Analysing The Economic Changes In Dubai
Dubai is a Middle Eastern sector, located in the United Arab Emirates. In 1971, the UAE was formed and all the emirates are ruled by Supreme Council of Rulers, yet every emirate is still fundamentally independent.
Efficiently over the last three decades, Dubai has changed. Dubai came to be one of the main business centers in the world; with a more vital, active, and diversified economy. As for its geographic location, Dubai has the benefit of a strategic location and serves as the largest re-exporting hub in the Middle East. Dubai’s liberal government policies as well as its great infrastructure and its international outlook of its future are all making Dubai the center of attention and grabbing investors into it. Moreover, Dubai’s economy has reached a very high level of development and diversification due to its fixed growth in finance, industry, transport, trade, and tourism. (Economic Development,2009).
This paper will be looking at the economic development of Dubai generally. Moreover, it will be emphasizing on Dubai’s oil resources, agricultural resources, structural development in its economy, and its Foreign Direct Investment.
As the UAE’s oil production developed extremely fast, UAE grew as well. Moreover, as one of the biggest oil producers in the world, the UAE used oil revenues in their benefits to construct a very diverse, special, and exclusive economy. Dubai fills up the gap between Europe and Asia, as it is recognized to be the hub for universal finance, tourism, and trade.
Dubai is quickly growing and its money is not coming strictly from their oil resources only, but also from tourism, constructions, finance, and shipping. Dubai is trying to find several ways in order to take control over inflation and the labor force market to carry on with its great development.
Oil resources are very profitable, relevant, and beneficial to the economy. Oil resources are considered to be a very huge part of the economy of Dubai. In the early 1960’s, the Middle Eastern economy was fundamentally constructed on the construction and creation of oil. Ever since the finding of oil, a very huge transformation occurred in the county and growth has been and is still carrying on to be extremely fast. That growth is articulated in the 8% average of the annual GDP growth of Dubai. Regardless of achieving control over the oil industry in Dubai, the country is still looking forward to use its oil resources in increasing other non oil businesses in the region. Moreover, in the year of 1980 the oil industry of Dubai contributed to 55% of the total GDP and in the year of 2000 the oil industry accounted for 10% of the total GDP. Also, as a result of lowering the dependence of the economy of Dubai totally on the oil industry resources, the stability of the region will be reinforced and strengthened and the growth will continue on a yearly basis.
As of 2006, “revenues from oil and natural gas currently account for less than 6% of the emirate's revenues. It is estimated that Dubai produces 240,000 barrels of oil a day and substantial quantities of gas from offshore fields. The emirate's share in UAE's gas revenues is about 2%. Dubai's oil reserves have diminished significantly and are expected to be exhausted in 20 years.” (Dubai History,2007).
Dubai, an internationally known city has made many contributions that have helped in its development. Not only is it technologically as well as Architecturally advanced, it also acts as a main re-export market to other Gulf countries it resides next to.”. The Dubai World Trade Centre estimates that Dubai imports 80% of the UAE's consumable items per year” (Richard Séguin, 2008). Because of the high temperatures and dry weather, UAE often relies on agricultural imports mainly from the western part of the world. “The majority of the $3.5-4.0 billion in annual food imports come from the United States, United Kingdom, Germany and France. Agriculture and food exports to the UAE from Canada over the past four years have averaged over $90 million, with a sharp increase in 2006, to reach $200 million” (Richard Séguin, 2008).
Mainly in Dubai, a large variety of agricultural commodities from all around the world can be found.”. The UAE already imports large volumes of Canadian wheat, canola seed and pulses. Even Canadian ice cream exports reached the $8 million level in 2006.” (Richard Séguin, 2008). This, increased interest in agriculture lead Dubai to expand in its super market chains and stores and to hold an annual food show “Gulfood trade show. Gulfood, the largest, best attended and fastest growing food show in the Middle East takes place in Dubai in February of each year.” (Richard Séguin, 2008).
At first Dubai did not mainly focus on its agricultural duties, it focused on becoming a world renowned city and a trademark of the UAE. However, because of the economical as well as environmental benefits, dubai decided to enhance its agricultural and eco-friendly environment in order to increase the quantity of available jobs in Dubai and UAE, as well as to benefit the environment by decreasing the amounts of pollution by setting rules and regulations.
After Dubai’s oil supply started to be severely diminished, which happened around 2004, Dubai started to direct more of its resources to build more facilities and structures for commercial, residential, and decoration purposes resulting in the construction boom from 2004 - 2006. This real estate boom has a long, since its go date back as early as the 1980’s. This construction boom then accelerated in the 1990’s and then increased even more by a proportion that was unwitnessed in modern history around 2004. Today, due to this boom, Dubai contains about 30,000 construction cranes, which is about 25% of the world’s total supply of cranes. On average, non-commercial real estate and construction account for about 22.6% (on average) of Dubai’s economy. One of the most notable and biggest construction projects in Dubai’s history was the Jebel Ali port. Jebel Ali, one of the city’s trading landmarks, was built in the 1970’s and has the largest man-made harbor in the world. However, between 2008 and 2009, many of Dubai’s construction projects came to a halt due to the global financial economic crisis. Today, Dubai hosts the world’s tallest building, the 828 meter Burj Khalifa, Dubai Mall, the world’s 7th largest shopping mall, the world’s largest fountain known as “The Dubai Fountain”, the world’s second tallest and most expensive hotel “Burj Al Arab”, among many other glorious and well-deserved structural records. Also, still under construction is Dubai Land, an amusement park set to be almost twice the size of the Walt Disney World Resort in Florida, USA. Today, Dubai has over 70 shopping malls, and 250 gold retail shops, and 120 high risers, 15 of which scrape the skyline, exceeding a height of 300 meters, which is more than any other city in the world. These accomplishments and records left Dubai with the world’s tallest skyline as of Jan. 4th, 2010, earning Dubai titles such as “The city of skyscrapers” and “Shopping capital of the Middle East”. The table below shows how many completed skyscrapers Dubai has and the proportion of those exceeding certain heights as compared with competitive cities across the world. (Hennessy,2005).
Foreign Direct Investment:
Since the early 1990's, Dubai has attempted to branch out away from oil-related activities. New sectors have been present. The free zones in Dubai have attracted considerable foreign direct investment (FDI). These zones made it possible for foreign investors to avoid existing UAE legislation that required all businesses to have at least one local sponsor. To encourage foreign direct investment (FDI), Dubai also established a real estate sector by the late 1990s.
This too required the circumvention of existing legislation, as UAE law banned foreigners from owning property. The solution was to offer renewable 99-year leases, backed by the personal guarantee of the crown prince. Today, thousands of properties are owned by foreigners, and three major government-backed companies in addition to numerous smaller developers continue to fuel high demand for new real estate projects. Legislation has now been enacted allowing for genuine foreign freehold ownership. The boom that Dubai has been experiencing since the 1990s is still going on, transforming the city from a desert village to a world class economic hub. During the remainder of the 90's, however, many foreign companies began moving business to Dubai. Due to this movement and the rising oil prices, Dubai began to concentrate on free trade and tourism to stimulate their economy. Throughout the next decade, numerous structures were erected. Today, Dubai is one of the largest tourist destinations in the world. To promote their new tourist based economy, the Dubai government put into motion several large construction projects. Many of the buildings that went up were among the largest in the world, the most luxurious, and the most unique. From 1990 to 2003, Dubai's GDP has increased by a staggering 263%, and continues to grow by 10% annually. As reported on May 5, 2009 by the financial times on foreign direct investment, Dubai has been classified for the first time as the top destination on foreign investment in the world which attracted about 342 projects, capital investment reached to $ 21 billion (77.3 billion Dirham) and over 58000 new jobs were created. Latest available data from the central bank shows that in 2009 direct investment into the UAE as a whole plummeted to Dh14.7 billion ($4 billion) from Dh50.4 billion in 2008, as the region was hit by the global financial crisis. The data does not give a breakdown for Dubai. According to A T Kearney's 2010 Foreign Direct Investment Confidence Index, the UAE is seen as the most attractive investment destination in the Middle East in the next three years and ranks 11th worldwide. Dubai's economy is slowly coming back and investor confidence is improving as the state's debt problems are easing. The expected rise in foreign investment would help economic recovery and could reignite investment in the financial and infrastructure sectors this year. As recently mentioned in an article published on February 15th, 2011 Dubai is expecting a 30 percent increase in the Foreign Direct Investment despite the debts it has and financial crises that took place. Recent events surrounding the global financial crisis, a survey found that the huge majority of investors have no plans to reduce their investments in the city. More than 80 percent of all investors surveyed, which had or have planned investments in Dubai, either plan to maintain the current level of investment or further increase their investment levels in the next three years." As the economy is heading towards a better direction many investors are ceasing the opportunity and taking their chances in investing in Dubai which means rising in foreign investment would help economic recovery. “We see a trend of newcomer companies to Dubai from South America, especially Brazil and Chile, China, Korea, some from the United States and Europe,” Gergawi said in an interview.
Dubai is one of the fastest growing cities in the world. Dubai has a number of high level plans and projects which at the present are still under construction and some will be constructed in the near future. Dubai’s future appears to be more successful, enjoyable, and brighter since the whole region is growing and developing rapidly. Dubai is still considering having a constant fixed economy by increasing its non oil producing businesses and developing investments. Moreover, Dubai is looking forward to assure that it has enough capacity of labor force market to work in the region. As the government is making sure that it gets billion dollar plans and projects, which are causing the growth of the cost of living and inflation, they should start paying more attention to the needs of the poor.
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