion and with increasing employment g rowth rate in UAE. What Historical Events during the Stages The Library of Congress identified that UAE is the most resourceful country in the Persian Gulf, which has become independent in 02 December 1971 from the British colonial rule following the British proclamation that it would withdraw treaty relationships from seven Gulf States that prevailed since 1892.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Britain considered it significant to establish its supremacy in this region as the East India Company had specific interest to safeguard its maritime routes, by making peace treaty with the major Sheikhs British established the region as a center for slave trade. Before independence, there were seven isolated Emirates with long historic background, for about a century the defense and foreign affairs were controlled by the Britain and following the independence United Arab Emirates was fashioned by the group of tribally structured Arabian Peninsula sheikhdoms at the northwestern coastline of the Gulf country Oman with an area of 83,600 square kilometers (1). KAMCO (3) added that the country recorded a steady economic growth while the value of GDP was US $ 105.6 billion in 2004 and turned into doubled US $ 254.4 billion by 2008 that evidenced 65% of GDP growth, beside oil sector, the government emphasized non-oil growth. Orozco (5) remarked that UAE faced a serious catastrophe by Sept ember 2008 following the global financial crisis stating with the historical fall of oil prices, stock market, property market, and banking systems seriously shocked along with drop in remittances and tourism as well fall of investments and of the real estate bubble in the gulf market. The natural resource of the county is a great blessing for the county to overcome the impact of global financial crisis, but as an integral part of international financial system, UAE still face the impact of global recessionary impact. The ongoing political situation has barely exposed the rulers of the wealthy country UAE are worried that they perceive an alarming danger for the fall of the regime; to mitigate such risk the government of UAE necessitates to introduce appropriate economic development policy which would be capable to avoid social unrest and political violence. Influence of historical events of UAE in Relation to Other Gulf Countries Mirkin (6) argued that UAE has common cultural with long historical accords and common religion alignment, same language, and tradition with GCC 1 and other Arab nations, but there are huge dissimilarity due to geopolitical and socioeconomic diversity, thus, there is no chance for UAE to influence others with its historical events. Rather, there are enough opportunities for UAE to be influenced by the concurrent events of other Arab nations, for instance, the concurrent wave of Arab Spring influenced one by one Egypt, Syria, Tunisia, and other Middle East countries are going to be influenced. No historical event of any Arab countries have no credible acceptance to the people for the reason that historical event connecting with religion has just encouraged strengthening tradition Arab Monarchy suppressing the people and their democratic right. Religion radicalism has no further appeal to the suppress people’s movement for democracy, Arab people want freedom of speech freedom of media, the historical even any economic allowance could not compromise the burning desire of democracy and there is no other alternative rather than democratization liberalization. Although, the demographic configuration of UAE has similar characteristics Factors behind UAE Economic and Social Development The United Arab Emirates Yearbook 2007 pointed out that remarkable economic and social development of UAE has generated by the contribution of several factors, devoid of those factors, the country may not capable to see the light of modern progress. The major factors that played vital role for socioeconomic development are the most dominant oil market, vigorous growth of public joint stock companies, gradual expansion of free-trade zones and floating local stock markets and state sponsored bulky new projects along with the good judgment of economic policies that established solid foundation for extraordinary economic and social development (UAE Govt 2) Four Factors of Development Among the different factors of economic and social development, this chapter of the paper would discuss only following four factors– Dominant Oil Market of UAE Chandra (1) mentioned that discovery of oil resources in 1962, UAE explored to place itself from poor to least developed country by 1970 and by 1990, it turned into a reach country with higher GDP growth that influence the incumbents regular life providing huge job opportunity. Strong reserve of oil, increasing oil price and diversified investment of oil income explored in the non-oil sector, before oil exploration, the people were very poor and dependent on pearl trade and agriculture. In 2000, UAE assessed as the fifth largest oil reserve of oil with 98.8 billion barrel oil and six trillion CM natural gas with a production capacity 2.1 to 2.4 million barrels and real estimated contribution to the GDP AED 328 billion with export revenue of AED 202 billion in 2005; thus, the contribution of oil market is unreliable. Free-Trade Zones Shimy (7) addressed that the WTO int roduced the free trade zone concept by keeping foreign companies out of national custom taxation and documentation; in real life evidence, there is a huge variety of generic free zones formed with different aim and objectives to accelerate overall economic activity of a county. Although, the legislation of GCC does not allow full foreign ownership, UAE is the pioneer in this region to offer 100% foreign owned companies and formed free zones that played the most important role for the success of economic diversification of the country that tremendously attracted FDI inflow. The free zones also contributed the county with boost of exports, job opportunity creation, foreign labor force import, modern technology transfer; and skill development of the human resource while forward and backward linkages local companies also explored with remarkable contribution to the GDP. Stock Markets of UAE Khedhiri and Muhammad (3) pointed out that there are two stock exchanges in UAE named DFM2 and AD SM3, which started their official journey in 2000 although there prevailed authority ESCA4 and they experienced wonderful growth from their beginning in terms of market capitalization and volume of listed companies and turned into the second largest stock market in GCC region. Greater than before oil revenue, diversification of financial activities and lower interest rates in UAE has seriously contributed to the exploration of stock market in the country the current exceptional growth of the stock market restructured the investment opportunities including foreign company’s enlistment, although total number of listed companies are not enough big. Public Joint Stock Companies In the economic and social development of UAE, Public Joint Stock Companies have kept tremendous contribution to accelerate the trade and commerce along with social mobility within the emirates, to form a PJSC5 the minimum requirement is an investment of AED 10 million by the entrepreneur members, for bank ing sector the required investment is AED 40 million (UHY 3). The PJSC would organize with at least ten sponsor members, 51% of the shares would be owned by the chairperson and directors from UAE nation, rest 49% could be shared by the foreign nations; this provision provided opportunity to come closer with foreigner where business interaction and communication bring them to exchange their views that ultimately influence for social motivation. Importance of the Factors The four factors for social and economic development has a great significance to raise a nation to be united to bring itself from the very poor to the extremely rich stage; moreover, these factors also flourished mass education and higher study and to face the challenge of globalization. At the same time, social motivation that flourished by the implication of the factors has turned the people to move for democracy. Impact of West Relationship to shaping the Factors Katzman (1) added that the foreign policy of UAE dem onstrates its gradually more aggressive alignment to the USA, and supporting all US policies in the Middle East including sanctions against Iran, indicates very weak foreign policy and creates misunderstanding with the neighboring countries. The relationship of UAE with the western countries has shaped in a position that the county that it does not bother to sacrifice both national and regional interest to continue its process for Americanization, but this strong accord with the USA may not protect the negative impact that already motivated towards western culture and democracy instead of Islamic monarchy. The extent of social motivation by the westerns has progressed to a certain level of people where people do not compromise for democracy with any financial incentives, religion values or economic development, they urge for freedom of speech in exchange for their life. Conclusion UAE is the most moderate Islamic country with traditional Arab monarchy that turned the country from a poor colonial rule to one of the richest Arab country based on strong oil economy that already diversified its economy towards non-oil sector. Economic and social development of UAE has strongly aligned with the oil reserves, free-trade zones, public joint stock companies, stock markets and these factors accelerated economic growth with smooth social progress, keep away from the ancient agriculture and pearl trade. Although, the country has strong historic, cultural, ethic alignment and language similarity, but there is influence of its historical events to the others, but the others have great influence on UAE in terms of democracy and freedom of speech. The quick shifting political situation may suggest for decartelization and liberalization without any violence. To mitigate social conflict and political unrest, it is essential to introduce new policy for decartelization and liberalization, which could contribute the country to generate further social and economic progress with ba lanced economic growth. The outcomes of this study would contribute the policymakers of UAE with a better understanding of the concurrent Arab world and would direct for appropriate solution. Butt, Gerald 1997, Oil and Gas in the UAE. PDF file. 20 March 2012. Chandra, Devam. Ontribution of Oil as Gas Industry in UAE. 2011. Web. Ellaboudy, Shereef. â€Å"The Global Financial Crisis: Economic Impact on GCC Countries and Policy Implications.† International Research Journal of Finance and Economics, 41(1). 2010. Web. Hellyer, Peter. Garey, Laurence 2012, World War Two Plane Crashes in UAE. PDF file. 20 March 2012. adias-uae.com/publications/hellyergarey04.pdf Indexmundi. Country Profile of the UAE. 2012. Web. https://www.indexmundi.com/united_arab_emirates/. 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Shimy, Nermine 2008, From Free Zones to Special Economic Zones – The UAE Case Study. PDF file. 20 March 2012. oecd.org/mena/competitiveness//41613492.pdf. The Economist. No sheikh-up here: Tiny shoots from the Arab Spring get crushed. 2012. Web. https://www.economist.com/midd le-east-and-africa/2012/03/17/no-sheikh-up-here. UAE Govt 2007, United Arab Emirates Yearbook 2007. PDF file. UHY 2010, Doing Business in UAE 2010. PDF file. WEF 2007, United Arab Emirates and the World. PDF file. Footnotes 1 Gulf Cooperation Council 2 Dubai Financial Market 3 Abu Dhabi Stock Market 4 Emirates Securities and Commodities Authorities 5 Public Joint Stock Companies